On November 9, the co-chairs of the National Commission on Fiscal Responsibility and Reform laid out a preliminary proposal to cut the federal deficit by hundreds of billions of dollars.  The sweeping proposal - which has garnered opposition from liberals, labor unions and conservatives, including most members of the commission itself - includes several items related to the construction industry, including the AGC-endorsed recommendation to increase the federal gas tax.  The co-chairs and members of the commission made it clear that the proposal was just a starting point endorsed by only the co-chairs. The commission report will be official only if supported by 14 of 18 commission members.In addition to joining other transportation stakeholders in sending a letter to the commission in support of a proposal by Senators Tom Carper (D-Del.) and George Voinovich (R-Ohio) to increase the gas tax by 25 cents, AGC sent a detailed letter to the commission recommending a 25 cent gas tax increase to be divided between deficit reduction and the Highway Trust Fund.  AGC has and will continue to meet with the members of the commission in advocating for the increase to be included in the commission's final report, due December 1.The draft proposal also calls for cutting billions of dollars in domestic and military spending and remaking the tax code.   Spending cuts of note to the construction industry are:  the termination of low-priority Army Corps of Engineers construction projects (beach erosion and rural water treatment program run by the Corps); cuts to the U.S. Embassy construction budget (largely in security reduction);  elimination of runway expansion and capital investment grants to large and medium-sized hub airports through the FAA's Airport Improvement Program; and an increase in the Inland Waterways Trust Fund fuel tax to cover all costs of construction and maintenance.  The plan would also ban Congressional earmarks.On the tax code front, the plan would end or cap a wide range of tax breaks including the deduction for home mortgage interest and dependent children.  The plan calls for a higher tax rate on capital gains and dividends while offsetting that increase by lowering individual rates.  The plan would also lower the top corporate tax rate of 35 percent to as low as 26 percent.In an attempt to tackle the problems with Social Security, the plan calls for a gradual increase in the retirement age to 68 by 2050 and 69 by 2075, a reduction of Cost of Living Adjustments, and cutting benefits by changing the current benefit formula.  The plan also seeks to address the Medicare "Doc Fix" through various payment reforms, cost-sharing and malpractice reform.

Senator Claire McCaskill (D-Mo.), chair of the Senate Contracting Oversight Subcommittee, is pressing forward in her efforts to investigate the effectiveness of the Alaska Native Corporation (ANC) program. McCaskill has expressed on numerous occasions her concerns over the unique government contracting preferences for ANCs and will soon introduce legislation to treat ANCs equal to other small, disadvantaged businesses seeking government contracts.  Senators in Alaska are expected to strongly oppose this legislation.If enacted, her legislation would:Eliminate the ability of ANCs to receive sole-source contracts exceeding the caps applicable for other 8(a) participants of $3.5 million for services or $5.5 million for goods;Eliminate the automatic designation of ANCs as socially disadvantaged business enterprises, requiring ANCs to demonstrate their social disadvantage by providing evidence of "racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups";Eliminate the automatic designation of ANCs as economically disadvantaged, requiring any ANC seeking to participate in the 8(a) program to demonstrate that corporation's economic disadvantage upon entering the program;Require ANCs to count all affiliates and subsidiaries in size determinations for 8(a) eligibility, which shall be limited to no longer than nine years, as is required for other 8(a) participants;Require ANCs who choose to participate in the 8(a) program to own a majority interest in only one 8(a) subsidiary at any one time;Require ANCs who choose to participate in the 8(a) program to be managed by individuals who qualify as socially and economically disadvantaged under the program, as other 8(a) participants must do; andProhibit ANCs who chose to participate in the 8(a) program from operating as pass-throughs to non-Native companies that do not qualify under the 8(a) program.Following an investigative series published by the Washington Post in October, Senator McCaskill also called on the Small Business Administration's inspector general, the agency's independent auditor, to investigate the claims made in the articles and asked that the inspector general report back to Congress and if necessary, refer its findings to the Department of Justice.AGC is currently conducting a review of this legislation and its potential impact on government contracting.To view of copy of Senator McCaskill's letter to the SBA IG, click here.  To view a summary of Senator McCaskill's proposed legislation, click here.

