Over Half of Budget Cuts Derived From Federal Construction Programs
After several long weeks of negotiations, the White House and House Republicans announced in the late hours of April 8 that they have agreed on a $1.208 trillion spending package for the remainder of FY 2011. The package represents nearly $40 billion dollar cut in non-defense discretionary spending for the remainder of FY 2011.
The House passed the bill Thursday with a vote of 260-167, and the Senate is expected to pass the measure later Thursday as well, in time for the president to sign it by midnight on Friday when the continuing resolution expires. In order to get the deal passed through regular order, Congress passed a short-term budget deal that keeps the federal government funded through the rest of the week.
Similar to the cuts provided in H.R. 1 (the original continuing resolution for FY 2011 that passed the House) this latest package appears to have a
severe impact on federal construction accounts. Based on a list of
cuts provided by the House Appropriations Committee, AGC has determined that funding for federal construction accounts will be cut by $21.9 billion. Among the biggest cuts are:
- Department of Defense Military Construction - $6,237 B
- Federal Highway Administration Contract Authority - $2,500 B
- High Speed Rail - $2,900 B
- Clean and Safe Drinking Water State Revolving Funds - $997 M
- GSA Construction – $638 M
Not all of these cuts will have the apparent impact on the construction industry. For example, the Federal Highway Administration funding cut rescinds $2.5 billion in existing contract authority that had been previously apportioned to states but was never funded. The cut to high speed rail funding disrupts President Obama’s plan for a nationwide network that has yet to materialize. In addition, a major portion of the Department of Defense cuts represent reduced construction activity due to the closeout of BRAC 2005.
Previously, AGC issued
guidance to assist contractors engaged in work with the federal government should the government shut down.
AGC continues to communicate to Congress that the planned cuts have the potential to eliminate jobs and will have a real and lasting impact on the entire economy. Before cutting federal construction dollars a thorough evaluation of the programs needs to occur. AGC
sent this letter to Congress today, and will continue to advocate for sound investment in our nation’s infrastructure as consideration of the FY 2012 budget commences.
FY 2012 Budget
On Friday, April 15, the House completed business on the FY12 blueprint in a
235-189 vote, setting the stage for a budget showdown with Senate Democrats and the White House over spending priorities for the federal government.
The
"Path to Prosperity," released by Paul Ryan (R-Wisc.), is a framework that directs Congress to cut at least $5 trillion dollars of spending over the next decade by: reforming Medicaid to become a block grant program; reconfiguring Medicare to be a voucher program; defunding health care reform; and reducing taxes. For transportation, the budget resolution calls for significant reductions in spending with total budget authority decreasing by 31 percent from current levels.
Ryan's outline suggests that the Highway Trust Fund not receive any additional revenues from either a user fee increase or general fund transfer, and that the surface transportation reauthorization bill will have to reflect these reduced funding levels. The budget proposal suggests that Congress can keep the Highway Trust Fund solvent without additional general fund transfers or increases in the gasoline tax by consolidating dozens of separate highway programs identified by the General Accountability Office as duplicative.
This proposal is the first shot in the budget wars that will be fought later this year in addressing the nation’s difficult deficit situation. While the budget resolution is not legislation, the Senate will also fashion its own version that will have to be reconciled with the House-passed version. Although the budget resolution is non-binding, it does present the blueprint that governs future budgetary decisions by the Congress. House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) has already indicated that he intends to write a surface transportation reauthorization bill that will be constrained by the revenue currently coming into the Highway Trust Fund.
AGC and its transportation construction stakeholders
sent a letter to Chairman Ryan and all Members of the House expressing our opposition to the cuts in transportation.
The President's Long-Term Budget Plan
President Obama released his own vision for long-term spending Wednesday. His outline proposes $4 trillion in deficit reduction over the next 12 years. He calls it a "balanced" approach as deficit reduction would be attained from a combination of spending cuts and tax increases. The release of the plan was not coordinated with Democrats in the House or Senate. His call for a 16-member congressional working group on the budget with a goal of finishing work by the end of June was a new wrinkle for an already complex budget negotiation process.
The president's plan calls for cutting non-security discretionary spending by $770 billion, reducing security spending by $400 billion, and repealing Bush-era tax cuts for the "wealthiest Americans." His plan also aims to save $480 billion from Medicare and Medicaid.
For more information, contact Sean O’Neill at oneills@agc.org, or Marco Giamberardino at giamberm@agc.org.
NOTE: After passage of the continuing resolution in the House and Senate on April 14, the House Appropriations Committee updated their FY2011 budget cuts chart. These numbers are different than what was previously reported in AGC's Construction Legislative Week in Review and Federal Contractor Report.
