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House T&I Committee's TEA LU Bill

Special Report:  Reauthorization of TEA-21’s Highway, Transit, and Safety Programs - H.R. 3550 (TEA LU)  -  March 31, 2004

NOTE:  Also see the following updates to this document:
    Changes in TEA LU from 4/1/2004 Manager's Floor Amendment, including earmarks (4/1/2004)
    Addendum:  Article on bill as passed House on 4/2/2004 (4/16/2004)
    Addendum:  Article re TEA-21 Reauthorization Status (4/23/2004)

On Wednesday, March 31, 2004, the House of Representatives will begin considering H.R. 3550, a bill to reauthorize federal highway and transit programs.  No votes will take place until at least Thursday, April 1.  For your reference, the following is an update of information regarding these programs prepared by the California Institute under the Federal Formula Grants and California Project – a joint venture between the California Institute and the Public Policy Institute of California (PPIC).  Various resources, spreadsheets, and other information are available at http://www.calinst.org/transpo.htm .  (Please note that this information is based on the bill as approved in committee, and does not reflect changes and corrections (if any) that the Committee may have made in the last few days.)

Overview of the TEA LU Bill (as approved by T&I Committee)

On March 24, 2004, the House Transportation and Infrastructure Committee marked up and passed a bill to reauthorize for six years the nation's surface transportation laws.  Dubbed the Transportation Equity Act - A Legacy for Users (TEA LU), H.R. 3550 would provide $275 billion for highway, transit, and transportation safety programs, an increase from the $217 billion 6-year figure of its 1998 predecessor, TEA-21 – the Transportation Equity Act for the 21st Century.  Funding under TEA LU is divided $217.4 billion for highways (FHWA), $51.5 billion for transit (FTA), and $6 billion for safety programs.

The $275 billion total is $100 billion less than many Committee members had hoped for, and – to highlight that belief – during the markup the committee also approved a more generous $375 billion plan (H.R. 3994) which is not expected to come to the floor. (A Senate version of the bill would spend $318 billion; the President had previously proposed an alternative at $256 billion.)

Even though the $275 billion price tag, however, is in dispute; an OMB statement argues that the real TEA LU spending figure is $284 billion.  The Administration is recommending a veto of the bill as proposed, both due to the cost and because it dislikes the bill’s “re-opener” provision.  That provision would terminate all funding by the end of FY 2005 unless new legislation is enacted by then to increase the “minimum guarantee” on states’ highway programs funding to a 95 percent rate of return.

            Spreadsheets showing national totals for highway and transit component programs from the transportation bills, as well as a general side-by-side comparing transit provisions from the House, Senate, and Administration bills with current law are available at http://www.calinst.org/transpo.htm . The information is derived from the Federal Formula Grants and California Project, a joint venture between the California Institute and the Public Policy Institute of California (PPIC).

Highway Program Provisions of TEA LU

            The TEA-LU bill would provide $217.4 billion for federal highway programs, an increase from $171.1 billion under TEA-21, but less than the approximately $255 billion provided by the Senate’s bill, S.1072.  Highway spending would ramp up from $34.4 billion in 2004 to $39.9 billion in 2009.  For the minimum guarantee, the bill would retain TEA-21’s required percentage rate of return on state tax payments at 90.5 percent, but it would apply that share only to highway formula programs, excluding earmarked projects from the scope of that fair share calculation.

            Although funds for the bill are believed insufficient to raise the minimum guarantee on highway programs from 90.5 percent to 95 percent, the bill incorporates a “re-opener” provision – with what might be termed an “equity hammer” – to pressure Congress to address this issue by next year. The bill’s equity requirement would cut off funding for most of the major highway grants by the end of FY 2005 unless a law has been enacted guaranteeing an increase to specified levels - 92 percent in 2006, 93 percent in 2007, 94 percent in 2008, and 95 percent in 2009. The bill also calls for an inflation-adjusted hold harmless provision in such subsequent legislation, whereby every state would be guaranteed its prior-year funding level plus an increase geared to the consumer price index.

