Editorial – The President’s FY18 Budget Proposal and How Congress Can Meet Our Infrastructure Needs

In mid-March the Trump administration released its proposed budget for fiscal year 2018 (FY18). The top-line version of the overall budget titled “America First – A Budget Blueprint to Make America Great Again” tackles only about one-third of the total line items with a more detailed budget due out next month. While the new administration talked a lot about infrastructure its “skinny” budget as it has been called doesn’t seem to hold up to the claim of more infrastructure projects. The priorities in President’s Trumps budget as he said in his budget statement are “safety and security” which in numbers means major increases in defense spending and the budgets for the Department of Justice and the Department of Homeland Security while the U.S. Army Corps of Engineers budget sees decreases.

The budget introduction does address infrastructure needs acknowledging that the president has emphasized that as one of his major priorities. “To spearhead his infrastructure initiative the president has tapped a group of infrastructure experts to evaluate investment options along with commonsense regulatory administrative organizational and policy changes to encourage investment and speed project delivery” the budget said. The president wants the highest return projects and maximum government leverage and oversight to use taxpayer dollars effectively. But it still represents trying to do more with less. The Corps has been trying to do more with less for years and that’s why we have an enormous billion-dollar backlog on water resource infrastructure projects.

Likewise the proposed budget cuts Corps funding by 16.3 percent (compared to the 2017 Continuing Resolution which has been funding the government since last year and set to expire on April 28). The president’s FY18 budget proposal funds the Corps at $5 billion down from $6 billion in 2017.

The Corps of Engineers has long been working with Congress to better prioritize projects do more with less and expedite the execution of projects. Many in Congress that support the waterways and our industries that work on the waterways have long been advocating for increased budget spending for the Corps. Now they may again be asked to make more cuts.

AMERICA: KEEP IT MOVING AND AAPA The American Association of Port Authorities (AAPA) did not support much of the president’s proposed budget which it saw as potentially decreasing federal support for port dredging facility improvement environmental enhancements and security.

“We’re apprehensive about the fiscal 2018 budget” said Kurt Nagle AAPA president and CEO. “Adequate federal investments into U.S. port-related infrastructure both on the landside and waterside are crucial for the efficient movement of goods so the nation can remain globally competitive. Activities at U.S. seaports account for more than a quarter of the nation’s economy support over 23 million American jobs and generate more than $320 billion a year in federal state and local tax revenue. It’s vital the federal government uphold its end of the partnership with ports so the country can have a 21st century goods 

movement system in place.”

On the federal chopping block in the proposed budget are the U.S. Department of Transportation’s (USDOT) Transportation Investment Generating Economic Recovery (TIGER) grants program. Last year the program awarded ports $61.8 million for infrastructure projects. Nagel said a key Department of Homeland Security grant program for port security is also facing significant cuts.

Nagel was critical of the overall numbers for Corps budget proposal but acknowledged that the details of each program are not yet known. In developing the coastal navigation program that funds improvements and maintenance of harbors and deep-draft shipping channels AAPA recommends that the FY18 budget provide $2.9 billion for the Corps’ navigation program including $1.6 billion for the coastal navigation portion that covers deep-draft investigations construction operations and maintenance and donor and energy transfer port activities; and expand USDOT’s TIGER program or create a new multimodal discretionary grant program like it and fund it at $1.25 billion annually.

Also to help the public and policymakers recognize the value of our country’s ports AAPA created the “America: Keep It Moving” campaign which focuses its efforts in part on encouraging federal policymakers to take action to modernize and maintain federal navigation channels with needed investments. Even with overwhelming bipartisan support for recent water resource legislation in 2014 and 2016 AAPA said “funding donor equity and efficiency challenges remain.”

AAPA recommends that for FY18 $1.33 billion in the Harbor Maintenance Tax (HMT) go to waterway work a 3 percent increase over FY16 funding. AAPA said the administration estimates 2017 HMT revenue to be $1.802 billion.

The Water Resources Reform and Development Act (WRRDA) 2014 authorized eight navigation channel improvement projects. To complete these projects under the administration’s FY17 budget request which was $105 million AAPA said at that rate it would take 20 years to complete those eight authorized projects not including the seven projects authorized by WRDA 2016. AAPA also encourages Congress to pass a FY17 Energy and Water Appropriations bill to include additional project authorizations.

BUILDING A 21ST CENTURY INFRASTRUCTURE

Many in Congress are still hoping to realize the president’s call for $1 trillion in infrastructure spending. On March 9 the House Transportation & Infrastructure (T&T) subcommittee on Water Resources and Environment held a hearing on Building a 21st Century Infrastructure for America: The Role of Federal Agencies in Water Infrastructure.

