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The original documents are located in Box 43, folder "1975/04/12 - Mike Duval and Dick
Dunham" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 43 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
10AM - Saturday, April 12
Meeting with Mike Duval and
Dick Dunham
THE WHITE HOUSE
WASHINGTON
April 7, 1975
MEMORANDUM FOR
JIM CANNON
VIA:
DICK DUNHAM
JIM CAVANAUGH Ae-
FROM:
MIKE DUVAL Whe
SUBJECT:
RAILROAD INITIATIVE
In following up with DOT staff on the meeting you chaired
in the Roosevelt Room with Secretary Coleman, et al., I
found out that you and the Vice President met with Coleman
and his staff late last week.
According to DOT's staff, the Vice President and you indicated
a strong desire to see if we could reprogram highway funds
into rail rehabilitation projects. Because this approach is
substantially different from the ideas discussed in the Roose-
velt Room, I thought I'd better come back to you for additional
guidance prior to moving forward with the memorandum to the
President.
I hope to go over a draft memorandum tomorrow or Wednesday
with DOT staff and would appreciate some guidance from you
as soon as possible.
I
open HT F for maintenance
of int estate higher
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open for other Thaus expensiture
is combines us user bee
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every to complete interotole syskem
SALD 817 R. FORD
DOMESTIC COUNCIL CLEARANCE SHEET
DATE: April 9, 1975
**
JMC action required by:
TO:
JIM CANNON
VIA:
DICK DUNHAM RD
JIM CAVANAUGH
Not seen yet left him
MIKE DUVAL
a copy
FROM:
GLENN SCHLEEDE
SUBJECT:
Auto emissions, fuel economy and related
issues
COMMENTS:
**Most critical point in timing is a response to
the inquiry from Senate Public Works staff on
issue in my April 2 memo on this subject.
**Also, note that Zarb apparently hopes to take the
issue via ERC to the President by Friday.
DATE:
RETURN TO:
Just done will shanld should Da. it machs go he to achens study
2
Material has been:
Signed and forwarded
is
Changed and signed (copy attached)
Returned per our conversation
Noted
FORD is LIBRARY QERALD
Jim Cannon
THE WHITE HOUSE
WASHINGTON
April 9, 1975
MEMORANDUM FOR:
FROM:
Glann JIM CANNON
GLENN SCHLEEDE
SUBJECT:
AUTO EMISSIONS, FUEL ECONOMY AND
RELATED ISSUES
The attached paper reflects my current understanding of the
findings from the interagency review effort that has been
underway over the past 2½ weeks.
I am asking selected people in the agencies to review this
summary to make sure it is correct.
I think this may be useful to you in deciding whether we
should pursue explorations with the Senate Public Works
Committee as discussed in my April 2 memo.
I understand that OMB staff is providing a summary memo to
Jim Lynn today on the interagency effort. I also understand
that Frank Zarb has an agreement with Jim Lynn that this
issue will be reviewed by the Energy Resources Council.
Also, Frank Zarb apparently intends that this issue be
presented to the President by this Friday -- hopefully along
with the issues of fuel economy standards and taxes.
The EPA Air Quality Office's new. assessment of the sulfuric
acid problem which was leaked and then released last week
appears to have contributed to the disruption of House
Commerce Committee plans to prompt action on an auto
emission-fuel economy bill. They had earlier planned to
report a bill this week.
Attachment
FORD is LIBRARY GERALD
DRAFT 4/8/75
AUTO EMISSIONS, FUEL ECONOMY AND RELATED ISSUES
This paper summarizes the answers suggested by information
now available on the implications of various auto emissions
standards for such considerations as air quality, health
effects, fuel economy and automobile costs. It does not
deal with either the political feasibility of establishing
a particular set of standards, the potential strategies, or
the posturing that is now underway by various individuals
and groups concerned with some aspect of the problem.
Critical Background Considerations
Before summarizing information on implications, three points
are important:
1. Many considerations interrelated. Requirements for auto
emissions or fuel economy should be decided in relation
to several other considerations; specifically the impact,
if any, on: (a) air quality, (b) public health,
(c) technological options for meeting emission
and fuel economy requirements, (d) initial car costs,
(e) car maintenance costs, (f) fuel requirements,
(g) changes in safety requirements that might impact
ability to meet fuel economy or emission requirements,
(h) safety considerations other than health impact of air
pollution, (i) industrial capability for making adjust-
ments necessary to provide vehicles or fuel needed, and
(j) auto sales, auto industry employment and related
economic impact. No comprehensive review of all these
issues is available at present. Probably the most
comprehensive is the OMB-led interagency review of auto
emissions.
2. Gaps in information. There are serious gaps in informa-
tion needed to make decisions. Probably the most critical
gaps at present involve:
the probable extent of buildup of sulfuric acid in the
air from catalysts. Data now available consists
almost exclusively of estimates derived from air
quality models. Buildup of sulfuric acid will depend
on such factors as the nature and quantity of emissions,
meteorology and air chemistry. Collection of empirical
data is just getting started. (The data on this issue
which led to Train's March suspension decision is
being challenged as grossly overstating the problem by
a paper written in EPA's air quality organization which
was released prior to review by other parts of EPA or
by outside experts.)
