Is the Mass Transit “New Starts” Program Fundamentally Flawed – and Can Congress Fix It Without Earmarks?
August 9, 2017
The Trump Administration picked a big fight with Congress early on in the transportation budget. In its budget overview on March 13, the White House indicated its budget would limit “funding for the Federal Transit Administration’s Capital Investment Program (New Starts) to projects with existing full funding grant agreements only. Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects.”
The impasse over the program has revealed an inherent structural flaw in the way that Congress has chosen to fund the program – and if history is any guide, Congress may not be able to overcome the Administration’s dislike for the program without reversing its six-year-old ban on the “earmarking” of special projects.
(ETW has put together a helpful history of this program and the various ways Congress has seen fit to fund it over the last five decades – read it here.)
Contracts that aren’t contracts, and non-binding agreements. New subway and light rail systems and extensions are expensive, and they take years to construct. Since the 1960s, the federal government has been helping some local governments with the cost of these new systems by promising federal aid to be delivered over a multi-year period.
The logical way to fund multi-year promises was with a funding source available over multiple years, and this was how the program really got going in earnest. The 1970 mass transit authorization law gave the Urban Mass Transit Administration a lump sum of $3.1 billion in contract authority to fund such agreements over a six-year period. This was a huge jump in the size of the program (FY 1970 spending for the program was $175 million, and $3.1 billion was 18 years worth of money at that annual rate.)
The law let UMTA commit and spend that $3.1 billion as slowly or quickly as it chose. But the budget authority has already been provided, so UMTA could be legally and fiscally certain that the money would be there to cover the fifth year of an agreement, so long as UMTA didn’t sign contracts that exceeded $3.1 billion in the aggregate.
Excluding the 1979-1982 period, the new starts program was run on multi-year contract authority up through fiscal 2005, and it made sense – multi-year commitments, supported by multi-year budget authority that was sure to be available in those future years.
But since FY 2006, the new start program has instead been subject to the annual discretionary appropriations process. And from a budget point of view, the word “discretionary” means that the money comes in the annual appropriations bills, and that Congress has the discretion to fund that account at whatever level it deems appropriate – even all the way down to zero – without exposing the federal government to legal liability. (If failure to appropriate money exposed the government to legal liability, the money would be classified as mandatory spending, not discretionary.)
As a result, the “full funding grant agreements” (FFGAs) signed by the Federal Transit Administration for individual projects are not really contracts, and they aren’t multi-year grant agreements, either. The statute governing the program (49 U.S.C. §5309) says that
“A full funding grant agreement under this paragraph obligates an amount of available budget authority specified in law and may include a commitment, contingent on amounts to be specified in law in advance for commitments under this paragraph, to obligate an additional amount from future available budget authority specified in law…The agreement shall state that the contingent commitment is not an obligation of the Government.”
A FFGA can legally obligate only the amount of budget authority already appropriated – all of the promises for future fiscal years are “contingent commitments” that may never materialize.
It is actually quite difficult to find the text of FFGAs – FTA does not put them online, and a lot of transit agencies don’t, either. But here is the FFGA from the big Honolulu project that was just completed. It was executed on October 1, 2012.
The Honolulu project had an unusually large amount of money appropriated in advance (see Inouye, Daniel) so the FFGA was able to obligate the $320 million that had already been appropriated, and the other $1.23 billion was a contingent commitment of possible future appropriations.
Not all new starts are in areas where senior appropriators are able to watch out for them, but even so, once a FFGA is signed, the Appropriations Committees have been pretty diligent about providing the promised amounts each year – even after the GOP took back the House in the 2010 elections and let the Tea Party into the debate.
But the failure of Congress to provide the money promised in the contingent commitment part of a FFGA is still, technically, possible – and the Trump Administration appears to be using that possibility as a legal rationale for its refusal to move forward with several pending new start projects that need Secretary Chao to sign their FFGAs before they can move forward.
(Substantively, the Trump Administration – at least through the message coordinated by the Office of Management and Budget – does not like the new starts program and wants to phase it out. They seem to be using the legal argument that they can’t be forced to promise money that does not yet exist as a way to bolster their substantive dislike of the program.)
Under the system that Secretary Chao seems to be proposing (we can’t be sure because it came during Q&A and she did not articulate it particularly well), the Department will only move forward with FFGAs once Congress has appropriated all of the money – not just in the year that the FFGA is signed, but in all of the “out-years” as well.
