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Hearing Of The Senate Environment And Public Works Committee - Impacts Of Expected Highway Trust Fund Insolvency

Chaired By: Senator Barbara Boxer

Witnesses Panel I: Ray Lahood, Secretary, Department Of Transportation; Panel Ii: Kathy Ruffalo, President, Ruffalo And Associates; Don James, Chief Executive Officer, Vulcan Materials Company; Jack Basso, Director Of Program Finance And Management, American Association Of State Highway And Transportation Officials

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SEN. BOXER: (Sounds gavel.) The hearing will come to order. Thank you so much, Secretary LaHood and the rest of today's witnesses for being here today to discuss such an important issue, the sovereignty of the highway trust fund. And I'd ask unanimous consent to place in the record a document that shows the 24 entities that are calling upon us to fix this trust fund before August.

I'll just read a couple of them. Alaska Department of Transportation, Arizona Department of Transportation, California, the Rural Transportation Advisory Council of Arizona, Kent County, Delaware, a lot of agencies in Florida, Georgia, Illinois, Missouri, Oregon, Indiana, Pennsylvania, Tennessee, Texas, Virginia, Washington State, Wisconsin, the American Highway User's Alliance, the American Society of Highway Engineers and the National Governors' Association.

So I think we all understand that the job before us is urgent and the good news is I think we all do agree on that across party lines. I certainly know that Secretary LaHood made himself available to come to the Hill with a team from the administration to discuss this matter and I know that he's very bound and determined to work with us across party lines to solve this problem.

Look, this is about jobs, it's about our economy, for every billion dollars in federal funds invested in Transportation and matched by state and locals there are 34,779 jobs created, and $6.1 billion in economic activity. So I know all of us are focused on economic recovery. We cannot come forward with a plan that's a year, that doesn't do it. I like what the administration did on an 18-month timeframe, because that gives certainty to our people.

I am open personally to many ways of filling the gap. I had suggested to the administration using some of the unused stimulus funds. It's something that I know that Senator Vitter has written a bill on this, but unfortunately from my standpoint it's a very short term. It expires right before the election, which may or may not have been his intent. I'm not saying, but the fact is we know where we are right before an election. It's hard to get the permanent fix done.

I would prefer to see 18 months because it gets us past the politics and in addition to that, and this is very, very key, it gives certainty to the people and that's very, very important. We have a lot of issues on the table in terms of a long-term solution to our funding. So I'm going to ask unanimous consent that my entire statement be placed in the record and I'll continue to read part of it.

We know that we expect to encounter the shortfall in the highway trust fund as early as August, and the mass transit account of the highway trust fund is also expected to run out of funds soon. And the highway trust fund provides federal funding for our highway, bridge and transit systems. And I think it's important to remember that the federal government provides about 40 percent of the capital expenditures for highway transportation nationwide, and that spurs the state and locals to act and we then putting all of our funding together, really stimulate this economy and do what we have to do to move people, to move products, very, very important.

I am proud that the economic -- the American Recovery Reinvestment Act provided $48 billion for transportation improvements. I have to say I stood shoulder to shoulder with my ranking member trying to get more funds in that particular -- I will repeat I stood shoulder to shoulder with my colleague trying to get three times more funding into the stimulus bill for highways and transportation. When we stand together I think it sends a powerful signal.

That's why some of us think it would be good to go to the unused stimulus funds from other areas because we think that this particular use puts people to work, keeps them working and keeps our economy moving. So let me just say that transportation investments have a positive impact on our communities regardless of where we're from. And we must have continued investment; we must have continued job creation.

Again, I want to thanks Secretary LaHood, and I think this is key. He answered our call. We sent a letter to him; he said we're going to fix this problem together. He said 18 months is what we want to do. I think that is an intelligent number of months to give the certainty to our people at home and to give us enough time to really reform the way we do transportation.

So the time is short and I know that Secretary LaHood has offered to work with us, give us the technical assistance we need, but we intend to do this job and I think our date is what to mark up a bill -- middle of July we will get our work done. I thank you very much and I turn to my ranking member.

SEN. JIM INHOFE (R-OK): Thank you, Madame Chairman. I'm going to go ahead and submit my record -- statement to the record. I'll just highlight a coupled of things. First of all, we did try. We made an effort back during the $789 billion stimulus bill to get a much larger percentage of that, Mr. Secretary, into something that really is stimulus, and that is road construction. We had a lot of things that were ready to go and that would have worked very well.

Now I know that in my state of Oklahoma Gary Ridley, our transportation secretary, has -- we would have to deprogram somewhere between 50 and $80 million worth of projects. These are projects that have already been let, contracts that have already been let. It's a very serious thing that we are facing. Now I can remember when we went through the crisis in September, and at that time I reminded everyone that we had a problem 10 years prior to that when then- President Clinton took $8 billion out of the highway trust fund and put it into the general fund in an attempt to balance the budget. I objected to it then and every since then I've been trying to get it back.

Well, we successfully did that. In fact that was over a threatened veto by the president that we successfully did that last September. Now we're going to have to have more money, and one of the sources I want to look at is if it's logical to have undone a wrong that was 10 years old last September, what's wrong with going back now and saying we need also to transfer the interest that has been earned over that 10-year period.

The other thing that we've been trying to do -- and I'm sure that Senator Vitter is going to get into this and I agree with his effort that he's trying to do -- is to do it through some of the stimulus money that came originally out of the $700 billion plan.

Now, I regret that I wasn't able to talk to my chairman about this earlier, but I think that we're going to -- what I would attempt to do would be to not have projects included in this for either the White House, the executive department or us, and I know this is right when we're starting in to see if we can make this thing work. We need to have an extension; to me the 18-month extension makes sense.

What I don't want to do is find ourselves in a position where we have -- the same position we found ourselves in last September, but now finding ourselves in that same position where we have to renege on contracts, where we have to stop construction, and I just don't want that to happen. So I'm still open to all possibilities here and hopefully perhaps Senator Vitter and some of the others have some ideas that might work, Mr. Secretary.

SEN. BOXER: Senator Udall.

SEN. TOM UDALL (D-NM): Thank you very much, Chairman Boxer. And Secretary LaHood, great to have you here today. I'm going to put any statement in the record but I would just like to briefly say I think the Highway Trust Fund is very important to our transportation system, and we know that it needs additional revenue. There are a number of proposals that are on the table: raising the gas tax, which I understand the administration doesn't want to do; create some kind of new fee or tax or something along the line based on vehicle miles traveled, which would be another way to look at that; toll roads and congestion prices; toll roads and congestion pricing.

And then I know the National Service of Transportation Infrastructure Financing Commission has talked about increases fees on freight movers. I think at a time of reform we should be looking at are the folks that are using the roads, are they using them and paying their fair share? And I think we've heard for years, and years and years that freight movers don't necessarily pay their fair share so I think we need to look at that.

So happy to have you here today, Secretary LaHood, and look forward to your and the administration's suggestions to us as to how we move forward. I know one of your suggestions is that we delay the transportation bill, and I think that's something we need to discuss and take a look at that. So thank you for being here and Chairman Boxer, great to be here with you today.

SEN. BOXER: Thank you so much. We'll go to --

SEN. INHOFE: Let me mention, I have the same problem we always have. We are marking up the defense authorization bill so I'm going to have to be going in and out of this thing right now.

SEN. BOXER: We will miss you for sure. I mean it; I'm not kidding. I mean it; this is my ally in this. So we're going to go to Senator Vitter, then we're going to go to Senator Lautenberg.

SEN. DAVID VITTER (R-LA): Thank you, Madame Chair, and thank you Mr. Secretary, for being here and more importantly for all of your leadership and all of your work. I really appreciate it. I feel strongly with regard to this issue in support of two principles. Number one, that we need to continue the highway program and continue that vital work, and number two, that we should not borrow more money on top of everything we've borrowed over the last several months and the last several years to do it.

And because of that I have introduced a bill that Chair Boxer has referred to, and it would extend the Highway Trust Fund and backfill the program exactly as the administration has talked about for the same time period, but do it from already appropriated stimulus funds. Let me make some important points in that regard. First of all, we would adopt exactly the same timeframe and the same extensions as the administration I believe has talked about, which is 18 months.

So whatever timeframe you all would envision, it would be the same timeframe. Number two, it would backfill the fund with stimulus funds and in doing so give maximum flexibility to the White House and the administration in determining how best to do that. So we would not micromanage where to take it or how to move the money around, we would suggest maximum flexibility to the president and the White House. And I think that is important to give the administration all of those options.

And number three, under language actually contained in the bill, if we were to come up with a new highway bill, a more permanent fix, a more permanent extension, this legislation would immediately sunset and would be replaced with the provision of that highway bill. So if we can come together and pass a highway bill next year and it would take effect before those 18 months are past, then my bill would sunset, that would end and whatever provisions of the new highway bill that are applicable, those would apply.

I think this is the right way to go for three reasons: Number one, we have enormous exploding debt and we shouldn't add to it; number two, this is exactly the sort of shovel-ready infrastructure spending for which there is a broad bipartisan consensus in the Congress, and in fact a lot of us wanted a heck of a lot more of this than the 3.5 percent in the stimulus bill.

And number three, this does give maximum flexibility to the administration in order to figure out how to do it. At the end of the day, by the time the stimulus bill is completely worked through, I am personally confident that we are going to have more than that $20 billion that cannot be spent for various reasons or has not been accepted by the states. Now we don't have that identified yet, but I believe at the end of the duration of the stimulus bill we will have more than that.

So let's give the administration maximum flexibility to identify how to do that in the meantime, and take these funds from the stimulus. I know in our private conversation before the hearing you mentioned that economy advisors at the White House, including Larry, are looking at ways to pay for this backfill outside the stimulus. My only comment would be if those exist in the budget, then those should be used to pay down debt and to pay down spending and we should still use stimulus funds to backfill the Highway Trust Fund in this manner for the next 18 months.

So I look forward to working with you and the administration and other members. This proposal has got a lot of early interest; it's only been circulated a couple of days. It's got a lot of early interest including bipartisan interest so I look forward to following up on that. Thank you, Madame Chair, thank you Mr. Secretary.

SEN. BOXER: I'm glad you talked about 18 months; I think that's really key for me too because otherwise I think it's too short an extension. Okay, we have Senators Lautenberg, Cardin hand Carper.

SEN. FRANK R. LAUTENBERG (D-NJ): Thank you, Madame Chairman, welcome Mr. Secretary. We would obviously hope that you bring -- that you are a bearer of good news. Now the only question is how much news is good news. It's got to be a pretty big package because, you know, we're working against all kinds of odds and becoming more efficient, less abusive of the environment and more dependent, relatively speaking, on foreign oil and we see by the end of the summer the Highway Trust Fund is likely to run dry, delaying essential repair and construction projects from coast to coast and costing hardworking Americans their jobs.