FORD i 078830 LIBRARY
- 2 -
probable levels of automobile related air pollution
in cities that now or may in the future exceed air
quality standards. (EPA's projections are being
challenged as too pesimistic because they assume
greater growth in vehicle miles traveled than is
likely to occur, for example, with higher gasoline
prices.)
the nature and quantity of pollutants -- other than
HC, CO, NOX and sulfuric acid -- emitted by current
or future cars and the health impact, if any.
the probable decisions of the automobile industries
under any particular set of emission or fuel economy
requirements.
3. Alternate emission levels. For the purpose of identi-
fying the merits of various alternative emission levels,
six levels are being or should be considered:
HC
CO
NOX
a. Statutory
1977
1.5
15.0
2.0
1978+
.41
3.4
.4
b.
EPA - March 12
1977-79
1.5
15.0
2.0
1980-81
.9
9.0
2.0
1982
.41
3.4
2.0
C. President (1/30/75)
.9
9.0
3.1
d.
1975-76 Standards
1.5
15.0
3.1
e.
Canadian Standards
2.0
25.0
3.1
f. 1973-74 Standards
3.0
28.0
3.1
Answers Suggested By Information Now Available.
1. What should be the emission control requirement for
oxides of nitrogen (NOx) - 3.1 grams per mile; or 2.0?
Key considerations include:
a.
Air Quality. Ten metropolitan areas are of concern.
Three areas will meet the national ambient standards
and seven will exceed the standards regardless of
whether the automobile standard is 2.0 or 3.1. Those
not meeting the standards are projected to have
slightly higher concentrations in 1980-85 at the 3.1
level. Stationary sources are a more important
factor than automobiles in NOₓ concentrations.
Technology is not available to control NOₓ from
existing stationary sources.
GEBALO FORD LIBRARY
- 3 -
b. Health Effects. The health impact of the growth
in NOₓ that is due to automobiles controlled at
2.0 VS. 3.1 is very small and there is disagreement
as to whether the impact is significant.
C. Fuel Economy. Emission standards at 2.0 rather than
3.1 are expected to reduce fuel economy by 3-4%
(85,000 barrels of gasoline per day in 1980). (5-7%
over the next two years.) EPA believes there will be
little or no fuel economy penalty.
d. Consumer Cost. $10-25 in initial car cost and $0-15
in annual maintenance cost.
e. Other Pollutants. Holding down NOₓ tends to increase
HC. Also, meeting a 2.0 NOx standard may require
use of an air pump which greatly increases sulfuric
acid emissions if catalytic converters are retained.
2. What should be the emission control requirements for
hydrocarbons (HC) and carbon monoxide (CO)
HC
CO
California and President
0.9
9.0
1975-76 standards and EPA
recommended for 1977-79
1.5
15.0
Canadian
2.0
25.0
1973-74 standards
3.0
28.0
Key considerations include:
a. Air Quality.
CO. The primary factor affecting CO concentra-
tions is the rate of replacement of old vehicles.
Limits more rigid than the 1973-74 standards
(which reduced emissions by 70% from uncontrolled
levels) have little impact on ambient concentra-
tions. The 1985 impact on ambient air of a
reduction from 15.0 to 9.0 is negligible.
HC. Changes in ambient concentrations relating
to standards tighter than 1973-74 are very small
for the same reasons as CO, plus the fact that
only about 25% of HC from other than natural
sources comes from automobile exhaust emissions.
Sulfuric Acid. Catalysts now available result in
sulfuric acid emissions, which are approximately
doubled when accompanied by an air pump. Catalyst
with air pump is necessary on nearly all cars to
meet 0.9 and 9.0. 1.5 and 15.0 can be met on
most cars without a catalyst. Neither Canadian
1898017 GERALD R FORD
- 4 -
nor 1973-74 standards require a catalyst and such
standards would remove the incentive for continued
use of a catalyst.
EPA's suspension decision was based on a conclusion
that sulfuric acid concentrations may be great
enough to cause a significant health risk. An
April 3 paper by EPA's Air Office (not reviewed by
other elements of EPA) -- which has been made
public -- contends that earlier estimates of
sulfuric acid concentrations are greatly overstated.
b. Health Effects.
HC and CO. Very, very little or no predictable health
effect differences at any of the alternate levels.
Sulfuric Acid. Great concern over health impact
at levels of concentration predicted by EPA's
January 30 paper which formed the basis for EPA's
suspension decision. If EPA's Air Quality Office's
new estimates are found to be correct and are
accepted, there will be considerably less concern
for health effects.
C. Fuel Economy.
3-5% loss in fuel economy by moving from 1.5 and
15.0 to 0.9 and 9.0 --- roughly equivalent to
85,000 barrels per day gasoline penalty by 1980.
Adoption of 1973-74 standards would open up a
number of technological options which would
permit increasing fuel economy -- by %
compared to 1.5 and 15.0
If small amounts of lead were put back in gasoline,
DOT believes a 9-12% increase in fuel economy could
be achieved. (i.e., with 1973-74 or Canadian standards.)
It may be possible to achieve 50% fuel economy
improvements in the 1980 fleet, compared to 1974,
by use of Canadian or 1973-74 standards, assuming
the catalyst is not used.
d. Consumer Cost.
Added cost by 1980 of moving from 1.5 and 15.0 to
.9 and 9.0 would be about $50 in initial car cost FORD
with no catalyst and $120 with catalyst.