On Tuesday, voters across the country voted on ballot initiatives that will raise revenue for transportation, transit and other infrastructure programs. Despite the economic conditions, measures passed include increases in sales taxes, property taxes and vehicle registration fees to finance roads and transit projects. A number of school districts and localities issued increases in bonds for construction.

Republicans gained a net of 63 seats so far on Tuesday night, putting the House at 239 Republican seats, 186 Democratic seats, and 10 seats uncalled (list below).  The current Senate breakdown is 52 to 46 (Republicans picked up 6 so far) with 2 states - Washington and Alaska - yet to be finalized. The AGC PAC contributed more than $1,000,000 to 252 candidates.  So far, AGC has contributed to 209 winners or a win percentage of about 83 percent.  That number will continue to be adjusted as the undecided races come in.

Still Counting and "Lame Duck" May Set Tone for Next Year Click here to view the shift in power and AGC's projected changes in leadership. The voting is over, but the counting continues.  Republicans have secured a majority in the U.S. House of Representatives and there is a smaller majority of Democrats in the U.S. Senate. This year's wave election may have also washed out the old saying that "all politics is local." The local voters were driven by national issues like health care and spending, and were fueled by national media that focused on party conflict. Incumbency and experience were the cause of significant losses for sitting Committee Chairs of the Budget, Armed Services and Transportation Committees. The conflict continued unabated when Nancy Pelosi (D-Calif.) issued a statement this morning celebrating the Democratic majority for "courageous action" and Jim DeMint (R-S.C.) issued a statement urging new members not to "fall into line."  The Republican majority and shrinking Democratic numbers will alter the legislative and regulatory issues AGC members face during a lame duck and in the future. While the change in power is clear, what exactly will come of it is not. In the coming weeks and months, AGC will work to analyze and interpret events in Washington, D.C., and will keep you updated on what the changes in Congress mean in practical terms. Republicans will start the lame duck session with 42 instead of 41 senators as a result of special elections held in conjunction with the general election.  The 112th Congress will require bipartisanship to pass even small issues. The tone will be set early in the Congress by the interaction between the leaders of both parties, both chambers and the president - in fact, it may be set during the lame duck session beginning November 15. Lame DuckThe lame duck agenda will include the funding for the rest of fiscal year 2011 (nine months worth of federal funding) and the extension of SAFETEA-LU and FAA authorization, as well as deciding how to handle the expiring tax cuts, extension of the Medicare doc fix and extension of unemployment benefits.  It could also include the confirmation of Jacob Lew as the new Office of Management and Budget director. They could also vote on a bill to block the imposition of the greenhouse gas rule and the Defense authorization.  The productivity of the lame duck will likely signal the productivity of the 112th Congress.Congress OverviewThe closely divided Congress will contrast with the large majorities Democrats held after the 2008 election. Some of the new members bring with them their own agenda and an anti-establishment mentality that could impact how leaders in both parties try to corral votes. The outstanding question is this: Will there be more partisanship or more bipartisanship? The agenda will be dictated by what the lame duck does or does not accomplish.Congress and the Administration may be able to work together on trade issues, education and deficit reduction. However, many members will be cognizant of the recent voter backlash against members of Congress who had moved more toward the center.The parties will elect leaders and committee chairs during the lame duck. Click here to see a run-down on who AGC anticipates will be the Congressional leaders in the 112th Congress.Federal Construction SpendingBoth Republicans and Democrats have pledged austerity. Republicans in Congress and President Obama have put some specifics to where they feel construction spending should be. In his FY 2011 budget, the president proposed holding spending close to $112 billion in 2011 and a  three-year discretionary funding freeze. For 2012, he has instructed departments to cut their spending by five percent more. The Republicans have pledged to impose a hard budget cap, and  hold spending at about 2008 levels (Congress appropriated a little more than $107 billion for construction in 2008, very close to where the Obama Administration would be with a five percent cut for 2012).  The lower spending levels and the hard budget cap envisioned by the Republicans will likely create a battle for funds in a zero sum world.  In addition, AGC envisions a significant fight among Republicans on how to handle or how to limit earmarks.  Fewer earmarks could result in fewer votes for construction spending legislation in the future.Obama Administration OverviewWith President Barack Obama now halfway through his first term, his reelection efforts start today. Leading up to Election Day this year, he said his major priorities for the next two years were overhauling the nation's immigration laws, passing energy, education, transportation and climate-change legislation, and shrinking the federal deficit. Even with both Houses of Congress, Obama had difficulty winning approval of the health care and financial reform bills, and he failed to pass cap and trade legislation.  His goals will now be even more challenging. The president will need to decide if he will work with or work against a divided Congress.  President Obama will probably continue to advance goals that do not rely as much on Congress, such as making greater use of the executive branch's regulatory machinery. However, much of his agenda could be scuttled by the economy, and based on the election results he will have to address the jobs situation before the larger social issues.

