'Kentucky Kickback:' The Only Public Works Earmark in Debt Limit Deal

The recent debt limit deal negotiated by Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY) included only one earmark for a major public works project--an additional $2.1 billion authorization for the Olmsted Dam Project in McConnell's home state of  Kentucky. 

Despite McConnell's protestations that he had nothing to do with the inclusion of the additional funding in the deal he negotiated, the Senate Conservatives Fund charged  last week that "now Kentucky Senator Mitch McConnell has an Obamacare earmark of his own . . . In exchange for funding Obamacare and raising the debt limit, Mitch McConnell has secured a $2 billion Kentucky kickback."

The project was first authorized by Congress in 1988 in Section 3 (a) (6) of Public Law 100-676, the Water Resources Development Act of 1988 at an original price tag of only $775 million. Two and a half decades later, the federal government has spent just short of $1.7 billion on the project to date, which remains less than half way complete. The original $775 million authorization was exceeded years ago, and subsequent Congresses have increased the project's authorization on a year-by-year basis to coincide with the additional appropriations made in each new fiscal year. 

According to the Army Corps of Engineers, the $1.7 billion Congressional authorization for the Olmsted Dam project was scheduled to be exceeded in the second quarter of FY 2014 (which begins January 1, 2014), prior to the passage of the debt limit deal that increased the authorization to $2.9 billion.

Section 123 of the debt limit deal (officially called "An Act making continuing appropriations for the fiscal year ending September 30, 2014, and for other purposes" and referred to by some in the press as the Continuing Resolution Debt Limit bill) passed by the Congress and signed into law by President Obama last week says simply that "Section 3 (a) (6) of Public Law 100-676 is amended by striking both occurrences of "$775,000,000" and inserting in lieu thereof, "$2,918,000". 

The legislative summary of the bill elaborated on the rationale behind the increase. "This anomaly will allow construction on the project to continue," it stated, adding that, "[i]f the [authorization] limit is not adjusted for Olmsted, construction will stop. A stoppage would cost an additional $160 million but would not ultimately prevent the lock from being built."

Senator Lamar Alexander (R-TN), the ranking member of the Senate Energy and Water Appropriations Subcommittee that has legislative oversight authority over the Olmsted Dam project, echoed this defense of the increase in the project's authorized spending. 

In a statement issued last week after the $2.1 billion earmark was first reported, Alexander claimed that "[a]ccording to the Army Corps of Engineers, 160 million taxpayer dollars will be wasted because of canceled contracts if this language is not included . . . Senator Feinstein and I, as chairman and ranking member of the Energy and Water Appropriations Subcommittee, requested this provision. It has already been approved this year by the House and Senate."

The House however, has not yet voted on final passage of H.R. 3080, its bill that addresses the issue of funding for the Olmsted Dam project. The Senate passed the Water Resources Development Act of 2013, which deals with funding for the Olmsted Dam project, on May 15 by an 83-14 vote. The Senate bill, though it provides a mechanism that allows the Secretary of the Army and the Corps of Engineers to automatically increase the authorization levels for the Olmsted Dam and dozens of similar projects, does not specify the amount to which the Olmsted Dam project authorization can be increased.

Rand Paul, Ted Cruz, and Mike Lee were among the 14 senators who voted against the bill. Mitch McConnell and Lamar Alexander were among the 83 senators who voted for the bill.

Section 1003 of the Senate bill says the Secretary of the Army merely has to tell Congress they want to increase the authorization level for any Corps of Engineers project that has exceeded its authorization by 120% and provide a report justifying the increased authorization, and it automatically is increased. This unusual provision is well outside the normal budgeting process. 

In the case of Olmsted, the Army Corps of Engineers has already submitted a justification to increase the project's funding to at least $2.9 billion. That number may well grow to more than $3 billion in future justifications.

In effect, senators who voted for the Water Resources Development Act of 2013 abdicated Congressional fiscal authority over dozens of Corps of Engineer projects in addition to the Olmsted Dam that are over budget to the same bureaucrats in the Corps of Engineers responsible for managing those projects so poorly from the beginning.