This is how the federal government buys a lot of other kinds of big-ticket items – for example, the Pentagon traditionally relies on a “full funding” policy when buying things, defined in this CRS report as meaning that “DOD cannot contract for the construction of a new weapon or piece of equipment until funding for the entire cost of that item has been approved by Congress. Sufficient funding must be available for a complete, usable end item before a contract can be let for the construction of that item.” And they use a process called “advance procurement” to let Congress appropriate money for years in advance before they have to let the contract.
(However, in recent years, a few things have gotten too big for even the Pentagon to buy in a single year. A new process called “incremental funding authority” exists for the new Ford-class nuclear aircraft carriers, and that authorizing law sounds a lot like a transit FFGA: “A contract entered into under subsection (a) shall provide that any obligation of the United States to make a payment under the contract for any subsequent fiscal year is subject to the availability of appropriations for that purpose for such subsequent fiscal year.”)
The unusual nature of the new starts program – funding large, multi-year commitments out of annual discretionary appropriations – may give the Administration a leg to stand on in court if project sponsors try to go to court and force a FFGA signature. And the long-term cost of these agreements can really add up.
|As of today, USDOT has signed not-contracts with transit agencies promising to provide this much money for ongoing projects, if Congress appropriates enough money in FY 2018 and future years…||$5,424.9|
|(The Trump Administration has requested $1.2 billion of that money in FY 2018 and has pledged to request the remaining $4.2 billion in future fiscal years.)|
|But other areas want the Secretary to sign not-contracts to promise funding for their new projects as well (subject to future appropriations). Here are some of those, and how much in future federal appropriiations would be needed:|
|AZ Phoenix South Central LRT||$348.5|
|CA Los Angeles Westside Purple Line Section 3||$1,075.0|
|CA Santa Ana Garden Grove Streetcar||$99.0|
|MD National Capital Area Purple Line||$572.0|
|MN Minneapolis Blue Line LRT Extension||$752.7|
|MN Minneapolis Southwest LRT||$913.8|
|NJ Portal North Bridge (Jersey Transit, Hudson County)||$811.2|
|NY NYC Canarsie Power and Station Improvements||$43.1|
|TX Dallas CBD Second Light Rail Aliignment||$325.2|
|TX Dallas DART Red/Blue Line Platform Extensions||$18.0|
|WA Seattle, Lynwood Link Extension||$1,072.7|
|Total, NS/CC Projects Rated “Medium” or Above in FY18 Report||$6,031.3|
|And that doesn’t iniclude the new Hudson River Tunnel which could seek new start funding of $4 billion or more…|
If only there were precedent for what Congress can do when an Administration refuses to sign new FFGAs.
In April 1981, President Reagan submitted his full FY 1982 budget revisions to Congress. He proposed exactly what the Trump Administration is proposing for the new starts program (“letters of intent” were used instead of FFGAs back then):
FY 1982 was during the post-Budget-Act, pre-Trust Fund period of the new starts program when it was dependent on annual appropriations. The Appropriations Committees responded by putting this in the FY 1982 DOT Appropriations Act:
It is worth noting that this language was put in the text of the law itself, not in the text of the committee report or the conference report’s statement of managers, because report language is only as binding on the Administration as the Administration lets it me. (If an Administration feels that refusing to comply with report language is worth the hassles that Congress can give them, they can usually refuse to comply and not have to worry about being overruled in court.)
The Appropriations Committees went on to continue to earmark the program more or less completely throughout the Reagan Administration (even though the program was once again completely supported by multi-year contract authority starting in 1983). ETW has assembled a compete list of all the earmark language in the period, here.
With the exception of one provision for the Los Angeles subway in the 1987 surface transportation act (which Reagan cited repeatedly in his veto message and subsequent lobbying), the authorizing committees did not start earmarking the program until the 1991 ISTEA law. Sections 3031 through 3035 of ISTEA earmarked new start money for the whole six-year duration of the bill. See also section 3030(c) of the 1998 TEA21 law and section 3043 of the 2005 SAFETEA-LU law. The Appropriations Committees stayed in the Act (the multi-year authorization laws did not earmark the entire program, far from it) but they usually made sure to put the earmarks in the text of the law, not the committee report, when dealing with Republican Administrations (see the FY 2006 law for an example, starting on page 2418).
