A COMMISSION REPORT 

Toward a Federal 

Infrastructure Strategy: 

Issues and Options 

Advisory Commission on 

intergovernmental Relations 

A-I 20 

August 1992 
U.S. Advisory Commission on 

Intergovernmental Relations 

800 K Street, NW 

South Building 

Suite 450 

Washington, DC 20575 

(202) 653-5610 

FAX (202) 653-5429 

ii US. Advisory Commission on Intergovernmental Relations 
EXECUTIVE SUMMARY 

Toward a Federal Znfrastructure Strategy documents the 

progress of an interagency initiative to develop a federal 

infrastructure strategy through a partnership including 

the Department of the Army, the Environmental Protec- tion Agency (EPA), the Department of Energy, other 

federal agencies, state and local governments, and the 

private sector. Emphasis was placed on planning, design, 

finance, construction, operation, and maintenance. 

The Advisory Commission on Intergovernmental Re- lations convened a series of workshops for representatives 

from more than 25 congressional and other federal agen- cies and departments, and more than 70 organizations 

representing state and local governments, public works 

providers, and related research, advocacy, professional, 

and user groups. The year-long consultations were guided 

by a federal interagency work group. The participants 

concluded the project with a call for federal agencies to 

pursue new opportunities for action on infrastructure im- provements together with state and local governments 

and the private sector. 

The findings and recommendations of earlier reports 

provided a framework for the dialogue. Each group also 

responded to questionnaires covering basic financing, per- formance, and governing practices. The participants ad- vised working toward specific actions to carry out the 

recommendations contained in earlier reports rather than 

conducting another study. 

Based on the consultations, a broad consensus 

emerged around five infrastructure issues that should be 

addressed by the federal government: (1) rationales for 

federal investment, (2) regulations, (3) technology, (4) 

financing, and (5) management. 

Within each category, participants examined (in order 

of importance): strategic investment, regulatory and ad- ministrative relief, flexibility in federal funding, research 

and development plus technology transfer, intergovern- mental funding, revenue diversification, and management 

improvement. 

Rationales for Federal Investment. The issue statement 

focused on (1) clear goals; (2) visions of specific infrastruc- ture systems and programs; (3) national needs studies; and 

(4) principles for determining appropriate federal roles. 

Most public works are provided by local governments, 

state governments, and the private sector. Developingbroad 

national infrastructure strategies, therefore, involves inter- governmental relationships and public-private partnerships. 

Federal infrastructure stmtegy is best understood as a subset 

of a broader national infrastructure strategy. 

Traditional federal infrastructure programs were of 

two types: (1) grants (e.g., highways, transit, wastewater 

treatment plants, public housing, and open space), and (2) 

direct building and operation of federal projects (e.g., 

flood control facilities, harbors, and air traffic control 

facilities). Many grant programs have been consolidated, 

discontinued, or downsized, and most of the direct federal 

programs now require significant state or local cost shar- ing. There also is increasing reliance on user fees and trust 

funds to finance highways, transit, airports, airways, wa- terways, and harbors. 

Federal aid for infrastructure has declined significant- ly over the past decade. State and local governments have 

been looking more to the private sector. Techniques being 

used include developer exactions, impact fees, transporta- tion management associations, and administration of 

community facilities by private community associations. 

Federal Standards, Regulations, and Mandates.The issue 

statement focused on (1) standard setting, (2) regulations 

and mandates, (3) burdens on state and local govern- ments, (4) flexible regulations based on performance 

goals, (5) stability, (6) reimbursement of state and local 

costs, (7) small governments, and (8) relationships. 

There has been a large increase in the number and 

cost of regulations, most of which focus on process or 

technical standards rather than on performance. Propos- als were made to (1) shift from technical regulations to 

performance standards, (2) apply sanctions when per- formance standards are not satisfied, and (3) require that 

the federal government share in the cost of implementing 

regulations. 

New Technologies, Research, and Innovation. The issue 

statement focused on (1) potential for technological, man- agerial, legal, institutional, and other innovations; (2) 

innovation in procurements, reducing or spreading liabili- ties, and accounting; (3) a major federal role in infrastruc- ture R&D; and (4) technology transfer. 

The federal government could fulfill its leadership 

role in innovation and technology sharing by (1) shifting 

from technical to performance standards and encouraging 

experimentation, (2) funding federal labs, (3) spreading 

the risk of new technologies, (4) tort reform, (5) financing 

project evaluations, (6) promoting technology sharing, 

and (7) creating a means to facilitate information sharing. 

Financing. The issue statement focused on (1) changes in 

infrastructure finance, (2) the “beneficiaries pay” princi- ple, (3) intergovernmental financing, (4) revenue diversifi- cation, and (5) federal income tax treatment of 

infrastructure investments by state and local governments 

and private investors. 

Most participants (1) agreed that there should be sta- bility in funding sources, (2) saw little probability of a 

resurgence in federal financing, (3) thought limited re- sources could be used more efficiently if federal grant 

programs were redesigned, and (4) believed that more 

investments should be eligible for tax-exempt financing. 

Financing initiatives to be watched include (1) federal 

promotion of state revolving loan funds for wastewater 

treatment facilities, (2) the ISTEA authorization for mix- ing public and private funds, (3) experiences with the May 

1992 executive order on privatizing public facilities ac- quired with federal funds, and (4) model public/private 

cost-sharing contracts. 

Management. The issue statement focused on (1) performance rather than inputs, (2) flexibility in regulations 

and funding, (3) economic incentives, (4) capital improvement programming and budgeting, and (5) training. 

Performance is difficult to quantify because there are 

too few agreed-on standards. Better measures of infrastructure services need to be constructed so that performance standards can be developed. There also is a need for 

better coordination and cooperation between federal 

agencies that have infrastructure-related responsibilities. 

U.S. Advisory Commission on Intergovernmental Relations iii 
iv US. Advisory Commission on Intergovernmental Relations 
PREFACE 

In 1990, an appropriation was made to the U.S. Army 

Corps of Engineers to develop a federal infrastructure 

strategy in consultation with other federal agencies, state 

and local governments, and private organizations. At the 

Corps’ request, the Advisory Commission on Intergovernmental Relations assisted in the process by convening a 

series of workshops for government representatives, public works providers, and related groups. 

The consultation process was bottom up, and its goal 

was to find practical steps that can be taken by federal 

agencies working together to improve existing programs. 

A number of such opportunities were identified. 

Coordination within the federal government can 

benefit state and local governments in a variety of ways, 

including improving technical and managerial policies for 

infrastructure and developing consistent federal approaches to administrative and regulatory requirements. 

This report documents the year-long consultation 

process and recommends that it continue, with a strong 

focus on developing specific opportunities for improvement. ACIR anticipates working with the Corps and a 

series of intergovernmental task forces on helping to 

make the nation’s infrastructure more efficient, better 

coordinated, and more productive. 

