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March 31, 2011 - ASCE Statement - Transportation and Infrastructure-FY 2012 Army Corps of Engineers Budget

Statement of
The American Society of Civil Engineers
Before The
Subcommittee on Transportation and Infrastructure
of the Senate Committee on Environment and Public Works

March 31, 2011

“President’s Proposed FY 2012 Budget for the Army Corps of Engineers”

Mr. Chairman, Senator Vitter and Members of the Subcommittee:

The American Society of Civil Engineers (ASCE) is pleased to offer this statement for the record for the hearing before the Subcommittee on Transportation and Infrastructure of the Senate Committee on Environment and Public Works on March 31, 2011, entitled “President’s Proposed FY 2012 Budget for the Army Corps of Engineers.”

Our 2009 Report Card for America’s Infrastructure reported that decades of underfunding and inattention have jeopardized the ability of our nation's infrastructure to support our economy and facilitate our way of life.

The FY 2012 budget proposal for the Corps of Engineers is inadequate. It would provide $4.6 billion, which would fund the operation and maintenance of more than 600 flood and storm damage reduction projects, 143 commercial coastal navigation projects, and 51 commercial navigation projects on the inland waterways, according to USACE statements. It also funds construction of 90 projects where construction is already under way as well as two new construction starts.

Because the president’s budget for the U.S. Army Corps of Engineers for Fiscal Year 2012 is insufficient to meet the nation’s growing infrastructure deficit on our waterways, ASCE is recommending an appropriation of $5 billion for the Corps of Engineers Civil Works Program in FY 2012

The president’s budget would fund 58 studies already under way and studies for four new starts. It will enable the Corps to process approximately 70,000 permit requests and to operate 75 hydropower plants with 350 generating units that produce about 24,000 megawatts per year. The budget will enable about 370 million outdoor recreational visits to Corps projects and will provide water supply storage for about 14 percent of the nation’s municipal water needs.

Nevertheless, the president proposes to reduce spending on critical Corps of Engineers infrastructure programs in FY 2012. The funding for Civil Works in the 2012 Budget is about 15 percent below the enacted amount of $5.445 billion in FY 2010. It is about 6 percent below the FY 2011(unenacted) budget level. These budget cuts must be reversed to ensure safe infrastructure and a sound economy.

More recently, the House passed a continuing resolution that would cut $516 million from the Civil Works program in FY 2011. The presidential and congressional reductions continue the unfortunate trend toward under investing in federal infrastructure that saves lives and promotes economic growth.

In 2005, Hurricane Katrina vividly demonstrated the perils of relying upon poorly funded infrastructure to protect lives and property. An ASCE investigation (conducted on behalf of the Corps of Engineers) reported in 2007 that chronic under funding was one of the principal causes of the levee failures after Katrina.

Because of the congressional budgeting process, the stream of funding for the New Orleans hurricane protection system was irregular at best. If a project was not sufficiently funded, the USACE was often required to delay implementation or to scale back the project.

This push-pull mechanism for the funding of critical life-safety structures such as the New Orleans hurricane protection system is essentially flawed. The process creates a disconnect between those responsible for design and construction decisions and those responsible for managing the purse-strings. Inevitably, the pressure for tradeoffs and low-cost solutions compromised quality, safety, and reliability.

The project-by-project approach—in which projects are built over time based on the availability of funding—resulted in the hurricane protection system being constructed piecemeal with an overall lack of attention to “system” issues. The project-by-project approach appears to be associated with congressional limitations. The USACE was forced into a “reductionist’s” way of thinking: reduce the problem into one that can be solved within the given authority and budget. Focus only on the primary problem to be solved, inevitably making the issues of risk, redundancy, and resilience a lower priority.
American Society of Civil Engineers, The New Orleans Hurricane Protection System 71-72 (2007).

In our Report Card, levees received a D–. More than 85 percent of the nation's estimated 100,000 miles of levees are locally owned and maintained. The reliability of many of these levees is unknown. Many are more than 50 years old and were originally built to protect crops from flooding. With an increase in development behind these levees, the risk to public health and safety from failure has increased. Rough estimates put the cost at more than $100 billion to repair and rehabilitate the nation’s levees. The nation’s 12,000 miles of inland waterways received a grade of D– as well. The average age of all federally owned or operated locks is nearly 60 years, well past their planned design life of 50 years.

Congress must move quickly to enact a Water Resources Development Act to protect the health and welfare of American citizens from the catastrophic effects of levee failures. The levee safety program should be modeled on the successful National Dam Safety Program. The act should require the federal and state governments to conduct mandatory safety inspections for all levees and establish a national inventory of levees.

The act should require the federal and state governments to conduct mandatory safety inspections for all levees and establish a national inventory of levees. The National Flood Insurance Program should map all areas potentially flooded by a levee breach and identify these as special flood areas to better communicate risks and encourage affected property owners to seek appropriate protection.

The next WRDA should require the Comptroller General, in consultation with the Secretary of the Army, to study the potential benefits of formally uniting the National Dam Safety Program with the National Levee Safety Program. The study should examine (1) the potential to improve the protection of the general public health, safety, and welfare from dam and levee failures through a unified dam and levee safety program; (2) the administrative and budgetary efficiencies to be achieved in the unification of the national dam and levee safety programs; and (3) any other factors the Comptroller determines will assist the Congress in assessing the benefits of the integration of the two programs.

In addition, WRDA should require the Secretary of the Department of Homeland Security and the Secretary of the Army to complete a study of the potential benefits of transferring the two programs into an independent federal dam and levee safety agency. Congress must solve the problem of declining balances in the Inland Waterways Trust Fund. The tax rate for the trust fund has been 20 cents per gallon since January 1, 1995. We believe that an increase in the waterways user fee is long overdue, and we concur in the recommendation that the current fee be increased between six and nine cents a gallon.

