Federal Stimulus Package Provides Jump Start For Transportation Projects

In February, President Obama took a major step to get transportation moving again when he signed the federal stimulus package - the American Recovery and Reinvestment Act of 2009 - providing $787 billion ($575 billion in new spending and $212 billion in tax cuts) to help turn around the country’s struggling economy. The bill included substantial one-time funding for transportation and other provisions impacting motorists, including new vehicle purchase incentives.

Of the total stimulus bill, $46.7 billion (5.9 percent) was allocated for transportation purposes. The bill included strict “use-it-or-lose-it” deadlines to ensure that the funds will be put to work quickly. Investing in our transportation infrastructure is a great way to boost employment in the short term, while making a lasting impact on the economy and mobility.

As the stimulus bill was being developed, the Auto Club advocated for the inclusion of an adequate level of transportation infrastructure funding, the use of existing formulas to quickly distribute funding across the country, a reduction in federal “red tape” to streamline project delivery, the addition of greater transparency and accountability in the use of the stimulus funds, and the selection of projects that could both be completed quickly and have a lasting benefit for mobility and the economy. While less than 6% of the funding was allocated for transportation purposes, the final bill is consistent with the Auto Club’s recommendations. The following is a summary of key aspects of the final stimulus package.

• Highway Funding ($27.5 Billion) - States and local agencies will use the money for highway and bridge improvements, although some can be “flexed” to transit projects. The bulk of this money will flow through existing formulas. According to the bill’s “use-it-or-lose-it” requirements, states will have until the end of June 2009 to issue contracts for the first half of their allocations and until March 2010 to contract for the remaining half. All unused funds after these deadlines will be redistributed to other states.  California will receive $2.57 billion in this formula-based highway funding. The state legislature has passed special legislation to make sure the federal dollars get to Caltrans and to the regional and local agencies that will be building the projects quickly. Based on the progress to date, California appears to be in a good position to meet the federal spending deadlines and to take additional funding from other states that don’t meet the deadlines.

• Transit Funding ($8.4 Billion) - The transit share is only for capital projects, not operations, and will be subject to “use-it-or-lose it” requirements as well. California’s transit operators will be receiving $1.06 billion via existing formulas to develop projects statewide.

• Other Transportation Funds ($10.8 Billion) - The bill includes $1.5 billion for competitive grants to transportation projects, $1.3 billion for Amtrak improvements, and $8 billion for development of high speed rail. In addition, President Obama has proposed $1 billion annually over five years for high speed rail projects nationwide as part of the budget process. California hopes to compete well in the chase for additional stimulus dollars for high speed rail, intercity rail, and other transportation improvements.

• Incentives for New Vehicle Purchases - The bill allows an income tax deduction for state and local sales and excise taxes paid to purchase new cars, light trucks, recreational vehicles, and motorcycles during 2009. This deduction is not allowed for taxpayers with personal incomes over $125,000 or household incomes over $250,000, and cannot be used for purchases exceeding $49,500.

• Green Vehicle Technologies and Energy Initiatives - The bill includes over $40 billion for a variety of energy-related programs, including $2 billion to aid manufacturers of next-generation car batteries and $200 million in grants for electric vehicle technology research. State and local governments will receive $700 million to reduce diesel emissions and buy new alternative-fuel vehicles. Another $600 million is allocated to improve fuel efficiency of federal vehicles.

Next Steps

The federal stimulus bill is providing a significant boost for transportation funding, but the job is far from over. Our transportation needs are so great that these billions of dollars for transportation represent but a small first step towards the ultimate goal. Underlying this much-welcomed one-time infusion of funding is a broken transportation-funding system. The federal Highway Trust Fund, which is where the federal gas tax revenues go before being used for highway and transit projects, ran out of money last fall - requiring an $8 billion infusion from the general fund - and is expected to go broke again later this year.

The federal government, while not spending enough on transportation, is simply spending more than it gets from gasoline taxes - the federal gas tax of 18.4 cents per gallon was last increased in 1993. And, the money that it does spend sometimes goes to ineffective projects and is often spent inefficiently, with even modest sized projects tied up in red tape for years wasting millions of dollars.
The Auto Club has urged President Obama and Congress to get moving on the next steps - the passage of a new, multiyear transportation bill (the current bill expires at the end of September) that both increases transportation funding and reforms the way those funds are used. The nation needs to invest more in roads and transit, but motorists (who will likely be asked to pay more in gas taxes or other charges to achieve this) must be assured that the money goes only to the best projects and that it is spent more efficiently. And, we need to do away with the political “earmarks” that funnel money to dubious projects, like the infamous “bridge to nowhere.” Greater investment in transportation paired with clear spending reforms and efficiencies is a path to a better future.