The Commission believes that maintaining, expanding, and modernizing America’s infrastructure is essential 

to the nation’s continued economic and environmental 

health. The Commission is pleased to have taken part in 

the consultation process and urges all governments to 

cooperate in developing the opportunities that are unfolding to improve the infrastructure. 

Robert B. Hawkins, Jt 

Chairman 

U.S. Advisory Commission on Intergovernmental Relations v 
vi U.S. Advisory Commission on Intergovernmental Relations 
ACKNOWLEDGMENTS 

This report wasprepared under the direction of Bruce 

D. McDowell, the Commission’s Director of Government 

Policy Research. Others on the ACIR staff who contniuted to the study were Jeffrey Fitzpatrick, Patricia Pride, 

and Cameron Gordon. Consultants to ACIR were Michael Bell and Nancy Connery. The facilitator for the first 

two workshops was John Murray. The facilitator for the 

remaining workshops was Frank Blechman. Suzanne 

Spence typed the manuscript. 

Kyle Schilling, the Director of the Institute for Water 

Resources, led the U.S. Army Corps of Engineers’ cooperative effort with ACIR for this study, and provided financial assistance. He was assisted by ?bm Ballentine, 

Eugene Stakhiv, and Lim Vallianos. 

Speakers at the various workshops were: 

Peter Butkus, Public Works Manager, Department of 

Community Development, State of Washington; 

Robst Dawson, Vice chairman, Cassidy and Associates; 

MarZene Eide, Chair, Transportation Steering Com- mittee, National Association of Counties; 

Francis Francois, Executive Director, American Association of State Highway and7hnsportation OffiAlbert Grant, Immediate Past President, American 

Lowell Jackson, Vice President of Bansportation, 

Lester Lamm, President, Highway Users Federation 

cials; 

Society of Civil Engineers; 

Greenhome & O’Mara, Inc.; 

for Safety and Mobility; 

Richard Mudge, President, Apogee Research, Inc.; 

Edith Page, Infrastructure Project Manager, Office of 

Michael Shibley, Infrastructure Partnership and NaJohn Thomas, Executive Director, American Society 

Max Whitman, President, American Public Works AsAt the Commission meeting on June 12, 1992, at 

which this report was adopted, the Commission was addressed by: 

Edwin Dickey, Principal Deputy Assistant Secretary of 

the Army for Civil Works; 

Thomas Larson, Administrator, Federal Highway Administration; and 

Tad McCall, Deputy Associate Administrator for Federal Enforcement, U.S. Environmental Protection Agency. 

The Commission expresses its sincere appreciation to 

all of these persons and to the 200 or so others who played 

significant roles in making this study a success. The Commission and staff take full responsibility for the accuracy 

and content of this report. 

Technology Assessment; 

tional Association of Homebuilders; 

for Public Administration; and 

sociat ion. 

John Kincaid. 

Executive Director 

U.S. Advisory Commission on Intergovernmental Relations vii 
viii U.S. Advisory Commission on Intergovernmental Relations I 
CONTENTS 

Introduction ......................................................................................... 

Context for a New Federal Initiative on Infrastructure ................................................... 

The Early Reports ................................................................................ The More Recent Reports ........................................................................ Definitions of Infrastructure ....................................................................... 

Consultingthe Actors ................................................................................ 

Five Essential Infrastructure Issues and Opportunities for Action ......................................... 

The Essential Issues ............................................................................. 

I . Rationales for Federal Investment ............................................................... 

Formal Issue Statement ....................................................................... National vs . Federal Infrastructure Strategies .................................................... Carving Out Appropriate Federal Roles for the 1990s ............................................. Criteria for Justifying a Federal Role ........................................................... Survey Findings on Federal Roles .............................................................. Potential Opportunities for Interagency Cooperation ............................................. 

I1 . Federal Standards, Regulations, and Mandates .................................................... 

Formal Issue Statement ....................................................................... Workshop Discussion ......................................................................... Potential Opportunities for Interagency Cooperation ............................................. 

I11 . New Technologies, Research, and Innovation ..................................................... 

Forrnal Issue Statement ....................................................................... Workshop Discussion ......................................................................... Strategies for Improving the Performance of Public Works ........................................ Potential Opportunities for Interagency Cooperation ............................................. 

Iv . Financing .................................................................................... 

Formal Issue Statement ....................................................................... Workshop Discussion ......................................................................... Survey Findings on Infrastructure Financing ..................................................... Potential Opportunities for Interagency Cooperation ............................................. 

V Management .................................................................................. 

Formal Issue Statement ....................................................................... Workshop Discussion ......................................................................... Survey Findings on Importance of Federal Coordination .......................................... Potential Opportunities for Interagency Cooperation ............................................. 

Conclusion ...................................................................................... 

Recommendation .................................................................................... 

Appendix ........................................................................................... 

Executive Order 12612. Federalism President Ronald Reagan October 26. 1987 .......................... 

President George Bush February 16. 1990 ....................................................... Memorandum on Federalism Executive Order for the Heads of Executive Departments and Agencies 

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U.S. Advisory Commission on Intergovernmental Relations ix 
x U.S. Advisory Commission on Intergovernmental Relations 
INTRODUCTION 

This report documents the progress, to date, of a new 

federal interagency initiative to develop “a federal infrastructure strategy.” The congressional committee report’ 

initiating this new effort emphasized “pursuing opportuni- ties for providing local infrastructure facilities” through a 

partnership including the Department of the Army, the 

Environmental Protection Agency (EPA), the Department of Energy, other federal agencies, state and local 

governments, and the private sector. Consideration was to 

be given to planning, designing, financing, constructing, 

operating, and maintaining the nation’s infrastructure. 

Special mention was made of identifying public/private 

financing opportunities. 

Major studies of the nation’s infrastructure problems 

were undertaken in the last ten years. These reports focused largely on transportation facilities; water resources, 

supplies, and quality; and the management of solid and 

hazardous wastes. The issues have been defined over and 

over again. Some progress has been made, and additional 

opportunities to move ahead have been identified. But the 

problems continue. 

The federal agency representatives brought together in 

this effort to develop a new strategy advised working toward 

specific actions to cany out the recommendations contained 

in the previous reports rather than producing a new study. 

The approach taken was to consult with representatives of 

governments and the private sector in a series of workshops 

convened by the Advisory Commission on Intergovernmental Relations (ACR). The consultations were guided by a 

federal interagency work group. The workshop deliberations 

included more than 25 congressional and other federal agen- cies and departments, and more than 70 organizations representing state and local governments, public works providers, 

and related research, advocacy, professional, and user 

groups (see Figure 1, next page). 

