funds withheld in the 1973 fiscal year against Missouri's highway apportionment from Congress.

STATEMENT OF EUGENE M. JOHNSON, PRESIDENT, AMERICAN ASSOCIATION OF STATE HIGHWAY OFFICIALS, BEFORE THE JOINT HEARINGS OF THE SENATE AND HOUSE PUBLIC WORKS COMMITTEES—March 1, 1967

Gentlemen of the Committee, I am Eugene M. Johnson, President of the American Association of State Highway Officials, and Chief Engineer of the Mississippi State Highway Department.

The State highway departments of this Nation are very appreciative for the opportunity to testify at these hearings and tell you something of the effects of the 1967 fiscal year cutback and the Federal-aid highway program.

There is no doubt but what the State highway departments are the agencies most affected by this action and the ones who have to make the necessary adjustments in the highway program caused by it.

Many of the Nation's highway administrators did not know of the cutback order of November 23, 1966, until they arrived at the AASHO Annual Meeting that was held in Wichita, Kansas, November 26 through December 2nd. Most of them were enroute to the Convention when the order was received in their offices.

Inasmuch as the order was unexpected and retroactive, the reaction was accompanied by shock and several opinions were expressed as to appropriate action that the State highway departments should take compositely while assembled at Wichita. In fact, the order was referred to by many as our "Thanksgiving Turkey," and the connotations placed thereon were not ones of thanksgiving.

The order, itself, stated that in recognition of the need for reducing nonmilitary Federal expenditures to aid the Vietnam War effort, and to curb inflationary pressures, the Federal-aid highway program would be limited to $3.3 billion of total obligations during the 1967 fiscal year.

The order also froze the unobligated balances that several of the State highway departments had on the books, and against which many thought they were making their current obligations which, because of the order, all were charged to the reduced 1967 fiscal year allocations.

States having ACI projects were required to repay such advances out of their reduced fiscal year allotment before additional lettings could be held. This further complicated the situation in such States. The freezing of the balances and the retroactive nature of the order caused some rather serious problems for some of the highway departments in reducing the level of highway letting activity for the balance of the year below what can be considered as a minimum level.

In fact, one State had already obligated some $2 million more at the time of the order than is allowed for the entire 1967 fiscal year.

Another thing that complicated the picture was that there was no indication whatsoever as to how long the cutback would remain in effect. This complicated the problem of the highway departments rescheduling their work program and making maximum and efficient use of their various classifications of skilled personnel.

After considerable discussion at the AASHO Annual Meeting in Wichita, no official action resulted and public announcement made on the matter. However, the concensus was reached that it would be unbecoming of a group of highway officials of this Nation to question the reasons given for the cutback, or to take issue with them, for it would appear that we were placing highways above the National interest.

It was also thought that it would not be in good taste to argue that the President should have reduced some other Federal spending instead of high

ways.

As a result, a letter was written to Mr. Alan S. Boyd and co-signed by then President Charles E. Shumate and Executive Director A. E. Johnson of AASHO, calling for some special dispensation for those States where hardships existed because of the cutback.

A copy of the letter and the response from Secretary Boyd are attached. We believe that these letters should be rather important documents in the record of these hearings.

We had anticipated by this time that some positive action would have been taken to relieve the most severe hardship cases, but at the time our Executive Committee met to develop and adopt this statement to be presented in this hearing, we had not received any official word to this effect. In fact, we have been kept pretty much in the dark as to what are the Administration's plans with respect to the cutback.

We have not received any information as to the duration of the cutback and such information is vital for the operation of the highway departments. If it continues, some departments will have to dismiss highly specialized personnel. We understand that there have been some advance release of fourth quarter highway obligation allotments to some few States, but no additional moneys have been made available to alleviate conditions.

Both the State highway departments and the highway industry of this Nation had great credence in the intent statement of Congress that the Interstate program should be completed as soon as possible, and we, of the State highway departments, have built up personnel and have planned accordingly.

The cutback does not appear to be in line with legislative provisions, but appears to be an Executive action and we assume and hope that it is temporary in nature.

To us, it appears to be based more on fiscal reasons than anything else and probably thereby originated with the fiscal planners at the Federal level instead of those administering the highway program.

By administratively reducing the highway program, of course, balances will accrue to the Trust Fund which are then loaned to the General Fund, so that highway user funds do become available to help reduce budget deficits.

As to the inflationary control reason for cutting the highway program back, any highway contract awarded during the balance of this current fiscal year would not be substantially reflected in Trust Fund balances for several months, and we doubt if there is anyone who really knows what the National economic situation might be at that time.

The cutback does not reduce expenditures on contracts already awarded, in other words it does not reduce expenditures at this time to any great degree, but affects the National economy several months in the future.

Inasmuch as outstanding economists interpret the same economic indicators and trends in different ways, we doubt very much if anyone really knows what the economic situation will be 18 months from now, and from this we submit that the inflationary control argument is not entirely valid.

