The Transportation Construction Coalition supports a multi-year reauthorization of the federal surface transportation program funded at the highest level that can be supported through the Highway Trust Fund. If this is not possible before Congress adjourns this year, however, it is essential that the programs in the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) be temporarily extended until a new multi-year authorization can be passed.
Construction is a major force in the national economy. The last Census of the Construction Industry tallied 572,851 construction companies with a total employment of 4.6 million persons, annual estimated payroll of $118 billion and value of work put in place of about $528 billion annually in the United States. Because the construction industry puts in place the infrastructure that keeps America's economy on track, derailing the construction industry is tantamount to derailing the nation's economy.
More specifically, for this hearing, I want to discuss the disastrous impact an extended delay of highway reauthorization legislation will have on the highway construction industry and the American economy, and why we believe a short-term extension of the program is crucial.
As you know, on September 30, the authorization for the nation's highway and transit programs expired. Until Congress approves a new highway bill, or at least extends the expired bill, the U.S. Department of Transportation (DOT) cannot release new highway funds to the states. It is imperative that the program not be allowed to lapse any longer. The highway construction industry is largely dependent on the federal-aid highway program for capital funding. On average, federal funds account for 44% of highway capital investment.
While it appears that a multi-year reauthorization bill is not possible this year, I want to impress upon you why an extension of the program is essential. I would like to use an example from Saturday's Washington Post. The article, "Delay of Wilson Bridge Funding Criticized" quotes Virginia DOT Secretary Robert Martinez saying, "if everything goes right, we are right at the brink of a major, regional transportation crisis." AAA President, Robert L. Darbelnet seems to agree saying, "With each passing day 172,000 vehicles pass over the bridge, making it a little less structurally sound and bringing it closer to the day when traffic restrictions will have to be imposed."
I know what you are thinking -- a short term bill would not fix the Woodrow Wilson Bridge. I understand that. The Wilson Bridge is a popular and proximate example for the infrastructure problems facing our country. Nearly one-third of the nearly 600,000 bridges on our nation's federal-aid eligible highways are rated deficient. While a short term bill would not fix the Woodrow Wilson Bridge, the problems that smaller structures face are similarly exacerbated by delays.
I have heard some in Washington, D.C. claim that a short-term extension of the ISTEA legislation is not necessary because all states have unobligated balances they can use until a multi-year bill is completed next year. This is absolutely not true. The Transportation Construction Coalition estimated earlier this year that by March of 1998, assuming the states could flex all unobligated balances into needed accounts, 26 states will expend all unobligated balances. By the end of February, eleven states are expected to run out of budget authority including Florida, Alabama, Arkansas, Missouri, New York and Oregon. In March, California, Connecticut, Idaho, Maine, Nevada, Virginia and Wyoming will run out of funds. It should be noted that this is the brightest scenario, if states are granted complete flexibility.
Also critical in our eyes is what the available funding can be used for. While it is true that the Federal Highway Administration (FHWA) estimates that as of September 30th states had $10 billion in unobligated highway account balances, only $2.6 billion of that funding is available in the core highway construction accounts of Interstate Maintenance, National Highway System, and Bridge. In fact, 17 states had less than one million dollars in funding for the National Highway System. In my state of Virginia, for example, we have only $2,967,000 in the National Highway System account, $3,851,000 in the Interstate Maintenance account, and $50,873,000 in the Bridge account -- totaling $57,691,000 in useable highway construction funds. Virginia will not have another letting with federal funds until a reauthorization bill is enacted, thereby crippling our state's construction industry.
To illustrate what the actual impact of not passing any reauthorization legislation will be to the states, the American Association of State Highway and Transportation Officials (AASHTO) conducted a survey and found that 1,982 transportation construction projects valued at $3.07 billion will be affected in the first quarter of fiscal 1998 (Oct.-Dec. 1997). During the second quarter of the fiscal year, an additional 2,926 projects valued at $4.4 billion will be affected by the delayed authorization. In Virginia, this will impact 281 projects, valued at $255.7 million, in the first two quarters of fiscal 1998.
DOT has estimated that every one billion dollars invested in highway construction creates 42,100 jobs. So, using the AASHTO estimates, Congress is jeopardizing over 300,000 jobs in the first six months of fiscal 1998 (Oct. 1997 - March 1998). If no bill is enacted by July 1, 1998, the total amount of projects delayed is estimated at $11 billion, which would impact over 470,000 jobs. A short-term extension of the program would alleviate much of this unnecessary pain because federal funds would flow to the states, the federal-aid highway program would continue, and hundreds of thousands of jobs would not be lost.
The reauthorization legislation is vital to states because states will delay the planning and bidding of highway construction projects until legislation authorizes new money to flow to the states. The delays directly impact the American economy because states do not make progress on needed construction work, which, in turn, puts construction contractors and suppliers out of business. Without work, construction companies will not be able to provide jobs and will have difficulty making payments on machinery and facilities. In Virginia, without an extension of the federal-aid highway program, I will begin to lay off my employees beginning in January, 1998, and I will not be able to rehire them, until a bill is enacted. Furthermore, I will stop using my concrete, pipe, steel, cement, asphalt and guardrail suppliers beginning in March of 1998, and I wont use them again until 45-60 days after the bill is signed.
