March 18, 2014
On March 4, 2014, the Obama Administration released its $3.9 trillion federal Fiscal Year (FY) 2015 budget proposal. Over the next ten years, the government would spend $48.7 trillion while taking in revenues of $43.8 trillion. This represents a $2.2 trillion deficit reduction from the Office of Management and Budget's (OMB) baseline projections. Proposals to reduce the deficit include immigration reform and reduction in government outlays from health care changes and savings, as well as revenue increases through business tax system reform, tax expenditures reduction, and modification of various estate and gift tax provisions. With notable exceptions related to transportation, many of the budget's proposals are similar to those offered last year in the Administration's FY 2014 proposal.
Because leaders in Congress reached a compromise in late 2013 for a two-year budget that includes FY 2015, the proposed Obama budget is best viewed as a window into the Administration's policy priorities, rather than as a guide to how the federal government will spend its resources next fiscal year. CMAP is monitoring the Administration's FY 2015 budget proposal because federal policy in transportation, economic development, and housing plays a vital role in GO TO 2040 implementation.
The Administration's proposed $90.9 billion transportation budget includes some significant departures from the current budget, including the expansion of the Highway Trust Fund into a "Transportation Trust Fund" to incorporate new rail and multimodal accounts. While the proposal continues an emphasis on prioritizing maintenance investments (the "fix-it first" approach) and incentivizing greater private investment in transportation, the FY 2015 budget also outlines the Administration's proposal for a four-year, $302 billion reauthorization bill (first released in February 2014 and reviewed in a subsequent Policy Update).
The budget proposal includes $275 million to support modernization of the Chicago Transit Authority's Red and Purple Lines under a new "core capacity" project classification. First authorized under Moving Ahead for Progress in the 21st Century (MAP-21), this type of project increases capacity to existing transit systems by at least 10 percent and represents an expansion of the New Starts capital investment program. Red Purple Modernization is the first and, to date, the only project to be identified under the core capacity program.
Additionally, the FY 2015 budget proposes $14 billion for aviation, maritime, rail safety, and pipeline and hazardous material programs. This provision is not part of the Administration's transportation reauthorization proposal and includes $1 billion in support of the NextGen project to modernize the nation's air traffic control system. Additionally, the budget proposes a reduction and refocusing of the Airport Improvement Program, through which smaller airports would be eligible for grants and larger airports would be permitted to increase the Passenger Facility Charges they levy from $4.50 to $8.00.
Housing and Land Use
The Administration's proposal for the U.S. Department of Housing and Urban Development (HUD) follows trends seen in recent budgets. It would cut HOME and Community Development Block Grant (CDBG) program budgets by 5.0 percent and 7.4 percent over FY 2014 allocations, respectively. HOME provides formula-based funding for affordable housing development, while CDBG offers formula-based assistance for eligible communities to spend on neighborhood revitalization, economic development, and improved services. The Administration's budget describes an upcoming proposal to streamline the CDBG program by removing small grantees, encouraging a more cooperative and regional perspective, and requiring more strategic spending of funds. HUD is expected to release a supporting legislative package of CDBG reforms this spring. In contrast to the CDBG and HOME cuts, the Administration proposes significant additional funding for the Choice Neighborhoods program, which provides planning and implementation grants to neighborhoods with distressed public or public-assisted housing.
Most importantly, the proposed FY 2015 budget does not fund the Sustainable Communities Initiative (SCI) or its proposed successor, the Office of Economic Resilience (OER). SCI provided initial funding for CMAP's Local Technical Assistance program. The OER would have continued the cross-agency focus of SCI with a stronger emphasis on implementation of existing plans. While the Administration would provide $75 million in one-time funding through a proposed new Opportunity, Growth, and Security Initiative (OGSI), funding for this program is outside of the budget limits imposed by sequestration.
Workforce and Economic Development
While the Administration's budget continues to prioritize high-tech manufacturing innovation, it does not propose substantial increases in funding over FY 2014 allocations. The budget would extend several investments in economic development and technological innovation, primarily through research initiatives and education and training in science, technology, engineering, and mathematics (STEM) fields. The proposal would allocate $135.4 billion in funding for research and development activities, a 1.2 percent increase over the FY 2014 enacted budget. Additionally, it would provide $2.9 billion for STEM education programs across the federal government, a 3.7 percent increase.
These proposals could result in direct investment in metropolitan Chicago. For example, a FY 2014 budget proposal yielded a $70 million U.S. Department of Defense award for a team led by the University of Illinois to create a Digital Manufacturing and Design Innovation program. Announced in February 2014, the grant will leverage over $200 million in private funding to launch a Digital Lab for Manufacturing in Chicago. The lab will use advanced technologies and collaboration to spur research and commercialization.
FY 2015 Budget Proposals and GO TO 2040
CMAP supports the Administration's efforts to prioritize maintenance of the current transportation system and dedicate funds specifically for freight, as both are GO TO 2040 regional mobility priorities. However, this increase in funding would come from one-time revenues raised through corporate income tax reform. CMAP urges Congress to address the long-term structural challenges that face federal transportation funding, as well as to continue the user-fee system that has financed the transportation system for decades. GO TO 2040 calls on policymakers to increase the federal motor fuel tax and index it to inflation, while pursuing a long-term replacement for the gas tax.
The Administration's proposed budget recognizes the importance of regional and interjurisdictional planning and implementation efforts via the OER. However, the proposal only allocates monies that are above sequestration budget limits and that must be separately approved by Congress. Additionally, the budget continues to request spending cuts for HOME and CDBG programs, which are a critical source of funds used by many communities to implement the livability goals of GO TO 2040. But proposed reforms in these funding programs may increase efficiencies and encourage a more collaborative approach.
The proposed budget helps further some GO TO 2040 human capital goals for attracting more financial research and development support to the manufacturing sector, particularly through efforts like the Digital Manufacturing and Design Innovation program. Although manufacturing remains a key driver of the metropolitan Chicago economy, the region also needs to bolster its capacity to innovate.
CMAP's Federal Legislative Agenda
As federal policymakers consider the Administration's FY 2015 budget request, CMAP calls on them to support initiatives and programs that address the interconnected areas of transportation, land use, housing, the environment, and economic development, in addition to support for regional comprehensive planning efforts. The agency's 2014 federal agenda includes specific guidance on these issues.