With President Obama’s May 7 release of his detailed budget proposal for the coming fiscal year, the tussle over 2010 federal funding will intensify. Taking a tougher line on spending, Obama highlighted a plan to terminate or trim 121 programs, aiming to save $16.7 billion. Cuts would include about $1.5 billion from construction accounts. The Democratic Congress is likely to defer to Obama’s first budget request, but only to a degree. Lawmakers are not expected to rubber-stamp every line.

OMB Director Orszag and Obama spell out cuts in some federal programs.
Photo: AP/Wideworld
OMB Director Orszag and Obama spell out cuts in some federal programs.

Jeffrey D. Shoaf, Associated General Contractors’ senior executive director for government affairs, says Democrats will work more closely with Obama than they did with President Bush, but he believes the Obama administration is “in for a fight on the appropriations bills.” Shoaf says legislators “are in charge of the purse strings and often like for that to be known.”

Obama put an emphasis on the proposed terminations, though they only equal about 0.5% of his $3.55-trillion request. Targets include construction programs at the Army Corps of Engineers, Environmental Protection Agency, the Dept. of Energy and Dept. of Transportation. Office of Management and Budget Director Peter Orszag says, “If a program was not working or was duplicative of other things or was simply unnecessary, then it wound up on our list.”

The largest proposed construction cut is Health and Human Services Dept. aid for public- and private-sector health-care facilities and construction, which will receive $310 million in 2009. Also on the hit list are $244 million in what OMB terms “low-performing” Corps of Engineers construction projects, as measured by their benefit-cost ratios, as well as $180 million in Corps water and wastewater projects. OMB contends those environmental projects are outside of the Corps “main mission areas” of navigation, flood control and ecosystem restoration. Another target is $145 million in EPA water infrastructure earmarks. OMB says the 2010 budget would boost clean-water and drinking-water state revolving funds (SRFs) for those types of projects.

The White House also wants to reduce the federal subsidy for the terrorism-risk insurance program, starting in 2011.

One item on Obama’s list, a proposed 9% cut in the Labor Dept. Office of Labor-Management Standards, drew fire from the Associated Builders and Contractors. The standards office monitors unions’ finances. OMB argues that trimming its funding by $4 million would “more appropriately reflect the agency’s workload.” But ABC says the number of audits the office did in 2007 was triple its 2003 total. ABC Chairman Jerry Gorski says the proposed reduction “is nothing less than a tragedy as it would prevent individual union members as well as the public from seeing just how union leaders are spending their members’ money.”

The outlines of Obama’s budget were released in late February but were fleshed out by the newly issued 1,374-page budget appendix. Overall, AGC calculates the proposal includes $118.7 billion for construction, a cut of $724 million, or 0.6%, from 2009 appropriations. The clear winner is EPA water infrastructure, which would be hiked 75%, to $5.2 billion. That total includes more than tripling the allocation for clean water SRFs and a 81% jump for drinking water SRFs. The National Utility Contractors Association is pleased with those numbers, says CEO Bill Hillman. But he notes that for water programs, “We’re in no danger of investing too much.” EPA’s most recent estimate pegged clean water needs at $202.5 billion over 20 years.

Municipal officials also liked the proposed 14% gain for Housing and Urban Development Dept. Community Development Block Grants. Michael Wallace, a senior legislative counsel with the National League of Cities, says the budget follows Obama’s pledge to fully fund the program. Wallace says when the 2010 budget plan’s $4.5 billion for CDBGs is coupled with nearly $1 billion in economic-stimulus funds, it represents “an excellent boost.”

For the federal-aid highway obligation ceiling, the budget has a $41.1-billion placeholder, including $5 billion from the Highway Trust Fund and $36 billion from the general fund. OMB says that “does not represent the administration’s recommended funding levels or a budgeting approach for the upcoming reauthorization.” But it does show that the trust fund would have to be bolstered to support a $41-billion program on its own.

What Obama Proposes for Construction: (in $ millions)
Program FY 09 Proposed FY 10 % Change
Federal-aid highways obligation limit 40,700 41,107* +1
Federal Transit Administration 10,229 10,336 +1
FAA Airport Improvement Program grants 3,515 3,515 0
DOE defense environmental cleanup 5,657 5,496 -3
Corps of Engineers construction 2,142 1,718 -20
EPA Water Infrastructure 2,968 5,191 +75
— Clean Water State Revolving Funds 689 2,400 +248
— Drinking Water State Revolving Funds 829 1,500 +81
GSA construction 746 658 -12
GSA repairs and alterations 692 496 -28
HUD community development block grants 3,900 4,450 +14
Bureau of Prisons buildings and facilities 576 97 -83
DOD military family housing 1,423 489 -66
DOD base realignment and closure 9,224 7,876 -15
DOD other military construction 12,339 12,835 +4
Spending totals are rounded.
*Includes $5 billion from Highway Trust Fund, $36.1 billion from general fund
Sources: Office of management and Budget; U.S. Dept. of Transportation