The New Visions Fiscally-Constrained Balanced Budget

The New Visions plan's treatment of budget issues represents an important policy shift. The budget comes to grips in a flexible, policy-oriented manner with CDTC's perspective on relative priority for funding within a constrained budget. It also provides direction for exploration of additional funding.

Additionally, the completion of the New Visions effort concurrently with developing CDTC's 1997-2002 Transportation Improvement Program (TIP) placed a special burden on the New Visions budget. It was required to provide some guidance to hard decisions regarding TIP capital programming and scheduling.

CDTC follows a structured approach to the New Visions budget that establishes policy, guides TIP decisions and provides flexibility to deal with changing budgetary assumptions. The approach described is built upon the following funding principles which are central to the New Visions plan, having been developed through CDTC's past practice, task force work and public response.

1. CDTC desires full implementation of all plan elements.

For example, reducing the percentage of deficient bridges to 20% (one element of the plan) and improving bike and pedestrian accommodations on a priority network (another element) are both important, and complete implementation success is desired for both.

2. Under constrained budgets, preserving the existing transportation system has a higher priority than making improvements or additions.

CDTC's existing principles and the New Visions effort have repeatedly emphasized the need to maintain what we currently have as a priority.

3. Even under constrained budgets, making some degree of progress with improvements is essential.

It is realistic and appropriate to assume that some amount of highway or bridge improvement, bike accommodation or access management redesign will be included in CDTC's and members' action agendas -- even if budgets are reduced from historic levels.

4. Availability of funds dedicated to a particular mode, system or purpose frees up "flexible" funds.

Sources with a tightly defined list of eligible purposes are a reality. These benefit specific purposes directly, and other purposes indirectly. Practically speaking, if CDTA receives a discretionary Section 3 capital grant for bus replacement, or if State Dedicated Funds for state highway projects are increased, this increase reduces the load on other, flexible fund sources.

5. Priority for the use of flexible funds is not to be based on ownership.

This statement emphasizes CDTC's historic perspective, on funding, reaffirmed through the New Visions effort -- funding availability and project design should be based on function and location, not on issues of jurisdiction.

Based on these principles the New Visions adopted approach is based upon the conclusions that:

· Flexible funds can be broadly targeted to specific project categories based on relative funding need -- after accounting for the availability of dedicated funds and after assigning extra weight to the funding requirements of preserving the existing system; and,

· Project priority within a project category can be determined based on need, cost effectiveness, urgency and other factors.

Following this approach, CDTC has used the cost of full implementation of the consensus strategies and other New Visions recommendations on a comparable basis. Careful distinction has been drawn between preserving the existing investment and making improvements.

CDTC has been well served in the effort to define a full implementation budget by extensive effort to identify desired actions at a scale that is able to receive broad support. As a result, consensus strategies for transit, bike and pedestrian, arterial management, special needs and other improvements defined by task force recommendations are roughly of comparable scope and "reach". The full implementation budget is not an unconstrained budget which seeks to mitigate all congestion, address all infrastructure deficiencies, retrofit the entire network with ITS components or make ideal pedestrian and bicycle accommodations. Effort has been made to keep the full implementation plan reasonable and plausible over the 21-year horizon.

Using New Visions budgets to target funding to various project categories will be treated broadly during TIP development, as a guide in developing a balanced program rather than a rigid funding sub-allocation. Partly this recognizes the fact that the full implementation budget estimates are imperfect and will be refined in coming years. Broad treatment will also keep this potentially valuable tool from becoming a hindrance to CDTC's effective decision-making process. CDTC is not a project sponsor or implementer, and flexibility is necessary to respond to those aspects of the plan which are implemented.

The approach is policy-centered, focussing on CDTC's commitment to a wide range of initiatives without being wedded to a single, inaccurate estimate of costs and funding availability. It is dynamic in its ability to handle changes in funding while also providing the basis for any effort to increase levels of either dedicated or flexible funds. It also places appropriate attention on all elements of the plan because of their inter-relation with regard to funding availability.

The following "Regional Transportation Plan Budget" is based on the system preservation needs and full implementation budgets described earlier and relate to three budget scenarios:

1. A Reduced Funding Scenario. This is an assumed 16% reduction (relative to inflation) in state and federal funds used for capital purposes. Such a reduction could come about through an inability of resources to keep pace with inflation or from a reduction in anticipated federal or state funding. (The proposed 2000 Transportation Bond is expected to provide about 16% of highway and bridge capital resources, for example.) Under this scenario, most flexible funding would cover system preservation needs, with only about $16 M available annually to other purposes. Improvements would be tied nearly totally to dedicated funds and other earmarks. This effectively eliminates CDTC's budget goal to achieve steady progress in all areas. Under this scenario, bridge and pavement conditions could be maintained but major bridge projects may need to be deferred. Only a small portion of the desired improvements in local street reconstructions, ITS, bike and pedestrian, congestion relief, and transit improvements could be undertaken.