At a time when we need more investment in our transportation infrastructure, we can't afford to go belly up in August. We can't afford to go belly up any time, but when you think of what the needs are and what is being proposed, the two don't exactly meet and I salute a recommendation that says, let's just make sure that we keep this traffic moving by having a reasonable time extension on the turn fill and give us a chance to think through the problems that we have to work with in order to make the whole program more efficient.

It's been more that two years, for example, since the tragic bridge collapse in Minneapolis. Two years and still more than 25 percent of our nation's bridges are classified as deficient. In my home state of New Jersey, where 34 percent of our bridges are classified as deficient. You know, we look at the funds coming to us from the federal government and I know how hard the administration is trying.

And how hard it is on all of us to look at the bumps in the road, the delays in traffic, the foul air, all of those things and not looking at a plan that says we're really going to grab hold of this.

My state, for instance, winds up being a thoroughfare state. Our traffic -- not just from New Jersey people, but from people who are going, doing their traveling through our state, across our state, and the load is so heavy it's almost impossible to carry. So we need to invest, expand transit options because they're more convenient and more energy efficient. In this economy with today's endless traffic, people are looking to both use less time on the road, away from their families, away from their jobs, and looking to save money as well.

2008 Americans took nearly 11 billion trips on public transportation, the highest ridership level in 52 years. And this record ridership establishes that people will choose transit if the option is there. President Obama, Secretary LaHood have offered a plan to keep the highway trust fund solvent on a short-term basis, and I commend you for it. But I can't believe that we can do anything that is less than a single-year extension to the current law and be able to give us the time necessary to write a comprehensive authorization bill that meets all of our transportation needs.

I look forward to working with you and the administration to quickly pass an extension that protects our transportation priorities. But as we finalize this short-term solution, we've got to get to work on the longer-term solution. Senator Rockefeller and I have introduced a bill that would take a long term and large scale approach to transportation planning. It would set a national transportation policy that puts us on a track to repair, maintain and modernize our nation's infrastructure.

And I look forward to working with our chairman, who's really energized about this. She's -- the crisis that we face in reality and with you, Mr. Secretary, President Obama as we looked to include these important benchmarks in the next surface transportation bill and just to summarize it looks to me like the only option we have now is an extension of the current bill long enough to give us a chance to catch our breath, catch up to our planning, deal with other problems that are of an emergency nature and get on with repairing a system that's a long time broken down.

SEN. BOXER: Senator Lautenberg, I just want to associate myself with what you said about the need for a transformational policy. It is essential and that's why I too favor this short-term extension, this 18 months, because we have so much work to do across party lines with the administration so that we get it right. And I think that your statement was quite eloquent and I just wanted to congratulate you on it.

Senator Barrasso.

SEN. JOHN BARRASSO (R-WY): Thank you very much, Madame Chairman. I do have a statement that I'll include in the record. I want to thank the secretary for being here today to share your thoughts and your ideas. Wyoming is a state of big geography, long miles and interstate 80 running through the state, gets significant amounts of traffic. It doesn't either originate nor end in Wyoming so we have specific needs.

I agree with Senator Lautenberg; we do need a short-term strategy, we need a long-term strategy. The question is how are we going to pay for it. And people talk about either cutting spending or increasing revenue. This is not a time when I think we should be looking at increasing gasoline taxes for the people of America, and what I would like to see is using money that is already part of the stimulus plan for projects that are ready to go and use that money to deal with our short-term immediate needs.

So with that, Madame Chairman, I'll just submit my statement for the record and look forward to hearing from the secretary. Thank you.

SEN. BOXER: Thank you, Senator, very much.

Senator Cardin.

SEN. BENJAMIN CARDIN (D-MD): Madame Chair, thank you for conducting this hearing. I want to welcome Secretary LaHood and thank him for his continued service. We very much appreciate your leadership within the Department of Transportation and the aggressive way that you're going after trying to find solutions to our nation's infrastructure needs. And I think we all understand the practical problems of a temporary, short-term extension that allows for the infrastructure improvements to continue to be made and to search for long-term solutions that will be adequately funded so that we can invest in America's future.

And I think we've got to be honest about it. We're going to have to take a look and make some hard decisions. I would hope that it will be a given that we need to advance the infrastructures of America. We know the dire needs that are out there; we understand the economic impact of this. So we need to make sure that we get it done right.

Madame Chair, I just really want to underscore what's at stake here by mentioning what happened Monday night in the district in a Lamata train that was heading between Maryland and the district in which several people lost their lives, the worst tragedy in Lamata's history. Our prayers go out to the families of the victims, those whose lives were forever changed as a result of that tragedy.

Now we don't know what happened and the National Transportation Safety Board is conducting and investigation and they'll have our complete support. And we'll take at least several months before we have the conclusions from that investigation and we need to make sure that goes forward. But one thing is clear; the Lamata system is stretched. It is strained, it is old. Last year I visited the Shady Grove station; I took a look at the platforms there. They're literally being held up by wooden planks.

They need help; this is an old system. This is America's system. Almost half of the ridership on Lamata are individuals going to and from federal facilities as workers. Ten percent is in the capital complex in the Pentagon alone, so we have a direct responsibility here and last year I was proud that we did pass at long last a game plan for adequately funding this transit system, the second-busiest in America, that doesn't have a dedicated revenue source.

And we did pass a framework to get that done where the district, Maryland and Virginia have agreed to match federal participation. And the difficulty here, Madame Chair, and I just want to point this out because the appropriations committee will be meeting shortly going over the transportation appropriation for next year and they're going to have a lot of conflicting needs. I understand that; it's a very tough budget.

Last year we authorized $1.5 billion of federal funds over 10 years for the Lamata system. That passed this Congress by overwhelming support. Now the first installment's due this year of $150 million; it's not in the president's budget. Now I understand that the budget was put together in a difficult moment and I appreciate Secretary LaHood's commitment to work with us to try to find adequate funding for the Lamata system, and we need to do that, working with this committee, working with the Appropriations Committee because literally the safety of the readership is at stake here.

We know the trains are too old, need to be replaced. And by the way, Congress came up with over $100 million to help replace some of those trains. We need to be more aggressive at it. So Madame Chair, as we are looking for ways of short-term extension of our current surface transportation programs so that we can make sure that our roads and our bridges and our transit systems around the nation are advanced and are maintained, I just want people to understand how urgent this need is and look what happened Monday night right in this community and know that we have to make a stronger commitment towards our nation's infrastructure.

SEN. BOXER: Very well said, Senator. Senator Carper followed by Senator Merkley.

SEN. TOM CARPER (D-DL): Thank you, Madame Chair. Secretary LaHood, very nice to see you. Welcome. I wonder what it's like sitting on that side of the table as opposed to this side, but you look pretty comfortable, at least so far. (Laughter.) This is -- the point of issue, as we all know, we've got a serious problem and we appreciate very much your thoughts as to how we might address this problem.

We have a simultaneous meeting going on in the finance committee on healthcare reform and I need to stroll over there so I won't be able to stay for as long as I like but we're grateful for this opportunity to have some conversation and look forward to more in the months to come.

I want to applaud the administration's proposal for an 18-month extension of SAFETEA-LU and though we all would prefer a full authorization bill now, I don't believe that's practical given our current economic environment and our funding uncertainties. When we do pass a full authorization though, I believe that we must increase our nation's investment in transportation. When the economy begins to improve and I see growing signs that at least we're bottoming out; I'm encouraged by that.

But when the economy improves I think some increase in the federal gasoline tax will be an important component of that investment. However, we cannot expect the American people to pay more until we refocus the existing transportation system that we have. The looming insolvency of the Highway Trust Fund and the expiration of SAFETEA-LU in September provide this committee, I think the Congress and the administration with an important opportunity to set the stage for transportation reforms.

And we can start now by instructing the Department of Transportation to study performance objectives. And we can enhance the data collection and modeling capabilities of the department as well. I do appreciate your willingness to serve in this capacity. We appreciate your leadership on this issue and we look forward to hearing the administration's suggestions on how to use this opportunity to set the stage for greater reforms to come later. Good luck, thanks again for joining us.

SEN. BOXER: Thank you very much, Senator.

Senator Merkley.

SEN. JEFF MERKLEY (D-OR): Thank you very much, Madame Chair, and thank you, Mr. Secretary for being here to launch this process of wrestling with our transportation bill. I'm very glad to see you're going to be out in Oregon next week; I believe that I am going to have a chance to meet with you briefly on the morning of July 1st. It looks like I won't be able to escort you on the streetcar ride, which I'd hoped to do, but I know you're going to be well taken care of out there.

This bill, obviously, is going to be very important to Oregon as to the other 50 states. And I know you're engaged in dialogue with my colleague on the House side from Oregon, Congressman DeFazio, about structure and strategy. I'll certainly be engaged in the substance of the issues and appreciate the challenges that come to bear on meeting this shortfall in the trust fund and continuing the development of two of these goals within our transportation system. So thank you.

And like my colleague I have to go to the Health Committee so I also apologize that I can't be here for the duration of the hearing. Thank you.

SEN. BOXER: Thank you, Senator.

Senator Voinovich. No?

SEN. GEORGE VOINOVICH (R-OH): During the question period, or --

SEN. BOXER: Excellent.


SEN. BOXER: Well, it looks as if --

SEN. : We haven't heard from Secretary LaHood yet.


SEN. VOINOVICH: Let's hear from our witness.


SEN. VOINOVICH: (Off mike) -- till the questions, how's that?

SEN. BOXER: Sounds very fair. Well, Secretary LaHood, welcome, and the floor is yours.

SEC. LAHOOD: Thank you.

SEN. BOXER: I think we should say seven minutes for a secretary. Seven minutes, yes, go ahead. D

SEC. LAHOOD: Thank you. (Laughter.) Before I begin my formal testimony I want the committee to know that the thoughts and prayers of all of us at DOT are with the families who lost loved ones in the metro crash on Monday. I met this morning with the general manager of Lamata, John Kato, and he and I had a very lengthy discussion about what we can do to assist with the way forward and their opportunities to improve safety in the metro system and we will continue to work with Mr. Kato's staff along the way.

But I know this is not under the jurisdiction of this committee but as the secretary of transportation I felt because of the fact -- I agree with Senator Cardin, this is America's metro system and when you look at the enormous number of people who were delivered around this region during the inauguration and so many tourists who use this system I felt it important that I express these thoughts about this. I appreciate the opportunity to stress the state of the Highway Trust Fund and its impact on federal surface transportation programs.

I want to begin by updating the committee on the department's progress on implementing the American Recovery and Reinvestment Act. As of today we have obligated $19 billion, roughly 40 percent of the total appropriated through the Department of Transportation. We have made these funds available for more than 5,300 approved transportation projects in all 50 states and three territories. Over 1,900 projects are underway.

I'm proud to report that the department has met every statutory deadline imposed by Congress and that every state has obligated 50 percent of its highway related recovery funds within the first 120 days as the law required. Traveling around the country with the vice president I've seen first hand the positive impact this program has had on workers and their communities. Through the Recovery Act we're putting people back to work while revitalizing our roads, bridges, rails, airports, transit systems and sea ports.

