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The Administration's FY 2005 Budget Request

With the White House under considerable election-year pressure to restrain spending and reduce the federal budget deficit, the Administration's FY 2005 budget request for surface transportation remains essentially flat in relation to the FY 2004 enacted funding levels. The U.S. Department of Transportation is recommending $33.64 billion in Federal-Aid highway obligation limitation and $7.26 billion in federal transit program spending, amounts identical to those approved for FY 2004. Amtrak would receive $900 million, $318 million less than in FY 2004 and half of the amount requested by Amtrak President David L. Gunn (see below) The only exceptions to holding current spending levels constant are the safety-related programs which the Department considers as a top strategic priority. The FY 2005 budget request contains a 130 percent increase in funding for the National Highway Traffic Safety Administration (to $689 million from FY 2004 level of $299 million); and a 25 percent increase for the Federal Motor Carrier Safety Administration (to $455 million from $364 million in FY 2004).

In a rush to criticize the budget request for its failure to provide increased funding, interest groups have ignored its many innovative features. In addition to elevating safety as a new key strategic objective, the program budget expands the deployment of intelligent transportation systems technology, targets "ready-to-go" highway projects that address traffic bottlenecks, and begins to focus resources on improving global freight connectivity and eliminating bottlenecks in major freight corridors. The FY 2005 program plan also takes steps to raise the profile of transportation system management and operations, streamlines the environmental review process and enhances the overall readiness of the Department to respond to acts of terrorism. Two of the issues raised by the Budget request are further discussed below.

The "New Starts" Program

Last year, the House Transportation Appropriations Subcommittee expressed alarm about the rapidly growing demand for transit New Starts funds and criticized the Federal Transit Administration for exercising inadequate control over access to the New Starts funding pipeline. The FTA was directed by the Committee not to consider any New Starts or expansion of New Starts "unless it determines that the underlying alternatives analysis supports the chosen alternative as the superior choice" (House Report 108-243, quoted in " FY 2004 House Transportation Appropriations Bill," Innovation Briefs , Vol. 14, No. 5, Sep/Oct 2003). This, however, has not deterred the FTA from requesting a total of $425 million in Fiscal Year 2005 as a first installment on funding eight new Full Funding Grant Agreements (FFGAs) with a potential federal exposure of $4.77 billion. In addition, FTA is requesting $150 million in FY 2004 to support 30 other projects in the final design or preliminary engineering pipeline.

As reported in FTA's FY 2005 Annual Report on New Starts (Rpt. No. FTA-TBP10-2004-1), a companion document to the President's Annual Budget Request to Congress, the eight FFGA projects include: (1) the Los Angeles Gold Line East Side Extension (total federal commitment sought: $490.7 million/ FY 2005 appropriation request: $80 million), (2) a 9.4- mile Bus Rapid Transit line along Cleveland's Euclid Avenue ($82.2 million/ $25 million). In last year's New Starts Report, the project received a "Low" rating for cost effectiveness; (3) A monorail system serving the northern portion of the Las Vegas "Strip" ($159.7million/$40 million); (4) a Long Island Rail Road (LIRR) connection under the East River to Grand Central Terminal (potential commitment of $2.63 billion still under negotiation/$100 million) (5) A 25-mile light rail line running from downtown Phoenix through Tempe and terminating in Mesa ($587 million/$75 million); (6) a 1.5-mile LRT extension in Pittsburgh's North Shore area to its existing LRT system ($217.7 million/$55 million). In last year's New Starts Report, the project received a "Low" rating for cost effectiveness.

Two additional projects are listed in the FY 2005 New Starts Report as expected to be ready for a funding commitment in FY 2006 or beyond. They are: (7) A 9.6-mile light rail line extending from Uptown Charlotte to Interstate 485 in south Mecklenburg County ($193 million/$30); and (8) a Regional Rail System in the Raleigh-Durham area. ($413.5 million/$20 million). No doubt, the 30 projects currently in the final design/preliminary engineering pipeline will produce a number of additional candidates for full funding grant agreements in the years ahead.

It should be noted that FTA does not consider a "Low" rating as a statement about the ultimate merits of the project, but rather "an assessment of the project's current strengths and weaknesses." FTA nurses failing candidate projects along ("works with the candidates to improve their estimates of the benefits of the project" in FTA's words) until their "Low" rating can be converted to "Medium." (Projects not rated at least "Medium" receive an overall rating of "Not Recommended." ). This explains why two of the projects rated "Low" last year have ended up as candidates for Full Funding Grant agreements in this year's budget proposal. In FTA's rating and evaluation process there is no such thing as a failing grade: to paraphrase Garrison Keillor, all projects eventually end up "above average".


The debate about Amtrak funding continues. The Administration in its Budget Request has proposed $900 million to support Amtrak in FY 2005, but Amtrak President David L Gunn has asked Congress for twice the amount or $1.8 billion, warning that the Administration's proposal would force Amtrak to shut down. This is not the first time that Gunn has used the threat of a system shutdown to negotiate a funding increase. He used the same tactic last year when he succeeded in persuading Congress to raise the Administration's proposed FY 2004 funding of $900 million to $1.22 billion.

Gunn argues that the Administration proposal would leave unfunded $800 million worth of urgent capital improvements such as replacing crumbling bridges and aging rolling stock. In his congressional request, he pointed to Amtrak's improved financial performance and more transparent accounting as signs of progress. But the Administration wants to see more fundamental changes, as proposed in its Passenger Rail Investment Reform Act. If Congress enacts those reforms, U.S. DOT said it would be willing to support as much as $1.4 billion annually in future years. The main thrust of the Administration recommendations is to secure more local and state funding to support rail service in heavily traveled corridors, and to open up some routes to competition (See "Reinventing Amtrak," Innovation Briefs , Vol. 14, No. 5, Sep/Oct 2003).

The future of that bill and of the funding level for Amtrak, remains unclear. Over the Administration's objections, the Senate approved a six-year $2 billion annual authorization for Amtrak without taking up the reform legislation. However, with the Senate and the House holding widely divergent opinions about Amtrak, the ultimate level of funding for the intercity passenger rail program, as indeed its long-range future, will not be known until the differences are ironed out in a House-Senate conference.



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