« PreviousContinue »
STATEMENT OF HON. F. C. TURNER, FEDERAL HIGHWAY ADMIN
ISTRATOR, DEPARTMENT OF TRANSPORTATION; ACCOMPANIED BY DAVID E. WELLS, CHIEF COUNSEL, FEDERAL HIGHWAY ADMINISTRATION
Mr. TURNER. At your pleasure, Mr. Chairman.
We are delighted to welcome you to the subcommittee and I wish to express to you the appreciation of the subcommittee for your willingness to come and assist us in this study.
Mr. TURNER. I have with me Mr. Dave Wells, Chief Counsel for the Federal Highway Administration. With your permission, I would like to have him here with me.
Senator ERVIN. We are delighted to have Mr. Wells here with us also.
Mr. TURNER. Mr. Chairman, I am here to discuss with your subcommittee the action that the Federal Highway Administration has taken pursuant to several past directives to reduce Federal spending in recognition of the need for curbing inflationary pressures. There have been four limitations imposed on the obligation of Federal-aid highway funds.
1. On November 23, 1966, an initial limitation of $3.3 billion was established for fiscal year 1967.
The $3.3 billion limitation reflected a program reduction of $700 million from the previously expected level of $4 billion.
2. On January 23, 1968, a limitation of $4.115 billion was established for calendar year 1968.
No more than 45 percent of the calendar year limitation could be incurred through June 30, 1968. The new limitation represented a reduction of $600 million in the approximately $4.7 billion that was expected to be available during calendar year 1968.
3. On September 6, 1968, the program was suspended for 3 full months in order to reduce expenditures during the fiscal year by $200 million.
This suspension was one of the measures taken in response to the Revenue and Expenditure Control Act of 1968, which, as you know, directed that government expenditures be reduced by a total of $6 billion during fiscal year 1969. The reduction in Federal-aid highway expenditures during fiscal year 1969 was accomplished through the temporary deferral of new project approvals for a period of about 3 months.
4. On September 4, 1969, President Nixon directed a 75 percent reduction in new construction by the Federal Government. Also, at the same time, the President urged the States and local governments to follow the example of the Federal Government by cutting back temporarily on their own construction plans.
Since the Federal-aid highway program provides grants-in-aid for the construction of highways by the States, curtailment of the program in line with the President's statement involved actions to be taken by the States.
No further steps were taken to prescribe a specific curtailment of the Federal-aid highway program, pending developments in connection with the voluntary action of the States in complying with the President's request. The States' deferral plans indicated a program level of $1.080 billion less than the $5.044 billion originally proposed for the fiscal year ending June 30, 1970. The President subsequently withdrew his request for deferral on March 17, 1970.
For fiscal 1971, the obligation ceiling as now set is $4.6 billion.
In summary, the ceilings on Federal-aid highway funds available for obligation during a fiscal or calendar year, including the special limitations prescribed for fiscal year 1967, calendar year 1968, fiscal year 1969 and the voluntary limitation requested by the President during fiscal year 1970 did not affect the fiscal year apportionments authorized by Federal-aid highway legislation nor the availability of revenues in the highway trust fund.
The funds apportioned to the States but not obligated during a year were carried forward and remained available for obligation in later years. Revenues accruing to the highway trust fund and not required for current expenditures were invested by the Treasury Department in public debt securities and remained available to the credit of the trust fund for making payments to the States at some later date.
We recognize that the impact in individual States varies to some degree because there is no way to take into consideration what each State would have obligated during the fiscal year had there been no deferral. In other words, some States may have planned proportionately higher programs than could be accomplished under the lower obligation amounts allowed, whereas there would be little or no impact in other States because they have not planned large programs.
The point that I would like to stress here is that each State received its proportionate share of the amount of funds available under the limitation.
As you know, the highway program is a fairly substantial part of the total public works program in all States. The immediate effect of a reduction in the availability of funds is to defer the approval of projects that permit them to move from the planning and engineering stage over to actual construction; to obligate the funds, in other words.
The control step that we take within FHWA is to defer the letter authorizing the State highway department to advertise for bids. We set maximum limits on the total amount of new obligations which the State would be permitted to enter into within a given period of time—usually on a quarterly basis.
Now I would like to summarize the statutory authority which provides the basis for the administrative actions which I have just outlined.
Among the issues with respect to executive withholding or impoundment of funds which arise in the context of title 23, United States Code, which deals with the Federal-aid highway program, are: (1) The intent of Congress as expressed in title 23 and (2) whether the States have vested rights in apportioned highway funds.
In 23 U.S.C. 101(b), Congress declared that acceleration of construction of the Federal-aid highway system and prompt completion of the Interstate System are in the national interest. The language is
not mandatory. The courts have held that such statements of policy do not add to or alter the specific operative provisions of a statute. These citations appear in the February 25, 1967, opinion of the Attorney General (p. 14), which opinion we are submitting for the record :
(The documents referred to above follow :)
[42 Op. A. G. No. 32 (1967)]
FEDERAL-AID HIGHWAY ACT OF 1956-POWER OF
PRESIDENT TO IMPOUND FUNDS
Appropriation acts are of a fiscal and permissive nature. They authorize but
do not compel the executive branch to expend funds. Under the Federal-Aid Highway Act of 1956 (June 29, 1956, c. 462, 70 Stat.
