President Releases Budget Request for 2015

On March 4, President Obama released a framework for his $3.9 trillion budget request for fiscal year (FY) 2015, while more detailed budget documents are expected to be released next week.  The budget, which is $56 billion above the $1.014 trillion limit on discretionary spending established as part of December’s bipartisan budget deal, projects a budget deficit of $564 billion for 2015.  House and Senate Republicans have come out against the budget, proposing the breaking of budget caps and payment for the increase in spending by proposing tax policies that have been panned by business groups in the past, including: increasing the burden of the estate tax; retaining high rates on pass-through businesses; and taxing carried interest at ordinary income rates. The budget outlines a four-year, $302 billion transportation bill that would increase funding by an average of ten percent from 2014 enacted levels.  It also includes several infrastructure financing provision supported by AGC, including: eliminating the volume cap on private activity bonds for water infrastructure; creating a national infrastructure bank and encouraging Congress to work on similar proposals; and providing for America Fast Forward Bonds for transportation. In terms of federal construction accounts, the budget provides about $166 billion for FY 2015 – a 15 percent increase from 2014 enacted levels. There are winners and losers in the budget.  Most of the winners can be found in transportation, where the president proposes to increase both highway and transit spending.  Military construction accounts are the major losers – with cuts of over $3 billion.  A full analysis of the FY 2015 budget for federal construction accounts can be found here. Transportation The president laid out his framework for the reauthorization of MAP-21.  The $302 billion four-year proposal would provide an $87 billion increase over current spending levels in the Highway Trust Fund, expands the TIGER grant programs and authorizes TIFIA at $1 billion per year over the next four years.   The budget does not provide specifics on how to pay for current spending levels, let alone the extra spending proposed in the president’s request. The proposal would fund the Federal Highway Administration at $199.2 billion over four years – adding a new competitive grant program and new multi-modal freight programs.  The Federal Transit Administration (FTA) does very well in the new budget, which is consistent with the administration’s support in the past.  FTA would receive $72.3 billion over four years for an average spending increase of 19 percent.   Within the FTA, the new starts program would be increased from $1.94 billion in 2014 to $2.5 billion in 2015 and the Formula Grants increased by 17 percent annual average increase to $13.9 billion. Also included in the plan is $1.25 billion per year for TIGER Grants and $1.3 billion per year for high speed rail. Federal Construction The president’s budget provides a mixed bag for direct federal contractors. Starting with the bad news, the president would look to dramatically cut military construction and the U.S. Civil Works accounts in FY 2015. Specifically, Army, Navy and Air Force military construction accounts would see about $1 billion reductions each under the proposal compared to the previous fiscal year. On the civil works side, the program would see about a $1 billion cut—with the construction account bearing the brunt of it with a $525 million cut—compared to the FY 2014 appropriations levels approved just six weeks ago by Congress. The good news rests with the General Services Administration (GSA). The budget proposal would provide $2 billion for the agency’s construction accounts, representing a dramatic increase from FY 2010 through FY 2013 funding levels, where the agency saw about $300 million annually for construction. Overall, construction funding for the Department of Veterans Affairs would remain level at about $1 billion. However, the majority of funding proposed would go towards the agency’s major construction account (for projects above $10 million), a change from FY 2014 where the minor construction program saw the majority of funding. Water Infrastructure Once again, the president called for cuts to the Environmental Protection Agency’s (EPA) state revolving loan funds (SRFs) and the Rural Utilities Service’s Rural Water and Waste Disposal program.  As for the SRF’s – the budget provides $1.018 billion for clean water SRFs – a 30 percent cut from 2014 enacted levels.  Drinking water SRF’s would receive $757 million under the budget – a 17 percent cut from 2014 enacted levels.   The Department of Agriculture’s Rural Water and Waste Disposal Program is funded at $304 million, a cut of 34 percent from 2014 levels. For more information, please contact Sean O’Neill at (202) 547-8892 or oneills@agc.org.