The Federal Railroad Administration today announced the award of $2.482 billion in High-Speed and Intercity Passenger Rail grants. Fifty-four projects in 23 states and several multi-state regions are included in the grant awards. These awards are in addition to the $8 billion in grants for projects approved earlier this year through the American Recovery and Reinvestment Act (ARRA). Projects in 31 states and the District of Columbia were funded under ARRA awards.According to AASHTO, many states are already moving ahead in implementing the ARRA funded projects. In Florida, for example, contractors are testing soils and surveying property along I-4, in anticipation of the Tampa-to-Orlando high-speed rail line expected by 2015. Illinois is upgrading 39 miles of Union Pacific railroad track for high-speed service between Alton and Lincoln. Maine is replacing 30 miles of track between Portland and Brunswick in anticipation of a Boston-to-Brunswick line with new stations in Freeport and New Brunswick.

AGC submitted comments Friday to the Financial Accounting Standards Board (FASB) in response to the Board's proposed Accounting Standards Update to create a single revenue recognition standard across multiple industries, including construction.  The accounting update could have significant impacts on construction contractors, including increased administrative costs and effects on surety credit.  By introducing considerable subjectivity into the process, the new standard also will open the door to financial manipulation leading to less consistency and transparency in the financial reporting process in the industry.Although the October 22 comment period has passed, information about the proposal can be found here.  To read AGC's comments to FASB click here.

AGC is finalizing its comments on the Federal Accounting Standards Board's proposed accounting standard that would require the disclosure of withdraw liability from multiemployer pension plans on company financials. AGC's comments urge FASB to withdraw the Exposure Draft and reconsider the proposal.AGC's concerns with the Exposure Draft (ED) are extensive. The draft under-appreciates the costs associated with compliance and overestimates the relevancy of the information that would be provided if the ED were to go into effect as written.  Any information included will be neither timely nor accurately reflective of the financial impact of participating in a multiemployer plan.  The draft significantly underestimates the complexity of the relationship between employers and multiemployer plans, and significantly underestimates the importance of the construction industry exemption that makes almost any liability merely theoretical rather than material.  Comments on the exposure draft are due Monday, November 1, 2010.If you are interested in sending your own letter to the FASB, please keep in mind the following guidelines:Deadline is Monday, November 1, 2011.The FASB will not consider form letters.  Comments should be thoughtful and individually written.Letters can be mailed or emailed to the following addresses:Technical DirectorFile Reference No. 1860-100Financial Accounting Standards Board401 Merritt 7PO Box 5116Norwalk, CT  06856-5116Email: director@fasb.org (For emailed letters, please include "Comment Letter - File Reference No. 1860-100" in the subject line of the email.)