378, as amended, 23 U.S.C. 101 note), the States have no inchoate right to funds apportioned to them prior to the actual approval of a project by the
Secretary of Transportation. The hortatory declaration of congressional policy set forth in 23 U.S.C. 101(b)
does not constitute a mandate to approve all qualifying projects for which
funds are available. The highway taxes imposed under the Highway Revenue Act of 1956 (June 29,
1956, c. 462, 70 Stat. 387, 397) are not paid directly into the Highway Trust Fund, and the assets in that fund are neither directly nor automatically available for the payment of Federal contributions to the States. The President has the power to impound Federal-aid high way funds after they
have been apportioned to the States but before they have become obligated as the result of the approval of a specific qualifying project.
FEBRUARY 25, 1967. THE SECRETARY OF TRANSPORTATION.
DEAR MR. SECRETARY: This is in reply to your letter of February 21, 1967, requesting my opinion as to the legality of a reduction in the amount of Federal-aid highway funds which may be obligated during the Fiscal Year ending June 30, 1967.
The facts underlying your inquiry are as follows: President Johnson's message to Congress of September 8, 1966, Transmitting Proposals for Meas? rcs for Curbing Inflation and Preserving our National Economy, announced that a reduction or deferral of lower priority Federal expenditures by approximately $3 billion was required in order to assure the continuing health and strength of our economy (H. Doc. 492, 89th Cong., 2d sess., pp. 1, 4). Pursuant to this mandate the Director of the Bureau of the Budget by letter dated November 7, 1966, advised you, in your then capacity of Under Secretary of Commerce for Transportation, that the Federal-aid highway program would have to bear a fair and feasible share of the deferrals.
In line with subsequent discussion with and instruction from the Bureau of the Budget, the Federal Highway Administrator advised his division and regional engineers on November 23, 1966, that the Federal-aid highway program was being limited to $3.3 billion in total project obligations during Fiscal Year 1967. The instructions indicated that the limitation was in recognition of the need for reducing non-military Federal expenditures in order to curb inflationary pressures.
Prior to this action it was anticipated that $4 billion would be made available for obligation during Fiscal Year 1967. The effect of the action is to defer
1 Although the Department of Commerce is still technically responsible for the administration of the Federal aid highway program. 23 U.S.C. 101, these functions are in the proc. ess of being transferred to the Department of Transportation pursuant to section 6(a) (1) (A)-(G) of the Department of Transportation Act. October 16. 1966. P.L. 89-670. 80 Stat. 931, 937.
Vol. 42, Op. No. 32.
to fiscal years subsequent to fiscal 1967 the obligation of funds in excess of $3.3 billion for Federal-aid highway projects. The reduction of funds was limited to the approval of future projects and did not affect the availability of funds for projects which already had been approved and which, pursuant to 23 U.S.C. 106(a), constitute contractual obligations of the United States.
An understanding of the legal problems raised by your inquiry will be facilitated by an outline of the pertinent provisions of the Federal-aid highway program. The program involves successive, and distinct, stages of authorizations, apportionments, programs, projects and appropriations.
The basic authorizations for appropriations for the Interstate Highway srstem relating to the 15-year period ending with Fiscal Year 1972 may be found in section 108 (b) of the Federal-Aid Highway Act of 1956, June 29, 1956, c. 462, 70 Stat. 378, as amended, 23 U.S.C. 101 note. The funds expected to be available with respect to each fiscal year included in these authorizations are apportioned among the States on or before the first day of January preceding the fiscal year for which they are authorized to be appropriated. 23 U.S.C. 101 (a), (b). Funds so apportioned remain available for obligation at any time prior to the close of the second fiscal year after the fiscal year for which they are authorized (23 V.S.C. 118 (a), (b))).
After apportionment, the States submit general programs of proposed highway projects for approval (23 U.S.C. 105). Following the approval of a program by the Secretary, the State submits "such surveys, plans, specifications, and estimates for each proposed project included in an approved program as the Secretary may require." Approval of a specific project by the Secretary "shall be deemed a contractual obligation of the Federal Government for the payment of its proportional contribution thereto." (23 U.S.C. 106(a))
Payments to the States are made pursuant to appropriation acts based on estimates of the requests to be made by the States in each fiscal year for reimbursement for work performed. We understand that there is a variable, often considerable, time lag between the approval of a project and the requests ou the State for partial or full reimbursement of the Federal proportional contribution to the cost of the work performed on that project. Thus actual appropriations in any given year will include reimbursement of costs resulting from projects approved in preceding years.
The amount which may be appropriated in any given year for Federal-aid highway purposes is subject to two limitations: First, it cannot exceed the amounts provided for in the authorization act and, second, it cannot exceed the funds available in the Highway Trust Fund. See, e.g., Departments of State, Justice and Commerce, the Judiciary and Related Agencies Appropriation Act, 1967, November 8, 1966, P.L. 89-797, 80 Stat. 1479, 1495 (Bureau of Public Roads, Federal-Aid Highways (Trust Fund)).