But Congress’s self-imposed ban on earmarks, which began in 2011, has ceded much more authority over the new starts program back to the Administration. This is the first time that Congress has faced an Administration unwilling to keep the program going without Congress having the most direct means to force its will. The earmark ban is specific – it prohibits legislative or report language directing a specific amount of money to a specific state or Congressional district, unless the project was requested by the President.
The House and Senate appropriations bills both attempt to get around the earmark ban by putting money towards specific types of projects, and (in the case of the Senate bill) trying to deem report language to have force of law and using that report language to dedicate money towards projects with a specific rating in the New Starts Annual Report. (The Senate bill even shortens the duration of the appropriation to four years, in violation of 49 U.S.C. §5338(h), possibly hoping to force an Impoundment Control Act violation by Trump Administration refusal to spend the money.) But neither approach is certain to force the Secretary to sign specific grant agreements anytime soon.
The FY 2018 Capital Investment Grant Appropriation (No Earmarks Here)
House Bill Language
Senate Bill Language
|For necessary expenses to carry out 49 U.S.C. 5309, $1,752,989,851, to remain available until expended, of which $1,007,929,851 shall be available for projects au- thorized under section 5309(d) of title 49, United States Code, $145,700,000 shall be available for projects authorized under section 5309(e) of such title, $182,000,000 shall be available for projects authorized under section 5309(h) of the title, and $400,000,000 shall be available for projects authorized under section 5309(q): Provided, That the Secretary shall continue to administer the Cap- ital Investment Grant Program in accordance with the procedural and substantive requirements of section 5309 of title 49.||For necessary expenses to carry out 49 U.S.C. 5309
and section 3005(b) of the FAST Act, $2,132,910,000 to
remain available until September 30, 2021…$1,007,910,000 shall be available for payments on previously executed New Starts full funding grant agreements, $454,000,000 shall be
available for new New Starts full funding grant agreements, $200,000,000 shall be available for payments on previously executed Core Capacity full funding grant agreements, $145,700,000 shall be available for new Core Capacity full funding grant agreements, $149,900,000 shall be available to complete payments on partially funded Small Starts projects, and $168,400,000 shall be available for new grant agreements for Small Starts projects: Provided, That the Secretary shall administer the program and assist project sponsors according to 49 U.S.C. 5309 and make payments available to project sponsors in accordance with the report accompanying this Act.
|House Report Language||Senate Report Language|
|The Committee directs FTA to continue to advance eligible projects into Project Development, Engineering, and Construction through the Capital Investment Grant evaluation, rating, and approval process. Specifically, the Committee directs the Secretary to allow a project to enter into project development when the applicant satisfies the requirements; to advance a project into project engineering when that project satisfies the requirements; to negotiate a construction grant with the project sponsor for every project that receives a medium rating or higher, submit the notification to Congress promptly after conclusion of the negotiation of the constru tion grant agreement, and execute the construction grant agreement within 45 days of providing such notification to Congress if the project continues to meet the requirements; to enter into a full funding grant agreement for any new fixed guideway capital project and core capacity improvement project that has met the requirements immediately after completion of the 30-day notice period for such projects; and enter into a grant agreement for any small start project that has met the requirements immediately after completion of the 10-day notice period for such projects.||The Committee recommendation includes $1,007,910,000 to cover the cost of the 11 existing FFGAs for New Starts projects and $200,000,000 to cover the cost of the two existing FFGAs for Core Capacity projects in fiscal year 2018, which shall be distributed consistent with the proposed schedule of Federal funds for each FFGA. The Committee recommendation includes $149,900,000 to complete funding for previously funded Small Starts projects that do not have a signed agreement. The Committee’s recommendations also includes for new projects that received at least a ‘‘medium’’ overall rating in the fiscal year 2018 annual report: $454,000,000 for New Starts FFGAs, $145,700,000 for Core Capacity FFGAs, and $168,400,000 for Small Starts grant agreements…In addition to providing funding for this program for the projects described above, the Committee directs the Secretary to continue to advance eligible projects into project development and engineering in the capital investment grant evaluation, rating, and approval process pursuant to 49 U.S.C. 5309 and section 3005(b) of the FAST Act in all cases when projects meet the statutory criteria.|