LIBRARY GERALD
- 5 -
Meeting 1975-76 standards would increase costs
of about $35 without catalyst and $95 with catalyst.
Meeting Canadian or 1973-74 standards would cost
about $25 with or without catalyst.
3.
Should the catalyst be retained; should the catalyst
be permitted if a sulfuric acid standard can be met; or
should the catalyst be barred?
A decision on this question will be affected heavily
by the correct answer on the question of sulfuric
acid buildup.
Other factors that will or should be considered are
public reaction and acceptability once the issue
becomes better understood, consumer cost, the
feasibility and practicability for improving the
catalyst technology and the incremental health and
air quality impacts with or without catalyst.
Those favoring retention of catalyst argue that
(a) removing sulfur from gasoline is still an option
or (b) that the geographic areas which have potential
sulfuric acid problems are sufficiently small to
permit solving the problem through gasoline reblending
and Federal fuel allocation approaches.
4.
What should be the role of leaded gas?
There is general agreement that small amounts of lead
in gasoline would permit increasing engine compression
ratios, and improving automobile performance and fuel
economy.
If catalysts are retained, unleaded gasoline must be
used. The question of health impact of small amounts
of lead in gasoline is still in some dispute but is
generally regarded as not being a significant problem.
5. What is the right period of time under which future
automobile emission standards should be fixed and known --
three years, five years or longer?
The voluntary fuel economy agreement with the auto
industry assumed five years.
The EPA conclusion reflects a change in standards
at the 1980 model year point (as well as the lower
NOx emission level). Greatest uncertainty is
GERALD FORD TIBRARY
- 6 -
introduced by the stated intention of establishing
a sulfuric acid standard by 1979.
The auto industry apparently believes that:
firm standards for five years as well as an
answer on a sulfuric acid standard are
necessary.
that an answer on NOₓ emission levels for 1982
and the future is critical to any decisions on
advanced technology (e.g., diesel, stratified
charge)
THE WHITE HOUSE
INFORMATION
WASHINGTON
April 9, 1975
MEMORANDUM FOR
JIM CANNON
DICK DUNHAM
WALLY SCOTT
FROM:
MIKE DUVAL
Make
SUBJECT:
COLEMAN'S RAILROAD PROPOSAL
I had a meeting in my office yesterday evening with the DOT
staff to go over their draft decision memorandum to the
President on the railroad issue. See the attached outline
which lays out the alternatives they are considering.
I pointed out that, even under their Option 1, the railroad
funding ($1.2 billion) would constitute a net increase in
expenditures in FY '76. Although these would come out of
rescinded highway funds, it is an amount that the President
did not include in his highway budget but instead, requested
either rescission or deferral by Congress. In short, the
DOT proposal (realistically) assumes that Congress will not
buy the President's $5.2 billion highway level for FY '76.
Coleman's people are assuming that the Congress will defer
and rescind a lesser amount than the President has requested,
and that difference is the amount they hope to make up in
railroad expenditures.
I felt it was important that the Department put before the
President an honest option which would contain a new railroad
grant program but not result in increased DOT expenditures
over the President's FY '76 Budget. I also felt it was
important that the Department consider a direct highway-
railroad trade-off option.
Accordingly, the DOT staff is re-doing their paper with four
options. They will include:
1. A $1.2 billion railroad grant proposal which would
come out of the $5.2 billion highway funds proposed
in the President's FY '76 Budget. This will result
in no budgetary impact for FY '76 but one heck of
a controversial proposal.
2
2. DOT's Option 1.
3. DOT's Option 2.
4. Flexible use of the current highway program funds.
(This is an idea that I have not had an opportunity
to think through fully, but I will describe further
on in this memo.)
Once the four options are put together, DOT will call a meeting
of the following principals to discuss the ultimate decision
paper for the President: Jim Cannon, Jim Lynn, Secretary
Coleman, and appropriate staff.
A decision memorandum should be ready for the President early
next week. I have asked Warren Rustand to see if there would
be an hour on the President's schedule during the middle or
end of next week to discuss the DOT decision paper once we
get it.
Obviously, if the President goes to Congress with a proposal
to spend $1.2 billion (or any like amount) on railroads and
rescind an equal amount from highways, this will be met with
a stir of controversy and, in my judgment, a strong likelihood
of failure. It might be better to simply attempt to modify
the eligible uses of highway funds along the lines of the
1973 Federal-aid Highway Act, which permitted the use of
some of the urban systems money for mass transit projects.
I would envision a proposal which will permit the States to
use their highway apportioned funds for capital railroad proj-
ects. Interstate, urban or rural funds would be eligible. If
the State is working on a main line (trunk trackage) it would
be eligible for 90/10 funds and, for other lines, 70/30 money
would be available. I would recommend consideration of a
couple of incentives. First, to encourage the States to opt
for railroad projects, perhaps we could state that, for every
dollar apportioned to a State used for railroad projects, the
State would actually get $1.20, thereby increasing its State-
wide apportionment. Second, there could be some arrangement
whereby the Secretary of Transportation could allow 100% grants
if the project selected is energy critical. This might encour-
age the rehabilitation of spurs into the coal mining areas, etc.
This proposal could be consistent with our highway legislative
proposal because it would not matter whether the railroad proj-
ect was liquidated out of Trust Fund revenues or general revenues.