We do admit that there was a larger increase in highway costs in the 1966 fiscal year than normal, but there are indications that the November 23rd cutback action was taken at one of the peaks in the highway cost chart, and there are indications that highway costs in the last quarter of calendar 1966 were on a decreasing trend.

In fact, the last quarter, as compared to the third quarter, shows a drop of 22%. The highway cutback cannot claim much credit for this decline because the predominance of the last quarter's lettings of 1966 had already taken place. The fourth quarter decline gives added emphasis that the 1966 cost index was probably one of the peaks of the highway cost curve. It is natural that the cost of everything gradually rises during a period of affluency.

It must also be understood that the big Interstate highway program has now reached the point where unit prices will be greater because of the type, character and location of the remaining work to be done under the program. Many complex projects, especially in urban areas, remain.

Also, the type of work is more and more of the complicated type that involves larger contracts, which in many areas attracts fewer bidders, however, such is not the case in all States. We feel that we have not suffered loss of competitive bidding.

We note that in the December 15, 1966, Engineering-News Record, which is accepted as authoritative in the construction field, highway costs are almost identical to general building costs.

We note also that the outlook for materials costs is to remain steady or soften somewhat, with some increases in labor costs probable in the near future. From 1960 through 1966, highway costs increased 19%, or an average of a little over 3% a year. General building costs were 17% for the same period. Between 1963 and 1966, both experienced a 12% increase.

Federal-aid highway construction calendar year price trends, with 1957 to 1959 being an index of 100, are as follows:

The national average on the average number of bidders and the relationship of bids and engineers' estimates are indicated as follows for Interstate and Primary and Urban Federal-aid projects:

The above figures were developed by the Bureau of Public Roads from data supplied by the State highway departments.

We do not believe that a cutback can be rationalized entirely on the basis of highway construction cost increases, and that it would be desirable to slow down highway construction in order to force lower prices and build roads cheaper at some later date. This could only happen if we were to create a recession of considerable magnitude.

Each year of delay in completing the highway program will, on the average, add 22% to the cost unless we do have a recession.

It is natural for trends and costs to increase over the years. In fact, we anticipate at this time, the additional cost of the remaining part of the Inter state highway program will total at least $3 billion due to the normal increase of cost over the stretchout time of 1972 to 1975.

Any savings resulting from slowing down the highway program until costs decrease lose their significance when compared with the loss in user savings and lives that would result in such a delay.

To support this contention, we refer to President Lyndon B. Johnson's remarks on August 13, 1964, when some of us had the opportunity of attending the signing of the Federal-aid Highway Act of 1964. In referring to the Interstate pro gram, he stated that it has put more than one million Americans to work and that it was already saving 3,000 lives a year, and by 1972 (the original completion date) it will be saving 8,000 lives a year.

He stated further that it saved $6 billion in user benefits last year which will climb to $11 billion a year at the completion date and that the program is not costing the General Fund of the United States Treasury a single cent. He went on further to say that for much too long, the man who owns and drives an automobile has been treated like a stepchild.

We concur in the above sentiments completely and the President has expressed the case for adequate and safe highways.

We also observe that the cutback in the highway program is inconsistent with the present all out emphasis on highway safety.

It is important that we do everything possible to improve highway safety and to alleviate growing traffic congestion.

With the cutback, the 1967 fiscal year Federal-aid highway program is about three-quarters of a billion dollars less than the program of the 1966 fiscal year. It would appear that the Highway Trust Fund could have supported a 1967 fiscal year obligation of $4.2 billion or more, maybe to $4.4 billion, which makes the net reduction in the highway program around a billion dollars instead of $700 million.

The 90% feature of the Interstate highway program, and the 50% basic matching of the ABC Federal-aid highway program, has resulted in the current Federal contribution to highway construction being about 65%, and the States contributing about 35%.

During this past calendar year, the States financed approximately one billion dollars of highway construction with their own funds outside of the Federal-aid program.

Up until 1956, the Federal contribution to highway construction in this Nation averaged about 10% to 12%, with it reaching an all-time high of 20% in 1955. With the larger Federal contribution, Federal-aid pretty well dominates the States' highway programs and their schedule of lettings, so the cutback has a rather serious effect on the highway departments' plans and does require considerable adjustment in our programs.

It also causes much indecision as to how to schedule State matching funds and, in effect, stagnates those funds for the duration of the cutback.

The manner in which the cutback was made constitutes a unilateral action and has raised some serious questions as to whether or not the Federal-aid highway program is any longer a partnership operation, or whether the States are contracting agencies only for a program that is subject to change without notice. This is not stated in a critical manner, but in a constructive vein and reflects some comments made by a rather large number of State highway administrators.

We are currently having problems in graduating enough Civil Engineers and in recruiting those graduate engineers to take care of future highway needs. The cutback will adversely affect recruiting efforts by the highway departments this coming year. Our position in this highly competitive endeavor is being impaired.