We must solve our long-term infrastructure financing challenges so we can assure the American people that we will build on this momentum and continue to invest in our transportation needs for the future. As you know, we anticipate that the Highway Trust Fund will be unable to sustain current spending levels into 2010. We have shared with appropriate committees in the House and Senate. Our estimate that an additional 5 to $7 billion will be needed through the end of this fiscal year plus 8 to 10 billion through fiscal year '10.

Clearly this situation cannot continue. We have an inherited system that can no longer pay for itself. Let me assure the committee we are monitoring the situation very closely. We are ready to take proactive steps to manage the cash flow balance in the account. Last week I proposed an immediate 18 month highway reauthorization that calls for a $20 billion cash infusion into the Highway Trust Fund to cover our needs through March 2011.

We look forward to working with Congress on a full reauthorization measure for surface transportation programs but we do not believe this important legislation should be rushed. In the interim we must keep the trust fund solvent and we will work closely with the White House and Congress to identify appropriate funding and offsets.

Critical reforms are needed as a part of this effort to help us better make investment decisions focused on smarter investments in metropolitan areas and promote the concept of livability to move closely -- to more closely link home and work. As we move forward, several key principles and priorities should be our guide. First, we need transportation funding mechanisms that are both sustainable and flexible, tying revenues to an unpredictable source like the fuel tax is simply inadequate to our needs. We need access to resources that will enable us to plan and execute far-reaching transportation programs that meet our goals for safety, mobility, economic competitiveness, environmental stewardship and livability. Therefore we must diversify sources for transportation funding.

The Treasury's general fund, the National Infrastructure Bank, public/private partnerships, in some instances user fees are just some of the mechanisms we must consider over and above our current financing approach. In addition to ensuring we must invest adequately in new transportation needs for the future; we must also bring our current transportation system into a state of good repair. We must get a much better handle on this issue and step up efforts to assess the capital needs across all modes.

Other priorities that require sustainable funding include reducing energy consumption all across modes, investing in intelligent transportation technologies and making public transportation even more accessible to suburban, rural and dependent populations. The new surface authorization program offers all of us an opportunity to refocus our investments so that all Americans have access to the safe and efficient transportation systems they need and deserve. We must approach this task with a renewed sense of accountability and discipline by insuring that we invest our limited resources wisely, then we can measure the results.

I'll be happy to answer any questions. Thank you for the opportunity, Madame Chair.

SEN. BOXER: Thank you, Mr. Secretary. We'll have five minute rounds and go around until people feel they've asked enough questions.

Mr. Secretary, after we solve this current funding crisis, and I do want to thank you for stepping up to the plate instead of just walking away and saying it's your problem Congress, you came forward and we appreciate that. I certainly want to work with you on a comprehensive and transformational multi-year authorization that will improve all the modes of our nation's transportation system and their impact on our environment. And I know you've been doing some thinking on this and as a matter of fact I have some view into it, but if you could for the record tell us some of the things that you would like to tackle in the long term to really transform our transportation system.

SEC. LAHOOD: Look, my priorities are priorities that I really have worked in collaboration with President Obama on. I mean, there's no question that when you look at $8 billion for high-speed rail, that's the president's priority. We don't have high-speed rail in America. Folks from your state, Madame Chair, have been working , as you know, decades to get to high-speed rail and they're in a very good position and we're going to be helpful and we're going to work with them.

We're going to work with other regions around the country on high-speed rail, so that is a new initiative, that's President Obama's initiative . We also believe that people are tired of being in traffic jams for 90 minutes trying to get to a grocery store or get to work and that we believe the concept of livable communities, where you create modes of transportation, whether it's transit, bus, street cars, light rails, so that people don't have to drive an automobile everywhere they go.

And you can do this in urbanized areas by creating livable neighborhoods or you can do it in communities. Portland, Oregon is a very good model for this and so the concept of livable communities is part of what we believe should be the transformational aspect of this, placing more emphasis on transit. I met with a number of port officials from your state yesterday, Madame Chair. We believe that ports can be the economic engine now for many parts of the country, not only creating jobs. And so we will put a good deal of emphasis on the Marine highway.

We have $1.5 billion in discretionary money. We've looked -- we are looking at some very strong applications from ports around the country to enhance their ability to create more capacity. We're being outcompeted by our friends north and south of our country, so we want to work on our opportunities to really enhance ports. We believe that enhancing transit and other modes -- look, we're always going to sustain our highways. We have a state-of-the-art interstate system. It's second to none anywhere in the world. We're not going to give up on that; we have to have the resources to make sure we take care of it.

We know that it's the lifeline for many rural parts of the country. It's the only way that people can get around, but we need to think also outside of the box on how we pay for these things and that's why we talked about tolling public, private partnerships, infrastructure bank, which I know some people on this committee like and others don't like it. But look, we need to think outside the box. The Highway Trust Fund is insufficient right now to meet all the things that we want to do.

So those are probably three or four things that we're thinking about out of the ordinary, traditional way of thinking about an authorization bill. Some of this comes from people that we've met with in the Senate and the House that want to implement these things, and some of it comes from people in our department too.

SEN. BOXER: Well, thank you. I met with my port people. I think it was right before they met with you; I'm glad you had a good meeting with them. And I think there's no question -- I guess a few of us here have ports, and we know what engines they are for growth, moving the goods in and out. And then in Los Angeles we bring in 40 percent of the imports and then we move them across through Senator Barrasso's state and he has impacts from that, as all my colleagues do as these goods move through on these heavy trucks. So we all are bound together with what happens at our ports.

And I would say that I really agree with you because at this point in time my ports can't expand because the air is so polluted and the trucks sit there and they're belching out all these terrible toxins into the air. We have unfortunately still -- these big ships are still using bunker fuel, which we're making progress on getting rid of this. And if you look at -- and we've had hearings on this -- that the incidences of cancer, they are clustered around our ports. So for reasons of health and reasons of economic growth, we need to figure this out.

And so I'm very glad you've raised the issue of our ports. My state bonded itself; the people voted to bond themselves up to $9 billion for high-speed rail. So I'm glad you mentioned that because we see it as a way to be able to jump on a train and go between San Francisco and Los Angeles instead of taking your car or even a bus or even a metro to the airport. It just saves time and it's a cleaner way to go and a very pleasant way to go.

So that's why I very much want to get to the five-year bill. I want to get to that transformational bill, but I recognize as, you know -- again, Senator Lautenberg spoke for me and the very words he used that at the moment with the trust fund so depleted we have to figure out a way to replenish it. And, you know, I will tell you there's a lot of pushback on an infrastructure bank. I don't need to get into that with you.

A lot of us on this committee, we want to figure out a way to fill the Highway Trust Fund and do it in a way that makes sense, that the users pay. And we already see truckers stepping up to the plate to help us and we want you to keep your mind open in the administration, because we think the Highway Trust Fund works. And with that, I'll turn it over to my friend and colleague.

SEN. INHOFE: Thank you, Madame Chair. I know the title of this meeting goes beyond just the 18-month extension, but that's frankly all I'm concerned about right now because that's the immediate problem that we have. I alluded to this, Mr. Secretary, in my opening statement that last September -- and I don't recall the exact date -- when the crisis hit us, at that time you were not in the position you're in now but I was.

And we had what I felt should -- an equitable solution and my own president, President Bush, at that time objected to it. I went to him and he said if you try to do that I'll veto it. Well, what the idea was, it was back in 1998, then-President Clinton took $8 billion out of the trust fund and put it in the general fund. There was a reason for doing that at the time, that was to make the deficit look smaller and all that.

But I objected to it at the time; in fact, I think everyone on this panel who was serving at that time objected to it because there was an honesty issue there. And I know I'm taking too long on this, but I think it's important because I'm coming up with a solution that I would like to have you give serious consideration to. The moral issue there was that we have a trust fund, people put money into that as they're using it. It's a user fee. They don't really object to that; it's a popular tax. If you need it there is such a thing.

But then that is under the assumption that the money that they put in goes to fixing roads, highways and its intended purpose.

Now, when you took $8 billion out, that was a violation of that confidence in that tax. So I went to the -- at that time they said that if we would take that back out and understood the damage that was done 10 years before, put it back into the trust fund it would: Number one, fix the crisis that we had at that time; and number two, it would correct something that shouldn't have happened 10 years before. So that happened and the president did not veto it and in fact, it was scored at zero as budget neutral.

Now, I would only say that if that was the right thing to do then, and I think it was the right thing to do then and we did it then, what's wrong with going back and then recouping the interest, which is about $13 billion because if it was right to recoup the principal, then it would be right equally to recoup the interest. So that's my first question is where are going to be on that when we try to propose that?

SEC. LAHOOD: Well, Senator, I need to really see if there's any interest that has accrued on this money and look at that. I would --

SEN. INHOFE: Okay. Let's just go into the assumption that I'm right because I've already checked into it. (Laughter.)

SEC. LAHOOD: My feeling, Senator, is that you all need to -- and I know you understand this -- but I had a meeting with Larry Sommers yesterday and we talked about this issue. And I want you to know and I want the entire committee to know that the folks at OMD are trying to find the money and to pay for to get us to $20 billion through March of 2011. That's our goal; there are a lot of people working on this.

And I will be happy to take your suggestion back to these folks, as well as -- I had a discussion with Senator Vitter about his bill, as well as the suggestion that he's making and the bill that he's putting into --

SEN. INHOFE: Which I agree with. I want to say that I agree with Senator Vitter and -- well, he's not here but I'm just saying that we have some choices here.

SEC. LAHOOD: The thing that I want you to know and I want every committee -- there are a lot of people putting their heads together right now to figure out how to -- where to get $20 billion and how to pay for it. And I will take your suggestion back.

SEN. INHOFE: Well, first of all we're talking about in an 18- month extension I'd like to -- what figure would you like to use for the 18-month extension for getting about --

SEC. LAHOOD: Twenty billion.

SEN. INHOFE: Well, it's my understanding that it's not that great, but we can go back and look at how the --

SEC. LAHOOD: Well, look at -- Senator, I mean, we have some very smart people in the department, and --

SEN. INHOFE: Well, I know we're not very smart up here, but I've heard --

SEC. LAHOOD: Well, my statement didn't imply that you weren't smart because I know you are, but I'm just saying all of the smart people at the department put their heads together and we figured out it's about $20 billion through March 2011.

SEN. INHOFE: Okay, I'm just asking in a very friendly way, and you and I have been friends for a long time. But there are ways of doing this and that was something that was done, that everyone then afterwards, even though they were opposed to it in the beginning thought it was the right thing to do.

The second question I want to ask you -- because I think this is very important -- if we do an extension, an 18-month extension, that will take us out of this crisis time, but in my opinion, and the initial understanding I had -- not from you directly to me but just from things that I heard -- was it would be a clean extension. I know a clean extension is something that the Republicans want, and I'd like to know where you are and whether the administration will come down on a clean extension. I mean, you know, none of the reforms, none of the other stuff.