            The bill would make little change to the five major core federal highway formula programs, including the Interstate Maintenance (IM) program, National Highway System (NHS) program, Surface Transportation Program (STP), Congestion Mitigation and Air Quality Improvement (CMAQ) program, and the Bridge program.  The bill would carve out a $100 million per year from the bridge program, to be used for discretionary grants, and it would eliminate the interstate maintenance discretionary program.

However, funding for CMAQ – the program that yields California the greatest return – would increase slightly less than the other core programs.  (CMAQ’s proposed increase would be 15.59 percent, whereas the other four programs’ increase would be 15.98 percent.)

As discussed in a detailed 2003 report on California’s share of federal highway formula grant program funds entitled Federal Formula Grants and California: Federal Highway Programs, a joint report by the Public Policy Institute of California (PPIC) and the California Institute – available through a link at http://www.calinst.org/formulas.htm or directly from PPIC at http://www.ppic.org/main/publication.asp?i=467  – California received approximately 9 percent of the nation’s highway formula apportionments under TEA-21.

In 2003, California’s highway formula program shares varied from 21.8 percent of CMAQ, to lower shares of other programs, including Metropolitan Planning (15.3 percent), STP (9.8 percent), NHS (9.4 percent), IM (8.9 percent), Bridge (7.7 percent), and the Minimum Guarantee (7.5 percent).  A summary document provided by the T&I Committee indicates their prediction that California’s share of TEA LU apportionments from 2004 through 2009 will be approximately 9.1 percent of the national total.  A summation of those figures (UNVERIFIED, AS PROVIDED BY THE HOUSE TRANSPORTATION & INFRASTRUCTURE COMMITTEE), for both highway and transit programs, is available at www.calinst.org/datapages/tlu-totals.htm .

High Priority Projects, Mega Projects, and the Minimum Guarantee (MG)

High Priority Projects

            TEA-21 established a “high priority projects” (HPP) account to list special projects and funding earmarks for them, and it provided $9.4 billion over 6 years to underwrite the projects.  California accounted for $877 million or 9.4 percent of the nation’s total HPP earmarks under TEA-21.

The House TEA LU bill proposes total funding of $11.1 billion for nearly 3,000 HPPs over 6 years.  However, the House bill’s earmarks account for only $8.6 billion, allowing some flexibility for adding projects during conference with the Senate.  (It may be instructive to remember that each state’s funding levels may change between this version of the reauthorization bill and a final conferenced bill.  In 1998, the House version of the bill provided California 10.4 percent of HPP funding ($919 million of the nation’s $8.9 billion).  As noted, the version of TEA-21 that emerged from conference reduced California’s share of HPP funding to 9.4 percent.

California’s 235 projects account for $939 million – approximately 11 percent of the U.S. total earmarks in this version of the bill.  A full list of California projects, and a breakout of project totals by state, is available at http://www.calinst.org/transpo.htm .

Projects of National and Regional Significance (Mega Projects)

TEA LU authorizes a new $6.6 billion “Projects of National and Regional Significance” (a.k.a. “mega projects”) program to help States pay for high-cost highway projects that have significant national or regional benefits.  This discretionary grant program would be funded at between $1.1 billion and $1.3 billion per year nationwide, for a total of $6.6 billion over the bill’s 6-year life. Projects funded (expected to be at least $500 million each) would be expected to create jobs and expand business opportunities, improve safety, as well as leverage federal investments, and employ new technologies (including intelligent transportation systems). Grants would be financed via so-called Full Funding Grant Agreements (FFGAs), a tool used to fund transit New Starts capital projects, for example.

Importantly, the TEA LU bill does not specify how those funds are to be allocated.  In addition, it excludes both HPPs and Mega Projects from the MG rate of return calculations.

Minimum Guarantee – The “Size and Scope” Debate

            There has been considerable discussion about whether to increase the highway programs’ Minimum Guarantee (MG) from the TEA-21 level of 90.5 percent to a higher level, perhaps 95 percent or somewhere between.  The MG provides additional funding for transportation projects in “donor states” (such as California) that pay more federal gas and related taxes than they receive back in federal highway spending.

