Editors Note: Events of the last week underscore the financial challenges facing the world, our nation, states and local communities concerning basic services and transportation. In Greece and France voters rejected the discipline of sound financial management in favor of greater debt, increased financial irresponsibility, higher taxes and more societal benefits. I have heard people say, “What’s with those Greeks? Don’t they get it?” Unfortunately, one could project that the United States has its own problems with greater debt, financial irresponsibility, higher taxes and out of control entitlement programs.

Last week we published a story about the City of Hillsborough in Florida that halted its transportation projects due to funding shortfalls. In the last few days we have been watching the conference committee in Congress attempt to resolve the differences between the Senate’s MAP 21 and the House extension. If you read the Washington Letter published by the Carmen Group or Ken Orski’s Innovations NewsBriefs you have seen a very insightful summary by Gary Hoistma detailing the myths behind the financing package that supports MAP 21. The plan gets an “A” for creativity but an “F” for “reality.” It seems that living within our means both here at home and overseas is a foreign concept (no pun intended) to many elected officials and to the electorate at large.

The bottom line on MAP 21is that no matter how you spin the news, the Highway Trust Fund (HTF) falls off the cliff in late 2013. While it is hard to predict the exact timing, the fact is, absent something more substantive being done to shore up the finances of the HTF, a substantial and irreversible decrease in funding is projected. If the deal between the House and Senate resembles the finance plan in MAP 21 it is only an 18-month placebo that masks the true state of the HTF.

Two stories we included in The Tom Warne Report this week involve California’s High Speed Rail. One has an overt admonishment from Secretary LaHood that the California Assembly needs to “get off the dime” and pass legislation to fund the state’s share of the first project or they lose precious and essential federal funding. Governor Jerry Brown and some members of the California Assembly support the project and would like to comply with the secretary’s charge. But that is easier said than done as seen in the other article: the State of California faces a $16 billion deficit for the coming year. For perspective, California’s deficit is larger than the total budget in all but 15 states. Finding money for a project losing public support at an increasingly rapid pace is problematic for its boosters. An additional problem is the fact that if Republicans continue to control the House next year, high speed rail will probably not be funded.

A case could be made about the difficulties of building a transportation program that has substantive financing behind it while the rest of the federal, state or local budgets are spiraling into oblivion. Public works in Europe have all but dried up, leading to many firms from across the Atlantic coming to work in the US. If the US budget situation wasn’t precarious or if California didn’t have a structural imbalance (accounting/political speak for “you are broke”) then I would suggest that funds could be found and projects could be built. I know there are those who believe we can “build our way” out of this recession and soft economy. Building projects will help but it’s not the total answer.

In my observation, when the national balance sheet/budget or those at the state and local levels are in disarray, finding new funding for projects such as transportation is nearly impossible. With that in mind, I do not think you can resolve the transportation funding crises our states and nation face without bringing discipline, order and responsibility to the overall budget situation. I believe our efforts in the future need to be two-fold as we work with elected officials and stakeholder groups. We must solve the greater budget/finance picture and still advance transportation; the two go hand in hand. TW

Illinois Legislators Push Metra to Reject $141M Bridge Contract

Three Congressman are criticizing a pending Metra contract to build a $141 million railroad bridge because of the lack of minority participation from nearby neighborhoods. Metra officials claim they encouraged participation by African-American who live near the project on the South Side’s Englewood community.

“We are committed to the (disadvantaged business enterprise) process,” said Metra’s acting chairman, Larry Huggins. “We intend to honor that commitment.” Huggins said the organization has delayed awarding the contract to the apparent low bidder with the hope that “everyone can come together and work it out.” Metra officials say they have made efforts over the past two years to increase participation by disadvantaged businesses and spent $300,000 in outreach efforts to the Englewood neighborhood.

The three South Side Democrats, Reps. Jesse Jackson Jr., Bobby Rush and Danny Davis say IHC Construction Cos., based in Elgin, does not have enough minority contractors and would not provide enough jobs to minorities. According to Metra, IHC meets the contract goal of 25 percent participation by disadvantaged businesses.

The Englewood Flyover Bridge is planned to ease congestion on tracks that Metra, Amtrak and freight rail utilize.

California Gov. Hopes to Close $16B Deficit

Gov. Jerry Brown is proposing tax increases for the wealthy as a way to close California’s $16 billion budget gap, the size of which has nearly doubled over the past four months as a result of the governor’s overly optimistic projections since his January budget. In a new version of the state’s budget released this week, the governor’s plan would temporarily raise sales taxes to 7.5% from 7.25% for four years, and hike income taxes by up to three percentage points for seven years on individuals making more than $250,000 or households making more than $500,000 a year.

One of the main reasons for the increased budget gap is a drop in tax revenues during the fourth quarter of 2011, which came from a reduction in the amount of capital gains that Californians paid on the sales of stocks and other investments, according to H.D. Palmer, spokesman for the governor’s Department of Finance. “Estimated tax payments were down by a double digit amount,” Palmer said. “That’s an anomaly that hasn’t happened for 20 years.”

Obama Administration gives California High-Speed Rail Ultimatum

The Obama administration is threatening to rescind $3.3 billion in federal grants to kick start construction of California’s high-speed rail line if lawmakers do not appropriate the state’s portion of the funding by June. In recent meetings in Sacramento, U.S. Transportation Secretary Ray LaHood informed key lawmakers that the Legislature’s recent move to delay a $2.7 billion decision on the project until August will not be tolerated.

“We need the Legislature to make the strongest commitment possible,” said LaHood. “The way to do that is to include money for high-speed rail in the budget that is passed in June. August is too late for us.” When asked in an interview whether the administration may repeal the money, LaHood said, “Correct,” adding, “We may begin looking at other places in the country.”

Gov. Jerry Brown is hoping to begin construction on the initial $6 billion segment as soon as later this year in the Central Valley between Fresno and Bakersfield. Leading lawmakers indicated they will not be intimidated by political pressure, and maintained that they may not be able to complete hearings before the new budget goes into effect July 1.

In a news conference following the meetings in Sacramento, LaHood said, “What I have been reading about is they are planning on holding hearings, that they are going to go throughout the summer. That doesn’t suit us.”