This whole matter is on a very fast track (sorry!) and I think
we should get together and discuss this today or tomorrow at
the latest.
Options for a Railroad Unemployment Program
I. The Department's Original Proposal
A. Amount
-
$3 billion
B. Length of Time
-
27 months
C. Energy Emphasis -
Concentrates on mainline routes - 81% of which
handle coal
D. Rescission
- None
1.2
II. Option 1
1.2
A. Amount
-
$1.2 billion
1.2
B. Length of Time
-
15 months
C. Energy Emphasis -
Concentrates on mainline routes plus gives
priority to projects on mainline routes used
for coal haul
D. Rescission
-
$1.2 billion of highway funds
III. Option 2
A. Amount
-
$1.2 billion
B.
Length of Time
-
15 months
C. Energy Emphasis -
Same as Option 1
D. Rescission
- None
Options 1 and 2 above have been developed to meet the primary concerns
expressed at the March 31 meeting. These were:
4/8/75
2
1. That the program would have a substantial budget impact and,
therefore, violate the President's policy of no new initiatives;
2. That much of the employment effect of the proposal would come
at a time when the additional job creation effect would not be
needed because the economy wquld be on the road to recovery,
and
3. That the proposal should result in actions to meet the nation's
urgent need for moving ever increasing amounts of coal.
Option 1 has these advantages:
(a) It offsets the new authorizations. with an equal amount of existing
authorizations and thus over the long term does not add to Federal
spending. (There is, however, a short term increase in outlays.)
(b) It permits the Administration to initiate an urgent national pro-
gram by moving funds from a lower priority to a higher priority
transportation program.
(c) It is tied to three Administration objectives:
(1) assist the railroads;
(2) reduce unemployment, and
(3) meet our energy requirements.
The disadvantage of this option is that it will be difficult to sell a
highway authorization rescission on the Hill.
Option 2 has all the advantages of Option 1 plus removes its principal
Congressional obstacle. On the other hand Option 2 violates the President's
dictum of no new spending programs.
not logged
THE WHITE HOUSE
WASHINGTON
April 11, 1975
MEMORANDUM FOR
JOHN SNOW
FROM:
MIKE DUVAL
Who
SUBJECT:
RAILROAD REHABILITATION PROGRAM
I have reviewed the draft options paper on the Railroad
Rehabilitation Program. Please see my mark-up of your
draft.
I do not believe that this paper adequately presents the
options. It is a strongly biased advocacy paper which
attempts to make the case for Option 2. I believe we
need an honest options paper that fairly presents the
arguments on both sides of each option.
Furthermore, the paper could better identify the real
substantive needs for railroad rehabilitation. It can
be laid out briefly, but should be factual and compre-
hensively portray the current railroad needs.
I suggest that the options paper be redone and submitted
to Jim Cannon and Jim Lynn for distribution prior to a
meeting of principals.
My best guess is that a meeting could be held Tuesday or
Wednesday, if we receive an issues paper Monday morning.
I stand by to be of any assistance required over the week-
end.
CC: Jim Cannon
Dick Dunham
Jim Cavanaugh
Wally Scott
Options for Funding an Emergency Railroad Rehabilitation
Program
This paper addresses the principal alternatives for funding a Railroad
Rehabilitation program.
It assumes that there is general agreement on the following principles:
(1) That some immediate financial assistance to the industry is
urgently needed to counter the accelerated deterioration of
the physical plant that is occurring as a result of sharply
reduced maintenance levels;
(2) That the primary emphasis of the program should be to
rehabilitate and maintain mainline routes (those handling
10 million gross ton miles or more) and major terminals --
these are facilities which will be included in any major
restructured railroad system;
(3) That the program should assist the nation's energy goals by
giving a priority to those projects which will aid in the
movement of coal and other energy resources; and
(4) That the program should be short term and temporary -- this
program should be complimentary and set the stage for the
longer range programs being developed in the Administration.
(5) there to a need to repriortize Federal Transports tion
The specifications for a program to accomplish these objectives were funding -
attached to the March 21, 1975 memorandum from the Secretary to OMB
reduce
Hwy
Director Lynn. A copy of which is attached. The detailed specifica- funding
+
tions are subject to further review by OMB and others. A decision is
increase
needed now, however, on whether the Administration will submit a legis-
other.
lative proposal.
NO overall
The proposed program was discussed at a White House meeting on March 31, increase.
1975. The primary concerns raised at this meeting were:
(1) That the program would have a substantial budget impact
and, therefore, violate the President's policy of initiating
no new spending programs;
2
(2) That much of the employment effect of the proposal would
come at a time when the additional job creation effect would
not be needed because the economy would be on the road to
recovery, and
(3) That the proposal should be restructured to result in actions
to meet the nation's urgent need for moving ever increasing
amounts of coal.
We believe that we have accommodated the last two points by shortening
the program from 27 months to 15 months (one fiscal year plus the transi-
tion quarter) and agreeing to establish criteria for administering the
program which would give a priority to those projects on routes handling
coal and other energy resources.