In his first hearing as the new subcommittee Chairman Sen. Garrett Graves (R—LA) said there had been a lot of talk about a major infrastructure program and the committee was holding hearings to discuss what that should include.

Early in the hearing Ranking Member Peter DeFazio (D-OR) referenced the letter sent to President Trump from that committee encouraging him to fully use the Harbor Maintenance Trust Fund for its intended purpose. “Every day every American that buys an imported good pays a little bit more for it with the understanding that it is going to facilitate the movement of freight in and out the Unites States through our ports and that the more efficient movement of freight would offset any miniscule increase. Unfortunately if you don’t spend the tax then you still have the delays and the ships parked miles out into the ocean. People are paying the tax which isn’t getting spent so they’re paying for the goods because of the delays. We’re breaking faith with the American people. It seems kind of like a no brainer” DeFazio said. Our 59 busiest harbors he said have 35 percent availability of their maximum depth.

A lot of the discussion of the hearing focused on regulatory process and ways to streamline and minimize regulatory burdens but DeFazio said “The most major impediment is lack of funding plain and simple. Then you can deal with any regulatory burdens that crop up in the interim.”

Jonathon Kernion president of Cycle Construction Company in Kenner Louisiana spoke at the hearing on behalf of the Associated General Contractors (AGC) and as a long-time marine construction firm that has worked with the Corps of Engineers for many years. Quite frankly he said “In order to build 21st century infrastructure we need to be able to build it sometime this century. Sadly that’s easier said than done. There are many kinks in the water infrastructure project chain that can delay construction not only years but even decades.”

His recommendations highlighted opportunities to more efficiently deliver water infrastructure projects during the pre-construction and construction phases.

“During construction contractors face two primary problems: a certain and reliable funding stream and federal agency indecision” Kernion said.

He said while fingers could be pointed at many federal agencies the “buck starts and stops with Congress literally. Until Congress allows infrastructure projects to be funded outside the whims of the annual appropriation process where funding comes in uncertain drips and drabs we’ll continue to face unnecessary construction delays” Kernion said.

In looking at the pre-construction process Kernion was very critical of the environmental review and permitting process. “There are many federal agency cooks in the environmental review and permitting kitchen” he said which delays water infrastructure projects. He cited the Port of Savannah deepening project which was under environmental review for 14 years.

Kernion also pushed for incentivizing efficient and timely construction execution on the federal side. “In the private sector owners have various incentives to complete a project on time and on budget or even ahead of schedule or under budget” he said and thinks agencies could benefit from similar incentivebased payments.

ADVANCES IN TECHNOLOGY

Jerry Ellig senior research fellow at Mercatus Center at George Mason University gave interesting testimony. As an economist his research for the last 25 years has focused on the regulatory process government performance and the effects of government regulation. The majority of his testimony focused on three problems he sees with the current regulatory process: (1) a regulatory focus on activities and outputs rather than results; (2) significant deficiencies in the analysis that informs regulatory decisions and (3) “ready-fire-aim” rulemaking which decides outcomes and then develops the data to support them.

When questioned by Chairman Graves about specific examples of where the regulatory process was improperly applied Ellig said his research points to barriers that prevent better use of some of infrastructure. As example he used developing aircraft for sonic flight which is banned in the continental U.S. because of legitimate noise concerns. But with advances in material technology and engineering it could be possible to design airplanes that can travel at supersonic speeds while meeting a reasonable noise standard. Instead of banning supersonic travel why not develop regulations that allow noise up to a certain standard Ellig said.

He argued that the regulatory process often puts up barriers to innovation and technology which made me think of the dredging industry and how well it uses technology and innovation. Where regulations once viewed dredged sediment as a waste it’s now a resource in many places where the industry has worked hard with regulators to advance beneficial uses. The majority of projects in this country are also run by private dredging contractors who like Kernion pointed out can find business incentives for working faster and more efficiently. In addition to methods for better forming new habitat and using sediment beneficially technology plays an important role in dredging equipment. Automation and computer technology has played a huge role in making dredging more efficient and timely driven by private contractors not the Corps of Engineers.

Starting with the hydrographic surveys that identify the sediment to be dredged to the computer systems that run the dredge to moving a slurry down a pipeline efficiently or treating the sediment for contamination all use innovative technology that are bettering practices all the time. The dredging industry should serve a good example for how to work with federal agencies meet regulatory standards and push for more innovative practices.

In a world where funding will likely continue to be an issue innovation can lead us to more with less.