SEC. LAHOOD: Well, I was in the same meeting that you were at and it was pretty clear in that meeting that the folks around here are not very keen about talking about anything other than a clean extension. I got the message on that and I delivered the message yesterday to our friends at the White House about it. You know, they would still like to have as a part of the discussion and the debate on this some of these reforms, but I know where you're all at on this. You want a clean bill.

SEN. INHOFE: Okay, that's good. And by the way, my time has expired by I had a nice evening last night with your old boss.

SEC. LAHOOD: Well, thank you.

SEN. INHOFE: I enjoyed it.

SEC. LAHOOD: He's doing well.

SEN. BOXER: Senator Lautenberg.

SEN. LAUTENBERG: Thank you, Madame Chairman. I look at the situation that we are in and I think that what we see is a house on fire. We hear now that an upgrade is critical for Lamata, that is should have been done. What future disasters might fall upon us? How much more wear and tear is going to take place before we start seeing serious improvements in our transportation system? We need more national leadership; I don't know why this isn't seen as a crisis of major proportion, described that way. I don't diminish other things; I don't diminish the war efforts that we're involved with, making sure those troops are amply taken care of.

But this is a crisis. We are facing several of these, and we have a crisis with foul air and a declining quality in our environmental condition. Why aren't things like some of those used in the past identified as emergency actions to be taken now? Maybe we ought to just, say, go back a little bit, and I don't want to use a timeline because mine goes further than anybody else in this room. The fact of the matter is that maybe things like an analysis of whether slower driving is going to reduce the amount of pollution in the air, or is going to reduce the amount of fuel that we have to import.

Perhaps other things that are not obvious. We can't grow money; that's the problem. And we need it desperately because of neglect. We didn't take care of the functions of our transportation system, the functioning parts that you described. And I read carefully, Mr. Secretary, with respect what you said. Fifty-three percent of our highways traveled on are roads less than in good condition, 30 percent of our bridges structurally deficient, 22 percent of our transit buses and 32 percent of our transit rail cars all overage.

And I know personally that things over age can be effective, but (laughter) why aren't these things emergency conditions? And therefore, Mr. Secretary, wouldn't it be wise to put more money immediately into transit programs to make sure that the places -- there are shovel and picks ready to go in lots of places throughout the country to get people back to work. That's one of the critical issues that the country is facing and that President Obama is committed to reducing.

And yet I'd like to see more clean air for my asthmatic grandchild, and therefore cleaner air for all asthmatic grandchildren. And we can do those things if we invest in mass transit and reduce the pollution that's thrown at us because of our consumption of fossil fuel. And so, Mr. Secretary, does that strike a note with you that says, yeah, this is some place that we've got to go?

SEC. LAHOOD: Well, Senator, we at the department are committed to all modes of transportation and I'll tell you this, the $8 billion that was in the economic recovery for transit is being well spent. It truly is, on some very important --

SEN. LAUTENBERG: It's being immediately spent.

SEC. LAHOOD: Yes, sir. We've complied with every provision that Congress put in the bill for spending this money, and the money is going -- is going to be going out the door here very quickly.

And we're committed to transit; there's no question about it. And, you know, if Congress decides they want to step up more funding for transit, we'll find plenty of ways to spend it.

SEN. LAUTENBERG: Well, the thing that I'm really pleading for here is I'm pleading for a message that says the transportation system is one of the critical parts of our functioning as a society and that leadership in our country says, do the things that you can do. Use cars -- buy cars that are more efficient, have more efficient mileage. Drive less if you can do it. Drive slower. Ask the states to look at what the consequences of higher and higher speeds on the highway.

An emergency condition, as I said earlier. The fire's in the cellar; do we want to wait until the fire's up to the second floor before pouring lots of water on it? Thank you.

SEN. BOXER: Thank you, Senator.

Senator Barrasso. We're going in order of arrival. Senator Barrasso.

SEN. BARRASSO: Thank you, Madame Chairman. Thank you, Mr. Secretary. In your written testimony you had mentioned that you'd like to reform the highway program using kind of a long-term extension to make better use of what you called cost benefit analysis. And about 70 percent of the entire Federal Aid Highway Network is located outside of metro areas. And I express the same concerns that Senator Boxer did when she talks about the ports and the goods coming into those communities and then getting sent across the states to get to a place like Chicago, and how we use this cost benefit analysis.

Could you talk a little bit about what your plan is for using cost benefit analysis to reform the highway program and how that's going to impact on rural areas? Because if you do something along the lines of the number of cars per hour or cars per mile, they're clearly areas that are not -- that are getting overused in terms of our highway system and with repairs and expenses across Wyoming, Nebraska, Utah and similar states where the actual total volume is down but the one truck equals that of 4,000 cars.

SEC. LAHOOD: We want to make sure that every dollar that we spend that we can say to the taxpayers this is the best use of this money. And you've been -- all of you have been around long enough to know that people are tired of reading about transportation projects that are funded because of some sweetheart deal or some earmark or something like that.

We want to get to a place where we can say to Congress this is the best use of these dollars and develop metrics to show that the infrastructure dollars are being spent as wisely as possible. And so there are metrics there for us to judge, a transit project or a highway project, so that when somebody says, "Oh, this was done because so and so wanted it done," no, the answer is it was done because the cost-effective metrics that we put in place said it was so and it was needed. And that's the place that we want it, so we can justify every project using metrics that everybody understands.

SEN. BARRASSO: Well, I appreciate your comments, specifically the sweetheart deals, the earmarks -- I mean, we read now in the last week about the airport that nobody uses that's getting all of this money, so I'm encouraged by your comments that you're actually going to use cost and benefit and point out and hold the people accountable for the sort of things that are being listed as -- that doesn't seem to be the best use of it.

SEC. LAHOOD: Senator, that's where we need to get to, and that's what we want to do in working with Congress on an authorization bill so that there can be no criticism of Congress and no criticism of DOT, that we're all on the same page on these -- these are worthwhile funding, whether it's at an airport or whether it's somewhere else, because of the metrics that we use that prove that it has a cost benefit to the taxpayer.

SEN. BARRASSO: You also talked a little bit about livable communities, if I could visit about that. And certainly in Wyoming we could have significant reservations about the Washington with its wisdom coming in and telling the people of Wyoming what's a livable community and what's not a livable community in terms of how the federal government in Washington decides to spend its money, the one- size-fits-all approach. I don't know if you wanted to comment a little bit about that.

SEC. LAHOOD: No, this isn't Washington speaking, this is people like Earl Blumenauer and Peter DeFazio, who come from Portland, Oregon who have over a period of time worked with their local elected officials to develop a streetcar system, to develop housing along the streetcar system so everybody in Portland doesn't have to get in an automobile in order to go where they want to go.

This is not something that Ray LaHood dreamed up, this is the dream of members of Congress who have seen it by working with their mayors and their governors and their city councils for communities where people don't have to use an automobile to go everywhere. You don't have to have a three-car garage. You might have a car but you might also have an opportunity to get on a street car, a light rail, a walking path, a bike path in order to get to work or get to the drugstore. Look at, Senator, I got this idea from being around here.

SEC. LAHOOD: Thank you, Mr. Secretary. Thank you, Madame Chairman.

SEN. BOXER: Thank you.

Senator Voinovich?

SEN. GEORGE VOINOVICH (R-OH): Hello. Does anybody hear us? Does this administration hear from the folks out there that are in the business that have all come together and said we need a robust highway bill now. There's an urgency to it, good for our environment, good for our competitive position in terms of our economy, good for jobs, good for jobs. You're talking about finding some money to keep us going at the level we're at. The 285 we passed in 2005 was it adequate? It's way below what that is today. We're going to continue that?

We have a $2 trillion deficit and you're going to have to find some money so you can take care of us during the next year and 18 months? The way to get the job done is to pass a bill now, urgent, get it done. And Madame Chairman, I would like you to know that this bill we passed in '85 didn't get the job done. Number two, we've got stimulus money out on the street and that's going to evaporate and what the country needs is to know that within the next five-year period we're going to make a comprehensive commitment to the infrastructure, including high-speed rail, our highways, ports and the rest of it to get it down in a tune of about $450 billion.

Can you imagine what that will mean in terms of our economy, at giving some people confidence in where we're going? Is anybody listening? When you've got every group in this country that says we want this done now, we need it. And I'm going to be doing some studies, Madame Chairman, about out the impact that this is going to have on the reduction of jobs, and it's going to take a balloon that's got a little air in it and is looking forward to having a whole lot more air and the balloon is just going to subside and there won't be anything there. And that will be awful for our economy.

Does anybody know how bad it is out on the street? Does anybody know how many businesses have gone out? Do you know how many businesses are right on the fringe right now and they've got to have some kind of confidence that we're going someplace, at least one part of our economy. And by the way, we don't have to have an emergency spending, we don't have to borrow the money. We're going to pay for it and the American people will pay for it if they know they've got a product.

Now, Madame Chairman, I'd like you to say there a man over on the House side named Jim Oberstar that's had more than 50 hearings and spent two years on this. And the stuff that's been talked about, livability and performance, it's a terrific piece of legislation. They're going to mark it up in the House. And Madame Chairman, I think we should look at it and I think that we ought to get it and understand that this is important. The chairman's always talking about the environment. We get this bill passed and get going, this is going to have a dramatic impact on reducing greenhouse emissions.

It's going to have a dramatic -- you talk about our highway is the second to none? Give me a break; have you been to Europe lately? We're way behind Asia, China, India. We're behind; we've fallen behind. If we want to compete, we need to have these corridors working . We need to get rid of congestion and we need the jobs badly.

We need them.

And so I would say to you -- and I thank you very much, sir, for the job you're trying to do and you're representing the administration -- I don't think they get it right now about what this is. And there's going to be a bunch of us in the next couple of months that we're going to the American people and we're going think talk about the situation as it is and the impact that not going forward with this bill is going to have on our economy and our environment and our competitiveness in that global marketplace.

It's time to do it; we shouldn't wait for 18 months and try to fiddle faddle it around and try to figure out -- you know, robbing Peter to pay Paul. You know there's no money here; you either have to make an emergency and borrow the money or figure another way to borrow the money or go through -- Jim's suggesting ad hoc about interest, you know, the interest. Go calculate the interest; there's no money there. Where are you going to get the money for the interest? It's not there.

So my message to you is to go back the president and start talking about where we are because I'm going to tell you something, there is going to be one large crescendo in this country during the next couple of months to let people know of America just exactly where we are today and what we need to do.

SEN. BOXER: Well, Senator, I share your passion for doing a transformational bill. I've been here for a very long time in Congress and I have always pushed hard for change and transformation. And sometimes I've won it and sometimes I haven't. In this case I feel as the chairman of this committee, until I know how I can tell the American people we're going to pay for this major change and major need, I'm not ready to find that solution.