It is my conclusion that the Secretary has the power to defer the availability to the States of those funds authorized and apportioned for highway construction which have not, by the approval of a project, become the subject of 1 contractual obligation on the part of the Federal Government in favor of a State.
Although your inquiry is not directly concerned with an appropriation act. but rather with the effect of legislation authorizing actions ultimately leading to appropriations, it will be useful to consider first the effect of a congressional appropriation of money. The basic function of such legislation is to furnish the formal permission required by Article I, section 9, clause 7 of the Constitution for the withdrawal of funds from the Treasury. Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937). The courts have recognized that appropriation acts are of a fiscal and permissive nature and do not in themselves impose upon the executive branch an affirmative duty to expend the funds, Hukill v. United States, 16 C. Cl. 562, 565 (1880); Campagna v. United Siates, 26 C. CI. 316, 317 (1891); Lovett v. United States, 104 C. Cl. 557, 583 (1945), affirmed on other grounds, 328 U.S. 303 (1946); McKay v. Central Electric Power Cooperative, 223 F 20 623, 625 (C.A.D.C. 1955).
2 While 23 U.S.C. 118(b) uses the term "expenditure," the second sentence of the subsection indicates that the term "expenditure is there used in the sens. of "obligation."
3 Section 209 of the Highway Revenue Act of 1936, June 29, 1956.c. 462, 70 Stat. 387. 397.23 U.S.C. 120 note. established the Ilighway Trust Fund and appropriated into that Fund amounts equivalent to specified percentages of certain taxes received in the Treas. ury. Under Section 209 (f), the amounts in the Highway Fund are available for appropriations out of the Fund. to be made annually, for expenditures to meet the obligations of the finited States under 23 U.S.C. 106(a).
Congress, of course, is fully aware of the rule that an appropriation act in itself does not constitute a mandate to spend. The classic exposition of this characteristic of appropriations legislation may be found in the House Appropriations Committee report on the General Appropriation Bill, "Responsibility of the Executive Branch."
“Economy neither begins nor ends in the Halls of Congress. * * * The Congress * * * decides the maximum amounts which must be appropriated for * * * various activities, and the annual appropriation bill provides the sums so determined by the Congress.
"Appropriation of a given amount for a particular activity constitutes only a ceiling upon the amount which should be expended for that activity. * * * [It is the) responsibility (of every Government official] to so control and administer the activities under his jurisdiction as to expend as little as possible out of the funds appropriated." H. Rept. 1797, 81st Cong., 2d sess., p. 9.
Or as the then Senator Harry S. Truman observed in 1943 :
"Mr. Truman. * * * When the Congress appropriates funds it gives the executive branch an authority to incur obligations. Certainly none of us hold that we give a mandate to expend the funds appropriated. We expect the funds to be used only where needed, and not in excess of the amount appropriated, to carry out some phase of law." 89 Cong. Rec. 10362.
An appropriation act thus places an upper and not a lower limit on expenditures. The duty of the President to see that the laws are faithfully executed, under Article II, section 3 of the Constitution, does not require that funds made available must be fully expended. This principle has received statutory recognition in the Anti-deficiency Act, February 27, 1906, c. 510, sec. 3, 34 Stat. 49 (31 U.S.C. 665(C)), which anthorizes the executive branch to effectuate savings of appropriated funds, and in 31 U.S.C. 701, which provides that unexpended appropriated funds shall revert to the Treasury.
Many factors must be weighed by the Executive in determining the extent to which funds should be expended. Consideration must be given not only to legislative authorizations and appropriations but also to such factors as the effect of the authorized expenditures on the national economy and their relation to other programs important to the national welfare.
A situation analogous to the present one arose in the early 1940's when the economy of the t'nited States shifted first to defense and later to war production. At that time President Franklin Delano Roosevelt directed that projects having a lower priority would have to be postponed or even cancellent in spite of the availability of appropriated funds. In response to complaints about the curtailment by the Bureau of the Budget of certain programs of the Agricultural Marketing Administration, President Roosevelt set forth the powers and responsibilities of the executive branch in this area:
"It should, of course, be clearly understood that what you refer to as the practice of the Bureau [of the Budget] of impounding funds duly appropriater by the Congress' is in fact action by the Chief Executive, and has two purposes. The first purpose is compliance with the Anti-deficiency Act, which requires that appropriated funds be so apportioned over the fiscal year as to insure against deficiency spending. * * * Secondly, the apportionment procedure is used as a positive means of reducing expenditures and saving money wherever and whenever such savings appear possible.
"While our statutory system of fund apportionment is not a substitute for item or blanket veto power, and should not be used to set aside or nullify the expressed will of Congress, I cannot believe that you or Congress as a whole would take exception to either of these purposes which are common to sound business management everywhere. In other words, the mere fact that Congress, by the appropriation process, has made available specified sums for the various programs and functions of the Government is not a mandate that such funds must be fully expended. Such a premise would take from the Chief Executive every incentive for good management and the practice of commonsense economy. This is particularly true in times of rapid change in general