Leading, a story about that giant arrogant bureaucracy that resembles the Pentagon: TxDOT. Their debt problems, and my analysis right below that.
Following which is a snip of a story where a bunch of Saudi and OPEC oil officials talk about how best to unload their massive holdings of falling dollars, without the rumors themselves causing a panic. Old story; somebody forgot to unplug the microphone.
But, as a small enticement factor for the weary web reader, a link that leads to the interesting video clip of the bird that actually imitates the sounds of its own doom:
Web posted San Antonio Express-News, November 16, 2007:
Shortfall forces TxDOT to cut budget
Web Posted: 11/16/2007 10:21 PM CST
Peggy Fikac, Express-News
AUSTIN — The Texas Department of Transportation, working to fend off a funding shortfall from the federal government, intends to cut hundreds of millions of dollars budgeted for everything from consulting engineers to right-of-way purchases.
The plan wouldn’t affect existing road projects, and it’s “difficult to say” what future projects would be delayed as a result, agency spokesman Randall Dillard said Friday.
Projections show that if existing plans for awarding contracts and expenditures were to go forward, the department would have at least a $1.8 billion deficit by 2012 and at least $3.6 billion by 2015, agency deputy executive director Steve Simmons said in remarks prepared for Thursday’s commission meeting.
“We in the transportation world cannot wait until then to address the problem,” Simmons said in the remarks.
The move comes as TXDOT staff is poised to recommend to the Texas Transportation Commission a separate $1 billion cut this fiscal year for new roads and expansion projects. Officials say funds aren’t keeping pace with needs and must be focused on key areas like maintenance.
The chairman of the budget-writing House Appropriations Committee said a call from a reporter was the first he’d heard of the agency’s move.
“I’m kind of surprised they didn’t talk to us about that,” said Rep. Warren Chisum, R-Pampa.
“It’s almost to the point you wonder if the agency hasn’t got so big, they’re another branch of government we’re not aware of,” said Chisum, who previously has taken issue with such agency decisions as its projected expenditure of $7 million to $9 million to promote the controversial Trans-Texas Corridor plan and toll roads.
That Keep Texas Moving campaign, while not cited by Simmons in his prepared remarks, could be cut along with other agency programs, Dillard said.
“Everything’s on the table,” he said.
Dillard said agency officials had sought to stir a public discussion on the funding issue and had called some lawmakers Thursday.
The chairman of the Senate Transportation and Homeland Security Committee was aware of the agency’s position on cuts and is supportive in light of the funding situation, said Steven Polunsky, committee director.
Sen. John Carona, R-Dallas, is “in complete agreement about prioritizing maintenance. He believes there is no project in the state of Texas that is worth risking a Minneapolis bridge incident,” Polunsky said.
The agency has an $8.3 billion budget this fiscal year, including $3.3 billion in federal money. Texas is getting less federal transportation money than previously expected, Simmons said. Another funding source that transportation officials had turned to was affected when lawmakers this year sought to rein in state partnerships with private entities on toll roads.
Carona worked for $5 billion in additional authority for road bonds approved Nov. 6 by voters, and he has talked up the need to raise the state’s gasoline tax and for a constitutional amendment to prohibit highway funds from being diverted to other sources.
In addition, Simmons said in his remarks, “Our districts and divisions will be notified that the administration in Austin will have to approve all purchases, from bulldozers to paperclips.”
No contradiction here between habitual leveraged spending and the problems described for TxDOT. The richest spendthrift agencies can get themselves into serious trouble.
In fact it is exactly such agencies as have become habitually imprudent about spending that get in the worst trouble. Look at Wall Street and the sub-prime loans, or better the Pentagon. However big and powerful, they have gotten overextended by banking on rapid growth trending forever.
To me the best example in TxDOT’s case is the sharp decrease in the money available from the Texas Mobility fund. This is a fund set up to allow TxDOT to borrow against future revenues that yielded a lot of cash for a few years but has now been pretty much milked dry. But the roads it built still have to be maintained.
The article points to cutbacks in federal funding, but TxDOT’s problem goes a lot deeper. Not only has TxDOT engaged in risky borrowing itself by trying to privatize everything, but it has encouraged a similar sort of recklessness by encouraging RMAs to get strung out on debt too, plus encouraging pass-through funding by local entities.
The whole picture to me resembles a Ponzi scheme where the number of drivers supporting the TxDOT system with gas taxes and tolls has to keep increasing fairly rapidly year over year, or the system collapses in some sense. If you go back and read the “official statements” for the bonds for the CTTP and US 183A, they had a list of such warnings about slow growth, or a change in driving habits, or gasoline cost rising above $2.50 to 3 per gallon.
Hundred dollar a barrel oil plus a recession and devaluation it brings are VERY LIKELY in combination to leave drivers unable to keep expanding their driving as usual. In fact the evidence from the FHWA driving data indicates that total driving in the US has stagnated while population has increased, for the last two years. The recent gas price increases combined with harder times indicated by the current economic data assure (me at least) that this trend will continue.
If $100 oil does throw the world economy into recession, it could get a lot harder to buy with an average hour’s earnings without any rise in gasoline pump price. This is partly be encouraging cost-push inflation throughout the economy with a time delay of six months or so. The way that oil prices are proposed to hit the airlines over the next decade is not just through jet fuel, but in causing widespread economic problems that stops the steady past growth in air travel, which is largely discretionary in nature, (unlike driving to work, which is an inflexible travel demand over the short run). Toll road debt looks like a poor investment for about the same reason I would avoid buying airline stock.
OPEC blunder reveals debate on weak dollar
Saturday, November 17, 2007 – Page updated at 12:00 a.m.
RIYADH, Saudi Arabia — The accidental airing of a closed OPEC session Friday provided a surprise glimpse into a sensitive debate over the weakening U.S. dollar, with Saudi Arabia’s foreign minister warning that even talking publicly about the currency’s decline could further hurt its value.
The high-profile blunder ahead of a rare OPEC summit revealed the debate as Iran attempted to convince other member countries to express concern over dollar depreciation in the meeting’s final declaration.
Oil is priced in dollars on the world market, and its depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves. Cartel officials have resisted pressure to increase oil production to ease prices.
“The reality is that we have this problem. I think we should draft the declaration to reflect our concerns,” Iranian Foreign Minister Manouchehr Mottaki said during a pre-summit meeting here with fellow ministers from the Organization of Petroleum Exporting Countries.
But Saud al-Faisal, foreign minister of U.S. ally Saudi Arabia, came out against the proposal with unusually frank comments.
“In my feeling, the mere mention that the OPEC countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries,” he said…