I know that Chairman Oberstar and yourself and others have talked about a big increase in the gas tax. I will tell you if you go out to the people of America and you tell them that's the solution, I don't think they will buy it. They're struggling right now. I think we have to come up with other ways. I have talked to Chairman LaHood and he has responded that the day after we pass this extension, and my goodness, we've done that before, there are moments when you need to have the time.

If the Highway Trust Fund wasn't going broke that would make this a very different conversation. So we will have this debate in this committee. I don't know of any others on the committee who share your view at this particular time. I know James Oberstar does; he's a great man with a great vision and I share a lot of his vision. But it's timing; it's the timing. And, you know, Secretary LaHood has stated that in fact we are going to work day in and day out and I hope that you will, despite your I would say extreme dismay and disappointment that most of us are moving toward this 18-month extension, in that period of time we're going to be needing, you know, probably daily on how to pay for the kind of vision that you've exhibited. And that's the fact; that's where it is. And I look forward to that debate.

SEN. VOINOVICH: Madame Chairman?

SEN. BOXER: Go ahead.

SEN. VOINOVICH: Madame Chairman, my theory is that if you put a package together that addresses the concerns of the American people and they can see that they're going to get something out of it in terms of as I mentioned dramatic decrease in the release of greenhouse gases, a major improvement in the elimination of congestions and traffic courts orders and livability, performance planning. And also the impact it's going to have on the economy and the jobs that I believe that they will support -- we know we have to find other sources -- but I believe they will support a gas tax.

Now I was a mayor; I was a governor. And I supported tax increases. I've gone to the people; I've explained to them what we're going to do with the money. And after they looked at it they came out and they supported it. And it's a sales job, they've got to know what the product is, and I'm saying that Jim Oberstar's going to vote bill out of his committee that does it. It's a terrific piece of legislation that gets at a lot of things that American people are concerned about and I think there's going to be a tremendous receptivity to it and I think if you have a product, Madame Chairman, where they can see it's going to really make a difference for our country, that they'll be supportive of it.

I mean, when the truckers tell me they're willing to have an increase, a big increase in taxes and every group that's out there that in the past, Madame Chairman, were always taking a walk, you know, they are there. They understand how important it is, and I just think that -- I just want you to know I'm going to work my you-know- what off in the next couple of months with everybody out there to convince the American people that we do need to get this done now and that's it's going to take some money and it means that we are going to have to pay more for our gas tax initially and that would take care of your problem in the next 18 months.

You're going to be working right now, aren't you, to try and find the money, to get us through this first time. Then you've got to find the next time, $20 billion. If we got the bill done, you know, on time, you wouldn't have to do that because we would have increased the gas tax and it would take care of your problem. And so I just -- in all due respect would urge you to look at this again.

SEN. BOXER: Senator, if I could just say this is a very important moment for us to send a strong signal that we are going to work together to, at the minimum, extend the highway bill so that it's seamless and nobody's threatened because all the programs will be going forward. We do have stimulus money out there; I don't think SAFEX (ph) should be overlooked, which is also increasing, actually, the projects on the ground.

So by extending, so you keep everything at the same level plus the influx of the stim money, you are moving forward and there's no reason to frighten people that in the short term anything bad is going to happen. We are agreed across this committee with maybe one or maybe two exceptions -- I only know one exception -- that the short- term, 18-month extension is the way to go.

Now my colleague is absolutely right. In the House is a different modus operandi, that the chairman, who I deeply respect and hold in high regard, has decided that it's his committee's role to put this out there and then the ways and means is going to figure it out. But I want you to know that the level of spending in the Oberstar bill, there's only half the money in the trust fund to pay for it. In other words, it only pays for half the Oberstar bill.

Now I, in good conscious as the chairman of this committee, don't feel that I can move forward at this time a fiscal stress and strain with that type of a bill without being able to pay for it. Now, I have some really good ideas on how to pay for it; I want you to know I've been working constantly on that. And by the way, our ranking member and I have been talking about it because we, although we haven't agreed on a full package of funding, we are beginning to make some progress on things we agree with.

It is true that the truckers have stepped up, and I think you're right to single them out. They are the only ones that have stepped up. All the others have spoken to me, have not put on the table what they will do. They want to do more but they haven't been specific. We need time; this is the moment in the next year or two, now, in the next two years, that we have to transform the way to do this. I couldn't agree more with you on that point and with Senator Lautenberg.

I also want to say to my friend that greenhouse gas emissions, that's a major problem. And the Obama administration has taken moves which are fantastic to increase fuel economy, tremendous strides. We looked at some modeling; it's extraordinary the amount of greenhouse gases that will be taken out. And we will be working on a greenhouse gas reduction bill, which I hope my friend will help me on, to do even more. So on that front we have tremendous possibilities.

I don't like to have a split with my friend from Ohio on this because he's on the right track on what we need to do. It's a question of timing; it's a question of PAYFOR. It's a question of sending a signal out today that we're going to move quickly because the Highway Trust Fund is going broke and we need to replenish it and that adds another layer of uncertainty, and I think the most certain way to foresee is this 18 months.

I will tell my friend we could write a bill, he and I, that would be a tremendous bill and I would guarantee my friend that it would have tremendous change in it as he said. He talked about many of the things that Secretary LaHood has spoken about. Let's be honest here. When it comes to going to the Senate floor, when you have that type of bill, this can't be done quickly. It has to take time, and time is not on our side in terms of a trust fund that could be out of funds as early as August. We're hoping not July.

And that will put hundreds of thousands of jobs at risk and for me, the most important thing I think we can do is to do this extension clean as it can be, clean as a whistle. So we don't delay it; we don't run into trouble. And Senator Inhofe and his staff and mine are working to that end. In any case, that's -- you know, we have a division but I have to say I believe I speak for almost all the members of this committee -- I can't say to a person -- but I have discussed this with most of them and they have supported the 18-month extension.

Secretary LaHood, I'm sorry that you had to sit through a debate here within the committee but I'm glad you did in a way because I think you can take back the message that while we, in the Senate, the majority of us here across party lines agree to a clean, 18-month extension not with these policy changes because it will, in fact, jeopardize a quick passage of this extension. We also believe, as Senator Voinovich does. The difference I have with him strictly on the timing, not on what he said. His passion, his concern, the issues he lays out, I haven't got one bit of a quarrel with.

So maybe if you could tell the president that we do have a short- term strategy in this committee and we have a long-term strategy that we want to begin as soon as we've taken care of our short-term problem, you have been so helpful and understanding. You know what it is to work around here and I just appreciate your leaderships, your straightforward comments and your patience. So we thank you very much. I don't know if you want to.

SEC. LAHOOD: No, look at -- I appreciate your leadership, Madame Chair, and I would say to Senator Voinovich that, sir, I've been out around the country. I just met with your governor; I just met with your other colleague that serves in the Senate here. He came to my office, we talked about a lot of issues. I've had three meetings with the governor of Pennsylvania, three meetings with the governor of Michigan. These are states, your state, Michigan, Pennsylvania, Illinois, these are all states that are hurting very badly and we know the pain out there.

And we think our portion of the economic recovery is doing many, many good things. When I get out around the country I see a lot of people working as a result of the fact that our positions of the stimulus is working. We're getting the money out the door they way Congress asked us to do, and I'll tell you this, President Obama does have a vision for transportation and I've tried to express it here in my statement. It's not something he's going to ignore or turn a blind eye to at all.

But I want you to know that we have listened. Not only to you, sir, but to many other people around the country as we get around. I've been to many states and I talk to a lot of elected officials, including some who are serving in this body and we will work with you. Your vision of transportation is very similar to President Obama's vision of transportation, and as the chairwoman said, the timing is I guess where we part company.

SEN. BOXER: Senator, if you want to reply.

SEN. VOINOVICH: (Off-mike) -- know where I'm at and all I can say to you is that if people that you've met with -- I think probably when we get back from the break, you're going to see a tremendous number of people who you say are not willing to step to the table who are willing to step to the table and I've met with them and they're a strong, united group.

And I'm going to join with them and others and Jim Oberstar to try to convince you and others that we need to get on with this and we can't wait 18 months to do it and that one of the things that we're going to have to -- one bullet that we're going to have to bite in order to pay for this and not have to borrow the money or do all the other things that we always do around here when we don't have the money, we finagle it, that one way that we're going to do that is that we're going to pay for it. And the American people, I think, will be -- will understand that.

The second thing they're most concerned about today beyond jobs is the fact that they know that where we're going, the way we're going in terms of our national debt is not sustainable. They get it, the Europeans get it, the world gets it, we don't get it. And if we talk about, you know, Secretary you're going to try to find a little money someplace. It will be, you know, rob Peter to pay Paul, something to get you through it, and then you've got to find some more money.

A much cleaner way would be to the American people say this is a really good highway bill that's needed for our country and we know that with the facts you're going to be supportive of this because it's going to make a difference. And by the way, it's not emergency spending; it's not some of the other Mickey Mouse stuff that we do around here. We're going to pay for it, okay? We're going to pay for it. Wouldn't that be wonderful for once?

SEN. BOXER: Yes. And I'm very glad you're going to meet with the players because I've met with all of them and the only one of the group that has put forward a proposal have been the truckers. And I could tell you I am very grateful to them, but I want to say this. I couldn't agree with you more. The deficit and the national debt has got to be brought down. We had that under Bill Clinton and we did it. We inherited from the first President Bush an enormous debt and enormous deficit, and we did it under Bill Clinton.

We got a balanced budget; we got a surplus and we got that debt going down. We're going to do it. That's the reasons why I want the extension, because I don't feel comfortable bringing forward the bill until I know how I'm going to recommend paying for it. I can't imagine why I would every do that. I don't see it in my view as being fiscally responsible, just to put together a giant bill and send it off to some other committee and have them figure it out.

I want to work with you, Senator Voinovich, so we can have the people of the ports say this is what we're willing to do to pay for it. The railroads, this is what we're going to do to pay for it, you know? I'm not going to keep going back to the American people on a gas tax; let the heavy users like the truckers step up to the plate. And we can work together, and I have stated before I am willing to see the gas tax index to inflation. I think that's a fair thing to do. So there are ways we can do that in a fair way, but again, it's chicken and egg.

The theory of Chairman Oberstar seems to be I'm going to write this great bill, which he's done, and now it's going to force the way to pay for it. My view is when I do the bill I want to make sure we have that done. It's just my thinking, but it also is Senator Inhofe's thinking, it is also the vast majority of my colleagues, Senator Baucus and others, including -- I don't know of any other Republican that doesn't agree with that.

But having said all that, I hope that we can work together as you meet with these various groups, Senator, because if we have a breakthrough nothing is going to stop us from writing our bill the minute we have our breakthrough. For example, if we had a breakthrough in three months, I'm going to sit with you, we're going to get a bill out there and we're going to move. So this is a question of immediacy versus the long-term solution and that long-term solution is going to come. It could come in three months. I think with your driving force it could come in two months; I'm very much open to that.