U.S. House of Representatives, House Report 101-536, Accom- panying the Enew and Water Development Appropriations Act, 

1991, October 19,1990, p. 22 

The workshop participants focused on three questions: 

1. Can a government-wide or multi-agency federal 

infrastructure strategy be developed? 

2. What issues should a federal infrastructure strat- egy address? 

3. Can federal agencies work more closely together 

to create greater value from federal investment 

and involvement in infrastructure? 

The past decade has brought sigmfiit changes in the 

federal government’s infrastructure roles-its financing role 

has declined while its regulatory role has expanded. State 

and local governments and the private sector are picking up 

greater infrastructure responsibilities, but the transition has 

not been smooth. State and local governments, like the 

federal government, have budget problems, and the private 

sector has been in a long economic recession. 

In reassessing the appropriate size and form of the 

federal role, therefore, it is necessary to ask Can and 

should state and local governments and the private sector 

take greater responsibility for the nation’s infrastructure? 

Whether it is practical to develop a comprehensive 

federal infrastructure strategy is a question that remains 

open. Nevertheless, based on the consultations, a broad 

consensus emerged around five key infrastructure issue 

areas that should be addressed by the federal government: 

(1) rationales for federal investment, (2) regulations, (3) 

technology, (4) financing, and (5) management. In the pro- cess of reaching this consensus, several potential opportunities for federal interagency cooperation were identified. 

The following sections briefly set the current infrastructure debate in historical context, describe the process, still ongoing, that brought the different groups 

together, examine the five infrastructure issues identified 

above, and note opportunities for action. The report ends 

with a call for federal agencies to pursue these opportunities together, in cooperation with state and local governments and the private sector. 

U.S. Advisory Commission on Intergovernmental Relations 1 
Figure 1 

Organizations Represented at One or More Workshops 

ongress 

znate Environment and Public Works Committee 

Louse Committee on Public Works and Transportation 

louse Subcommittee on Economic Development 

‘ongressional Budget Office 

:ongressional Infrastructure Caucus 

:ongressional Office of Technology Assessment 

:ongressional Research Service-Library of Congress 

ieneral Accounting Office 

xecutive Branch 

:ouncil of Economic Advisors 

invironmental Protection Agency 

:ederal Accounting Standards Advisory Board 

ieneral Services Administration 

Iepartment of Agriculture-SCS 

Iepartment of ArmyCivil Works 

Corps of Engineers 

Iepartment of Commerce 

Iepartment of Energy 

Iepartment of InteriorBureau of Reclamation 

U.S. Geological Survey 

Iepartment of TransportationUnited States Coast Guard 

Federal Aviation Administration 

Federal Highway Administration 

Federal Railroad Administration 

Federal Transit Administration 

Maritime Administration 

Office of the Secretary 

Transportation Systems Center 

Department of Treasury 

State Government 

kademy for State and Local Government 

Council of State Governments 

Ohio House of Representatives, Ways and Means Committee 

State of New Jersey-Washington Office 

local Governments 

International City/County Management Association 

National Association of Counties 

National Association of Regional Councils 

National Association of Towns and Townships 

National Conference of State Legislatures 

National League of Cities 

Metropolitan Washington Airports Authority 

City of Atlanta, Department of Planning and Development 

Lehigh County (Pennsylvania) Authority 

Research Groups 

Apogee Research 

Building Research Board 

Civil Engineering Research Foundation 

Committee for Economic Development 

Governmental Accounting Standards Board 

Infrastructure Institute 

Johns Hopkins University, Institute for Policy Studies 

Manufacturers’ Alliance 

National Academy for Public Administration 

Ohio State University, School of Public Policy and Management 

Taubman Center for State and Local Government 

Harvard University 

Arizona State University, School of Public Affairs 

Transportation Research Board 

University of Maryland, Department of Economics 

University of New Mexico, New Mexico Engineering 

The Urban Institute 

Research Institute 

Professional Associations 

American Consulting Engineers Council 

American Planning Association 

American Society of Civil Engineers 

Community Transportation Association 

Government Finance Officers Association 

Policy Advocates 

Advocates for Highway and Auto Safety 

Campaign for New Transportation Priorities 

National Industrial Transportation League 

National Wildlife Federation 

Public Securities Association 

Rapoza Associates 

Surface Transportation Policy Project 

Water Environment Federation 

User Groups 

American Trucking Association 

Bell Atlantic Network Services, Inc. 

Highway Users Federation 

International Longshoremen’s and Warehousemen’s Union 

National Grange 

Public Works Providers 

American Association of State Highway and 

American Public Transit Association 

American Public Works Association 

American Road and Transportation Builders Association 

American Waterways Operators, Inc 

American Water Works Association 

Associated General Contractors of America 

Association of American Railroads 

City of Baltimore, Department of Public Works 

Bovis, Inc. 

Greenhorne & OMara 

National Solid Waste Management Association 

National Stone Association 

New York Metropolitan Transit Authority 

Portland Cement Association 

R.W. Beck and Associates 

Sverdrup Corporation 

Tennessee Valley Authority 

Wade Miller Associates 

Washington State Public Works Trust Fund, 

Department of Community Development 

Greater Chicago Metropolitan Sanitary District, 

Transportation Officials 

Water Reclamation District 

2 U.S. Advisory Commission on Intergovernmental Relations 
CONTEXT FOR A NEW FEDERAL INITIATIVE ON INFRASTRUCTURE 

I ageida immediately. 

The Early Reports 

In 1981, America in Ruins charged that lack of maintenance was seriously endangering the ability of the nation’s 

infrastructure to continue meeting essential needs. Shortly 

thereafter, some highway bridges fell down, with catastrophic results, and the need for action appeared urgent. 

The Congress followed with three studies in rapid suc- cession during the mid-1980s. Hard Choices (1984), prepared 

for the Joint Economic Committee, indicated that infrastructure investment needs were far outstripping the funds 

available. A study for the Senate Budget Committee by the 

Private Sector Advisory Panel (1987) also called for greater 

investment, emphasizing a strong federal role and greater 

use of trust funds, tax exempt bonds, and public/private 

partnerships. Finally, the Congress established the National 

Council on Public Works Improvement (NCPWI) to study 

these issues definitively. 

In Frde Fod&*om (1988), its final report, NCPW 

concluded that the nation’s infrastructure was ‘brely ade- quate to fulfill current requirements and insufficient to meet 

the demands of future economic growth and development.” 

The council called on federal, state, and local governments, 

in partnership with the private sector, to double the nation’s 

rate of capital investment in infrastructure by 2OOO. The 

NCPWI report also identified key needs for improving the 

performance of public works systems, such as: 

m Using better management techniques; 

= Carving out more appropriate roles for the federal, 

state, and local governments and the private sector, 

Establishing incentives for better maintenance; 

Tiking advantage of new technologies; 

Exploring low-cost methods of providing services; 

Providing better trained personnel; and 

Using innovative financing techniques. 