If there is no bill through January, we will lose the entire spring construction season. In the likely event that there is no bill until June 1998, we will lose the entire spring and summer construction seasons, which would put many construction companies out of business. Construction does not operate like an assembly line that we can just shut down. The design and construction of highway projects are carefully planned months in advance. Projects to be constructed in April or May, must be planned and funded by January or February. Virginia has the following lettings of federal-aid highway funds scheduled for December, 1997 through August, 1998 that will be cancelled without an extension of the highway program.
Letting Date Value of Work
December, 1997 $31,250,000
January, 1998 $15,790,000
February, 1998 $25,225,000
March, 1998 $61,260,000
April, 1998 $12,420,000
May, 1998 $9,880,000
June, 1998 $17,260,000
July, 1998 $107,510,000
August, 1998 $49,185,000
Without an extension of the highway program, the FHWA, which oversees the Federal- aid highway program, the motor carrier safety program, and research programs, will be shut down at the end of December. The 3,700 FHWA employees that approve projects and actually keep the federal-aid highway program going, including the state's ability to obligate funds in a timely manner, will be laid off.
Furthermore, since the program expired, states have already begun to lay off truck safety enforcement officers because funding is no longer available in the Motor Carrier Safety Assistance Program (MCSAP) in many states. There are virtually no unobligated balances of grant funds or new federal funds available to the states for motor carrier safety activities. According to the Commercial Vehicle Safety Alliance (CVSA), by the end of December, up to 8,000 inspectors nationwide funded by MCSAP will be in jeopardy. Nearly 170,000 inspections per month, training, hazardous materials, and other enforcement activities supported by the federal program would be cut back or cease altogether.
A delay in reauthorizing the federal-aid highway program will also put lives at risk. According to the FHWA, poor road design and conditions were factors in thirty percent of the 42,000 fatalities on the nation's highways last year. The inability of states to make improvements to our nation's highways will likely result in increased fatalities.
Mr. Chairman, one of the major problems with letting the federal highway program lapse is the uncertainty it is causing for all of us in the industry. It is easy for Congressional leaders in Washington to say "wait until next year" and use the highway program as a political football. But that is like telling us and our employees to wait until next March, or so, for our paychecks. We can't survive like that.
Except for a few large highway contractors, most of us are small firms and we are going to be badly hurt by a shutdown of the program. This uncertainty is already having a psychological effect on our outlook for the future. Contractors are putting off hiring and purchasing decisions until we have a better idea of where the highway program is going. This is going to have a strong ripple effect throughout the economy. If highway contractors aren't hiring or buying, some other firm isn't selling, and that is going to cause production and jobs to decline.
It is not just highway contractors and their workers who will be hurt if Congress does not extend the highway program. The highway program also affects a lot of other industries. There are engineering firms that help design and manage highway projects. There are suppliers of concrete, aggregates and other highway materials. There are manufacturing firms that build highway construction equipment. Shutting down the highway program will be like taking a knife to the heart of these industries.
Research conducted recently by a TCC member took a look at how the federal highway program affects two important industries -- the aggregates industry and the construction equipment manufacturing industry -- and I would like to submit the results of those studies for the hearing record. Concerning the construction machinery industry, the research found that each $1 billion of government highway construction spending generates about $300 million of equipment sales. Important companies like Caterpillar, JI Case, Cummins Engine and a lot of others are going to take a real pounding if there is no highway program. Without the $23 billion in highway money enacted for 1998, sales of construction machinery could go down as much as $6 to $7 billion from the current level, and that means a hundred thousand people or more could be temporarily laid off in this industry until Congress acts.
Since the multi-year reauthorization bill is likely to be entangled in the looming budget battle this winter, it is unlikely that a multi-year reauthorization bill will be passed until after the second quarter of fiscal year 1998. I am sure Senator Domenici and members of the Budget Committee will want to discuss the overall ISTEA authorization levels in the context of the budget resolution next year. Additionally, many controversial amendments to the reauthorization bill will still need to be debated. From what I understand, they will not proceed in the House until after the budget resolution is completed. Noting that 26 states will be out of funding by March, it is imperative that Congress pass a bill that provides funding for the federal-aid highway program until the multi-year bill is enacted. This expected, extended delay to reauthorizing the highway program is what makes this a true crisis to the construction industry.
I am disappointed that the six-year reauthorization bill was sacrificed by the insistence that it be the vehicle for campaign finance reform. Thousands of American jobs and the safety of our nation's roads are in Congress' hands. This program is too important to leave unfunded for the months ahead. Please do not leave for the year without passing an extension of the federal- aid highway program.
I would like to ask that in addition to our statement the record include two letters in support of a short-term extension from the Laborers and Operating Engineers unions; a TCC letter to senators that describes some of the issues we have discussed in more detail; a FHWA chart indicating unobligated balances as of September 30, 1997; an analysis of when states will run out of federal highway funding; a Washington Post article entitled, "Delay of Wilson Bridge Funding Criticized"; news release from the Iowa Department of Transportation; and copies of the economic studies I have referenced.
Thank you again for the opportunity to testify. I would be happy to answer any questions you may have.