So here's where we are. We're going to continue to work with you on this 18-month extension. Senator Voinovich is going to work hard to change our minds. I always am willing to hear his ideas on how we are going to pay for this big vision that I've ford at this time. We'll get there. I don't know that we can get there in three weeks when the trust fund is out of money. I should say maybe it's a little more than that; maybe it's six weeks or eight weeks. And I want to thank you, Mr. Secretary, because it's tough, it's hard. But we're getting there. Thank you very much.

And it's my privilege to call up our second panel: Kathy Ruffalo, President, Ruffalo Associates and she was a member of the National Surface Transportation Infrastructure Financing Commission; Don James, Chief Executive Officer, Vulcan Materials; and Jack Basso -- did I say that right, Mr. Basso -- all right, Director of Program Finance and Management, American Association State and Highway and Transportation Officials.

We welcome you and we look forward to your words of wisdom. So if people could leave the room quietly that would be very good. And we will start with you, Kathy Ruffalo.

MS. RUFFALO: Thank you, Madame Chairman and members of the committee. I appreciate the opportunity to address you today regarding the impending insolvency of the Highway Trust Fund. By way of background, I did spend 11 years as a staff member to this committee and had the privilege to work on IT, T21 and SAFETEA-LU. I also spend six years --

SEN. BOXER: And you lived to tell the tale. (Laughter.)

MS. RUFFALO: And I'm not sitting where you are now, so yes, I learned a valuable lesson. (Laughter.) I spend six years working in state government and I am a member of the Commission, as you mentioned. And all of that experience has certainly shaped my perspective on the situation that you find yourself in today and I have a very healthy respect for what you and your staff are trying to do and develop that multiyear proposal.

Having said all of this, I believe your task remains more difficult if Congress were to allow the Highway Trust Fund to become insolvent, allow for a dramatic reduction in transportation funding next fiscal year, and possibly allow for the last contract authority as the basis for our transportation program.

So I'd like to briefly cover a couple of areas with you today. I was asked to talk about the history of the Highway Trust Fund, so that's in my written testimony if you'd like to refer to it. But what I'd like to focus on is how did we get to where we are today and what are the impacts of the insolvency of the trust fund? As background there are two major sources of revenue into the trust fund; it's been talked about a little bit today. There are the motor fuel taxes and then of course the vehicle and tire taxes.

The motor fuel taxes account for about 90 percent of the revenue into the trust fund, and the non-fuel taxes and fees are about 10 percent. As we all know, the current economic situation has dramatically impacted the revenues collected from the motor fuel taxes and while increased fuel efficiency has had an impact, the fact that fewer people are choosing to drive and purchase fuel is a much larger factor.

But there are two other issues I'd like to bring to your attention. First, the non-fuel revenues continue to be extremely volatile. These are things like the truck trailer sales and tire taxes. It's the volatility in these non-fuel revenues that are impacting the balances in the trust fund. Again, while these non-fuel revenues are only 10 percent of the overall revenues into the trust fund, wild and dramatic swings in these taxes and fees can have a real dramatic impact on the balances of the trust fund.

The second issue I want to bring up is in SAFETEA-LU of course we had to spend down the balances in the trust fund. We spent down the balances in the trust fund because we knew that the revenue coming in from the fuel taxes was not going to be enough to spend the levels that Congress wanted to spend at the time. So over at the LIFA (ph) SAFETEA-LU we did spend down the trust fund balances and that's another reasons why we find ourselves in this situation that we're in today.

So there are basically two choices facing Congress and you all have talked about them this morning. We need to develop a solution to either add additional revenues into the trust fund for this fiscal year or do nothing and allow states and transportation agencies to experience a reduction in funding and slower reimbursement rates. So we need to decide are we going to break the promises of SAFETEA-LU or at least take care of this fiscal year?

Madame Chairman, I know that you and others on the committee are committed to finding a solution to our current insolvency problem, and also to finding intermediate and long-term funding solutions. It's my hope that the entire Congress will choose the same route and will take action to resolve the solvency issue for fiscal year 2009. As has been discussed, Congress did pass the stimulus bill in February with the stated purpose of creating and sustaining jobs. It would not make sense to not provide additional infrastructure spending six months after that bill; it just seems counterintuitive.

So as has been mentioned again, the impact from mini gap (ph) and federal transportation funding will have a ripple effect across the transportation sector and certainly through the economy. Construction jobs will certainly be lost, but we have to keep in mind that in addition, businesses in the transportation sector will continue to be reluctant to hire workers if there's no clear signal that Congress is committed to these jobs and the investments being made. And in fact, some businesses may begin to slow down production of transportation- related features if it appears there will be a gap in federal funding.

Madame Chairman, I work every day with many of the stakeholders in the transportation industry, businesses, states, local governments and various transportation associations. I can tell you there's real apprehension regarding the impending solvency and the impact of inaction. I would like you and the members of the company to know that many in the transportation community stand ready to assist you in resolving this crisis and I hope you will tap these resources to help make the case on the importance of transportation investment to others in Congress, and just as importantly to public.

Madame Chairman, members of the committee, at the end of the day we're all trying to do the right thing for this country, so I believe we all need to remember there are real men and women behind all the numbers and the statistics that we tend to use up here. We can't get caught up in national statistics and forget the impacts of the decisions being made. Thousands of jobs depend upon federal transportation funding, and not just the direct jobs.

So whether to get to work, move goods across this country or maintain our quality of life, the federal government is and should be an important partner in transportation investment. So with your leadership, Madame Chairman, and the leadership of this committee, I hope Congress can quickly resolve this crisis. Thank you for holding this hearing and I'm happy to take any questions.

SEN. BOXER: Thank you very much. And then Don James, Chief Executive Officer, Vulcan Materials. Please proceed, Mr. James.

MR. JAMES: (Off-mike.) My goal is to bring you the point of view of the business I run and our employees and our customers to bear on the issue of the importance of the Highway Trust Fund and of the sustained and significant funding for America's transportation infrastructure that is needed.

Vulcan is the largest producer of construction aggregates in the nation, primarily crushed stone and sand and gravel. We're also a major producer of asphalt and concrete. Our products build highways, roads and bridges and other large infrastructure projects in America. We've been publicly traded on the New York Stock Exchange since our founding more than 50 years ago, and we're a member of the S&P 500.

Our employees at more than 350 operations serve customers here in the District of Columbia and in 23 states. We have been recognized twice in the last seven years as one of the top 10 of all Fortune 1000 companies for social responsibility. During the same period, Vulcan has been named by Fortune to its top 10 list in two other categories, including use of corporate assets and as a long term investment.

We strongly supported this committee's efforts regarding the American Recovery and Reinvestment Act. We and our industry association stand ready to assist the Committee in this vital effort to support transportation infrastructure investment -- investment that needs to be sustained and significant to meet the great and ever growing transportation infrastructure needs of the country. The business of successfully building and maintaining our national surface transportation infrastructure depends in large measure on the funding stability and the year-over-year predictability of the federal aid highway programs funded by the Highway Trust Fund. These authorizations provide an important continuity that my company, our employees and our customers rely upon in order to meet the significant and growing needs of our transportation systems.

Multi-year bills are particularly vital for the funding visibility and the related confidence they instill in state departments of transportation.

When state DOTs know that the Federal Aid Highway Program will apportion to them their federal funding year over year in an amount authorized, they have the confidence that their state expenditures will be reimbursed. The states then award contracts, and the process of building and maintaining our transportation infrastructure can proceed smoothly and efficiently. Confidence in the long term stability of the program is a critical factor in ensuring its success. When there are doubts, as there clearly are today, awards for construction projects slow because states are not sure there will be funding for reimbursement.

As the pipeline of project awards slows, this inevitably leads to a loss of jobs in the construction and related support industries. As a material supplier to highway contractors, we are the first to feel the impact of slowing rates of contract awards. The production of our products and the private sector jobs that are created precede by many months a state's request for federal reimbursement of its state funds used to pay for construction. This means that well in advance of any technical definition of insolvency in our Highway Trust Fund, at the point when the perception of a lack of future federal funding occurs, that lack of confidence impacts our employees and our customers.

Our slow down occurs at the first doubts about what Congress will do and when it will do it. We are already feeling the impact of these doubts. And with the end of the current year multi-year authorization coinciding with a predicted shortfall of $5-7 billion in revenue just to cover 2009 budget authority, anxiety and doubt about the future of the trust fund continue to grow. When one adds concerns about 2010, there's an even more negative speculation further reinforcing the perception of unpredictability for the Highway Trust Fund. There's another basic Congressional dynamic that contributes to the perception of trust fund stability -- timely bipartisan action. Prolonged delays and disagreements, however, feed concerns that Congress is not poised to address either the trust fund shortfall or a multi-year reauthorization in a timely manner.

From the vantage point of our company, our employees and our customers and the state DOTs we work with, the optimal solution includes addressing both the trust fund crisis and the timely passage of a multi-year bill. Meanwhile and ironically, in the absence of timely resolution of these matters, jobs in our industry and the construction trades that the Stimulus legislation was intended to create or save will continue to be lost. Transportation infrastructure investment is an investment in American jobs and the American economy. The Stimulus was intended to save or create jobs in part by putting Americans back to work building and maintaining our transportation infrastructure, thereby creating a real tangible value for our economy.

However, temporary influxes of federal funding are not as helpful in creating and in maintaining good jobs with good benefits as our stable multi-year funding streams. The best stimulus to the economy is a robust multi-year highway bill which will be most important in putting United States back on the road to infrastructure and economic recovery. Thank you for the opportunity to share with you today the impact on our company, our employees and customers from delay and uncertainty in the funding of our nation's highway infrastructure.

SEN.: BOXER: Thanks. Now Mr. Basso.

MR. JACK BASSO: Well, thank you, Madam Chairman, members of the Committee, for holding this hearing today, and we particularly thank you from AASHTO for giving us an opportunity to testify. The Highway Trust Fund has been the mainstay of stable predictable funding for the highway and transit programs since 1956. That has changed. In fact, during the past 12 months, we faced two cash crises, one last September, now the latest that will occur in August.

Let me focus on critical impacts of such a funding distribution on the states, the economy, transportation infrastructure investment and jobs. First, let me address the immediate impact of curtailing payments to the states. That change will produce an immediate cash flow distribution issue impacting negatively the already cash-strapped states. The highway program is a reimbursable program where the states execute contracts, makes payments that are reimbursed by the federal governments. States don't have the option to simply delay contracts or payments and thus must generate cash and then wait for reimbursement.

In the years before modern electronic payment systems, this could take as much as a week and cause states to incur borrowing costs to make payments. That is not acceptable in this particular fiscal climate and environment. As we turn to fiscal year 2010, the Administration estimates that the highway account of the trust fund will only support about $5.7 billion or an 86 percent reduction of program commitments.

AASHTO surveyed our state members and also have identified at least 1900 projects that would have to be delayed or eliminated altogether, the combined value of which is over $8 billion. That's just based on a survey at a 35 percent reduction -- probably triple that amount would occur in this situation. Let me cite a few examples. North Carolina reported that some 400 projects valued at $300 million would have to be cut and could affect adversely their GARVEE bond program.