Figure 2 contains the summary recommendations 

from Fragile Foundations. 

The More Recent Reports 

Fragile Foundations touched off a series of debates 

that continues to the present. In passing the law that 

established NCPWI, the Congress required the Congres- sional Budget Office (CBO) to evaluate the council’s 

final report within 90 days. CBO’s report, New Directions 

fortheNation’sPublic Works (1988), challenged the need to 

double the rate of investment. It emphasized, instead, the 

need to make sure that each infrastructure project be 

Figure 2 

A Strategy for Improving America’s Public Works 

No single approach is adequate to ensure the future viability 

of America’s infrastructure. A broad range of measures is neces- sary to make a meaningful difference by the turn of the century. 

Specifically, these should include: 

rn A national commitment, shared by all levels of government and the private sector, to increase capital spending 

by as much as 100 percent above current levels; 

rn clarification of the respective roles of the federal, state, and 

local governments in infrastructure construction and management to focus responsibility and increase aamuntability; 

rn More flexible administration of federal and state mandates to allow cost-effective methods of compliance; 

rn Accelerated spending of the federal highway, transit, aviation, and waterways trust funds; 

= Financing of a larger share of the cost of public works by 

those who benefit from services; ~ 

rn Removal of unwarranted limits on the ability of state and 

local governments to help themselves through tax-exempt 

financing; 

Strong incentives for maintenance of capital assets and 

the use of low-capital techniques, such as demand management, coordinated land use planning, and waste re- duction and recycling; 

rn Additional support for research and development to accelerate technological innovation and for training of public works professionals; and 

rn A rational capital budgeting process at all levels of government. 

None of these steps will be easy or unopposed. But the increasing 

cost of delay is certain. The Council urges the President, the 

Congress. and the nation’s state and local leaders to act on this 

rn 

lSource: National Council on Public Works Improvement, Fragile Foundations, 1988. 

U.S. Advisory Commission on Intergovernmental Relations 3 
carefully evaluated for its economic productivity. By 

thistime, a major argument was raging among economists 

about the macro effects of infrastructure investment on 

the nation’s economy. Some saw infrastructure investments leveraging the economy to much higher rates of 

growth than others. CBO followed up in 1991 with a more 

in-depth report, How Federal Spending for Infrastructure 

and Other Public Investments Affects the Economy. 

The Congressional Office of Technology Assessment 

(OTA) produced two major reports on infrastructure entitled Rebuilding the Foundations (1990) and Delivering the 

Goods (1991). These reports examine state and local public works financing and management issues, as well as 

public works technology, management, and financing activities of the federal government. 

While none of these studies reached a definitive conclusion on the benefits of infrastructure investment in 

general, the OTA reports clearly pointed to substantial 

needs for additional spending on infrastructure to remedy 

current deficiencies. 

Definitions of Infrastructure 

As these reports accumulated, it became apparent 

that definitions of infrastructure differ. Some definitions 

include public buildings, public housing, rural electrification, emerging telecommunications technologies, and 

other facilities that serve public needs, whether publicly 

owned or not. For the sake of manageability, NCPWI 

limited its studies to transportation, water, and waste. 

These three broad categories involve large intergovernmental systems of major national significance. Narrowing 

the definition of infrastructure in this way does not deny 

the fact that other facilities are public works of great 

importance. Much of what can be said of good practices in 

the fields of transportation, water, and waste also can be 

said about managing other facilities. 

