WASHINGTON - Federal grants to state and local governments would total $476.1 billion in fiscal 2009, a 2% increase over the $466.6 billion expected to be provided in 2008, according to President Bush's $3 trillion budget proposal.
The meager increase in federal spending for state and local programs is part of a broader strategy to spend tax dollars more wisely and ultimately eliminate the nation's budget deficit by 2012, Bush said in budget documents published yesterday. However, the funding increase is above the 1% growth limit that the White House is seeking to impose on most non-security related programs.
"My budget proposes to keep non-security discretionary spending growth below 1% for 2009 and then hold it at that level for the next 4 years," he said. "It also cuts spending on projects that are not achieving results - because good intentions alone do not justify a program that is not working."
The 2% increase for fiscal 2009, which begins Oct. 1, comes after Congress provided an estimated 1.1% increase for fiscal 2008, a 2.2% boost in 2007, and a 1.8% jump in 2006.
Leading Democratic lawmakers yesterday were critical of the Bush budget.
"The American people expect our nation's budget to chart a course that reflects their values and aspirations, makes critical investments in our future and is fiscally responsible," said House Speaker Nancy Pelosi, D-Calif. "The President's budget fails to meet those standards."
House Majority Leader Steny Hoyer, D-Md. said, "President Bush's final budget is simply a continuation of failed policies that have created dangerous deficits and debt, while at the same time decreasing critical investments in our nation's future."
Hoyer noted that the Bush budget does not eliminate the deficit by 2012 because is does not account for funding the war in Iraq or fixing the alternative minimum tax, which applies to interest earned on private-activity bonds as well as some governmental and 501(c)(3) bonds.
Meanwhile, the Bush budget also called for $39.4 billion for highway construction and $10.1 billion for transit programs. Those funding levels are less than the $41.2 billion for roads and $10.3 billion for transit required under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users. Typically known as SAFETEA-LU, the transportation funding law expires at the end of fiscal 2009. For current fiscal year, Congress provided $40.2 billion and $9.4 billion for roads and transit.
Budget documents attributed the proposed cut in 2009 highway and transit spending, in part, to a provision in the fiscal 2008 omnibus spending package that provided an additional $1 billion from the highway trust fund for bridge repair. Another reason for the cut is that the trust fund will go below a $5 billion balance in 2009, which triggers a cut in spending as gas tax revenues decline with the faltering economy, under the so-called revenue-aligned budget authority statute.
The highway trust fund, which funds highway and transit construction, contains revenues from the federal gas tax, which are distributed to states annually based on a formula. States sometimes use their share of the tax revenue to back tax-exempt bonds issued to finance transportation projects.
While the proposed cuts are below the annual funding authorized in SAFETEA-LU, the budget's spending recommendations "fulfill" a promise to provide $286.4 billion over six years authorized under that law, according to budget documents and Department of Transportation officials.
Nevertheless, "this proposal clearly leaves highway funding short of the 2009 level states had been promised," said American Association of State Highway and Transportation Officials executive director John Horsley.
To temporarily fix an anticipated $3.2 billion 2009 funding short fall in the highway account of the highway trust fund - and keep road construction dollars flowing - the budget proposes allowing the highway account to borrow from the mass transit account. The problem stems from gas tax receipts not keeping pace with spending levels proscribed under SAFETEA-LU,
If Congress does not address the situation in 2009, the 2010 deficit will be much larger than $3.2 billion, Horsley said. AASHTO estimates that a $3.2 billion cut in the federal highway-funding spending translates into about $12 billion in total cuts from state programs.
The budget also includes $175 million for transportation projects that demonstrate alternative strategies for reducing highway congestion through the use of tolling, such as charging higher tolls during peak hours or converting high occupancy vehicle lanes to high occupancy toll lanes.
For the Federal Aviation Administration's airport improvement program, the budget requested $2.7 billion - $765 below the $3.5 billion provided for 2008. American Association of Airport Executives president Chip Barclay called the proposal "short-sighted."
The current laws that govern FAA programs, which were to expire Sept. 30, were temporarily extended through the end of February. Bush intends to resubmit his proposal to replace the 7.5% airfare tax, the revenues of which are placed into the airway trust fund, with a combination of new user fees - which would be set by the transportation secretary - and increased fuel taxes that would also be indexed for inflation. The plan includes raising to $6.00 the cap on the surcharge that airports tack on to air fares to help pay for improvements from the current passenger facility charge limit of $4.50. The plan also includes reducing AIP funding for larger airports and increasing it for smaller ones.
Amtrak would receive $900 million under the budget plan, including $100 million to fund a rail capital grant program for states. That funding level is below the $1.35 billion Amtrak received from Congress for fiscal 2008. q