            Under TEA-21, the “scope” of the MG – the array of programs that are tallied to determine whether a state’s share is “fair” or not – is relatively wide.  TEA-21 guarantees a 90.5 percent aggregated minimum share return from contributions to the HTF Highway Account (from two fiscal years prior) for Interstate Maintenance (IM), National Highway System (NHS), the Bridge Program (HBRRPP), Congestion Mitigation and Air Quality (CMAQ), Surface Transportation Program (STP), Metropolitan Planning (MP), High Priority Projects (HPPs), Appalachian Development, Recreational Trails, and MG programs combined. If a state’s receipts from these programs would otherwise constitute less than 90.5 percent of their HTF Highway Account contributions, the MG provides extra funding (in amounts that change from year to year) to increase the state’s funding to that higher level.  The formula also guarantees each state at least $1 million in MG funds per year.

California received $436 million from the MG in fiscal year 2002, which was 7 percent of the nation’s $6.2 billion total distributed among all states in that year.  This amount results because California’s $2.1 billion in receipts from the programs within the MG’s scope was less than 90.5 percent of the $2.8 billion the state’s taxes added to the HTF for that year.  With the addition of $436 million to the state’s initial $2.1 billion in funding, the state’s rate of return rose above the prescribed 90.5 percent minimum return.

            Nevertheless, it is interesting to note that, after these calculations, California’s final rate of return in 2002 was only slightly above the 90.5 percent MG level, and California is one of the states least helped by TEA-21’s selection of the 90.5 percent level. In fact, no other rate of return level, whether higher or lower, would help California less.  (An increase to a 90.6 percent rate would raise California’s 2002 funds to $439.2 million, and a decrease to a 90.4 percent rate would not reduce the state’s MG apportionment below its $435.7 million level (but would reduce the nation’s overall MG cost).

            According to a 2003 report by PPIC and the California Institute, the nation’s total MG funding that would have been required in 2002 to guarantee a 95 percent rate of return on HTF contributions would increase the overall MG program by $3.3 billion to $9.6 billion.  At a 95 percent return, California would receive $874 million – 9.1 percent of the MG total, and the state’s $439 million increase would be 11.7 percent of the nation’s total $3.3 billion required MG increase. An increase to a lower percentage return – 92 percent or 93 percent return, for example – would produce similar results, with California’s percentage growth in MG funding roughly twice that of other states.  The report is available from PPIC at http://www.ppic.org/main/publication.asp?i=467 .

The “Scope” Question

            The Committee-approved TEA LU bill would alter the range of programs on which the MG is calculated. Whereas the scope of TEA-21’s MG-covered programs accounted for approximately 95 percent of all highway funds, the TEA LU bill proposes to scale back covered programs by removing the $11.1 billion in High Priority Projects (HPP) earmarks from the calculation.  On the other hand, it would add four newly proposed programs to the MG calculation (Freight Intermodal Connectors, Safe Routes to School, Highway Safety Improvement Program, and High Risk Rural Road Safety Improvement) – these programs are discussed below.  The proposed $6.6 billion in mega projects funding would not be included in the MG’s scope.

            An important consideration in assessing the scope question is the issue of what funding is guaranteed, and whether non-guaranteed funding should be included when assessing share returns.  Proponents of increasing the MG percentage argue that a reduction in the scope will reduce guaranteed funding to every state, which is true.  Whether the amount of TOTAL funding to a state will fall depends on the state’s receipts from other discretionary programs.  In general, if a state receives a large share of a program’s funding, that state would benefit from that program’s exclusion from the scope of the MG.  (For example, California received 7.4 percent of 2002 Bridge program funding and 21.3 percent of CMAQ funding.  California benefits from the inclusion of the Bridge program in the MG’s scope, but not from the inclusion of CMAQ.)

            California’s share of TEA-21’s HPPs counted in the MG (most, but not all, were in the MG’s scope) was just below 9.5 percent, a share slightly greater than the state’s share of other programs counted for the MG.

