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Staff summary of testimony to the PCSCB: Peterson, Construction Industry Round Table

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Ralph R. Peterson, Chairman, Construction Industry Round Table (CIRT)
(December 3, 1998)

Testimony: Mr. Peterson noted that while a federal capital budget presents challenges in areas such as "scoring" and depreciation, a federal capital budget represents an approach that has merit and potential value. For this reason, Mr. Peterson urged the Commission "not to state in its final report that it does not endorse or support 'capital budgeting,' instead that it recommends aspects of the capital budgeting approach that would improve current budget practices.

CIRT believes a capital budgeting approach should not require all capital or investment expenditures to be financed by borrowing, but rather an approach that permits or allows for borrowing. CIRT believes a capital budget approach has great potential merit because it:

  • Resolves Overstatement of Capital Project Costs: Currently, the consolidated federal budget overstates the cost of an individual capital infrastructure project for a given budget year by requiring the entire expense of a project, which typically has decades long life span of utility, to be taken or "scored" in a single year (particularly for the construction phase).

  • Diminishes Uncertainly: The current consolidated federal budget approach to capital infrastructure projects increases uncertainty in the system from feasibility planning to construction. Given the overstated nature of the expense any single federal budget year must assume to move to construction, many projects that are ready to proceed are limited, withdrawn, or delayed in order to await adequate funding appropriations.

  • Enhances the Ability to Meet Capital Project Needs: The present approach to capital infrastructure funding is critically short of the levels necessary to both maintain and expand to meet basic infrastructure needs in the United States. CIRT strongly agrees with the proposed draft report's summary statement that "the current process shortchanges the maintenance of existing assets."
To demonstrate the lack of adequate funding for capital infrastructure in the U.S., CIRT referred to a recent report prepared by the American Society of Civil Engineers (ASCE). This report found significant backlogs of funding needs for maintaining or improving the Nation's infrastructure, including roads and bridges, mass transit, aviation/airports, schools, drinking water, wastewater, and hazardous waste.

In concluding remarks, CIRT urged that at a minimum, the Commission should strongly endorse a two-year approach to developing budget needs (with establishment of a Capital Acquisition Fund), within the framework of a five-year strategy to reach stated and measurable objectives. CIRT believes moving toward a federal capital infrastructure budget type approach would be an important first step in ensuring proper funding for the infrastructure needs facing the nation.

Questions from the Commissioners: Mr. Peterson did not testify before the Commission.

President's Commission to Study Capital Budgeting

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