Congress continues to make progress in passing the remaining FY'02 federal agency appropriations bills, now over two months overdue. The DOT bill was completed late last week. The major funding bill still being developed is the bill for the Department of Defense, which is being used as a vehicle for $20B in emergency disaster relief spending. Debate continues over the best way to stimulate the economy, but with less emphasis now on infrastructure spending as a mechanism.

TEA 21 Reauthorization Activities:
The Senate Environment & Public Works Committee (EPW), which has jurisdiction over highway programs, announced a series of hearings for 2002 on a wide range of subjects related to TEA 21 reauthorization. No dates were provided but the hearings will focus on lessons learned from TEA 21, firewalls and Trust Fund forecasts, mobility, congestion and intermodalism, operations and security, transportation planning and smart growth, innovative financing, air quality, conditions and performance standards, project delivery and environmental streamlining, freight and intermodal facilities, and rural transportation. Senator Baucus, the chairman of the Senate Finance Committee and a long time senior member of the EPW Committee announced that he plans to have the Finance Committee hold hearings next year on issues related to the Highway Trust Fund balance, tax revenue scenarios and innovative financing and bonding mechanisms.

FY'02 DOT Appropriations
On November 30, 2001, the House and Senate conferees to the FY'02 DOT Appropriations bill finally reached an agreement with the White House on the Mexican truck issue and then rapidly completed the final bill. The House quickly approved the bill and the Senate was expected to do so December 4th. The overall bill is $59.6B, a 2.5% increase over current levels. Although the bill passed overwhelmingly in the House - 371 to 11, there is growing controversy over the last minute transfer of RABA funds from the highway formula program to discretionary earmarks. The highway and transit TEA21 guaranteed funding levels were honored, but some $1B in TEA21 RABA funds (additional Trust Fund revenues over estimates equally a total of $4.5B in FY'02) were diverted from the TEA21 statutory programs to fund Member requested project earmarks. Members of the TEA21 authorizing committees are very upset at this power play by the appropriators and are threatening to possibly try to alter the shift in some other piece of legislation.

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Although there has been a growing trend of increased earmarking in appropriations bills, this year's bill makes a dramatic jump. Close to 100 airport projects under the AIP program, historically identified for priority treatment but with final discretion left up to FAA, were specifically earmarked this year. All the TEA21 discretionary programs, such as the Border Crossing and Trade Corridors, TCSP, Federal Lands, ITS and Bridge programs, were not only 100% earmarked but additional RABA funding was added over the TEA21 levels for additional earmarks, leaving no discretion for US DOT. By diverting about $1B in RABA funds to earmarks, state will be getting about 11% less in RABA formula funds than expected (with CA, NY and TX the biggest losers) and no RABA bonus funds will be available for about 40 highway High Priority Projects. Programs that will receive a big jump in RABA funds include the Borders & Corridors and TCSP programs, but with all of the extra money earmarked.

The final bill provides $32.9B for FHWA, with $31.8B of that going to the core FHWA program. FAA will receive a total of $13.3B with $3.3B going to the Airport Improvement Program (AIP), the AIR21 guaranteed level. FTA will receive $6.7B and Amtrak will get the expected level of $521M for capital expenses. An additional $1.25B is made available from general funds for the new Transportation Security Administration (TSA) authorized by the recently passed aviation security bill.

The final bill does not include the $100M extra in transit New Start funds which the Senate bill had included. Therefore many New Start projects received less than expected. Even many projects with Full Funding Grant Agreements (FFGAs), received a modest "haircut" in order to accommodate as many projects as possible within a finite pot of money.

Please note: a number of New Start projects which appear to have been zeroed in the FTA section of the bill were actually funded under "General Provisions" at the end of the bill using some of the $1B in RABA funds discussed above.

The final conference report can be accessed through the Internet at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=107_cong_reports&docid=f:hr308.107.pdf
(Note: it takes a very long time to load).