Other Highway Provisions

The bill requires each state to spend a portion of its NHS, CMAQ, STP, and IM funding for intelligent transportation systems deployment. The bill requires national spending of $500 million per year for the six-year period, and a state’s required set-aside share would be determined by multiplying that amount by the state's share of the nation's funding for those four programs. The funds would be shifted from within ongoing state accounts; no separate funding is provided.

TEA LU would also require states to spend a portion of their highway formula for congestion relief activities (adding capacity, improving access, increasing efficiency and reliability) in urbanized areas over 200,000 in population.

Among the new programs proposed by the bill is a National Corridor Infrastructure Improvement program – a $600 million discretionary program with a focus on international trade that DOT would distribute considering intermodalism, truck traffic increases, and both cargo and passenger vehicle mobility.  California’s prominent international trade position may make the state a logical recipient of such funding.

Similarly, California’s statistics might provide the state a significant portion of a proposed “coordinated border infrastructure program.”  The new $200 million per year formula grant ($1.1 billion over TEA LU’s 6-year life) would apportion funds among border states according to each state’s share of incoming commercial trucks (20%), incoming cars and buses (30%), and weight of incoming cargo (25%), and on the number of land border ports (25%).

On the other hand, because of unfavorable formula design, California would receive little funding from another program that might normally be expected to benefit California.  A new Freight Intermodal Connectors (FIC) program seeks to improve the productivity and efficiency of freight transportation. Funding of $250 million per year ($1.4 billion total) would be allocated based on each state’s share of three equally-weighted factors: number of freight intermodal connectors (33.3%), annual commercial vehicle contributions to the Highway Trust Fund (33.3%), and the National Highway System formula (33.4%).  California houses the nation’s largest and busiest port complex, and a formula based on volume of traffic might benefit the state.  But the proposed FIC formula bases funding on the number of connector roads, and a 2000 study by FHWA identified 584 intermodal freight connectors nationwide, of which just 34 – or less than 6 percent – were in California.  The formula’s other two factors would benefit California little more: the state’s share of NHS funding was 9.2 percent, and its share of commercial vehicle HTF contributions was 7.9 percent.

A new “Safe Routes to School” program would apportion to states $1 billion over 6 years based on elementary and middle school enrollment.  However, the program contains a very large “small-state minimum” provision: each state would receive at least $2 million per year, which thereby apportions $102 million equally among states (50 plus DC).  Thus, almost all of the proposed $125 million to be apportioned in 2004 would be distributed equally among states.  Even by 2009, when the program would grow to $200 million, half of formula funds would be distributed evenly among states – essentially providing a 1 percent small-state minimum.  Typically, California is the state that is most disadvantaged by small-state minimum provisions.

As approved by the Committee, TEA LU creates a new formula for apportioning $210 million per year (beginning in 2005) to install protective devices at railway-highway grade crossings. Funds would be based on the number of public crossings (50%) and the STP apportionment factor (50%). Although the total will depend on what data is used to calculate apportionments, FRA data indicates that California houses 4.2 percent of rail grade crossings, and the mixed formula might provide the state approximately $14.5 million (6.9 percent) of the nation’s funds.

A $675 million new formula grant for improving safety on high-risk rural roads would likely provide California limited funding.  The state has among the lowest proportions of its population living in rural areas.  The formula would apportion funds one-third on public road lane mileage for rural minor collectors and rural local roads, one-third on nonurbanized population, and one-third on vehicle miles traveled on public roads (the bill’s language does not specify rural miles traveled).  California accounted for 3.2 percent of rural minor collectors, 3 percent of rural local road miles, and 4.3 percent of nonurbanized population, and 11.2 percent of total road miles traveled.  Averaging these three factors, California’s share of funding might be approximately 7.6 percent.

A Dedicated Truck Lanes discretionary pilot program would provide $25 million per year to help separate commercial truck traffic from other traffic, and a discretionary truck parking facility pilot program would be authorized at $5 million per year.

