Management & Labor

Crossroad

Now that the ink has dried on the federal economic stimulus bill and billions of dollars for road, bridge and transit projects are flowing to...
by | February 28, 2009
 

Now that the ink has dried on the federal economic stimulus bill and billions of dollars for road, bridge and transit projects are flowing to the states, the real battle can begin. This fall, the federal law that drives surface transportation policy and spending at all levels of government is set to expire. That law has been revised several times over the past two decades, and its name has always included the acronym TEA. What's coming, however, may look more like a double espresso.

That's because a broad consensus is emerging that the underlying system is past due for an overhaul. Everyone from state and local departments of transportation to the U.S. Chamber of Commerce to the nation's road builders to President Obama seem to agree on the main points. Transportation policy has lost a sense of purpose since the Interstate Highway System was completed in 1992; Congress has been too addicted to earmarking money for pet projects to think strategically about mobility; the taxes used to finance investments haven't been sufficient to repair the crumbling roadways, deteriorating bridges and decaying rail systems that we already have -- let alone build much of anything new. "We've been underfunding transportation for three decades, and it's showing," says Pete Rahn, director of the Missouri Department of Transportation. "We've squandered the inheritance that we've received as a generation."

The stimulus package is a start toward reversing that neglect. It's also the start of what is looking like a transformative year for transportation policy. The changes are potentially monumental and approaching on two very different tracks. For the short term, the feds are pumping $36 billion into "shovel-ready" projects, while imposing on states new standards for accountability and transparency. For the longer term, all eyes are on the federal transportation bill. What Obama and congressional leaders are setting out to do is create a 21st-century version of what Dwight Eisenhower had with the Interstates: a purposeful plan, as well as funding mechanisms that can sustain it.

"The nation's surface transportation system is at a crossroads," says Representative James Oberstar, chairman of the transportation committee in the U.S. House. "This year presents a great opportunity to forge a new national strategy."

In 1991, when the first President Bush signed the transportation bill known as " ISTEA," he called it a "jobs bill." Bush was summing up a view of transportation spending that would come to define Washington's approach for most of the next 18 years: Getting people working on projects mattered more than whether all the spending added up to a cohesive national infrastructure.

Today's stimulus package really is no different. The goal, as Obama defines it, is to put "in place the infrastructure of rebuilding roads, bridges, waterways, and other projects at the state levels that allow us to put people back to work." With the economy still sinking into recession, the imperative is to get states to spend the stimulus money as quickly as possible, reduce unemployment and jump-start consumer spending. So it's no surprise that most of the strings attached have to do with how states go about spending the money.

The amount of stimulus funding each state will get is determined by the same formulas that have always divvied up the federal transportation pie. The big difference is that states will be scrutinized to a completely new degree. To ensure that projects start quickly, states will have to prove that 50 percent of their funds will be used within 120 days. If a state has not used its funds by then, the feds will take the money back and redistribute it among the other states.

This "use it or lose it" rule has come in for some criticism. Some say it's unrealistic to expect states to spend so much money so quickly -- even with projects that appear ready-to-go on paper. The subsequent process of reclaiming and redistributing the money could actually delay the impact of the stimulus even further. But federal lawmakers are demanding strict accountability. "If we do not create the proper incentives for the use of the economic recovery funds," Oberstar says, "we should not be surprised when we learn that the funds did not have the intended effect."

Oberstar has proposed that his committee hold hearings once a month to review state progress reports. The committee would determine where the money was spent and how many jobs it created. The Obama administration, too, has been talking up transparency. U.S. Transportation Secretary Ray LaHood created a team within his department for the sole purpose of monitoring states' use of their transportation stimulus money.

The feds also will have a say in which projects states tackle first. States will prioritize their list of projects, most of which are expected to be small in nature and intended to pick away at the nation's enormous backlog of deferred maintenance. Repaving roads, adding sidewalks and upgrading rail tracks are just some examples of projects on state wish lists. Whichever federal agency disburses the funds -- typically DOT -- would be in charge of reviewing those lists.