4 U.S. Advisory Commission on Intergovernmental Relations 
~~~ 

CONSULTING THE ACTORS 

The federal infrastructure strategy project consulted 

separately with four constituencies and then brought representatives of all groups together intoa “synthesis group” 

to resolve differences. The findings and recommendations 

of the reports summarized above were presented to work- shop participants and provided a framework for much of 

the dialogue that occurred. The four groups convened 

were: 

Representatives of federal agencies as well as 

congressional committees and policy evaluation 

units having infrastructure responsibilities; 

State and local government policymakers; 

w Nongovernmental policy analysts, infrastructure 

users, and advocacy groups; and 

w Public and private infrastructure providers. 

Each group was surveyed before the meetings by 

questionnaires covering basic financing, performance, 

and governing practices. 

The survey questions were drawn from the recom- mendations of Fragire Foundarions (see Figure 2). 

The next section of the report is based on the survey 

responses and the professionally facilitated workshop discussions that comprised the consultation process. 

U.S. Advisory Commission on Intergovernmental Relations 5 
6 U.S. Advisory Commission on Intergovernmental Relations 
FIVE ESSENTIAL INFRASTRUCTURE ISSUES AND OPPORTUNITIES FOR ACTION 

In questionnaire responses and the workshops, participants identified five issues as being of primary importance 

in developing steps for federal action. These five issues 

were discussed initially as “strategies” or action state11. Regulation-Agree on Roles and Responsibilities 

111. Rchnology-Develop and Apply New Technologies 

ments (see Figure 3), but were not ratified in that form by 

the synthesis group. The issues/strategies pairs are: 

IV Finawing-Readjust Infrastructure Financing 

I. Rationales for Federal Investment-Invest Stra- V Management-Improve Infrastructure Managetegically ment 

Figure 3 

Five Essential Issues to be Addressed by a Federal Infrastructure Strategy 

. Invest Strategically 

Improved infrastructure is needed to sharpen America’s competitive edge, economic productivity, and efficiency. 

Clear national goals for infrastructure-a persuasive vision of the future-should be articulated. 

Greater political commitment is needed to support a healthy infrastructure. 

= National needs studies should be directed toward effective achievement of clear strategic investment goals. 

m Regulatory and administrative burdens in providing infrastructure should be reduced. 

= Flexibility in spending federal aid for infrastructure, and in complying with federal and state mandates, should be increased. 

= The intergovernmental burdens and lack of flexibility that hamper the provision of infrastructure are symptoms 

of differing perceptions about appropriate federal, state, local, and private roles. These differences should be narrowed 

by building closer partnerships. 

Special attention needs to be given to the compliance problems of small governments. 

JI. Develop and Apply New Technologies rn The potential for new technologies, and other products of research, to help solve infrastructure problems is great; 

it should receive greater attention. 

Accelerated technology sharing programs should be an integral part of this effort. 

More effective federal strategies and greater resources are essential to the success of this effort. 

The enormous changes in public revenue systems and expenditure patterns that have occurred over the past decade 

I This situation requires significant adjustments in infrastructure financing methods. 

a Specific adjustments that should be considered include: 

I. Agree on Roles and Responsibilities 

[v. Readjust Infrastructure Financing 

have left infrastructure at a disadvantage. 

Mechanisms that result in beneficiaries paying a greater share of costs 

Intergovernmental funding 

Tax-exempt funding 

Revenue diversification 

V. Improve Infrastructure Management 

m There should be incentives 

Management methods and practices should be reformed to focus on the performance of services (as indicated by output 

measures) rather than on facilities and operations “inputs.” 

(1) to stretch the safe and useful lives of public works through better maintenance, 

(2) to use the most cost-effective means of serving the public in each situation, and 

(3) to lower arbitrary barriers to using low-capital techniques. 

Flexible funding and flexible regulations can help ensure successful performance management. 

Capital improvement programming and prioritizing should be used more fully, in appropriate settings, by all gouernments. 

US. Advisory Commission on Intergovernmental Relations 7 
The synthesis group wanted to explore the issues 

more thoroughly before committing to strategic positions. 

An extended discussion of strategies versus issues made 

the following points: 

11 

A coherent (overarching) federal infrastructure 

strategy could offer benefits, such as: reinforcing 

larger national goals like international competitiveness, economic productivity, and quality of 

life; putting federal programs into better relationship with state, local, and private sector efforts; and developing consistency and mutual 

reinforcement among federal programs. 

3. Regulations 2. Regulatory/Administrative Relief 

3. Flexibility of Federal Funding 

w However, a coherent (overarching) federal infrastructure strategy may not be possible because, for example: responsibilities for federal 

infrastructure programs are divided among too 

many different federal agencies and congressional committees; the missions of these institutions are very diverse; the division of 

infrastructure responsibilities among the na- tion’s federal, state, and local governmentsand between the public and private sectors-is 

too dynamic and uncertain; and proposals to 

establish or more fully utilize interagency 

policy-setting and coordinating mechanisms 

are unlikely to be enacted (e.g., a federal infra- structure council, a cabinet council on infrastructure, a consolidated congressional 

infrastructure committee, a consolidated federal infrastructure department, or an infra- structure coordination role for OMB, the 

Domestic Policy Council, or the Council of Economic Advisors). 

Still, the federal government has an infrastructure 

strategy by default that is the net result of its diverse 

infrastructure programs and policies. Some thought to 

coordinating certain elements of these programs and policies might produce benefits. Political leadership in the 

Congress, at the White House, or in one or more major 

federal departments or agencies might help such coordination efforts to develop further. Examples of such leadership 

are the strategic planning process at the U.S. Department of 

Transportation (DOT) and the recent authorization of federal surface transportation programs in the Intmdd Surface 

Eansportation Eficienq Act of 1991 (ISTEA). 

Care should be taken to ensure that requirements for 

coordination not be allowed to gridlock the decision process and prevent the provision of essential infrastructure 

facilities and services. 

Whether or not it is possible to develop a coherent 

federal infrastructure strategy spanning a wide range of 

programs, the five essential federal infrastructure issues 

listed above are important to address. 

able 1 compares three perspectives on public works 

issues: (1) the highest priority issues cited by questionnaire 

respondents on an open-ended question; (2) the main 

points discussed at the workshop meetings of the four 

constituent groups; and (3) FragiZe Foundations recommendations. 

Although the four workshop groups had some common concerns, they initially had very different perspectives. Xible 2 summarizes responses by each group to the 

open-ended survey question on the most important issues 

that a federal infrastructure strategy should address. The 

issues listed received multiple responses within each 

group, and they appear in the order of greatest to lowest 

number of multiple responses. 

Table I 

Three Perceptions of Public Works Issues 

- 

I 

Workshop 

Discussions 

(main points 

receiving attention) 

1. Definitions/Goals 

2. A Vision 

Questionnaires: Issue Priorities 

(in rank order of importance 

to respondents) 

1. Strategic Investment 

111 I 4. Technology I 4. R&D/Technology Transfer 

Iv 5. Financing 5. Intergovernmental Funding 

6. Revenue Diversification 

Fragile Foundations 

(summary of recommendations) 

1. A National Commitment to Invest More 

2. Clarification of Federal-State-Local Roles 

3. Flexible Administration of Federal 

and State Mandates 

4. Accelerate Innovation through R&D 

5. Beneficiaries Should Finance 

a Greater Share of Costs 

6. Reduce Limits on Tax Exempt Bonds 

7. Accelerated Spending of the Federal Trust Funds 

8. Accelerate Innovation through Training Public 

Works Professionals 

9. Incentives for Maintenance 

10. Incentives for Low-Capital Techniques 

11. Capital Budgeting by All Governments 

8 US. Advisory Commission on Intergovernmental Relations 
Table 2 

Most Important Issues for a Federal Infrastructure Strategy’ 