The transit New Start earmarks can be found on page 114 and the bus earmarks on page 106. The highway earmarks for the TCSP, Federal Lands, Bridge, ITS, Interstate Maintenance, Borders and Corridors, etc. programs can be found starting on page 80. High Speed Rail earmarks are on page 100. FAA airport High Priority projects are on page 74. The additional projects funded with some of the diverted RABA money, including a number of rail and New Start projects can be found under "General Provisions" starting on page 124.

Economic Stimulus:
Just prior to the Thanksgiving recess the Senate Democratic leadership failed to get enough votes to pass an economic stimulus bill on the Senate floor. House and Senate leaders are now working behind closed doors to come up with a compromise between the House-passed bill, which provides tax relief only, and the broader Senate version. Late in the last week of November, in an effort to reach a compromise, Senate Majority Leader Tom Daschle agreed to drop all homeland security and infrastructure funding from the stimulus bill. The hope is that funding for a limited number of those programs will be added on to the pending DOD Appropriations bill as part of the emergency spending supplemental, but the outlook is not promising. What once looked like an easy $5B each for highway, transit and rail programs, and then gradually lowered, now looks unlikely.

Although separate bills which would provide funding for Amtrak tunnel safety, port security and some water security programs are still pending in Congress and may still be incorporated in the DOD bill, the proposed funding levels keep being whittled down.

However, there is some talk of doing another stimulus/emergency spending bill after the first of the year to provide additional funding for the war in Afghanistan and to fulfill President Bush's promise of $20B for New York City.

As they work to finalize an acceptable stimulus bill, Republicans continue to push for various tax cuts, including the elimination of the alternative minimum tax (AMT) for business, while Democrats want billions in worker relief such as unemployment benefits, training grants, and health care assistance for workers who have lost their jobs. One interesting compromise that Members seem to be gravitating toward is the concept of a payroll tax holiday. A month-long elimination of payroll taxes would provide relief for both individuals and employers.

DOD Appropriations/Emergency Supplemental:
As discussed above, the DOD appropriations bill is being used as a vehicle for the remaining $20B in emergency relief funds from the original $40B the President and Congress agreed to immediately after September 11. The House has already passed its version of the bill and the Senate is expected to take up its bill this week. The President has insisted that the extra funding be kept to $20B, but Members of Congress are interested in adding additional programs. In addition to $7.3B for the military, the House bill provides $4.3B for FEMA, including money for public works construction, $743M for DOT for aviation and Coast Guard security, $302M for Customs Service border and port security, $140M for EPA and $139M for the Corps for enhanced security of water supplies and $88M for DOE for power and nuclear plant security.

On December 20, almost two months after its original adjournment target, Congress recessed for the holidays and ended the first session of the 107th Congress. A number of major bills were completed in the days and hours before they adjourned, but a number of other key bills couldn't be resolved and will have to be taken up when Congress returns on January 23, 2002. The most prominent bill not to be completed was the economic stimulus bill, but all the infrastructure program funding had been dropped from the bills weeks ago. The stimulus bill bounced back and forth from the House to the Senate up until the last minute, but a compromise could not be reached between the House Republicans' plan to cut taxes to stimulate the economy and Senate Democrats' insistence on health insurance and unemployment benefits for workers who had lost jobs. It is possible Congress will take another stab at a stimulus bill early next year.

Several other security-related bills were completed and the final three federal agency FY'02 appropriations bills were approved. The administration is expected to send its FY'03 federal budget proposal to Capitol Hill on February 1.

Security Related Legislation:
Emergency Supplemental: The final approved FY'02 DOD Appropriations bill includes a $20B emergency supplemental appropriation for disaster relief and counter-terrorism activities. Of that amount, $8.2B is provided for homeland security. The infrastructure related programs include funds for the Customs Service for border crossing facilities, $93M for grants to US seaports for security enhancements and assessments and $309M in funding for the FAA, in part for explosive detection systems. The bill also includes $8.2B for disaster recovery in New York City and the DC area, which when combined with $3B in previously released funds, totals over $11B. This money includes $100M each in transportation assistance for security enhancements for Amtrak, PATH and New Jersey Transit systems and NY/NJ ferries, for a total of $300M.