There are  19 days until the November 2 election. Congress has left a number of must pass bills undone.  They made time for Health Care, Financial Regulation Reform and Cap and Trade, but they failed to pass a budget or bills to fund the operation of the government for a full year.  They failed to settle on the best way to address expiring tax cuts and passed a number of short term extensions of significant infrastructure programs like Highways, Transit and the FAA construction program.  Members of Congress will reassemble in the Capitol after the election to deal with two kinds of legislation: "Must Pass Bills" (bills that would cause a shutdown of government programs or other significant disruption if they were not passed) and "other" policy bills. The rules for legislation will not change in the lame duck.  Bills will continue to be written largely by the Senate. If the Senate can pass a bill the House will likely follow suit.  In addition to the three new senators, four Democrats and at least seven Republicans are retiring (not all voluntarily).  It is not clear that any of the retiring senators will significantly change their positions on legislation after Election Day. The Senate will likely remain significantly divided on big issues and make it very difficult to pass anything other than must pass measures.There will be immediate personnel changes in the House and Senate.  The House will fill two vacancies (New York 29 and Indiana 3). Both are likely to go to Republicans.  These will have little impact on the operations of the House. The Senate will add three new senators with special elections in Illinois, Delaware and West Virgnia.  All three of these seats are currently held by Democrats. A Republican pick up in any of these three could effectively shut the door on issues like card check or new OSHA rules.One big unknown is how President Obama will respond to the election.  The president's posture could have a significant impact on the productivity of the lame duck session. Below is a list of  legislative issues that impact the construction  industry that could be addressed during the lame duck; they are divided between "must pass," "almost must pass"  and "other."MUST PASSFY11 Appropriations Bill: The Continuing Resolution (CR) that provides funds to continue the operation of the federal government expires December 3.  The CR is necessary because Congress has failed to enact any of the 12 appropriations bills for FY 2011. Under the terms of the CR most government programs will continue to be funded at FY 2010 levels.  Congress intends to wrap up the 12 unfinished appropriations bills in a large omnibus during the lame-duck session. AGC continues to monitor discussions of limiting discretionary spending and its effect on construction programs. Bush Tax Cuts of 2001 & 2003: Without Congressional action, income tax rates, capital gains, dividend, and estate tax rates will increase on January 1, 2011.  Congress is contemplating three key scenarios: 1) a short-term compromise in which all tax cuts are extended for all taxpayers; 2) extend lower rates for individuals making $200,000 a year or less or couples making $250,000 a year or less; or 3) allow all taxes to go up next year, then consider a retroactive, permanent extension for all tax payers.  Congress also has to reach a consensus on rates for capital gains, dividends, and the estate tax.Highway Extension: This is not a six year bill or any additional funding, this is just keeping the federal program operating after December 31.  Since SAFETEA-LU expired on September 30, 2009, the highway and transit program has been operating under short term extensions. The latest extension expires on December 31, 2010. Congress must take action during the lame duck session to at least extend authorization into next year. The Congressional Budget Office has projected that between the revenue coming in and the general fund reimbursement last March, the Highway Trust Fund is able to support current funding levels through 2011. Although the administration has made two high profile announcements about the need for a six-year bill and suggested that it be front-loaded with an additional $50 billion, the long-term reauthorization is unlikely to be considered until the new Congress convenes.Aviation Extension: Not a multiyear bill, again, just keeping the program operating. The Federal Aviation Administration bill has been operating under short-term extensions since it expired in 2007. It remains unclear if Congress will be able to resolve a number of contentious issues in the legislation before it expires again. AGC is pushing for appropriate increases to the aviation user fee structure to meet airport capital investment needs while also providing for air traffic control modernization.ALMOST MUST PASSDebt Commission Recommendations: The National Commission on Fiscal Responsibility and Reform is a presidentially mandated Commission charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. The Commission must vote on recommendations by December 1.  