Regarding specific California projects, under the heading “high priority corridors on the national highway system,” TEA LU would add seven additional corridors, the first of which reads ‘‘(46) Interstate Route 710 between the terminus at Long Beach, California, to California State Route 60.”  (No additional funding is specified for the projects.)   And a TEA LU miscellaneous highway provision states, “The Harbor Boulevard off ramp from Interstate Route 405 in Costa Mesa, California, is deemed to satisfy the requirements of Title 23, United States Code, that govern the approval of the placement of ramps off of a Federal-aid highway.”  Another provision states, “The right-away revolving fund loan issued for the rail project that extends from Humboldt County to the San Francisco Bay Area and secured by the State of California and that was initiated in 2001 is deemed satisfied.”

            For a detailed discussion of federal highway formula grant programs, see Federal Formula Grants and California: Federal Highway Programs, a joint report by the Public Policy Institute of California (PPIC) and the California Institute from February 2003, available through a link at http://www.calinst.org/formulas.htm or directly from PPIC at http://www.ppic.org/main/publication.asp?i=467 .  Other links relating to TEA-21 reauthorization are available at http://www.calinst.org/transpo.htm .

TEA LU and Transit Programs

For transit programs administered by the Federal Transit Administration, TEA LU would provide $51.6 billion over six years (beginning with $7.3 billion in 2004 and rising to $10 billion in 2009).  TEA LU would specify that all transit funding be guaranteed (derived from the Highway Trust Fund).  The $51.6 billion total would represent an increase from the TEA-21 level of $41 billion, $36 billion of which was guaranteed (from the HTF) and $5 billion of which was discretionary (appropriated from the General Fund).  Two major categories comprise most transit funding: formula grants and capital improvement program grants.  In recent years, California has received between 15 and 17 percent of transit formula funding; the state’s share of capital grant projects has been less consistent.

 A summation of state-by-state apportionment figures (UNVERIFIED, AS PROVIDED BY THE HOUSE TRANSPORTATION & INFRASTRUCTURE COMMITTEE) for both highway and transit programs, is available at www.calinst.org/datapages/tlu-totals.htm .

Transit:  Formula Programs

TEA-21 distributed formula funds to three core programs as follows:  91.23 percent to the Urbanized Area Formula Grant (UAF) program, 6.37 percent to the Non-Urbanized Formula Grant program and 2.4 percent to the Elderly and Persons with Disabilities Formula Grant program.  TEA LU proposes to alter this core formula grant allotment scheme by reducing UAF funds to 89.5 percent of the total, increasing rural grants to 8 percent, and slightly increasing the elderly and disabled grant to 2.5 percent.

Because California’s share of formula program funds is greatest from the UAF – the state received 17.1 percent of the nation’s UAF total in 2003, 10.5 percent of elderly and disabled funds, and 4.3 percent of nonurbanized funds – the state’s share of funds would decline from the amount it would have received without the proposed change in the mix of formula allocations.

TEA LU would add a low density formula adjustment to nonurbanized formula, elderly and disabled formula, and the newly-created New Freedom program grants.  Low density provisions give greater weight to target populations from states (such as Alaska and Wyoming) with sparse populations.  The Nonurbanized formula grant would multiply the rural population of states with 10 or fewer persons per square mile by 1.5 and of states with 11 or 12 rural persons per square mile by 1.25.  The Elderly and Disabilities Formula grant would multiply target populations in states with 10 or fewer persons per square mile by 2 and would multiply the number of elderly and disabled persons from states with 11-30 persons per square mile by a factor of 1.25.  (According to the 2000 Census, five states – Alaska, Montana, North Dakota, South Dakota, and Wyoming – would have Elderly and Disabilities Formula grant program populations double-counted, whereas five other states – Idaho, Nebraska, Nevada, New Mexico and Utah – would have their population counts increased by 25 percent.)

