TESTIMONY OF KENNETH K. WERT

On behalf of the Associated General Contractors of America (AGC), I am pleased to submit testimony on the critical issue of how the recommended dramatic reduction in federal-aid highway funding for fiscal year 2003 will hurt the nation’s economy, the construction industry and my company. My name is Kenneth Wert, President of Haskell Lemon Construction Co. in Oklahoma City, Oklahoma.

AGC is extremely concerned with the recommended cut in highway funding in the President’s FY 2003 budget proposal. Toward that end, AGC strongly supports S. 1917, the Highway Restoration Act and the companion legislation, H.R. 3694. These bills call for increasing obligations for the federal-aid highway program by $4.4 billion over the President’s budget request. If included in this year’s Transportation Appropriation’s (FY 2003), it would fund the highway program at $27.75 billion in obligation authority, which is the minimum funding level included in the Transportation Equity Act for the 21^st Century (TEA-21). While supportive of this legislation, AGC supports increasing funding to the level in this year’s FY 2002 appropriation’s bill, an obligation limitation of at least $31.8 billion.

AGC is urging Congress to raise the funding for highways from the surplus that has accumulated in the Highway Trust Fund since the adoption of TEA-21. The money was collected with the express intent that it be spent on transportation improvements. Our proposal will accomplish this objective, spur the economy and save jobs.

The recommended cut in funding would be devastating to state Departments of Transportation across the nation. In Oklahoma, our State Department of Transportation (ODOT) would experience a reduction of approximately $110 million for FY 2003, if the federal program is cut by the proposed $8.5 billion. Construction of new vital highway projects will be the first to be cut. The Road Information Program’s (TRIP) analysis states that Oklahoma would lose 4,600 jobs just from the federal cut. Additional jobs will be lost if Oklahoma cuts its state highway funding as well. TRIP’s report states that the cut in funding could result in the loss of $627 million in economic benefits in Oklahoma. These lost economic benefits are based on the USDOT’s estimate that each $1 invested in transportation funding results in $5.70 in economic benefits that improve safety, reduce traffic congestion and reduce vehicle-operating costs paid by motorists.

Make no mistake about it, Oklahoma cannot afford any cut in funding, certainly not one of this magnitude. In Oklahoma, vehicle miles traveled increased by 31 percent between 1990 and 2000. Traffic fatalities average 737 annually. Many of these fatalities could be avoided with a variety of safety improvements to our state’s transportation system. Furthermore, 83 percent of the $58 billion worth of commodities delivered annually from sites in Oklahoma are transported on the state’s highways.

Reducing Oklahoma’s highway program by $110 million would be devastating for family owned businesses such as mine, Haskell Lemon Construction Co. For our company, the cut in highway funding will reduce bidding opportunities for new construction, which would result in a reduction in personnel, a reduction in plant and equipment, and the need to develop a revised business plan.

Let me be more specific as to the impact on Haskell Lemon Construction Co. We currently have a combined employment of approximately 225 employees. Our company has the present capability to progress multiple large scale ($10-20 million) projects simultaneously. Typical project duration is 9 to 18 months. Multiple crews within each construction discipline (i.e. grading, drainage, paving, etc.) allows for multiple construction operations to be in process in both urban and rural settings.

The proposed reduction in ODOT’s funding will result in the elimination of several construction crews within the company. It is conceivable that an entire construction segment within the company could be laid off – one grading crew (7 employees), one drainage crew (8 employees), one concrete paving/structures crew (10 employees) one asphalt paving crew (6 employees), one plant crew (4 employees), and shop support personnel (3 mechanics). In addition to the construction division employment effected by a reduction in ODOT’s program, several peripheral operations would also lose employees. The reduction in construction projects would eliminate demand for hauling construction materials (7 drivers), truck mechanics (2), and demand for aggregate production (3 plant employees). The initial loss in personnel would total over 50 employees – a reduction of 22% of total employment representing over $1 million in annual payroll.

It is important to consider that along with the lost jobs documented above, is the loss of benefits for the employees -- health and dental insurance. While the insurance is portable for a limited duration at the individual’s cost, it is becoming more expensive in an increasingly difficult insurance market. Many laid-off employees are forced to tap their profit sharing benefits at a substantial penalty to survive in today’s lean job market. These benefits are intended for retirement after years of service.

Finally, Haskel Lemon Construction Co. would be forced to evaluate its current plant and equipment operations. Our company operates four asphalt plants, one concrete plant, and two sand and gravel operations. Rolling stock and construction equipment are in the hundreds with a replacement cost in excess of $20 million. A reduction in Oklahoma’s construction program would require the company to evaluate its plant and equipment and liquidate those assets that would not have the opportunity to produce as a result of a reduced construction market.

This is the dramatic impact a highway funding cut of this magnitude would have on our company. There are hundreds of other family-owned construction companies that would react the same way and be forced to lay off tens or hundreds of valued employees.

Mr. Chairman, on behalf of AGC, I thank you and every member of this committee for introducing and cosponsoring S. 1917 and attempting to mitigate some of the impact of this proposed highway funding cut. AGC and I stand ready to assist you. Thank you for the opportunity to submit testimony.