This paper address four options for dealing with the issue of funding
this program in light of the President's declared policy of initiating
no new spending programs
The Department's Original Proposal
A. Amount
- $3 billion
B. Length of time - 27 months
C. Energy emphasis - concentrates on mainline routes - 81%
your Give
+
of which handle coal
D. Offsetting reductions - none
but
While the funding requirements of this proposal are in conflict with the
policy of the President and would require the proposal to be treated as
a special exception, there are some compelling arguments for considering
such an exception. The current economic downturn has hit this industry
severly. First quarter railroad operating income is down from $170
million in 1974 to a net loss of $102 million in 1975.
This severe financial decline is occurring in a basic transportation
industry which has been plagued by a chronically low rate of return on
investment and has, therefore, been unable to either invest enough in
new plant and equipment or maintain existing plant and equipment in
satisfactory condition. As a result of the sharp drop-off in earnings
during the current economic downturn, the industry will sharply reduce
the amount of maintenance to be undertaken. This will result in further
sharp decline in the physical plant and its operating capability. It
this is very weak. Only 2 reasons for exception
-
national security e.g., energy.
2
ungent humanitarin reason.
3
could result in an industry which is incapable of serving the nation's
requirements for hauling coal and other commodities when the economic
recovery occurs.
While we believe a compelling case can be made for an exception to the
President's policy based on the urgent needs of the railroad industry,
we have developed the following four options to accommodate the program
and the policy.
Option 1 -- Reduce the size of the program
A. Amount
- $1.2 billion
B. Length of time - 15 months
C. Energy emphasis - Concentrate on mainline routes plus estab-
lish a priority for projects on routes.
handling coal and other energy resources.
D. Offsetting reductions - None
modern 5
This option reduces the overall Federal commitment, the length of time
for the program, and emphasizes the energy related objectives.
On the other hand, it does result in increased Federal expenditures without
offsetting reductions. Therefore, this option raises the same issues as
the Department's original proposal in relation to the President's policy;
albeit at a lower level.
Option 2 -- Reduce the size of the program and rescind existing highway
contract authority in an amount equal to the proposed
program
A. Amount
- $1.2 billion
B. Lenth of time - 15 months
C. Energy emphasis - Concentrate on mainline routes plus estab-
lish a priority for projects on routes handling
phones all-set. D.
coal and other energy resources.
Offsetting reductions - Rescind $1.2 billion of the $9.1 billion
Results , hemit
:>
in highway funds currently being impounded.
This option proposes the recission of $1.2 billion in existing authoriza-
tions in the highway program to offset the additional Federal funding
commitment contained in the proposed railroad rehabilitation proposal.
&
This trade-off would have the following advantages:
increase
(1) it would not increase the Federal funding authorizations, and
$1.2 MINUO $1.26 = $1.26
4
(2) it would permit the reallocation of funds from lower priority
very
to higher priority transportation programs.
very
The latter point would put the Administration in a posture of dealing
with urgent national problems even at a time when we are committed to
no new spending programs. It would put pressure on the Congress to
consider trade-offs rather than simply adding additional amounts for
the Railroad Rehabilitation programs they are considering. We believe
that public reaction, except for the traditional supporters of expanded
highway programs, would be very supportive.
The primary disadvantage of the proposal is that in the short run -
FY 1976 and the transition quarter - the trade-off between the highway
rescission and the new proposal may not have the same budget effect.
There would be no expenditure reduction during this period associated
with the highway rescission if the Congress approves the Administra-
tion's plans to defer the $9.1 billion and the courts permit the
Executive Branch to impound highway funds. These actions are rather
unlikely and the Executive Branch has lost every major highway impound-
ment case and the Senate is rapidly moving toward a disapproval resolu-
tion on our $9.1 billion of impounded highway funds. Therefore, given
these two circumstances we believe the $1.2 billion rescission will
reduce Federal expenditures during this period; albeit from a higher
expenditure level than that proposed by the Executive Branch. We
estimate that reduction to be approximately $350 million.
On the other hand, we estimate the expenditure effect of the railroad
any excermatto two
rehabilitation proposal to be in the range of $500-$750 million during
FY 1976 and the transition quarter. Therefore, the expenditure effect
is not totally offsetting. While this is the case, we believe the
difference is small enough to permit an Administration initiative
(8500mll) how no small in
without violating the thrust of the President's policy.
Notates
the
Option 3 Reduce the size of the program and offset the impact of the
program through reductions in the highway program below the
ydo
levels contained in the FY 1976 budget
program
A. Amount
- $1.2 billion
B. Length of time - 15 months
C. Energy emphasis - same as option 1 and 2
D. Offsetting reductions - the rehabilitation program would be off-
set by reductions in the highway program
below the levels contained in the
President's FY 1976 budget.
5
This option would most nearly permit the railroad rehabilitation program
to be accommodated in the budget without increasing the deficit.
ParT
The proposal suffers from the credibility it will have in the Congress.
The Administration currently is proposing a $5.2 billion FY 1976
maintains
highway program. This compares to the $6.6 billion which the states
will have in FY 1975 as a result of the $2 billion increase released in
February. The Congress is rapidly moving to increase the $5.2 billion.
the Presidents
Indeed, Congresional action may result in a $15 to $17 billion highway
program for FY 1976 and the transition quarter. For the Administration
credibility.
to have credibility in achieving an acceptable highway program level
comprise with the Congress, it cannot propose to reduce the highway
program below the levels proposed in the President's budget. To offset
the budget impact of the Railroad Rehabilitation program through this
device, will cause more problems than it solves.