If the debt limit deal had not been passed, and the House were to pass H.R. 3080, the bill which has made it through committees but has not yet been voted on by the full House, and the Senate language was adopted in the final law, Olmsted's authorization would have been increased by an unspecified amount. 

On June 25 of this year, the Senate Energy and Water Appropriations Subcommittee, whose chairman is Senator Dianne Feinstein (D-CA) and whose ranking member is Senator Lamar Alexander (R-TN) passed a budget markup bill in committee appropriating an additional $163 million for the Olmsted Dam project. With this appropriation, construction on the project would continue throughout FY 2014 without interruption, and the total spent on the project would increase from $1.7 billion at the end of FY 2013  to $1,863 billion at the end of FY 2014.

Section 105 of the report also increased the authorization for the Olmsted Dam project to $2.9 billion, using the same language that was inserted into the debt limit deal passed by Congress and signed into law by President Obama last week.

Though press reports indicated that the final negotiations on the debt limit bill were limited to only Senators Reid and McConnell, when TIME contacted Senator McConnell, "McConnell’s office referred TIME to Sens. Dianne Feinstein (D-CA) and Lamar Alexander (R-TN), two members on the Senate committee that is responsible for appropriations. Their office said McConnell was not directly responsible for inserting the language."

As is the case with most public works projects funded by the federal government, many interest groups claim that the Olmsted Dam project benefits the entire country. They argue that the funding of dam projects that cross state lines are a defensible role for the federal government.

Brian Baker of Ending Spending, a group that is dedicated to limiting federal spending, noted in an article published by Breitbart News last week that "completion of the new locks system clearly has benefits for the larger Ohio-Mississippi River area and the nation as a whole." But Baker pointed out that "[a]s with most government programs, it is costing way more than originally estimated – hence the need for Congressional action to increase the amount permitted to be spent on the project."

Another fiscally conservative group, Taxpayers for Common Sense, contends that funding for the Olmsted Dam project "should have been dealt with in the final appropriations bill, or even better, in the Water Resources Development Act – which has passed the Senate and passed in committee in the House, and is scheduled for floor time in the House next week." They note that "the House increased the authorization to $2.3 billion, but the [Continuing Resolution] . . . increased budget authority for the project even more to $2.9 billion."

The group is skeptical of claims by "proponents of the measure [who] argue that it would have cost $70 million or $140 million in cancelled contracts if this increase hadn’t happened before the second quarter of FY14."

Their response?

"Please. Give me a break," they say.  "This project is more than 300 percent over budget, and we’re supposed to worry about a less than 5 percent increase?"

One interesting provision of the Senate bill is that it will fundamentally change the financing of inland waterway projects such as the Olmsted Dam. Whereas the original 1988 law called half of such projects to be paid for by the Inland Waterways Trust Fund, which is financed by "20-cent-per gallon taxes fuel used to transit the Inland Waterways System," the new bill would relieve that fund from paying anything for these projects.

Section 3 (a) (6) of the Water Resources Development Act of 1988 required that "costs of construction [were] to be paid one-half from the amounts appropriated from the general fund of the Treasury and one-half from amounts appropriated from the Inland Waterways Trust Fund."

Section 7008, the part of the Water Resources Development Act of 2013 passed by the Senate in May that deals with the Olmsted Locks and Dam, states that "Section 3 (a) (6) of the Water Resources Development Act of 1988 (102 Stat. 4013) [Public Law 100-676] is amended by striking 'and with the costs of construction' and all that follows through the period at the end and inserting 'which amounts after the date of enactment of this Act shall be appropriated from the general fund of the Treasury.' "

The House bill currently under consideration (H.R. 3080) also lessons the Inland Waterways Trust Fund contributions to such damn projects, but increases the federal government’s funding from 50% to 75%, rather than the 100% in the Senate bill.

David Bossie of Citizens United made the case in an article published by Breitbart News on Saturday that the federal budgeting process is broken. The special treatment of the Olmsted Dam project—the only major public works project specifically funded in the debt limit deal negotiated by the senator whose state is the major recipient of the project’s benefits—is strong evidence that Bossie is correct.

Image: Field and Stream





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