Port Security: On December 20 the full Senate passed a bill to increase security at US ports. The House has not yet produced a similar bill but may take up the Senate bill in January. The Senate bill requires USDOT to develop standards and procedures for conducting security evaluations and port vulnerability assessments. It authorizes $966M for port security upgrades, over and above the funding approved in the DOD bill (see above). It authorizes both federal grants and loans and loan guarantees for security infrastructure enhancements. It requires all ports to have a comprehensive security plan.

Rail Security: At the last minute Senate leaders decided to drop the rail security provision that had originally been considered along with the port security bill. The Administration expressed objections over the scope of the infrastructure improvements. Approximately $1.77B in federal funds for Amtrak fire and safety programs and tunnel improvements in New York City and DC/Baltimore had been approved by the Senate Commerce Committee but were then dropped during floor consideration. Senate supporters have vowed to re-visit the rail bill when Congress reconvenes in January.

Bus Security: Similar bills have been introduced in the House (HR 3429) and Senate (S 1739) to authorize grants to increase bus safety and security. The bills would establish a $200M fund for FY'02 to make grants to private bus operators, such as Greyhound, for security improvements such as passenger screening, baggage inspection and security upgrades at bus garages and terminals. The program, if passed, would be funded through a 25-cent surcharge on "over the road" bus tickets.

DOT Security: US DOT Secretary Mineta announced the selection of John Magaw to be the new Undersecretary for Transportation Security, heading up the Transportation Security Administration (TSA) which was recently created by the Aviation and Transportation Security Act. The Senate voted to confirm Magaw on December 20. He will serve a five-year term. Magaw has served in senior positions at the Secret Service, ATF and FEMA. Although the initial focus of the TSA will be on aviation security, particularly hiring and training thousands of newly federalized airport baggage screeners, eventually the agency will oversee all transportation security, including ground transportation.

Other Items of Interest:
President Bush signed the FY'02 DOT Appropriations bill on December 18. It is now Public Law 107-87. The bill includes very controversial report language directing the Federal Transit Administration not to approve any Full Funding Grant Agreements for transit projects that propose a federal share greater than 60%. Current law permits an 80/20 match. Although report language does not carry the weight of law, federal agencies usually abide by it in order not to anger the appropriators. In addition to the DOT appropriations bill, numerous transportation projects and provisions were added to the just-passed DOD/Emergency Spending bill. A more detailed discussion of those provisions will be distributed shortly.

In mid-December the Senate Commerce Committee held a confirmation hearing for Emil Frankel to be Assistant Secretary for Policy at US DOT and Jeff Shane to be the newly created Undersecretary for Policy, but the full Senate did not vote to formally confirm them before recessing. Both are currently at USDOT in a consultant capacity but won't be official until late January, at the earliest. FHWA and FTA each announced the appointment of Chief Counsels. Neither position requires Senate confirmation. Will Sears, a former consultant to APTA, transit lobbyist and a staffer for Senator Santorum (R-PA) is now in place at FTA. James Rowland, most recently a minority chief counsel to the Senate Judiciary Committee and former Senator Brownback (R-KS) staffer, will be the FHWA Counsel.

The final DOD Appropriations bill contains a provision which prohibits Amtrak from using any federal funds to develop a liquidation plan as required by the recent vote by the Amtrak Reform Council. This gives Amtrak a temporary reprieve while congressional supporters work out a plan for financial support for Amtrak. However, during the week of December 17, a key member of the House Transportation & Infrastructure Committee, Rep. John Mica (R-FL) introduced a bill to liquidate Amtrak. It is unclear if his bill will have much congressional support.

Language severely restricting the federal government from contracting work out to the private sector was dropped from the final version of the FY'02 Department of Defense Authorization bill. The so-called Abercrombie Amendment, added to the House version of the bill, was strongly opposed by many business and engineering groups.