Option 4--Accomplish the program objectives by amending the Highway Act
to make railroad rehabilitation a permitted use of highway
funds and creating a set of economic incentives for the States
to undertake railroad rehabilitation projects.
A. Amount
-
indeterminable
--
depends
on
State
actions
)NO.
specify
allowable
B. Length of time - a longer term program. 5 years
diversions-
unkrown
C. Energy emphasis - only to the extent that individual States
up to
establish this as a priority. NO. use
that
carrot
amount
D. Offsetting reductions - program would be funded within established
highway authorization ceilings.
This option expands on a provision which we are already planning to include
in this year's Administration highway bill. The bill currently would make
railroad facilities eligible categories of expenditure. The provision could
be "sweetened" by giving the Secretary authority to forgive State matching
requirements as well as to provide additional highway fund allocations to
and
States initiating railroad projects. This option has the virtue of con-
Glased
tinuing our efforts of broadening the uses of the Highway Trust Fund and
permitting States greater flexibility in making capital investment decisions.
x
On the other hand, this proposal will not have an immediate impact. It
leaves the decisions to the States on whether to invest in railroad
discussion)
poor
rehabilitation efforts. Insofar as States may eventually initiate some
projects, they are likely to be on branch lines which are threatened to
be abandoned. The State highway planning process will delay initiation of
even these projects for up to two years.
The intense competition for State highway funds, even given certain economic
incentives, is such that we foresee the initiation of very few projects.
A similar provision for mass transit projects had yielded less than
$100 million during the 18 months it has been in effect.
6
Finally, we are concerned that establishing economic incentives for rail
projects within the highway program may result in a highway program where
railroad and mass transit projects have priority over highways.
Recommendations
For the reasons stated above, we believe Option 2 is the most practical.
THE WHITE HOUSE
WASHINGTON
April 11, 1975
JMC:
Mike Duval is reviewing in conjunction with OMB
and will have review and recommendations for you.
WKH
upder
not
COMMITMENT Of
THE SECRETARY OF TRANSPORTATION
*
WASHINGTON, D.C. 20590
UNITED STATES OF AMERICA
April 9, 1975
MEMORANDUM FOR HONORABLE JAMES T. LYNN, Director, Office of Management and Budget
MR. JAMES M. CANNON, Executive Director, Domestic Council
SUBJECT:
Assessment of FY 1975/1976 Highway-Railroad Funding Situation
During our recent meetings, both of you requested the Department to do a com-
prehensive assessment of the highway funding situation, including an examination
of possible alternatives for offsetting a needed railroad roadbed reconstruction
program with reductions in currently authorized highway programs. The attached
paper is in response to this request.
As the attached paper points out, there is an excellent chance that the Congress
will force significant increases above the President's FY 75/76 budget by over-
turning the pending highway deferrals and by adding a separate railroad re-
construction grant program. Such action appears imminent, especially in the
Senate.
In view of the serious potential impact of these Congressional actions on the
President's attempts to keep the FY 76 and future budgets under control, I
believe the Administration would be well advised to consider developing a
compromise position to attempt to prevent large scale Congressional FY 75/76
program increases. The attached paper was prepared in this broader context
in addition to assessing a possible highway/rail funding tradeoff.
If we could develop a comprehensive compromise strategy, we may be able to
preclude Congressional action to overturn the President's FY 75/76 highway
deferrals -- an action which now appears likely. However, rapid Executive
Branch decisions would be necessary to achieve this objective; consequently,
I would appreciate your initial reaction to the attached proposal by noon
Friday, April 11, 1975.
Birl
William T. Coleman, Jr.
Copy to:
Walter Scott
Mike Duval
April 8, 1975
Highway/Railroad
Public Works Funding
Situation
The purpose of this paper is to discuss the following three points:
A. The current outlook for the FY75/76 Federal-aid highway funding.
B. The current status of Executive Branch/Congressional efforts to
assist the decaying railroad roadbed throughout the country.
C. Several alternatives available to the Executive Branch to deal with
points A. and B. above.
A. FY75/76 Highway Funding Outlook
For almost a decade, the Executive Branch has "impounded" Federal-aid highway
funds by unilaterally limiting annual program obligations to amounts less than the
full Congressional program authorizations. Because the highway program utilizes
contract authority funding, action by the Appropriations Committee is not required
to enable the highway program to move forward.
Justified primarily on the basis of national economic health requirements,
these impoundments had cumulated to approximately $4.3B as of December 30, 1974
(half way through FY75) 1/. Because of a unique feature of the Federal highway
statute which requires that funding authorizations for a fiscal year must be made
legally available for obligation no less than six months prior to the start of that
fiscal year, FY76 authorizations had to be apportioned to the States on 1/1/75.
Because the Executive Branch has chosen not to provide new obligations until the
start of the respective fiscal year (six months later - 7/1/75), this situation
created an additional $6.4B impoundment problem in FY75. In addition, P.L. 93-643
(signed 1/4/75) created further impoundment problems in FY75.
In February 1975, the President released from impounded funds $2.0B to help
generate employment. As indicated in Attachment A, the result of all these
actions means that we now have impoundments totalling approximately $9.1B. Of
this total, the President's budget anticipates the release of $5.2B in FY76
obligational authority on 7/1/75.
Bearing heavily on this situation are the following two factors:
(1) Recent Court decisions are ruling against Executive Branch impoundments
in the highway and other programs.
