Overview of President Trump’s Infrastructure Package
On February 12, the White House released its FY 2019 budget proposal and more detail on its Infrastructure Package. The proposals now go to Congress for consideration. The infrastructure package’s stated goals are to increase state and local authority in funding decisions, eliminate regulatory barriers, streamline permitting, and invest in our communities.
If anything, a bipartisan infrastructure deal will be harder in 2018 than it would have been in 2017, now that funding is tighter due to the tax cuts and the midterm elections in November could stall any major legislative effort. Therefore, major business leaders working to move freight quickly, efficiently, and safely are the most active proponents calling on Congress to act.
The infrastructure package is actually a set of principles and relies heavily on state and local governments to produce much of the funding. The $1.5 trillion infrastructure plan is centered on utilizing $200 billion in federal funds over 10 years for infrastructure in the hopes of spurring a total of $1.3 – $1.5 trillion in investments including state, local, and private funds. States and local government entities would apply for federal funds, with preference given to those that raise taxes, tolls or other revenue for the projects. Federal funding would be available for projects that can’t secure private financing, such as those in rural areas. The White House is recommending at least $21 billion in FY 2019 to initiate key elements of the infrastructure package.
The Trump package also proposes to use executive action to shorten permitting processes on projects to 2 years. An example of such action would be letting a single agency render the final yes-or-no verdict on a project. The plan recommends eliminating the section of the Clean Air Act that requires the Environmental Protection Agency (EPA) to review other agencies’ environmental impact statements, and it recommends revoking the EPA’s power to veto Clean Water Act permits issued by the Army Corps of Engineers.
The Trump plan targets investment in rural infrastructure such as broadband internet service with $50 billion in block grants to states, and recommends improving workforce training and apprenticeships, including expanding Pell Grant eligibility to students pursuing certification or credentials for in-demand trade fields.
Congressional leadership has responded by pronouncing that any infrastructure legislation needs to bipartisan and fiscally responsible in order to make real long-term investments in our nation.
The American Society of Civil Engineers has said the infrastructure backlog comes to $4.59 trillion in needed investments by 2025. The Trump package does not identify a new source of funding. The U.S. Chamber of Commerce endorsed a 25 cent federal gasoline tax increase to support the Highway Trust Fund; the current gas tax rate is 18.4 cents per gallon and 24.4 cents per gallon of diesel. Recently, President Trump indicated his interest in an increase, but congressional leaders are not onboard. A report by the conservative groups that oppose a tax increase, Americans for Prosperity and Freedom Partners, highlight that the burden of gas tax is borne by those Americans in rural communities who must drive every day. They also predict a drain on the overall economy because such a tax would drive up the cost of transporting goods and services on our nation’s roadways. The report estimates that North Carolina’s percentage of increase (adding 25 cents) over the current burden of state and federal taxes and fees per gallon would be 47 percent.
The White House proposed infrastructure package includes:
- $50 billion for rural infrastructure: 80% of funds would go to Governors of each state via formula; 20% would be for performance grants; aid for transportation, broadband, water and waste water, power and electric, and water resources;
- Allowing private activity bonds to be used for projects currently not allowed, including rural broadband, hydroelectric power, flood control, storm water, and brownfields and superfund site environmental remediation;
- Current uses of PABs for airports, water ports, mass transit, water and sewer, and transportation facilities would be expanded to allow more privately financed infrastructure projects to benefit from tax-exemption;
- Lift private activity bond state volume caps on debt sales based on population and PABs would no longer be subject to the alternative minimum tax in an effort to lower borrowing costs and increase their use;
- Prevent tax-exempt bonds from becoming taxable if infrastructure is privatized;
- $100 billion for an incentive program to attract non-federal funds, administered by the Department of Transportation, the Army Corps of Engineers, and the EPA. Aid targeted for roads, airports, passenger rail, ports, waterways flood control, water supply, hydropower, drinking water facilities, wastewater treatment, storm water, and brownfields and superfund site cleanup;
- $20 billion for projects which would “fundamentally transform the way infrastructure is delivered or operated;” projects must be ambitious, exploratory and ground-breaking and the funds would be administered by the Commerce Department;
- $20 billion set aside to “advance major, complex infrastructure projects” by expanding existing federal credit programs, such as: the Transportation Infrastructure Finance and Innovation Act, the Railroad Rehabilitation and Improvement Financing, the Water Infrastructure Finance and Innovation Act, the Rural Utilities Service lending program, and Private Activity Bonds; and
- $10 billion for a federal capital budget financing fund for federal agencies to finance large-dollar real property purchases and repay the fund in 15 equal amounts using discretionary appropriations from Congress.
The proposals now go to Congress for consideration.
Disaster Long-term Recovery
On February 9, Congress approved a bipartisan budget agreement that included additional funding for long-term recovery from natural disasters. In addition to providing funds for Puerto Rico, U.S. Virgin Islands, Texas, Florida, and California the measure included federal funds for North Carolina. We thank the North Carolina Congressional Delegation for this effort and especially want to acknowledge the leadership of Senator Thom Tillis.
