Transportation spending: Is highway reauthorization legislation in the cards?

Editor’s note: The following is the second of a six-part series on government budgets and government spending that comprise the Keating Report mid-year 2011 forecast. The topics we are covering include: federal budgets, transportation projects, state tax revenue, local government budget trends, ARRA-funded construction and government spending.

The transportation sector may be somewhat immune to federal budget slashers, says Justin Molavi, an energy analyst at Santa Monica, Calif.-based IBISWorld. “The transportation sector seems to be saved from most of the budget cutting that is expected to take place given our complete reliance on air and automobile travel,” Molavi says. “As a result of the recent controversy surrounding air traffic control, there will be more money to combat these types of issues and avoid them in the future. Budget line items that have to do with safety of travel are expected to pass with ease.”

Molavi says the Obama Administration’s dedication and fiscal support for high-speed rail will benefit the passenger rail industry. “However, as the money allocated from ARRA dries up, allocating more money to high-speed rail will be a hard sell as large looming deficit concerns are expected to outweigh increased high speed rail spending,” he says. IBISWorld is a publisher of U.S. industry research covering 700 market segments.

Transportation budgets are also top of mind for Michael Balsam, founder of Seattle-based Bear Pond Research. “I think the big story for the second half of 2011 is how the federal transportation reauthorization bill shakes out. Our nation’s infrastructure is becoming more deficient by the day with little prospect of keeping up with modernization demands. Although reauthorization is a congressional initiative, 100 percent of the impact is felt at the state and local levels where there is work to be done and workers on the sidelines waiting for this funding,” Balsam says.

Balsam expects a short-term resolution on highway reauthorization legislation. “Short of the stars aligning around increasing the gas tax to fund road construction, I expect the outcome to be a spending bill with a term shorter than the traditional six-year authorization,” he says. “This would begin to clear the immediate logjam but at the same time would kick the surface transportation spending can down the road.”

View additional installments of our second-half 2011 forecast as well as the January 2011 forecast.

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