President Barack Obama's proposed $3.8-trillion budget for fiscal year 2013 would continue to squeeze discretionary spending and make further cuts in many construction programs that were trimmed this year. The proposal includes some construction hikes and repeats Obama's 2011 call for a sharp, immediate boost for highways and transit. But the transportation proposal's outlook is dim, because Congress turned it down twice before.
Obama's budget request, sent to Congress on Feb. 13, is just the beginning of a long, tough partisan fight over 2013 spending. The outcome will have a direct impact on design and construction firms that focus on government projects.
The battle already has begun. House Budget Committee Chairman Paul Ryan (R-Wis.) quickly blasted Obama's proposal as "a political plan for the president's reelection." Ryan said the GOP would draw up a different budget plan of its own.
Jeffrey Shoaf, Associated General Contractors of America senior executive director for government affairs, predicts that "the president's proposal is likely to be rejected by the Senate and not considered by the House at all."
Final 2013 numbers won't become clear until fall at the earliest. But lawmakers from both parties have little room to increase even favored line-items. The failure of the congressional "super committee" to come up with a $1.2-trillion, 10-year deficit-reduction plan has triggered $984 billion in mandatory spending cuts over 10 years. That reduction, split between defense and nondefense programs, starts to take effect in January, unless Congress approves an alternate way to make similarly large deficit cuts.
In that environment, it's no surprise that Obama's 2013 construction numbers mostly carry minus signs. Reflecting new Dept. of Defense belt-tightening, Obama seeks a 20% cut in DOD construction. Part of that is the phase-down of the Base Realignment and Closure program, whose spending would drop 43%, to $191 million. In 2010 BRAC got nearly $8 billion. DOD wants two new BRAC rounds, but, if approved, they would not show results quickly and may not lead to a burst of construction.
The Corps of Engineers civil works program would be trimmed 5%, including a 13% construction-account cut. Robert Flowers, federal program director for Netherlands-based Arcadis, expects Congress to alter those Corps numbers. Flowers, a former Corps commanding general, adds, "There's a little bit of gamesmanship that goes into this, where the Corps budget gets cut because there's probably the knowledge that Congress will 'plus it up.'" He thinks Corps operations and maintenance and environmental cleanup accounts "will probably get a fair, robust budget."
Environmental Protection Agency water infrastructure funds would be pared 7%, to $3.4 billion. Within that total, aid for clean water State Revolving Funds (SRFs) would drop 20%, to $1.1 billion, and drinking water SRFs would be sliced 8%, to $850 million.
The General Services Administration is one of the few budget winners, with a 77% boost for repairs and alterations. GSA new construction would rise, but to only $56 million, far below 2010's $894 million. Dept. of Veterans Affairs' major construction would be pared 10%.
One potentially alluring budget item is a proposed six-year, $476-billion surface transportation authorization. It would be funded partly through a "peace dividend"—half of the expected spending reduction from the U.S. withdrawal from Iraq and reduced military presence in Afghanistan.