The budget agreement will allow North Carolina to be eligible for more than $125 million in additional federal assistance for North Carolina’s long-term Hurricane Matthew recovery efforts. The Governor’s Office must submit a plan to secure these funds.
- North Carolina is eligible for roughly $100 million in Community Development Block Grant Disaster Recovery (CDBG-DR) funding, which supports family and community needs, including housing, infrastructure, and jobs. The funding is critical for Eastern North Carolina’s long-term recovery efforts.
- North Carolina will receive roughly $25.5 million in additional Federal Highway Administration funds for the repair and reconstruction of roads that were damaged by Hurricane Matthew and the subsequent flooding.
This additional CDBG-DR funding adds to the $236,500,000 that the NC Congressional Delegation has secured in past spending bills. Immediately following Hurricane Matthew, $198.5 million was allocated in the December 9, 2016, Continuing Resolution and the remaining $37.96 million was authorized in the May 5, 2017, Continuing Resolution. These federal funds were allocated in two separate tranches: $6,114,000 in May 2017 and $31,862,000 in July 2017.
The Big Budget Deal (H.R. 1892, Public Law 115-123)
In an attempt to resolve differences and bring to a close the FY 2018 appropriations process, Congress approved a bipartisan budget agreement on February 9, setting spending caps for two years (FY 2018 and FY 2019), and providing almost $300 billion in additional funding. The measure also suspends the federal debt ceiling until March 2019.
The current Continuing Resolution, providing funds to federal programs at existing FY 2017 levels, expires March 23. Next, the House and Senate appropriators will get their new subcommittee allocations and hammer out the final details of an omnibus spending package for the remainder of FY 2018. This package should be enacted before March 23.
Because the Continuing Resolution approved February 9 was must-pass legislation, it became a legislative vehicle to resolve many additional issues. The bipartisan agreement:
- Provides $84 billion for disaster relief for 2017 hurricanes and wildfires; North Carolina is eligible for an additional $125 million community development and transportation long-term recovery funds;
- Extends expired energy tax credit provisions;
- Extends the National Flood Insurance Program;
- Renews through 2017 the designation of certain areas as “empowerment zones,” which provide area businesses with tax incentives;
- Grants a seven-year recovery period for motorsports entertainment complexes;
- Provides an option for companies to deduct as much as $15 million in certain film, television, and theater expenses, and up to $20 million in certain economically disadvantaged areas;
- Increases support for cotton and dairy producers by modifying agriculture programs; and
- Extends USDA’s Environmental Quality Incentives Program through FY 2019 at the FY 2018 rate of $1.75 billion.
Health Care Specific Provisions Included in the Package:
- Extends the Children’s Health Insurance Program (CHIP) through FY 2027;
- Extends Community Health Centers for two years;
- Extends Maternal, Infant, and Early Childhood Visiting Program through FY 2022, without requiring matching funds as included in an earlier House bill;
- Extends for two years the National Health Service Corps, the Teaching Health Center Graduate Medical Education Program, Special Diabetes Program funding research for Type 1 diabetes, the Family-to-Family Health Information Centers for children with special health-care needs, the Sexual Risk Avoidance Education Program, and the Personal Responsibility Education Program;
- Extends for two years the demonstration projects that provide low-income individuals with training or jobs in the health-care field with a labor shortage or that’s in high-demand;
- Extends and makes improvements in HHS foster care programs, including the Promoting Safe and Stable Families Program, the Stephanie Tubbs Jones Child Welfare Services Program, the Administration for Children and Families discretionary and targeted grant programs, and incentive payments for adoption and legal guardians through FY 2021;
- Repeals Medicare outpatient therapy caps for services deemed medically necessary;
- Extends for five years the three percent increase in payments for home health services provided in rural areas;
- Increased payment rates for five years for ambulance services in rural areas and areas that aren’t covered by Medicare Part A;
- Extends for five years the low-volume hospital adjustment that provides additional payments to hospitals with fewer than 1,600 Medicare patient discharges each year;
- Extends for five years the Medicare Dependent Hospital Program, which provides higher reimbursements to small rural hospitals where at least 60 percent of patients are Medicare beneficiaries;
- Extends for two years the geographic work adjustments that prevent physician service payments from being reduced based on geographic location;
- Extends for two years funding for outreach, counseling, and other assistance programs for Medicare beneficiaries;
- Extends for two years the Independence at Home Demonstration program and increases the limit on the number of participants;
- Expands the use of telehealth services for end-stage renal disease treatments, stroke evaluations, accountable care organizations (ACOs), and Medicare Advantage plans;
- Directs HHS to modify payments for home health services beginning in 2020, and include medical records of home health providers for determining eligibility;
- Continues for calendar year 2017 the exemption for critical access and rural hospitals from physician “direct supervision” requirements for outpatient treatments;
- Removes a requirement that “meaningful use” standards under Medicare and Medicaid incentive programs become more stringent over time, thus easing requirements for electronic medical records;
- Allows physician assistants to serve hospice patients, in addition to doctors and nurses;
- Allows physician assistants and nurses to supervise cardiac rehab programs, intensive cardiac rehab programs, and pulmonary rehab programs beginning in 2024;
- Repeals cuts to Medicaid disproportionate share hospitals (DSHs) for FY 2018 and FY 2019, but increases the reductions in FY 2021-2023; and
- Includes various provisions to get savings to offset the costs of these health-care programs such as increasing means testing of Medicare premiums for beneficiaries making more than $500,000, making CHIP the payer of last resort, altering payment rates and fee schedules, and closes the gap in Medicare prescription drug coverage, so called “donut hole,” one year earlier than scheduled by requiring drug companies to cover more of the cost.