If and only if 14 of the 18 members of the Commission vote in favor of the recommendations, it will go to the Senate where Majority Leader Harry Reid has agreed to give the recommendations an up-or-down vote by end of 2010. House Speaker Nancy Pelosi has agreed that, if the Senate passes the recommendations, the House will then vote on them.It is unclear if the Commission, which has been meeting since April, can get 14 of their members to support a package of recommendations.  They are still working out details on how it will present recommendations and whether members will vote on the package as a whole or hold separate votes on individual items.DOD Authorization Bill: Congress is at substantial risk of failing to approve a Defense Authorization bill, which sets the priorities and directives of the Department of Defense, for the first time in 42 years. Since matters of national defense are often non-partisan in nature, this authorization bill typically receives bipartisan support and is regularly approved. However, Senate Democrats have sought to use the defense bill as a vehicle to address some controversial social issues in this legislation. In particular, one provision would remove the restrictions on abortions in military hospitals and another would repeal the "Don't Ask Don't Tell Policy." Senate Democrats also attempted to attach an immigration reform measure known as the "DREAM Act" in an attempt to address concerns that this Congress has not acted on immigration reform. Delays over these issues derailed multiple opportunities to pass this bill before Congress adjourned and have now pushed consideration into the lame duck session.OTHER Renewable Energy Bill: One of the first votes in the Senate in November will be a procedural vote on legislation to create incentives for natural gas vehicles and plug-in electric vehicle infrastructure.  Attempts may be made to enact a renewable energy standard (RES) that would require U.S. electricity to be produced by renewable energy sources.Tax Extenders: Congress has yet to enact an extension of roughly $30 billion in tax incentives that expired at the end of 2009.  AGC is concerned that "extenders" legislation would be paid for, in part, by a tax hike on real estate partnership "carried interest."Federal Unemployment Benefits: Two deadlines for individuals to file applications for Federal Emergency Unemployment Compensation and to qualify for the Federal Additional Compensation, the extra $25 weekly benefit amount on state and federal unemployment compensation, are set to expire on November 30 and December 7, respectively. Dream Act: The immigration bill, known as the Development, Relief, and Education for Alien Minors ACT (DREAM Act), could potentially be considered in the Senate but passage of any comprehensive bill is unlikely. The DREAM Act would give conditional permanent resident status to undocumented people who entered the U.S. before their 16th birthday and are pursuing higher education or are part of the military. EPA Carbon Classification Delay: Congress may consider legislation that would delay pending U.S. Environmental Protection Agency regulation over greenhouse gas emissions from stationary sources for two years.  The first EPA greenhouse gas regulations are scheduled to take effect in 2011.Mine Safety Bill: The Miner Safety and Health Act would make significant changes to both MSHA and OSHA. AGC opposes the legislation because it turns the clock back on well over 10 years of progress in improved workplace safety while creating a more adversarial relationship between employers and OSHA.  Negotiations are expected to resume on the bill that passed a House Committee earlier this year.   Paycheck Fairness: The Paycheck Fairness Act is on the Senate calendar after the mid-term election. The bill limits defenses to Equal Pay Act claims and permits unlimited punitive and compensatory damages. This bill would limit employers to base pay decisions on factors like professional experience and local labor market rates.  Employees would have to specifically opt-out of class action lawsuits which would likely dramatically increase the size and penalties of class actions.  AGC has expressed our opposition to the bill to Congress.

AGC and the staff of the California Air Resources Board have reached an agreement on proposed changes to the state's off-road diesel rule designed to give the local construction industry time to recover from the recession while protecting air quality.As part of the agreement, CARB will delay enforcement of the rule until 2014, ease annual compliance requirements and give contractors greatly flexibility in how they can comply. The proposed changes, which will need approval from the board in December, are the result of AGC's successful efforts to identify significant flaws in the Board's original diesel emissions estimates.Read the press release here. Listen to the media conference call for details on the agreement.