(rank order by survey group) 

1. Political Commitment to 

Strategic Investment 

2 R&D plus Technology Transfer 

~ I Providers I @=a) 

Research/Advocacy/Users 

(N = 25) 

~~ 

S-L Government 

(N = 16) 

1. Regulatory Relief 

2. Intergovernmental Funding and 

Mandate Reimbursement 

1. National 

Needs Study 

2. Multi-Modal 

Transportation 

Funding 

3. Reducing Federal Regulatory and 

Administrative Overload, 

especially for Small Governments 

4. Tax Policy 

1. Consistency among Federal 

2. Flexibility in Using Federal 

Funds 

3. Regulatory Relief and Flexibility 3. R&D plus Technology Transfer 

4. Reliable Revenue Sources 

5. Intergovernmental Funding and 

4. Strategic Investment 

5. Privatization 

Fiscal Equalization 

I 16. Management Improvement I I I 

‘Based on Survey Question 7-What are the two or three most important infrastructure issues that the federal government needs to 

address? These tabulations were prepared at the time of the meetings. Later tabulations resulted in a totalof 97responses, as follows: 

Federal-17 (a 29 percent response); State-Local-19 (36 percent); Research, etc-27 (35 percent); Providers-34 (68 percent). 

What becomes evident most quickly from this table is 

that the federal working group had the most narrow programmatic concerns and the fewest concerns that received 

multiple responses (although many other issues were 

cited by a single individual on the 17 federal question- naires returned). 

Responses from the state and local government 

policymakers might be characterized as concerns about 

the federal impact on their infrastructure responsibilities. 

The research/advocacy/user respondents listed a broad 

range of strategies and practical concerns. The public 

works providers had the highest rate of response and the 

broadest mix of major concerns. 

Table 2 also provides some details pertaining to the 

five key issues. Respondents saw the need to examine the 

following factors: 

1. Strategic investment, 

2. Regulatory and administrative relief, 

3. Flexibility in federal funding, 

4. Research and development plus technology 

5. Intergovernmental funding, 

6. Revenue diversification, and 

7. Management improvement. 

This list represents the composite rank order of issues 

raised by all four groups, with strategic investment being the 

highest priority. This is the ranking used to organize nble 1 

and to arrive at the five larger categories of issues: rationales, 

regulation, technology, finance, and management. 

transfer, 

Strategic investment was listed as the top priority by 

respondents from the research/advocacy/user group, who 

tied it to developing political commitment to these objectives, as well as to international competitiveness and eco- nomic efficiency. The providers group linked strategic 

investment to economic development, productivity, efficiency, and international competitiveness. Some of the 

providers also linked it to a call for clear national priorities. In the words of one respondent, it is certainly easier 

to “follow the leader” if it is clear where the leader is 

In a related view, the federal group’s top priority was 

given to national needs studies, which could be used as 

strategic investment tools if prepared properly. An addi- tional federal respondent listed international competitiveness, another listed investment for performance, and 

others pushed national defense, transportation, and dam 

safety strategies. All of these responses indicate support 

for certain types of strategic investment. 

going. 

Regulatory relief and flexibility was the second highest 

priority overall. It was the top priority of public works 

providers and was ranked third by state and local government policymakers and the research/advocacy/user 

group. In addition, the first-place call by state and local 

policymakers for consistency among federal programs reinforces the issue of regulatory and administrative overloads resulting from federal actions. The state and local 

policymakers also tied this issue to the special needs of 

small governments for relief from the increasingly technical and demanding requirements of federal programs. 

Flexibility in federal funding was in third place overall. 

This issue placed second among the priorities of both the 

federal group and the state and local policymaker group. It 

was also imbedded in the third-place issues listed by the 

state/local and research/advocacy/user groups calling for 

flexibility and consistency among programs. 

U.S. Advisory Commission on Intergovernmental Relations 9 
Research and development (including technology transfer) received the fourth priority overall. Although it came 

in second with the research/advocacy/user group and third 

with the providers, it did not make the top rung of issues as 

seen by the federal and state/local groups. 

Intergovernmental funding was in fifth place overall, 

especially with regard to reimbursing state and local governments for the costs of meeting federal mandates. The 

providers gave it their second highest priority, but the 

research/advocacy/user group dropped it to fifth place and 

tied it to issues of fiscal equalization. The federal and 

state/local groups implied support only obliquely through 

their interest in flexible federal funding. 

Revenue diversification, in sixth place overall, is seen in 

various forms in the responses from three groups. For 

example, revisions in tax policy, especially with respect to 

municipal bond authority, received a fourth-place priority 

from the state and local policymakers, and the research/ 

advocacyhser group gave the same ranking to ensuring 

reliable revenue sources. The provider group brought this 

issue up in relation to privatizing financial responsibilities. 

The federal group did not focus on this issue. 

Management improvement, including the use of performance data came in last overall. The provider group 

was the only one to rank this issue. 

The Essential Issues 

Each of the five essential infrastructure issues categories is discussed more fully below. The formal issue statement agreed to by the synthesis group is presented first. 

Additional details are provided from the workshop discussions and the questionnaire surveys. Related opportunities for interagency cooperation that came to light during 

the consultation process are then described briefly. 

1. Rationales for Federal Investment 

Formal Issue Statement 

Clear Goals. Infrastructure is not an end in itself. 

Therefore, wise investment in infrastructure requires the 

clear articulation of other larger goals for such purposes as 

international competitiveness, economic productivity, 

health and safety, national defense, and quality of life. 

Vision. Specific visions of how infrastructure systems 

and programs can contribute to achieving clear national 

goals are necessary to generate political commitment and 

adequate financial support. 

Needs Studies. National needs studies should be conducted to calibrate the amount of infrastructure investment 

needed. Such studies should not be simply compilationsof 

all available proposals, but instead should analyze alternative means of achieving measurable performance standards 

and seek the most cost-effective investment opportunities. Needs studies should be developed through cooperative intergovernmental and public-private processes. 

Principles. Principles for determining appropriate 

federal roles to help meet infrastructure needs should be 

established. These principles should have a firm constitutional foundation, but should also reflect present conditions and intergovernmental consultations. Economies of 

scale and equity considerations may form the basis of some 

federal roles. 

National vs. Federal Infrastructure Strategies 

Many federal infrastructure programs finance major 

capital investments with high federal shares of project 

costs. Such programs and projects frequently receive 

widespread media coverage. In addition, federal environmental and other regulations often affect the construction 

of public works projects that are not federally financed. It 

is common, therefore, to view the federal government as 

dominant in the infrastructure field. 

Nevertheless, as pointed out in Fragile Foundations, 

most public works are provided by local governments, 

either directly or through the private sector. Most major 

highways are owned by state governments. Many water 

supply systems are privately owned and operated. Most 

hazardous waste disposal is privately provided. Much of 

the ordinary trash collection and disposal is private. Developing broad national infrastructure strategies, therefore, involves many intergovernmental relationships and 

public-private partnerships. Federal infrastructure strategy is best understood as a subset of a broader national infrastructure strategy. Thus, a national strategy must be set forth 

before a federal strategy can be established realistically. 

NCPWI set forth such a strategy in 1988, calling for a federal-state-local-private partnership (see Figure 1). 

Carving Out Appropriate Federal Roles for the 1990s 

Traditional federal infrastructure programs were of 