(2) The new Budget Control Act provides Congress with an explicit opportunity
to overturn Executive Branch proposals to withhold funds from obligation.
With regard to the first point, the Executive Branch has lost every major
highway impoundment case. At this point, DOT, Justice, and OMB are deciding what
to do about the most recent adverse decision at the District Court level.
Concerning the second point, the Senate is moving forward with action (S. Res 69)
to force the release of the currently impounded $9.1B. Under the Budget Control
Act, all that is required to force such a release is a majority vote in either
1/ See Attachment A for further detail.
2
House of Congress to disagree with the President's proposed deferral of funds.
Unless there has been a dramatic shift in Congressional sentiment over the last
several weeks, we believe this resolution will be reported from Committee almost
immediately and that the votes exist on the Senate floor to overturn the
President's deferral.
Because DOT believes that the FY75 program level of $6.6B (following the
President's $2B release in February) for FY75 is approximately all the States
can use in FY75, Congressional action to overturn the deferral would not have
much impact in FY75. However, it would set the stage for a similar action for
FY76--a step which could escalate the President's FY76 budget of $5.2B to
approximately $7.5B or even higher depending on the rate of State spending 2/.
As Attachment B indicates, the Senate Public Works Committee would probably
be willing to forget about voting down the deferral if the Executive Branch
would agree to utilize the full $9.3B available as of 7/1/75 in the following
fashion:
$ in B
Total
(1975) 1976 Transition Qtr (7/1/76-9/30/76) 7/1/75-9/30/76
Senate P.W.C.
(6.6)
7.5
1.8
9.3
President's Proposals (6.6) 5.2
1.3
6.5
Since this Senate proposal represents approximately the most the States could
probably spend in FY76, its main advantage to the Executive Branch is that the
transition quarter would definitely be financed from existing rather than new
authorizations.
Further compounding the FY76 funding is the fact that FY77 authorizations of
approximately $5.5B to $6.8B would become available in FY76 due to the operation
of the previously mentioned "advance availability" provision of the highway law
(see Attachment A). To correct this problem now and in the future, the Administration
highway bill will propose eliminating this "advance availability" provision starting
with the FY77 authorizations (this change is indicated in the FY76 Budget transmitted
last February).
B. Executive Branch/Congressional efforts to repair railroad roadbeds
Spurred by the dual problems of significant national unemployment and the
decaying railroad roadbed, DOT has requested Administration approval for a program
to provide immediate financial assistance to railroads to help them maintain and
upgrade their roadbed. The demands of Project Independence has heightened the need
for a strong, efficient railroad freight system to move coal around the nation.
DOT's proposal has not received approval by the EOP, largely on three grounds:
1. It would not produce jobs at a sufficiently fast rate.
2. It should perhaps await the transmittal of the final NE rail plan (USRA).
3. It would violate the President's "no new programs" and disciplined
spending pledges.
2/ See Attachment B for comparison of annual funding levels.
3
The first two points are covered by other parts of this submission and
the third is discussed later in this paper.
Elements of the Congress have also started to push for such a program.
Congressman Heinz (R/Pa.) has introduced H.R. 4622, the Railroad Right-of-Way
Improvement Act, which provides $2.5B in Federal funds for FY75-77. Hearings
in April/May are likely by the House Commerce Committee. In the Senate, Senators
Magnuson (Commerce Committee), Javits (Labor and Public Welfare Committee) and
others have introduced S. 1326 which provides $300M for FY75 and such sums as
are necessary for FY76 for such a program.
Most immediate, perhaps, is the introduction by Senator Randolph (Chairman
of Public Works) of legislation to authorize an approximate $1B program of
rail restoration grants. This effort is likely to be coupled with a Senate
attempt to include these funds in the FY75 second supplemental appropriation.
C. Possible alternatives to deal with these emerging situations
At the suggestion of Vice President Rockefeller, Domestic Council Director
Cannon, and OMB Director Lynn, DOT has been exploring possible ways to blend
the highway/rail funding situation so as to meet priority transportation needs
utilizing currently authorized funds. This would be consistent with the
President's pledge to fight any new programs.
Given the Congressional pressure to do something about unemployment with
transportation public works projects ("avoid leaf-raking jobs"), coupled with
the customary strong pressure to release impounded highway funds, it is not
too hard to assume that the Administration may be staring at the following
FY76 highway/rail programs funded by the Congress:
$ in B
7/1/75 - 9/30/76
President's Budget
Highway
Congress
Available 7/1/75
9.3
6.5
Available 1/1/76
5.5 - 6.8
--
Subtotal (highway)
(14.8 - 16.1)
(6.5)
Railroad Roadbed
1.0 - 1.5
--
Total
15.8 - 17.6
6.5
As indicated previously, DOT believes a railroad roadbed repair program is
definitely in the national interest at this point. It is also recognized that
we will have to reach some accommodation with the Congress on a FY76 budget
level for highways.
In this connection, it must be pointed out that any attempt to transfer highway
funds to another mode of transportation (or to eliminate them altogether) is
complicated by the fact that the funds are unevenly spread among the 50 States.
In view of this point, the following scenario addresses outstanding highway
authorizations which meet one of two tests:
4
1. They are narrow categorical grant programs which have been previously
opposed by the Administration and are inconsistent with the thrust of our new
highway bill.
