I-94 WORK BEGINS; FUNDING PERILS LOOM

WORK BEGINS ON I-94 CORRIDOR WITH $191 MILLION OF MOSTLY STATE FUNDS – JUST $1.7 BILLION SHORT OF PROJECT BUDGET

Special to the Readers of Milwaukeeworld.com

By Michael Horne

And the Milwaukee World Hound Dog Team

In a gutsy move, the Doyle administration is fast-tracking its I-94 North / South reconstruction and expansion by beginning work in 2008 on the project scheduled to officially begin in 2009 and run through 2016. Since the $1.9 billion budget anticipates a 50% to 80% share of federal funding, this could spell trouble in the current economic climate.

If you add the looming insolvency of the Federal Highway Trust Fund, which needed an $8 billion infusion last month to stay in business, this could spell crisis. Funded or not, the work has begun.

According to Jon Dyck, a Fiscal Analyst with the Wisconsin Legislative Fiscal Bureau, who specializes in transportation issues, the traditional 80% Federal – 20% State split is somewhat misleading:

“There is no prescribed federal/state split for the project, or any highway project. The 80% federal/20% state split (or sometimes 90%/10%) gets thrown around a lot, but it really doesn’t mean much. Unlike a program like Medicaid, the state doesn’t get more federal aid by spending more state money. We just get a lump sum based on a formula, regardless of what we spend or what projects we do. Similarly, the federal government doesn’t assume the responsibility for doing I-94 (or any other highway project) and doesn’t agree to “pitch in” for any percentage of the cost once we decided to do it; it is the state’s responsibility to do it and pay for it, using whatever funds it can find, including federal aid.”

Dyck goes on to say:

“Put another way, we’ll get the same amount of federal aid whether we do the I-94 project or not; if we didn’t do it at all, we’d just be able to use our federal money on other things.”

FEDERAL MONEY? WHAT FEDERAL MONEY?

On September 19^th, 2008, President Bush transferred $8 billion from the Treasury’s general account into the Highway Account of the Highway Trust Fund to “prevent a funding shortfall.” [The fund would have entered October with no money. “Highway Trust Fund is Nearly Out of Gas” Washington Post, September 6^th, 2008 By contrast, it held $26.5 billion at its closing on September 30^th, 1998]. In a message of thanks for the cash infusion, Transportation Secretary Mary Peters said:

“While the Highway Account has been temporarily replenished, we should not delude ourselves into thinking the fundamental problems of transportation funding are somehow resolved. ... Clearly, the current tax and spend model is both unsustainable and unresponsive to the country's needs.”

Two weeks earlier, Peters announced that states would be reimbursed for current projects weekly (rather than twice daily) and their checks would be prorated according to how much money was in the fund, using 80 per cent as an example. Any amount shorted would be made up the next week. In effect, this forces states, which depend on the federal government to reimburse them for highway projects, to pick up the interest on the funds. Even a one-week cash flow delay would cost Wisconsin unbudgeted millions of dollars in interest annually over the life of the I-94 project.

As a practical matter, states will begin to slow-pay contractors, who are under obligation to pay their employees in a timely (usually weekly) manner. Few contractors (if any) have the resources to carry a payroll of this magnitude for any extended period of time from their own resources or lines of credit. The worst-case scenario would be an abandoned, partially completed transportation project.

As the construction trade group Associated General Contractors announced last month:

“Numerous state departments of transportation announced that if the full federal funds were not forthcoming they would be forced to cancel contract lettings, slow down work on on-going projects and, in some cases, be forced to issue debt to make payments to contractors for work that is already under way.”

According to a release from the Federal Highway Administration, “the recent and sudden decline in American driving and the resulting decline in gas tax revenue during the summer had accelerated the predicted shortfall.” July 2008 vehicle miles driven was 9.6 billion fewer than in the same month in 2007. Total miles driven are the fewest of any year since 2004. "Less driving means less money for the Highway Trust Fund," said Acting Federal Highway Administrator Jim Ray. "The status quo cannot and will not work in the 21st century."