2. A Steady-State Funding Scenario. Adherence to the CDTC policy to make comparable progress across all improvement initiatives, steady and reasonable progress is possible at current funding levels -- if they keep pace with inflation. The degree of success is dependent upon total funding availability. Under levels of funding comparable to current levels (the steady-state funding scenario), expected state, federal and local funds would continue at current levels (adjusted for inflation) through the 21-year period, and all federal demo project funds and other anticipated "exclusive" funding would be received.[1] This budget level totals $460 M per year. After accounting for funds earmarked for specific purposes, this budget allocates $82.5 M annually to cover remaining system preservation needs, leaving $43.5 M of $126 M per year in "flexible" funds for improvements across all fronts. The flexible funds combine with exclusive funds to allow the Capital District to achieve about 2/3 of its desired set of $133 M in annual improvements.

This scenario represents the "financially constrained" version of the plan. The transportation system could function at this funding level and a large number of improvements made, but goals could not be fully achieved.

3. A Full-Funding Scenario. An additional $38 M per year above the steady-state funding scenario is sufficient to achieve full implementation of the entire New Visions plan. Although $38 M represents an increment in the annual transportation budget of less than 10% of the steady-state budget, it represents a significant increase (31%) in "flexible" funds available to the Capital District. The full funding budget overall is a full 1/3 higher than the basic, system preservation budget. ($501 M compared to $368 M.) The funding increase to move from the steady-state level to full implementation could be provided simply by ensuring that revenues are (1) adjusted for inflation and (2) track travel. The full-funding scenario calls for no more funding than would be provided by increasing current revenues (from all sources) 1% per year in real terms over the next 21 years -- a grow rate approximately equal to expected travel growth.

In all three scenarios, intermodal facilities are assumed to have access primarily to "exclusive" funding, such as passenger facility charges, tenant rents and direct federal state and local grants. FTA funds are also defined as exclusive to transit. FHWA earmarks for Enhancements, and Safety and Rail projects are treated as exclusive fund sources, as are FHWA Highway Bridge Rehabilitation and Replacement (HBRR) funds (assigned to the Bridge Rehabilitation & Reconstruction category.) Demonstration funds, FHWA/FTA planning funds, and private developer mitigation fees are also treated as exclusive funds. Existing budgets for highway operations at the state and local level are also treated as exclusive and not available for use on capital projects.

"Flexible" funds, which could assigned to any of the competing budget needs are limited to the sum total of federal and state funds, including local match, not otherwise identified as exclusive. These funds include most of FHWA's Surface Transportation Program, National Highway System, Interstate Maintenance and Congestion Mitigation/Air Quality funds, along with State Dedicated Fund, State Bond and other "100% State" funds.

Table 1 represents a summary of the funding levels possible for each investment category for the steady-state funding and full implementation scenarios.

Fiscal Constraint Requirement

The TEA21 requires CDTC's plan to be fiscally or financially constrained. That is, CDTC must not raise expectations for facility and service improvements that are not affordable under reasonable assumptions of funding availability. The New Visions budget policy explicitly addresses the fiscal constraint requirement. By following the stated policy, CDTC at all times is able to judge the magnitude and extent of improvements in any investment category that can be afforded at expected levels of resources. Error! Reference source not found. presents the fiscally constrained plan developed using forecasts of a steady level of funding.

Figure 1 and graphically represent the average annual 20-year funding levels for improvements by improvement category (aggregated somewhat for display purposes from the categories in the preceding tables). System preservation requirements (in 2000$) increase over time with increased truck travel, averaging $368 M per year. Similarly, if total funding tracks the growth in travel, it will grow over time -- averaging $501 M per year -- and meet the New Visions full implementation requirements.

Overall Budget Conclusions

On the whole, it appears that the revised plan's reach has increased beyond the previous New Visions' plan's reach. Better understanding of project costs, further identification of upcoming "extraordinary" bridge replacement needs and greater definition of intermodal projects have increased the full implementation budget roughly considerably. The new budget totals $501 M, or nearly 14% more than the full implementation budget adopted in 1997.