two types: (1) grants and (2) direct building and operation 

of federal projects. The grants generally had fairly high 

federal shares of project costs, required state and local 

planning, and called for federal approval of the projects to 

be funded. These programs included highways, transit, 

airports, wastewater treatment plants, public housing, urban renewal, community facilities, and open space. 

The direct federal programs, usually funded completely by the federal government (except perhaps for 

land contributed by a state or local government), included 

flood control facilities, dams, harbors, waterways, and air 

traffic control facilities. Amtrak is also heavily dependent 

on direct federal appropriations. 

In recent years, there have been many changes in the 

grant and direct programs. For example, many grant programs have been consolidated, discontinued, or downsized, and most of the direct federal programs now require 

significant state or local cost sharing. 

There also is increasing reliance on user fees and trust 

funds to finance the federal shares of federal infrastructure programs. These apply to highways, transit, airports, 

airways, waterways, and harbors. It has been the goal in 

recent years to move the Department of Transportation 

toward complete funding by user fees and trust funds. 

That goal has been about 80 percent achieved. 

10 U.S. Advisory Commission on Intergovernmental Relations 
Another change was consolidation of the urban renewal, open space, and community facilities programs into 

the community development block grant, thereby reducing federal control. In addition, the more than 800,OOO 

miles of federally designated highways have been replaced 

by a 155,000-mile national highway system and a flexible 

intermodal surface transportation block grant for state 

and local use. The wastewater treatment facilities construction grant program (with a 75 percent federal share) 

has been converted into a state revolving loan program. 

The new safe drinking water program mandates standards 

without offering financial assistance. 

Looking at the overall record, and judging it by buying 

power and percentage of state and local infrastructure 

budgets, federal aid has declined significantly over the 

past decade. 

With fewer federal dollars to count on, state and local 

governments have been looking more to the private sector 

to help finance and provide infrastructure. Techniques 

being used more frequently include residential developer 

exactions, impact fees, transportation management associations to mitigate the traffic impact of new commercial 

development and redevelopment, and administration of 

community facilities by private community associations 

rather than by local governments. Last year, the Congress 

voted to allow federal funds tobe mixed with private funds 

for highways and to permit tolls to be collected more 

freely on federally aided highways. 

It takes time for state and local governments to adjust 

to such changes, and still more changes may be on the way 

because of the federal government’s deficit position. Federal infrastructure programs, in general, have been caught 

in the part of the federal budget getting squeezed out by 

the pressures of entitlements, national defense, and interest on the national debt. Maintaining the federal partnership in infrastructure programs under these conditions 

requires new thinking. 

Criteria for Justifying a Federal Role 

On April 24, 1992, the federal work group met to 

identify principles or criteria for judging the appropriateness of federal roles in infrastructure programs. The 

group reviewed lengthy excerpts and other selected 

quotes from five major infrastructure reports, Executive 

Order 12612 on Federalism (see Appendix A), and a table 

comparing the concepts in these sources (seeTable 3). The 

group determined that there were three types of criteria: 

rn Values connoting “what’s right” in terms of basic 

societal principles; 

rn Political judgments confirming collective wants 

or desires; and 

H Technical judgments about the best ways of 

achieving results. 

These three types of criteria do not always reinforce 

each other. They are like three circles or spheres of influence. If they are too far apart, there is no overlap; if they 

overlap some, there is at least a bit of common ground; if 

they are coincident, there is complete agreement. Generally, 

there is partial overlap and a need to resolve differences. 

Values 

Four more specific criteria for determining the federal role in infrastructure were placed in the category of 

values-constitutionality, accountability, equity, and common sense. 

Constitutionality. Federal responsibilities are those 

enumerated in the U.S. Constitution or “reasonably implied” from it. Judgments differed about what could be 

reasonably implied. The Federalism Executive Order is 

designed to limit the size and role of the federal government through strict interpretation of the Constitution, 

avoiding preemptions of state and local discretion, avoiding extraneous conditions in federal-aid programs, and 

promoting flexibility in the means of complying with 

federal requirements. To some participants, however, limiting the size of government was not as important as other 

goals, and it was not emphasized in the other source documents. Nevertheless, the group agreed with the “federalism assessments” required by the Executive Order for 

gauging the impact of major policy initiatives on state and 

local. governments. Selective use of this technique, to 

avoid overburdening the rulemaking process, was recommended. 

Accountability. Those responsible for making a decision should be held responsible for the consequences. 

Policymakers, therefore, need to take care that their policies are practical to implement without imposing impossible or inequitable burdens on others. Some unfunded 

federal mandates may pass an inappropriate burden to 

state and local governments because they are enacted 

without the restraint of fiscal discipline. It is easy to enact 

a mandate if there is no responsibility to fund it; it may not 

be so easy for others to find the funding. Federalism assessments under Executive Order 12612 in the Executive 

Branch, and fiscal notes in the Congress are designed to 

surface these practical issues before major decisions mare 

made. If these processes work well, the resulting decisions 

are more likely to be “sustainable” over the long run 

because they will be practical to implement. 

Equity. Those who benefit from a program should pay 

for it. At the same time, the beneficiaries should pay in 

proportion to their ability to pay. Essential needs must be 

supplied to everyone, even if they cannot pay. Governments as well as individuals should be treated equitably. 

Program needs should be considered in relation to fiscal 

capacities and fiscal effort. 

Common Sense. Infrastructure programs should put 

the right facilities and services at the right place when 

needed, for a fair price, and the right people should pay for 

them. In other words, governments should reconcile diverse values, desires, and responsibilities to satisfy the 

“customer.” 

Political Judgments 

The group identified three important criteria under the 

heading of political judgments: national interest, declared 

national goals and programs, and national standards. 

U.S. Advisory Commission on Intergovernmental Relations 11 
Table 3 

Principal Elements of the Federal Government’s Roles: Executive Order 12612, 

National Council on Public Works Improvement, Congressional Budget Office, and Office of Technology Assessment 

1. Federal Policy Goals 

A. Set Uniform Standards 

B. Ensure Social Equity 

C. Limit Size of National Government 

D. Coordinate Local Actions 

E. Address National Goals (Rather than Local Ones) 

EXCEPT: 

E Provide Services Where Benefits/Costs “Spill Over” Local Boundaries 

G. Provide Services Where There Are Economies of Scale 

I Principal Elements I 12612 

X 

X 

X 

2. Criteria for Choosing Policy Tools 

A. Stay within Constitution 

B. Encourage Local Flexibility in Meeting Goals 

C. Avoid Preempting Local Powers 

D. Seek Policy Stability 

E. Keep Plans Simple 

F. Avoid Extraneous Requirements 

3. Recommended Federal Policy Actions 

A. Intra-Agency “Federalism” Officer 

B. Federalism Assessment for New Programs 

C. Benefit-Cost Analysis 

D. User Fees to Ensure Beneficiaries Pay Costs 

E. Targeted Grants to Manage Use Levels 

F, Efficient Facility Prices 

G. National Infrastructure Financing Bank 

H. Public Infrastructure Block Grants 

I. Improved Capital Budgets 

J. Performance Reporting 

K. Integrated and Coordinated Federal Policymaking 

X 

X 

X 

X 

X 

X 

X 

NCPWI 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

CBO 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

OTA 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

Note: A blank indicates that the source document did not explicitly address the issue, not necessarily that the concept was approved o 

disapproved. 

National Interest. There is a national interest inproblems that are larger than individual states, that cannot be 