However, the I-94 N/S project is deeply rooted in the status quo.

The Highway Account of the Federal Highway Trust Fund will face a shortfall of $1.1 billion to $3.2 billion in 2009, according to a Wisconsin Transportation Association position paper suggesting the result will be a “35% decrease in Federal funding obligation for Wisconsin” next year, when construction is to begin in earnest in Milwaukee and Kenosha counties.

SAFTEA-LU [Safe Affordable Flexible Efficient Transportation Equity Act: A Legacy for Users] is the principal federal transportation financing mechanism for states. It provided $630 million to Wisconsin in 2008, mostly from the trust fund. That amount will be reduced by $30 million for 2009 – the year in which the program is set to expire -- adding more uncertainty to the funding equation.

The most recent omnibus budget bill, passed by Congress earlier this month, “contains no new spending. It only continues funding on prior levels, and we do not expect any appropriations until at least March,” according to a representative of the Congressional Budget Office.

NO POLITICAL MUSCLE TO FLEX

Doyle and his administration might have a chance to guarantee funding for at least a portion of the I-94 N/S work, but that would requirel having sufficient clout in Congress to secure earmark funding, a source that has come into political disrepute. Transportation secretary Peters complained of 6,000 earmarks totaling $25 billion in her most recent budget.

Wisconsin traditionally fares poorly in earmarks and in transportation funding in general. In 2006 the state paid out $1.93 billion in gas taxes and got $1.81 billion back, putting us firmly in the “donor” camp, benefiting such states as Texas (home of President Bush) which got a dollar back for every 84 cents it spent.

There were a few earmark provisions in the Marquette Interchange Project funding, but Vincent “Vic” Barone, director of projects for the Federal Highway Administration was not able to identify any that are in the works for I-94 N/S.

Sen. Russell Feingold [D] does not make use of earmarks, so he’s out. His counterpart Herb Kohl [D] does make use of earmarks for things like the Holton Marsupial Bridge, but his office was never approached by the Doyle administration to secure funding for the I-94 reconstruction – expansion. If you don’t ask, you don’t git!

Rep. Paul Ryan [R], one of the two congressmen whose district includes the project is also another nonbeliever in earmarks, plus he’s in the minority party. Rep. Gwen Moore [D], whose district includes the Milwaukee portions of the work, has not made highway funding a priority.

THE DOYLE SOLUTION: 85% STATE FUNDING

The uncertainty of federal funding notwithstanding, the Doyle administration has decided to plunge ahead with its expansion program – the most expensive option considered for the freeway, and the one that adds a lane in each direction at an additional cost of at least $200 million to $500 million or more. [“While the preferred alternative with eight lanes will cost $1.9 billion, it is important to note that six-lane modernization would cost $1.7 billion. Simply replacing the roads the way they are would be around $1.4 billion.” WisDOT].

The governor was able to get work started this year by using mostly state funds at a ratio of $6 state funding per $1 of federal funds immediately available.

Again, from Jon Dyck of the Legislative Fiscal Bureau:

“Anyway, the state doesn’t have to wait around for the federal government to give us money to start work on I-94. The 2007-09 biennial budget act provided DOT funds to get the project started. [Statute] Specifically, Act 20 provided a total of $181.6 million for the project, including $67.6 million in state funds (cash from the transportation fund), $90.2 million in bonds (debt service to be paid from the transportation fund), and $23.8 million in federal funds (an allocation of our formula aid, not an earmark). How the Department gets the rest of the money will have to be worked out in the next few budgets.”

Won’t it ever!

POSSIBLY RELATED POST(S)
from the Milwaukeeworld Human-Powered Aggregator

"Doyle Warns of Possible $3 Billion Budget Deficit"
--Milwaukee Journal Sentinel Wednesday, October 15th, 2008