Still challenges ahead

By |  March 12, 2015

For the aggregates industry, there is much to be optimistic about in the Spring of 2015. Martin Marietta and Vulcan Materials, the nation’s two largest producers, are reporting strong earnings and outlooks. The Producer Price Index shows that crushed stone, sand and gravel are fetching higher prices than ever. And our Pit & Quarry Aggregates Industry Index is flirting with the 300 level for the first time.

While I’ve been very skeptical in this space for any hopes of a long-term highway bill in recent years, it seems the tide might be turning. In a conversation with Mike Johnson, president and CEO of the National Stone, Sand & Gravel Association, we both commented on what we referred to as the “noise” or “chatter” coming out of Washington regarding the need for an increase in infrastructure spending. It’s certainly at an increased volume, and not just from lobbying groups this time. Politicians in the White House and on both sides of the Congressional isle are calling for it. Washington knows the country needs this.

Still, there are challenges ahead.

In his NewsBriefs newsletter, author Ken Orski points out that the money needed to keep the federal transportation program funded at even just the going rate is substantial. “The Congressional Budget Office estimates that it would require an extra $13 billion each year just to maintain the program at the current spending level,” he says, noting that the Trust Fund shortfall is produced by a mismatch between a spending level of $53 billion per year and a revenue stream from the federal gas tax of only $40 billion per year.

“A six-year program,” Orski says, “would be faced with a shortfall requiring $78 billion in subsidies.”

An obvious solution to eliminating this mismatch would be to raise the federal gas tax, he adds, but a gasoline tax increase has been firmly ruled out both by the Republican House leadership and the White House. “Speaker Boehner thinks there just aren’t  enough votes in the House to pass it,” Orski says. “The administration is opposed because a gas tax increase would fall most heavily on those who can least afford it. Both parties cite public opinion surveys that consistently have shown a low level of popular support for a boost in the federal gas tax.”

With the current legislation set to expire at the end of May, the clock on a replacement bill is ticking.

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About the Author:

Darren Constantino is an editor of Pit & Quarry magazine. He can be reached at dconstantino@northcoastmedia.net.

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