ASCE endorses the recommendations of the Inland Marine Transportation System (IMTS) Capital Investment Strategy Team released in 2010. It would invest $7.6 billion in inland waterways improvements over the next 20 years.

We believe, however, that any increase in the Inland Waterways User fee also include a provision to index that fee to the consumer price index (CPI) and be adjusted every two years. We further recommend that any diesel fuel tax revenues received by the IWTF be taken off-budget by a “firewall” to establish discretionary spending limits in the same manner used for Highway Trust Fund and the Aviation Trust Fund to reserve the IWTF revenues exclusively for the reconstruction of the system’s aging infrastructure.

Our nation’s inland waterways are a strategic economic resource. The nationwide network includes nearly 11,000 miles of federal user fees through an excise tax on fuel. Commercial waterway operators on these designated waterways pay a fuel tax of 20 cents per gallon, which is deposited in the Inland Waterways Trust Fund (IWTF).

The IWTF, which was created in 1978, now funds half the cost of new construction and major rehabilitation of the inland waterway infrastructure. But the IWTF fund balance has eroded in recent years; the administration has proposed phasing out the existing tax on waterways fuel and establishing a lock user fee.

Moreover, the Atlantic Intracoastal Waterway (AIWW) is a designated IWTF project. The commercial users on the AIWW have been paying into the fund since its inception while receiving very little in return for the AIWW system. As there are no new construction activities or major rehabilitation projects planned for the AIWW, there is little likelihood any of the fees collected on the Intracoastal Waterway will be used to improve or maintain the AIWW. ASCE believes that this inequity for the AIWW needs to be addressed.

The IWTF balance has declined each year for more than a decade. In FY 2010, the actual fund balance was $5.5 million, but investment income in 2010 brought total assets to $58.5 million. For FY 2011, the Office of Management and Budget estimates general fund transfers to the IWTF at $85 million, with a year-end balance of approximately $30 million.

The administration’s budget request noted for FY 2012 that the administration will propose to replace the current fuel tax with a new funding mechanism that will raise the revenue needed to meet the authorized non-federal cost-share of these capital investments for traffic on the inland waterway system.

According to the Inland Waterways Users Board, large project cost overruns and delays in project schedules on the waterways have drawn down the IWTF balance. Project completion delays result from a federal budgeting and appropriations model that provides funding in annual and often-insufficient increments rather than a more reliable multi-year funding mechanism that would provide the certainty needed to more efficiently contract and build these capital projects.

Problems continue on a larger scale: forty-one states, including all states east of the Mississippi River and 16 state capitals, are served by commercially navigable waterways. The U.S. inland waterway system consists of 12,000 miles of navigable waterways in four systems—the Mississippi River, the Ohio River Basin, the Gulf Intercoastal Waterway, and the Pacific Coast systems—that connect with most states in the U.S. The system comprises 257 locks, which raise and lower river traffic between stretches of water of different levels.

Forty-seven percent of all locks maintained by the U.S. Army Corps of Engineers were classified as functionally obsolete in 2006. Assuming that no new locks are built within the next 20 years, by 2020, another 93 existing locks will be obsolete—rendering more than 8 out of every 10 locks now in service outdated.

The Corps of Engineers continues to suffer from many years of under funding for essential infrastructure systems. If allowed to continue, this trend likely will result in ever greater system failures and the consequent expenditure of tens of billions of dollars to rebuild what could have been built more economically in the first instance.

To cite one striking example, in 1986, Congress enacted the Harbor Maintenance Trust Fund (HMTF) to provide federal funding for the operation and maintenance (O&M) costs at U.S. coastal and Great Lakes harbors from maritime shippers. O&M costs involve mostly the dredging of harbor channels to their authorized depths and widths. The HMTF is financed by a tax on importers and domestic shippers using coastal or Great Lakes ports. The tax is assessed at a rate of 0.125 percent of cargo value ($1.25 per $1,000 in cargo value).

In FY 2012, the HMTF balance will be an estimated at $6.1 billion. The administration is requesting $732 million in FY 2012 for the O&M of channels and harbors—equal to 45 percent of the anticipated FY 2012 revenues of nearly $1.6 billion and to about eight percent of the fund’s anticipated year-end balance. Despite this large and growing surplus in the trust fund, the busiest U.S. harbors are presently under maintained. The Corps of Engineers estimates that full channel dimensions at the nation's busiest 59 ports are available less than 35 percent of the time. This situation can increase the cost of shipping as vessels carry less cargo in order to reduce their draft or wait for high tide before transiting a harbor. It could also increase the risk of a ship grounding or collision.

ASCE strongly supports enactment of S. 412, the Harbor Maintenance Act of 2011, and H.R. 104, the Realize America's Maritime Promise Act. These bills would require all revenues flowing into the HMTF (plus any interest earned) in any fiscal year to be appropriated for O&M expenses at harbors and channels. ASCE is recommending an appropriation of $1.597 billion from the HMTF for operations and maintenance of harbors in FY 2012, an amount equal to the total revenues (taxes and interest) to be received into the trust fund during the fiscal year.

Conclusion

In the face of the Corps’ aging infrastructure needs, the president's budget for the Civil Works Program in FY 2012 reduces federal investments in essential national civil works systems. Moreover, the negative budgeting trend is not likely to improve in future years. The Corps estimates that its budget proposals will continue to decline through FY 2015, with a low estimate of $4.5 billion for FY 2013. The Corps expects that inflation will reduce actual spending on key infrastructure programs by a further $3 billion over the next five years. ASCE believes that these levels of spending are inadequate to meet the nation’s security, economic and environmental demands in the 21st century.