New York reported an impact of over 100 projects valued at $468 million being reduced. Pennsylvania advised 115 projects valued at $528 million would be reduced, undermining the ARRA economic recovery effort. And Michigan, one of the hardest hit states economically, reported that it would drop some 215 projects valued at $414 million. When combined with the era funding as it phases out the reduction in Michigan would be some 67 percent.

As important as the loss of program is the negative job impacts from such a dramatic reduction. States are just hitting their stride on the economic recovery funding, and such a reduction would nullify the gains from the current investment program. The economy can't afford this loss. Given the value of infrastructure investment to support and create jobs, it is clear that we must move to address this crisis in the interest of the economy job creation support. The Administration has included a placeholder in the 2010 budget, and we certainly agree that we need to fix fiscal years 2009 and 2010 funding wise. We agree the shortfall must be addressed but don't support taking discretionary budget authority of the appropriations process to solve this problem.

We think it's more appropriate to continue the practice of a transfer to the Highway Trust Fund that will get us through this crisis. We also understand the Administration has stated that it wants offsets. And to that end, we've identified some areas, including interest which has been mentioned at about a $13 billion amount.

There's $22 billion that was not put into the Trust Fund from 1993 to 1997 from the 4.3 cents that was collected for deficit reduction. Those are just but a couple of examples. The bottom line is we need to sustain the program and the Trust Fund while Congress moves to enact long term legislation. Again, thank you for the opportunity to provide testimony, and I would be happy to answer any questions, Madam Chairman.

SEN. BOXER: Thanks. I just want to make sure -- I think your last sentence was what I wanted to hone in on, and I went through Mr. James' testimony and I want to make sure that Ms. Ruffalo agrees with this. I just want to make sure that the three of you have stated that your preference is that we -- and this is quoting from Mr. James' testimony. He said, "I am hopeful that Congress will pass legislation that brings financial stability to the Trust Fund for the remainder of fiscal year '09 and fiscal year 2010 while also working on a multi- year bill prior to Highway Trust Fund insolvency."

That is my view. That is Senator Inhofe's view. That is Senator Baucus' view, and I believe it's the view of the vast majority. So I would ask you -- and that is the White House's view. Is that what I hear from you, and I will reiterate it again that Congress passes legislation that brings financial stability to the Trust Fund for the remainder of '09 and 2010 while also working on a multi-year bill. Yes or no?

MR. BASSO: Yes, Madam Chairman, and I add one caveat.


MR. BASSO: We support strongly the efforts in the House of Chairman Overstar to move the bill. But we need stability in this Fund at this point in time.

SEN. BOXER: So you support a two track effort to make sure that the short term problem is taken care of while we still work on the long term?

MR. BASS: Yes ma'am.

SEN. BOXER: Does that speak for you, Mr. James?

MR. JAMES: Chairman Boxer, it is. I would emphasize that it is urgently important, we believe, that we get on with the multi-year reauthorization as soon as possible because that is really the basis of stability.

SEN. BOXER: Well, it is my intent to work with the Administration the day after we resolve the short term crisis. And by the way, we'll have many, many hearings starting in the fall. So we'll be calling you back for that purpose. Yes, Ms. Ruffalo?

MS. RUFFALO: And Chairman, I would certainly agree that we need to focus on fixing fiscal year 2009. As for 2010, if it appears that the October 1st deadline is going to come and go without the ability to enact a robust multi-year transportation bill, then I would certainly ask Congress to take action to keep the program continuing while Congress decides what's the appropriate length of time. So I don't know what that length of time would necessarily be. But certainly seeing that continuity of the program is very important.

SEN. BOXER: Well, my belief is that an 18-month extension shows our commitment to continuity. But a short term extension raises a lot of doubts, at least in my state, that they're concerned because they know a lot of what Senator Voinovich said -- most of it, practically all of it I agree with. But I can tell you there are people on both sides that don't agree with everything he said. So it's not going to be the easiest thing to do. We're going to do it.

And then we have, of course, the Banking Committee that takes care of the transportation sector. We have the Finance Committee that has to act. So I guess my point is the 18 month idea, coupled with working on this bigger vision immediately starting in the fall for our committee, it seems to me that sends a very strong signal that we don't have to worry about the short term problem and we are in fact resolving the longer term. How much would you have to raise again? I know Congressman Overstar wants to raise the gas tax. How much would he have to raise it to achieve his $500 billion bill, do you know?

MS. RUFFALO: Well, each penny raises about $1.8 billion, each penny of gasoline and diesel tax coupled together, about $1.8 billion. So if he needs roughly $250 billion, you know --

SEN. BOXER: Plus their fund is not making it on the current level.

MS. RUFFALO: Plus to meet the gap. I don't know the amount off the top of my head, but it's obviously going to be a sizeable increase.

SEN. BOXER: In the gas tax?

MS. RUFFALO: Gas and diesel, right. Yes ma'am.

SEN. BOXER: Well, could we get out our calculators and figure that out, please. And also I'd say, Ms. Ruffalo, that you said that the tires and vehicle taxes were very unstable, is that correct?


SEN. BOXER: And could you -- and you said it's responsible for ten percent of the funding, and you said it was more responsible for the problem than the gas tax. I hadn't heard that from my staff. Does my staff agree with that? So how much did that fund go down?

MS. RUFFALO: Right now, the decrease in the trust trailer sales tax and tire tax is about $2.5 billion has been the decrease right now. So if you look at the gap that we're facing, that's one of the sizeable reasons why we're seeing in for '09 -- I'm just talking about FY '09, that volatility.

SEN. BOXER: Okay. What is each of your suggestions for replenishing the fund not on the short term, but on the long term starting with you, Ms. Ruffalo.

MS. RUFFALO: Mine might be one of the longer answers --

SEN. BOXER: Go ahead.

MS. RUFFALO: Just having been on the Financing Commission. We put together a whole menu of options, as you all know. I can tell you quite honestly that, given the make up of our commission, we probably spent the first year and a half of our two years with members wanting to recommend anything but a fuel tax increase given the political difficulties in doing so. But at the end of the day when we looked at over 40 funding options, the option that kept coming to the top of the list as far as easy to administer, cost efficient to implement, and could generate a sizeable amount of revenue at the federal level was the fuel tax both gas and diesel. So we did recommend a ten cent per gallon gasoline tax increase and a fifteen cent per gallon diesel tax increase. And out of that diesel tax increase, we proposed a portion of it be used for freight projects.

SEN. BOXER: Now is that before you knew of the shortfall in the fund?

MS. RUFFALO: Madam Chairman, we knew there was going to be a shortfall. But we wrote our report over six months ago. So we certainly didn't -- as you know, these projections have been changing quite dramatically. We certainly wouldn't be able to use our projection today.

SEN. BOXER: Right. So that ten cent increase, would that cover Chairman Overstar/s bill?

MS. RUFFALO: No, that get us to where -- that would re-establish the purchasing power from 1993, the last time the fuel tax was raised. It would help us sustain current funding level in 2010. It would not fix the gap.

SEN. BOXER: Okay, and he's increasing programs by how much?

MS. RUFFALO: Well, he hasn't put numbers in, but I believe he's spoken about $250 billion gap if it's a $500 billion bill.

SEN. BOXER: So my understanding is that it's about a third increase for funds? More than that? So you can see where, if you rely on the gas tax, you're talking huge increases in the gas tax. Any other ideas, Mr. James, on how we can fill the gap?

MR. JAMES: Well, certainly we were disappointed, as I know you were, that the Stimulus package had much less highway infrastructure spending as a percent of the total. I believe, as Secretary LaHood pointed out this morning, the highway industry will be able to demonstrate that it is creating jobs faster and more quickly than perhaps other components of the Stimulus spending. As I've said in my remarks and in my written testimony, we create private sector jobs months and months and months before the federal money is actually dispersed --

SEN. BOXER: Well, let me just cut you off on this, Mr. James, because I agree with you in using the unspent Stimulus money. But that's a short term fix.

MR. JAMES: Yes, it is a short term --

SEN. BOXER: I'm not talking about that.


SEN. BOXER: I'm talking about the long term fix. What would your ideas be?

MR. JAMES: I think -- and I agree with the commissions that have studied this and reported back to Congress. It will require a combination of user fees which are, if they're dedicated to congestion relief and highway construction, I think we can get support. We know we've got the support of the trucking association and hopefully the support of a broad industry coalition alliance for that. But I think being creative about tolling is another opportunity. Any time the users of highways get the opportunity to pay for them, I think it is -- and there is a direct and taxpayers can see that every penny they're paying in gasoline tax and toll is being reinvested in the transportation corridor they're driving on, I think you get very good support.

SEN. BOXER: Hmm-mm.

MR. JAMES: And your state has certainly demonstrated that.

SEN. BOXER: We are using a lot of private sector/public sector agreements and tolling and so on and so forth. What about you, Mr. Basso, in terms of long run, not the short run.

MR. BASSO: Yes, long run, we proposed at AASHTO a matrix of funding revenue sources that came up to $1.3 trillion. It included a range of things from gravitating from a fuel tax to a VMT fee collection system. It included for freight a whole series of potential freight charges that could be used to dedicate the freight programs. It included a bonding program -- a fairly complex bonding program using tax credit bonds to generate as much as $100 billion. And it also included some additional fees that could be collected from other sources and put into this program.

SEN. BOXER: Let me ask you --

MR. BASSO: Ultimately, I think the -- well, I'm sorry.

SEN. BOXER: Go ahead, go ahead.

MR. BASSO: The one thing I'd add beyond that is we obviously have an eye on the climate change and cap-and-trade legislation.


MR. BASSO: The fact that I think some money particularly for the transit program --

SEN. BOXER: I agree with you completely. I think that a lot of our colleagues who are pushing for this don't understand the opportunities that they have with a cap-and-trade system to dedicate funding to transportation. Let me just, my last question, the VMT, vehicle mileage travel issue. Have you looked at it because clearly you obviously have because you're recommending that we look at it. I think the big -- there's a couple of problems that some of us have. We don't want it to be intrusive. So we're trying to figure out a way to do it so that it is not intrusive into a car because that's dead on arrival. We're not going to do that. But there may be other ways to do it. My question is because the truth is the more vehicle miles you travel, the more stress you put on the roads. Have you looked at a flat fee on that and what that would bring in?

MR. BASSO: We've looked at flat fees, and we looked at the equivalent of about what it would be just to equate to what we have today from gas tax, and it's somewhere in the range of two to three cents a mile is what would be required. Two other points that I'd make, something I think that will interest you, Madam Chair is that we have a report coming out here in about two weeks from the Transportation Research Board. We took to heart your comments to us several months ago can you come up with something in the shorter term that might work.


MR. BASSO: And we have a report to deliver to you --


MR. BASSO: -- that I think you will find interesting.

SEN. BOXER: Well, I'm very, very grateful to you. Senator Voinovich.