2. They are authorizations which were added by P. L. 93-643, enacted
1/4/75. Reluctantly signing this bill because of its energy saving features
(including the 55 mph speed limit), the President indicated these authorizations
were unneeded, highly inflationary, and too categorical in purpose.
Taking into account all the above factors, Attachment C outlines a possible
compromise funding plan for consideration by DOT Secretary Coleman and the
leadership of the Executive Office of the President. It is predicated on
the following features:
1.
Compromising the 15-month highway obligation level at the rate of the
FY76 authorization level and FY75 obligation level (it also roughly splits the
difference between the President's Budget and the Senate thinking).
2. Congressional elimination of approximately $1.1-1.2B in outstanding
highway authorizations as discussed above.
3. No new authorizations for the transition quarter.
4. Authorizing (possibly in the same bill) a new $1.0 - 1.2B public works
grant program for railroad roadbed restoration.
5. Congressional concurrence (in the new highway legislation) to move back
the date on which highway authorizations now become legally available.
If successful, this plan will undeniably add some outlays to the current
FY76 budget estimates. However, it would be considerably less than Congressional
action which is quite possible, and, quite significantly, it would eliminate
the advance availability highway feature which makes any annual budget
discipline virtually impossible.
ATTACHMENT A
I. Summary of FY75/76 Federal-Aid Highway Impoundment Situation
A. FY-75
$ in B
Impoundment as of 12/30/74
4.3
1976 authorizations apportioned
by law on 1/1/75
+6.4
(10.7)
New 1976 authorizations from P. L. 93-643
apportioned by law in FY-75
+.4
Presidents FY-75 Employment Stimulus Release
-2.0
(increase FY-75 program from 4.6 to 6.6)
Total, current impoundments
$9.1
B. FY-76
FY-75 carryover
9.1
Additional authority which becomes
available on 7/1/75
+.2
(9.3)
FY-76 President's Budget release of
FY-76 obligating authority
-5.2
Total, impoundment as of 12/30/75
4.1
Assuming no change in the legal
apportionment process:
FY-77 authorizations apportioned by
law on 1/1/76:
Interstate
+3.3
All other (not yet enacted)
+2.2-3.5
Total, FY-76 impoundment as of 1/1/76
$9.6 - 10.9
ATTACHMENT B
Federal-aid Authorization and Obligation Levels - FY1974-1976
($ in B)
1976
2/
7/1/76 9/30/76
1974
1975
Pres. Congress 3/
Pres. Congress
Authorization
App. 5.5
App. 6.2
6.6
6.6
--
--- 4/
Obligation
.4.9
6.6 1/
5.2
7.5
1.3
1.8
9.3
1/ Includes $2B increase - 2/75.
2/ Does not include possible addition of $3-6B in
1977 authorizations which would become available
on 1/1/76 under current practice. New Administration
highway proposal is predicated on changing these
availability dates until the start of the respective
fiscal year.
3/ Senate Public Works Committee thinking at this point.
4/ Notcertain. Congress could always authorize more
funds, specifically for this period.
ATTACHMENT
C
Funding Estimates (7/1/75-9/30/76)
$ in Billions
Possible
Possible
Congressional
Compromise
President's Budget
Action
Plan
Highway
Available 7/1/75
6.5(5.2 + 1.3)
9.3(7.5 + 1.8)
8.21/(6.5 + 1.7)
Available 1/1/76
-
5.5-6.8
-
Subtotal (highway)
(6.5)
(14.8-16.1)
8.2
Railroad
-
1.0-1.5
1.2
Total
6.5
15.8-17.6
9.4
1/ The following indicates the $1.1B in the Federal-aid account which would be
proposed for rescission:
Federal-aid highway account ($ in millions)
1974 Highway Act (P.L. 93-643) add-ons:
$200 Off-System Highway Construction Funds
50 Additional Bridge Replacement Funds
150 Additional Primary and Secondary Funds
1973 Highway Act categorical grants:
514 Available*Priority Primary Funds
171 Available* Economic Growth Center Funds
$1085
In addition, the following non-Federal-aid categorical grants would be proposed
for rescission:
Other Accounts (not Federal-aid)
$
90 Great River Road (1973 Highway Act)
25 Access Roads to Lakes (1974 Highway Amendments)
$115
*as of Feb. 28, 1975
THE WHITE HOUSE
WASHINGTON
April 11, 1975
MEMORANDUM FOR
JIM CANNON
DICK DUNHAM
FROM:
MIKE DUVAL
a
SUBJECT:
MEETING TOMORROW
Jim, I talked to Dick about tomorrow's meeting with you
as I thought it might be worthwhile if he could join
us because of the items which need to be covered. If
it's agreeable with you, I'd like to cover the following:
1. Secretary Coleman's Railroad Proposal. As you
can see from the memo I sent you this morning,
DOT is supposed to be redoing their options
paper and I expect something by Monday afternoon.
The next step should be a meeting of Principles:
Coleman, Cannon and Lynn.
2. Auto Emissions. The first cut at the OMB auto
emission paper has been completed, but Jim
Lynn has ordered a rewrite.
3. Overall Energy Wrap-up. A very brief report on
today's meetings on energy strategy.
4. Other Items. We can cover the five or six items
you mentioned that are outstanding.