White House’s FY 2019 Proposed Budget – Just the Starting Point
The first steps of the FY 2019 budget process began with the President’s State of the Union address delivered January 30, and the White House submitting its FY 2019 budget to Congress on February 12.
Unfortunately, the FY 2018 appropriations bills are not yet completed; these bills create the baseline for the FY 2019 funding discussions. The White House package does not include the new FY 2019 spending limits for defense and non-defense federal programs that were enacted by Congress and signed by the President February 9 (H.R. 1892, Public Law 115-123), nor does it project a balanced budget in 10 years, which is the standard goal.
Next steps: Congress must complete the FY 2018 appropriations bills before March 23, when the current Continuing Resolution expires. This omnibus appropriations bill will fund the federal government through September 30, 2018.
FY 2019: Trump Administration officials are currently testifying before House and Senate committees to present their budget recommendations. The 12 appropriations subcommittees in the House and the Senate will begin preparing their bills for consideration. In theory, the process will go more smoothly this year because the Congress and the White House already have agreed upon overall spending limits for FY 2019, although the debate on priorities will be intense as the November 6 Election Day approaches.
What to Watch for North Carolina (not a complete list)
- Deficit & Debt – Trump budget documents project a federal deficit of $984 billion in FY 2019 and the long-term debt to rise to $23.7 trillion over 10 years;
- Defense – strong Defense and Veterans Affairs budgets positively impact the military bases, large veteran population and the local community economies in NC;
- Community & Economic Development – Trump budget proposes to eliminate several critical programs utilized heavily for community and economic development including: HUD Community Development Block Grants (CDBG); USDA Rural Economic Development Loan and Grant Program of which North Carolina is a leader in making investments; the Economic Development Administration; the Manufacturing Extension Partnerships (MEP) program; Transportation’s TIGER Grants; Treasury’s Community Development Financial Institutions (CDFI) Fund’s discretionary grant and direct loan programs; Education Department’s Public Service Loan Forgiveness Program; Weatherization Assistance Program; Legal Services Corp; National Endowment for the Humanities; and National Endowment for the Arts, among others;
- Agriculture – Trump budget seeks a 16 percent cut to USDA including reducing funds for broadband development and distance learning, reforms SNAP nutrition assistance, and eliminates the Rural Economic Development Loan and Grant Program;
- EPA – Trump budget seeks a 25 percent cut at the Environmental Protection Agency; drastic reductions in research and development programs at our universities; cost-cutting overhauls to Medicare and other social safety-net programs;
- Opioids – Trump budget requests $13 billion in new funding to combat the opioid epidemic including $50 million for an anti-opioid media campaign; $50 million for overdose reversal drugs to be distributed to emergency workers; $100 million for prevention activities including a state-based program to monitor painkiller prescriptions; a $100 million public-private partnership between NIH and the pharmaceutical industry to develop treatments for addiction, overdose reversal, and non-addictive painkillers;
- Medicaid – Trump budget proposes to change Medicaid financing to give states a choice between a per-person cap on federal payments or a block grant; allows up to five states to create Medicaid closed drug formularies to select less costly drugs and set prices directly with manufacturers; cuts to home-health agencies and nursing homes; reduced payments to hospital-owned doctors’ offices; and calls for rewarding hospitals which provide charity care and reduce payments to hospitals that provide little or no charity care;
- FDA – Trump budget proposed big increase to FDA to secure the talented scientists needed;
- Affordable Care Act – HHS budget continues to call for repealing and replacing Obamacare, but would appropriate funds to cover the cost-sharing reductions for FY 2018 through calendar year 2019 to stabilize the insurance market and lower 2019 premiums;
- Amtrak – Transportation budget cuts funding for Amtrak passenger service and recommends state financing to meet the need; and
- Appalachian Regional Commission – Trump budget requests level funding, $158 million, for the Appalachian Regional Commission and assumes no major policy or programmatic changes. ARC is authorized through 2020.
Many say the President’s budget is dead-on-arrival, but the recommendations to eliminate programs and entire agencies must be given serious consideration and are not to be taken lightly. It is most important to demonstrate the need and the accomplishments of these programs at the local level to justify continuation. The completion of the FY 2018 appropriations process will better define the intentions of Congress which has the responsibility to appropriate federal funds.