While some see risks in trusting the states to spend the stimulus funds wisely, there's an even bigger danger lurking. It's the possibility that the stimulus binge could lend a false sense that the nation's transportation problem has been taken care of. Nothing could be further from the truth. As Jeff Solsby, spokesman for the American Road and Transportation Builders Association, puts it, "Addressing stimulus first does not reduce or alter in any way the infrastructure funding- and need-challenges we face."

The last time Congress revised federal transportation law, in 2005, it was clear that the end of an era was near. For one thing, the trust fund that pays the federal share of transportation projects was running out of money. (It almost went broke in 2008; Congress had to give the fund an emergency cash infusion.) So in a bill it called "SAFETEA-LU," Congress chartered a bipartisan commission to suggest how to bring the nation's transportation system into the 21st century.

The commission issued its report a little more than a year ago. It urges that the current federal programs "not be -re-authorized' in their current form," and that Congress "begin anew." This new era, the report goes on to say, "will not be dominated by a single transportation mode, as was the Interstate program." Rather, it will be "mode-neutral" and oriented around the national goals of facilitating commerce and trade, relieving congestion, cleaning the environment and improving safety. Instead of earmarks, there will be cost-benefit analyses. Piecemeal policy making will give way to performance measures. Above all, there will need to be more money -- public, private or both -- dedicated to the system. The commission report calls for an investment of at least $225 billion per year in transportation. By comparison, SAFETEA-LU currently authorizes spending only $286 billion over five years.

The question now is how closely the new president and Congress will stick to those principles. One clue to Obama's thinking comes from the campaign trail, where he embraced the idea of creating a National Infrastructure Reinvestment Bank, a new federal entity that would receive $60 billion over 10 years to invest directly in transportation projects with national significance. Essentially, the bank would sidestep Congress' parochial tendencies in order to ensure that the most economically critical road, rail and port projects don't get lost amid the pork.

For its part, Congress seems reluctant to do away with earmarks. Even after the infamous Bridge to Nowhere appeared in the last bill, Oberstar says there's no getting around "member priority projects" in the coming legislation. State and local officials don't necessarily want to see earmarks disappear, either. Maligned as it is, the earmark game is one that they, too, have learned to play with their members of Congress. And not every earmark represents a wasteful project. Jim Lynch, director of the Montana Department of Transportation, says his congressional delegation has done a great job at pinpointing money for the right projects in his state. "I don't believe earmarks are the problem," Lynch says. It's in "determining the earmarks" where Congress has gotten into trouble.

A major flashpoint in the coming debate will be how to raise revenue. The federal highway program relies on the gasoline tax as its lifeblood. But that funding mechanism has been crippled by anti-tax sentiment. The federal gas tax now stands at 18.4 cents per gallon and has not been raised since 1993. The bipartisan commission recommended raising the tax by up to 40 cents over five years. Any increase would be politically volatile -- as several states currently debating an increase in their own gas taxes, including Illinois, Iowa and Massachusetts, are finding out now.

Even if Congress can muster the will to raise gas taxes, new financing tools will be necessary. The gas tax, ironically, is becoming undermined by Americans' growing taste for fuel-efficient cars. So Congress may look at ways to tax drivers based on how much they use the roads, rather than by how much gas they consume. One idea that Oregon has been testing is to tax drivers on the basis of miles driven. Other approaches include putting tolls on freeways and charging congestion fees at rush hour. Lawmakers also will explore how to leverage private investment.

Other changes that will have big impacts on states and localities have to do with administration. Oberstar says he would like to streamline the more than 100 federal transportation programs down to a handful, in order to make accountability and regulation a simpler task. Florida and Texas are pushing for total flexibility in how their DOTs spend money -- they'd like federal funds distributed to the states in lump sums instead of being segmented into different accounts. And Congress is likely to run with the commission's idea for creating performance measures that states would be required to meet. For example, the feds might set a goal of creating an interstate rail system or a coordinated national freight system. And states would likely be held accountable for pursuing projects that move toward those goals.

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