At the same time, experience has confirmed that system preservation needs remain at roughly the levels estimated in 1997. As a result, it has become clear that a good proportion of the full plan is composed of actions that constitute desired improvements -- not mere preservation of existing services and facilities. The Capital District is successfully implementing intermodal projects, congestion management projects, ITS projects, transit enhancements, and community-supporting streetscape, bike, pedestrian and freight access projects. The revised New Visions budget reflects the fact that these projects are not cheap and go far beyond merely holding our own.

It is very good news that the revised estimates of resources have also gone up, indicating that funding commitments to the plan have kept pace with the growth in funding needs, as called for in the original New Visions budget. The revised budget and resource estimates indicated that the Capital District can continue to achieve a good share of the desired set of improvements if current funding levels remain intact. A higher proportion of exclusive and flexible funding is available for improvements in the revised budget, as compared to the original New Visions' steady-state budget.

Three wild cards threaten this picture of steady, consistently refined progress. The first is the Transportation Bond referendum in November 2000 and related assumptions of state funding of the capital program. The second is reauthorization of the federal authorizing legislation, TEA-21, in 2003. The third is the very recent identification of renewed inflation in the highway construction industry.

Based on a simple calculation of the share of the five-year highway and bridge budget that is expected to come from bond proceeds (about 15/95 or 16%), failure to pass the bond would remove at least $20 M a year from the CDTC budget. If the bond fails, and the Governor and Legislature cannot agree on a comparably-funded alternative revenue source, the New Visions steady-state budget is seriously imperiled and full implementation funding much less likely to occur.

Similarly, reauthorization of TEA-21 in any manner that provides fewer financial resources the Capital District would seriously constrain the region's ability to achieve the desired improvements. Funding losses could result from a turnback of taxing authority from the federal government to the state, creation of new "equity" formulas that provide a lower percentage of funding to New York State, or other changes.

Further, any inflationary effect reduces the purchasing power of a static level of resources. It also seriously compromises the ability of elected officials to increase the funding levels to both meet the impacts of inflation and address the desire for increased funding in real terms.

In summary, the New Visions 2021 budget tracks well with CDTC's expectations when it adopted the New Visions plan three years ago. However, the budget threats and challenges remain at least as serious as those present in 1997. A summary of key differences between the previous plan's budget and the new budget is shown on the following page.

Summary of Budget Differences from

Previous New Visions Plan

Annual Funding Levels	Previous New Visions Plan	Draft New Visions 2021 Plan
System Preservation Needs	$ 364.448 M	$ 368.362 M
Annual Cost of Improvements	$ 76.899 M	$ 133.111 M
Full Implementation Budget	$ 441.347 M	$ 501.473 M
Exclusive Funding Level	$ 293.175 M	$ 336.669 M
Flexible Funding Level	$ 107.600 M	$ 126.100 M
Total Steady-State Resources	$ 400.775 M	$ 462.769 M
Improvements Funded Under Steady-State Funding	$ 37.000M	$ 59.700 M
Percent Completion of Desired Improvements	48%	71%
Annual Funding Gap Under Steady-State Funding	$ 40 M	$ 39 M

Table 1: New Visions 2021

Regional Transportation Plan Budget By Element

		basic	plus	total		Steady-state Funding
		System Preserve	Desired Improve-ments	Annual Average Need	Available Exclusive Funds	Comparable Progress Policy	Full Implement-ation Scenario
REGIONAL PROGRAMS[2]
1	Intermodal Facilities	10.638	30.457	41.095	39.600	40.392	41.095
2	Transit Infrastructure	5.956	5.535	11.491	10.285	10.924	11.491
3	Transit Service	38.000	3.860	41.860	41.860	41.860	41.860
4	ITS (Technology) and Traffic Infrastructure	2.578	7.672	10.250	2.050	6.642	10.250
5	ITS (Technology) and Traffic Operations	.715	1.825	2.540	0.375	1.682	2.540
6	Highway Rehab, Reconstruction and Redesign -- Priority Network	55.960	31.845	87.805	7.790	72.829	87.805
7	Highway Rehabilitation & Reconstruction – Other	15.000	0.250	15.250	15.250	15.250	15.250
8	Bridge Rehab & Reconstruction	62.000	20.100	82.100	31.092	73.494	82.100
9	Highway and Bridge Maintenance	171.800	2.500	174.300	174.300	174.300	174.300
10	Strategic Highway and Bridge Actions -- CMS-based (capacity)		10.277	10.277	1.341