We hope that there are no anti-highway attitudes involved in the highway cutback, but whether there is or not, the action has resulted in a "trial balloon" to test the public's reaction. We believe that those reactions have pretty well answered a basic question as to the need and popularity of highway development. The public needs and wants highways. We are definitely not placing highways above other forms of transportation. More State highway departments will properly become Transportation departments. There are many areas where other modes are needed and must be provided, but in every State there is a common continuing major need for highway development and the motor vehicle will be in major usage in all parts of this country for many, many years to come. The State highway departments have legal responsibilities to their public for furnishing highways and those responsibilities cannot be voluntarily transferred to some Federal agency. Neither can the State highway departments let them go by defualt. So, therefore, we must be a partner in any highway planning at the Federal level or we must indulge in our own development of a proposed Federal program, inasmuch as the Federal involvement now influences the States' highway programs so materially. We oppose any proposal that might pool highway funds so they could be used for other modes. We also object to any proposition that would make the highway program a part of an overall Federal transportation program.

We believe that there is justification for continuing highway programs as we know them, and that highways and other modes of transportation can and must be properly put into perspective and coordinated through an adequate planning process.

The Blatnik Committee hearings of last year on the subject of toll roads helped establish that there is a major continuing need for highway development.

The highway part of a Federal transportation policy or program, after the completion of the presently designated Interstate program, must be based on justifiable and supportable highway needs, and upon the public's wishes in regard to highway transportation facilities.

We will oppose any move to regulate the amount of highway improvement in any national transportation policy or program that arbitrarily assigns a role to highways that is based on the financial investment return criteria as the only or the major determining factor.

We definitely cannot phase out one form of transportation before there is another one ready to fill the void and will furnish the same convenience and flexibility that the public now enjoys from highways and the personal vehicle. This is especially true when one considers the broad application of highway transportation. Transportation must also match the land use that it serves and

much of our continuing land use development, including the growing areas of our metropolitan regions, is oriented to personal transportation. It will take many years before extensive changes in land use and the spatial form of urban areas will change materially.

The magnitude of the highway transportation system of this country and its needs indicates that it will be many, many years before some of the newer proposed exotic forms of transportation will take over much of the load.

Mostly, we will see research development and demonstration projects which are sorely needed.

Even the Nation's largest cities must have and maintain an adequate level of highway transportation to move goods, services, and furnish an essential level of service in case mass transit facilities are not operating.

The State highway departments of this Nation are now involved in developing a recommended continuing highway program based on the highway needs in each of the several States. We believe that the individual highway departments have more knowledge in this area than anyone else.

We definitely want to work with appropriate Federal agencies in developing transportation policies and programs, but we still believe that a separate highway program can be justified for many years to come and we will act accordingly. We repeat, such a program must be based on needs and the public's wishes. Through no fault of ours, we have vast mileages of functionally obsolete highways still in use which were constructed during periods that traffic and speeds and even the size of vehicles were much less than those of today.

These facilities were constructed in an environment unlike the rather affluent and free-wheeling situation that exists today and is spawning so many new proposals.

Most of our existing highway system was built when the dollar had to be stretched and they were the best that could be done to accommodate the needs of that day and age. We would like to replace these inadequate highways and cure their faults just as soon as possible.

Every mile of highway that can be improved saves lives and dollars and enhances the economic health of this country. This cannot be accomplished by turning a highway program on and off. The highway program cannot be looked upon as an economic tool. It is too big, too complex and too important for such treatment.

Although it was the reluctant concensus of the State highway officials to accept the November 23rd cutback, they became alarmed when still another $400 million cutback for the 1967 fiscal year was rumored. It has definitely introduced uncer› tainty in the program and raised the possibility of fickleness in the administra tion of the program since it came so soon after the November 23rd cutback was announced.

The men heading the State highway departments feel that such a cutback must be opposed and that the Highway Trust Fund must not become a "piggy bank" that can be opened any time a little extra money is needed to help balance the budget.

Furthermore, we believe that such action is breaking a trust with the American people who are financing the Highway Trust Fund.

This whole matter may be one which Congress should direct its attention. If there is a loophole here that should be plugged, it should receive your immediate attention.

You have had data presented to you from Federal agencies as to the effects of the cutback. Following our practice, we went directly to the heads of the State highway departments for our information.

In the past, this type of information has proved to be very accurate although sometimes at variance with that presented by government witnesses. Our information has been put in tabular form and has been checked by the State highway departments for accuracy. The tabulation is attached, hereto, for your information.

We believe that this tabulation should be a rather important part of the record of these hearings.

A very important feature of the Federal-aid highway program over the years has been the contractual obligation provision written into the program in 1922, wherein a State highway department can start obligating its Federal-aid funds as soon as they are apportioned.

This provision has played a very important role in the success of the highway program over the years.