The proposed New Freedom initiative under TEA LU would apportion $590 million in new grants to states based on their share of disabled persons.  Funds are apportioned 60 percent to large UZAs (200,000 persons or more), 20 percent to small UZAs (50,000 to 200,000), and 20 percent to non-urban areas (less than 50,000) within states.  Another low-density adjustment would double the weighting of small UZA populations in states with a population density of 10 or fewer persons, and multiply small UZA numbers by a factor of 1.5 in states with a population density of 11 to 30 persons per sq. mile.  For New Freedom funds in nonurbanized areas, TEA LU would multiply counts by 1.5 in states with 10 or fewer persons per sq. mile, whereas states with 11 or 12 persons per sq. mile would receive an adjustment of 1.25 to their population of disabled persons.  TEA LU’s low-density adjustment would not apply to large urbanized area populations for New Freedom funding.

TEA LU proposes a high performance grant program that would benefit small transit intensive UZAs (50,000 to 200,000 persons) that can match or outperform larger UZAs (200,000 to 1 million), across a number of performance categories.  TEA LU’s high performance program provides $255 million over 6 years to small UZAs that meet or exceed large city industry averages for: passenger miles traveled per vehicle revenue mile, passenger miles traveled per vehicle revenue hour, vehicle revenue miles per capita, vehicle revenue hours per capita, passenger miles traveled per capita, and passengers per capita.  In 2001, California’s share of total passenger miles was 14.3 percent of the nation, whereas the state’s share of the nation’s revenue hours and vehicle hours stood at nearer 15.3 percent of the national total.  A recent Census Bureau report indicated that California’s share of public transit commuters is 11.7 percent.

Transit:  Capital Investment Program

Under TEA-21, Capital Investment Program grants are split between New Starts, Fixed Guideway Modernization (FGM), and the Bus and Bus Facilities program.  (FGM is a formula; the New Starts and the bus program are discretionary.)  TEA LU would retain the existing 40%-40%-20% split for distributing the $22.1 billion total capital investment grants over six years.  Projects would qualify for New Starts funds construction if their federal share of costs lies above $75 million and they receive a “highly recommended” or “recommended” approval rating from DOT.

After taking down $1.02 billion for a newly-devised Small Starts program (new fixed guideway capital construction of projects with a federal share of costs between $25 and $75 million), TEA LU provides $8.5 billion for New Starts, $8.5 billion for Fixed Guideway Modernization grants, $4.2 billion for Bus and Bus Facilities discretionary grants.

The T&I Committee’s TEA LU bill earmarks $942 million in Member projects under the bus program for fiscal years 2005, 2006, and 2007.  This represents about 46 percent of the $2 billion in bus program authorizations for those three years, thus leaving room for additional earmarks in a conferenced bill.  Of the $942 million in total earmarks, California would receive $178 million, or 18.9 percent.

The House TEA LU bill earmarks $3.1 billion in funding for 21 Full Funding Grant Agreements (FFGAs) under the New Starts program, and three California projects are on that list. The San Diego Mission Valley East Light Rail Extension is slated to receive $64 million in 2004, $81.7 million in 2005, and $7.7 million in 2006 (as the project nears completion). The San Diego-Oceanside Escondido Rail Corridor would receive $47.2 million in 2004, $55 million in 2005, and $12.2 million in 2006. And the SFO Airport - BART subway extension is to receive $98.4 million in 2004, $100 million in 2005, and $81.9 million in 2006.  California’s earmarked funding would thus total $548 million over the 6 years, which is 17.6 percent of the $3.1 billion total earmarked nationwide. (In addition to FFGAs, the TEA LU New Starts language specifies closeout funding for five New Starts projects that are nearing completion: under “Other Project Authorizations,” the bill provides $2.4 million, with California’s sole project (the LA-North Hollywood MOS3) accounting for $663,000 or 27.4 percent of the total.)

TEA LU does not specify which of the New Starts projects that are now at the “final design and construction” stage should be funded and with how many dollars, but the bill provides $5.5 billion for 41 such projects nationwide, including seven in California.  Likewise, the bill suggests (but does not require) maximum total funding of $745 million for 143 projects at an earlier stage of the funding pipeline – “Alternatives Analysis and Preliminary Engineering” – and 16 of these possible future New Starts projects are located in California.

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