SEN. VOINOVICH: Thank you, Madam Chairman. I'd like you to comment on the 2005 safety loop piece of legislation and the fact that, because of the cost of oil and steel, how that 285 has in terms of today's dollars evaporated in terms of what it buys because many of the states who wanted to move forward with their programs, as you know, weren't able to go forward with them, I know in Ohio, because the money didn't buy as much as what they thought it would buy because of the cost of steel and because of the cost of oil.

And the point I made to Mr. LaHood today was that in effect what we're buying is below -- I don't know how much, a third or something -- below what we had in 2005. And so if we continue that, we're at this lower level of spending, okay. Now we have the Stimulus bill that's coming in, and that's given us a little lift here. We're getting more money there. But if we don't make it clear that we're going to provide the money to pay for this year, okay, doesn't this leave a large uncertainty out there among the states about where we're going, i.e., if we were able to say, look, we're going to take care of the extension, don't worry about it, but it's at this lower level, you got your Stimulus money coming in -- and by the way, we're going to do everything we can to get this bill done, we'll have new money coming in, this is the level it will be, here's what it's going to buy, don't you believe that that from a public policy point of view would be the best way to go? And I just want to quote Mr. James.

You said "I'm hopeful that Congress will pass legislation that brings financial stability to the Trust Fund for the remainder of fiscal year 2009 and 2010 while also working on a multi-year bill prior to Highway Trust Fund insolvency. But this won't mean that our company, our employees and our customers will have avoided the impact of the current perception that the Trust Fund might become insolvent without remedy or that a new multi-year bill might be delay."

Now that's getting at the planning. I was around when we passed ICE-T. I was a governor at the time. I said we got to go to multi-year spending so that the companies and the suppliers and everybody knows what the level is so they can properly spend, And that re-bought, I think, a lot of logic and common sense to it. And by the way, I think it was a lot cheaper way of doing it than this appropriate this year down, up. Nobody ever knew what was going on. So could you both -- all three of you comment on that about in terms of what impact psychologically this is going to have if we don't say we'll take care of this year and then people say, well, we're going to delay the bill until after 18 months. You understand what I'm getting at.

MS. RUFFALO: Right. Well, Senator, there's no doubt that having some predictability and stability not just for the states but for businesses as well is going to be really important. One of the things that I hope Congress does not do are a number of very short extensions like we had under safety loop, a three weeks, a month. That kind of uncertainty just does nothing but give lack of confidence to people outside of Washington, DC. So certainly there are impacts to not having a multi-year bill done on time on October 1st, and you've certainly articulated what they would be, whether it's an 18-month extension or some other version of an extension. There's always an impact of not having the bill completed on time.

MR. JAMES: Senator Voinovich, I think the real key is to get the next multi-year highway bill done and in place. That is what is needed to get predictability and certainty that allows DOTs to move forward with significant projects and allows companies like Vulcan to gear up to be able to provide the materials efficiently on projects like that. So I can't -- I'm not a politician, and I don't understand necessarily all that has to happen to get the bill done. I agree with Ms. Ruffalo that having a series of short-term extensions is very damaging to the whole system and the program. But I do think getting to the multi-year bill as soon as possible and eliminating the uncertainty about what's going to be in that bill which seems to be an issue today about the content of what's in the bill and how all of that's going to work, that uncertainty creates a great deal of difficulty for the transportation network, I think.

SEN. VOINOICH: MR. Basso, yeah.

MR. BASSO: Senator, just two observations. I think the ultimate disaster would be a bill that drops to $5.7 billion because nothing is enacted. We at AASHTO see that. We need stability and predictability on the funding side. As to the extension, I think we think that an extension, assuming it will happen, needs to create some stability and predictability. But ultimately the point I made earlier about getting a multi-year bill in place as soon as possible, as Mr. James has said, is the critical piece to a capital program that can be actually put in place and sustained over the long term.

SEN. VOINOVICH: See, what I'm worried about is that we're at lower level on the spending, and we're going to fund that lower level and then the Stimulus starts to tail off, and then we have, as I mentioned, you know you've got the balloon, you've got a little air in it and then all of a sudden it just evaporates.

And I think that whole concept from a psychological point of view is going to have a very, very negative impact on everybody -- the states in terms of what they're doing, businesses that are out there and what they can do to plan. And you would all agree that the sooner we can get the multi-year bill done, the better off the country's going to be.


MR. BASSO: Yes, I do. And I was very encouraged by the comments from the Committee about the need for any extension to be a clean extension because if there is an extension and it is not a quote clean extension, that's going to create a tremendous amount of uncertainty, and the DOTs are going to tend to want to back up and wait and see, and then the whole job creation benefit of the Stimulus and the extension will get lost in the concern about the details of what new provisions are in the extension.

SEN. VOINOVICH: Thank you.

SEN. BOXER: Thank you, Senator Voinovich. Just to make it clear so we don't send a mixed signal from the Chairman and the Ranking Member, we plant to mark up a clean extension for 18 months the week of the 20th of July, and that's our plan and we are going to do it. So want to make that clear. Yes, Senator Klobuchar?

SEN. KLOBUCHAR: Thank you very much, Chairman Boxer. Thank you to our witnesses. I, you know, like everyone here, I'd like to see this bill enacted as soon as possible, especially for the State of Minnesota, the home state of Representative Overstar. And also I understand the hazards of doing this month to month and on the short term. When you talk about, Mr. James, not having a clean bill, what do you mean by that exactly? Some other things going through or what?

MR. JAMES: I think the programs that the state DOTs understand and can move forward with in an extension in my opinion are very important. If there are programmatic changes that the House and the Senate wish to have in a multi-year bill, that will have to be worked out. But trying to do that in an extension in whole or in part, I would have a great deal of concern it's going to cause the state DOTs to go whoa, we don't know that's going to work and we're going to back off on contract awards until we fully understand it. And then we have destroyed probably the most important part of the reason for an extension is to keep the jobs --

SEN. KLOBUCHAR: Keep the jobs going and the whole reason for the Stimulus. Do you think that there are some transportation policy issues that Congress should be considering outside of the comprehensive authorization process of either the new bill or this extension if you could pick some priorities? Secretary LaHood talked about better use of cost benefit analysis, improved mobility of goods and people promoting livable communities. What do you think that we could be doing now outside of this extension?

MR. BASSO: Senator, let me just mention I think outside of the extension and in the long term, there's a lot reform, a lot of things that we propose at AASHTO and the Congress propose need to be done. Given the short time, just being candid, that Congress has to deal with this extension, you may have been or may not have been informed the DOT issued a letter last night saying payments will be curtailed to the states in August. So --

SEN. KLOBUCHAR: Right. No, I'm aware of that.

MR. BASSO: There is not much done left to deal with this. We think a clean extension from our point of view is one that deals strictly with the shoring up and the money issue and doesn't try to enact major themes of reform, something that probably candidly can't be done in the short time that we have forward with the consequences and basically funding being cut off at a critical time.

SEN. KLOBUCHAR: All right. Ms. Ruffalo?

MS. RUFFALO: Senator, I would just add that having gone through three of these transportation bills from the vantage point of staff on this committee, given that there are only five weeks really in session in July and the first week in August to get some sort of extension to fix 2009, keeping it as clean as possible would certainly make it a little easier to get it through the floor process given the calendar that the Senate has. So I think one of the challenges will be, you know, are there any reforms that could be done on an extension that would not be so controversial that people would not want to see this extension passed. So I think one of the reasons why you hear concern about having the extension clean is just the need to get an extension done so quickly so that we don't see the states have a slower reimbursement rate beginning the first week in August potentially.

SEN. KLOBUCHAR: All right. Thank you very much.

SEN. BOXER: We're going to have to close this because of time this afternoon. Let me say thank you to all my committee members who came today. Very tough moment, and we have to stand up and make sure we do the right thing for the American people, for the environment, for our future. Now I want to say for me I hope people don't believe that I'm supporting an 18-month extension because I have a full plate. That is not the reason.

The reason is we have a crisis in the Highway Trust Fund, and we have no consensus on how to fund a transformational bill that I want and the majority of us want. We do not have that consensus, no where close. And in this very delicate slow economic turn around, we cannot have a moment's worth of hesitation on what we do. Now, for those who want to focus on transformation, I urge them to work with me on my global warming bill.

That is going to have a section on transportation. We're not waiting on that front because one of the best ways we can move to really clean up the air, to get off foreign oil and all the rest is to ensure that we move toward a transportation system that is viable, that is convenient, that is affordable and all the rest. So I hope that I've been clear here for those who have been thinking that the reason we're not going into the five or six-year bill is because our plate is full. No.

If I had a consensus on how to fund this and I could put it together in three, four weeks, I'd be right there. But if you listen to our witnesses and they all want a transformational bill -- they all said it, they are recommending to us that we take a dual track. I think Ms. Ruffalo was -- her original idea was a shorter fix. But she's even open to a longer fix, and the others definitely feel an 18- month. And I think that President Obama wants change as much as any one of us. He wants change. And part of the change will be reflected in the five or six-year reauthorization bill we do pass. And it's reflectively frankly in Chairman Overstar's bill.

So I know it's hard to have a two-track strategy. But we must because if we don't, we send a mixed signal out there and it's the last thing I want to do because too many jobs are relying on this and too many hopes are relying on this. And we will do both. We will solve our short term crisis, and we have a long-term bill that everyone is going to be proud of, that our President's going to be part of drafting that. Senator Voinovich is going to be part of drafting because we're not waiting for 18 months or 12 months to start. The day after we fix the short-term problem, we will get started, and that is a commitment from me to the members of this Committee. Senator Voinovich?

SEN. VOINOVICH: Yeah, I'd just like to say this that from a psychological point of view, and that's right now we've got to get people to believe that the glass is half full and things are going to get better. Madam Chairman, that maybe what we would be better off to do and I know it doesn't -- you're not going to agree with this, is that we would guarantee that the problem this year will be taken care of so you know -- the states will know they've got the money, and that we would represent to them that we're going to be doing everything in our power to get the multi-year taken care of so that we don't have to go through another extension.

I think that approach from a psychological point of view in terms of what Mr. James is concerned about, Ms. Ruffalo and Mr. Basso would put us in a much better position than we just do the 18-month extension with everybody saying, well, 18-month extension, and after it's extended, then how many more years is it going to be before we get a highway bill. So that's what we're talking about today. We've got to keep people like Mr. James and his customers confident that there's going to be money on the street so they can keep going.

SEN. BOXER: Senator, I, you know, except for the exact timing, we are in full agreement. I want a short-term fix. You're now suggesting a short-term fix. But your short-term fix is a little shorter than mine and a little shorter than the President's. But we're moving closer.

Let me just say today already at the -- is this in the Wall Street Journal? It says there's a warning that payments to the states could be delayed as we debate how to close the growing gap. That's a terrible signal. So again, I want to say to the Wall Street Journal or whoever is covering this is that, you know, this committee is ready. We have agreement across party lines. We're going to move this the week of July 20th, and we're sending a signal that we're going to take care of this problem.

I thank you very much, and we stand adjourned.

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