resolved between states because the incentives are wrong 

(spillover effects such as environmental pollution), and that 

will not be settled except by federal government action. 

Declared National Goals and Programs. Irrespective 

of the “national interest” principle, national goals and 

programs that are legislated legally establish legitimate 

federal roles. 

National Standards. It is often necessary and desirable for the federal government to set standards and issue 

regulations affecting state and local infrastructure activities. Minimum standards, allowing some state and local 

preferences to be exercised, often are preferable to uniform standards. Performance standards that promise uniform results without uniform actions offer an additional 

degree of flexibility that frequently is desirable. 

Best Technical Practices 

The group identified three important criteria under 

the heading of best technical practices-demonstrated 

need, economy, and effectiveness. 

Demonstrated Need. There needs to be some technically accurate and reliable way to measure infrastructure 

needs for new construction, maintenance, and operation. 

These methods must be able to evaluate alternatives for 

demand reductions. Assumptions must be explicit and 

open to public view. 

12 U.S. Advisory Commission on Intergovernmental Relations 
Table 4 

Importance of Federal Roles’ 

(rank order) 

Working Groups 

Federal Roles Federal State-Local Research, etc. Provider 

Composite 

Rank 

A. Direct Provision 

B. Capital Funding for Others 

C. Funding Operations by Others 

D. Regulating Performance 

E. Regulating Environmental Impacts 

G. Performing R&D 

H. Promoting R&D by Others 

I. Sharing Technology 

J. Intergovernmental Cooperation and Coordination 

E Aesthetic and Historical Impacts 

3 

2 1 1 1 1 

6 6 4 5 

4 

5 2 

6 4 

1 2 2 2 

3 3 3 3 

4 5 5 5 4 

Economy. Benefits (properly measured) should exceed costs. Efficiency and economies of scale should be 

maximized. Pricing policies to improve efficiency should 

be explored. Waste should be minimized. 

Effectiveness. Performance goals should be established, monitored, and evaluated. Programs should be 

simple enough to administer, and be stable enough over 

time to have a reasonable chance of success. Programs 

should be flexible enough to be administered successfully 

by small and large governments. 

Survey Findings on Federal Roles 

Criteria for justlfylng a federal role are not the Same as 

the federal roles themselves. To get at the actual roles, work 

group members were asked to evaluate the importance of 

~ 

ten federal government roles for infrastructure. Table 4 

shows responpes by all four groups, and a composite ranking. 

Significant importance was attached to five of the ten 

roles by at least three groups. Consensus among the four 

groups was that providing capital funds for others who 

build and maintain public works was the most important 

federal role. In second place was federal promotion of 

research camed out by others. The closely related role of 

technology sharing came in third, while fourth place went 

to promoting intergovernmental cooperation and coordina- tion. All except the federal group thought that fundinginfrastructure operations carried out by others was an important 

federal role. 

All the federal roles in the survey, except “aesthetic 

and historical impacts,” were ranked important by at least 

one of the four work groups. Table 5 shows that the federal 

roles cited in this survey question are related to those 

Table 5 

Relationships between Issue Priorities and the Importance of Federal Roles 

(resmnses to ACIR auestionnaire) .I 

Most Important Issues 

(Question 3 ~ ~~~ ~~ 

tank Issue 

1. Strategic Investment 

2. Regulatory/Administrative Relief 

3. Flexibility of Federal Funding 

4. R&D/Technology Transfer 

5. Intergovernmental Funding 

6. Revenue Diversification 

7. Manaeement ImDrovement 

Importance of Federal Roles 

(Question 5) 

Rank Federal Role 

Direct Federal Provision 

* Regulatory Performance 

* Regulating Environmental Impacts 

* Aesthetic and Historical Impacts 

4. Intergovernmental Cooperation/Coordination 

2. Promoting R&D by Others 

3. Sharing Technology 

Performing R&D 

1. Capital Funding for Others 

5. Funding Operations by Others 

*The federal roles were not ranked important by most respondents even though they relate to high-priority issues. 

U.S. Advisory Commission on Intergovernmental Relations 13 
listed as the most important infrastructure issues in the 

open-ended question. 

Potential Opportunities for Interagency Cooperation 

Federal agency representatives saw two problem areas in the “investment strategy” category that potentially 

could be improved through interagency cooperation. One 

concerns national needs studies (the most important issue 

identified by federal survey respondents); the other concerns the Federalism Executive Order that governs federal agency development of regulatory and legislative 

initiatives affecting state and local governments. 

The numerous deficiencies noted in most infrastructure needs studies suggest that a major effort should be 

undertaken to improve methods and practice in this field. 

In particular, best practice calls for performance-based 

studies that are rare at present. All fields of infrastructure 

could benefit. The Department of Transportation is a 

leader in this activity. 

It also was found that familiarity with the Federalism 

Executive Order is not widespread. If present trends for 

shifting greater infrastructure responsibilities to state and 

local governments continue, it would appear that more 

federalism assessments should be prepared. An interagency effort to establish principles for applying this order 

to public works programs could benefit all infrastructure 

agencies. Among infrastructure agencies, the Department of Transportation appears to be most familiar with 

this process. 

11. Federal Standards, Regulations, 

and Mandates 

Formal Issue Statement 

Standard Setting. It is often constitutionally appropriate, cost effective, and necessary for the federal government to establish infrastructure and infrastructurerelated standards. This is true especially when interstate 

and international considerations come into play. Such 

standards may promote health, safety, efficiency, equity, 

and program effectiveness. 

Regulations and Mandates. Federal standards may be 

imposed on state and local governments by regulations that 

prohibit certain activities and mandate others. An alternative is to develop standards “nationally” by nongovernmental 

organizations, such as the Governmental Accounting Standards Board (GASB). In this case, guidelines for good practice are developed and applied, perhaps with technical 

and/or financial assistance to encourage their use. 

Burdens. Many state and local governmentscomplain 

that federal requirements associated with infrastructure 

programs unnecessarily displace too much state and local 

decisionmaking authority, change too frequently, create 

too much administrative burden, and induce too much 

added cost to state and local projects. Unnecessary and 

avoidable burdens should be reduced, but it may be difficult to determine which ones are unnecessary. Burdens 

that are disproportionate to benefits should be considered 

for reduction. Benefit-cost analysis is one possible method 

for guiding such decisions. 

Flexibility. Flexible regulations, based on performance goals rather than on specific design specifications, 

often are urged as a way to reduce regulatory burdens, to 

get better decisions from decisionmakers closer to the 

scene, and to save money by allowing economies. However, one person’s flexibility may be another’s perversion of 

the standards. The results of flexibility may be uncertain, 

and it maybe difficult to write and monitor flexible regulations. Too much flexibility may indicate lack of any essential federal role. Substituting equivalent state and local 

regulations for federal regulations may help to reduce 

duplication, conflict, and waste. 

Stability. Broadly applicable, infrequently changing 

federal regulations can add a degree of nationwide stability to infrastructure programs. 

Reimbursement. Federally imposed burdens on state 

and local governments may be reduced by federal reimbursement of state and local costs in complying with federal 

requirements. Principles for determining what to reimburse could be helpful. 

Small Governments. Because of limited tax bases and 

technical capabilities, small governments sometimes experience proportionally greater burdens than others in 

complying with federal regulations. The Regulatory Flexibility Act of 1980 recognizes this fact, but it has not been 

fully used to grant needed relief. 

Relationships.Those who do the regulating and those 

who are being regulated might get more done by working 

in partnership rather than in contention with each other. 

New federal authority for negotiated rulemaking and administrative dispute resolution might offer fruitful opportunities to reduce regulatory and administrative burdens. 

Workshop Discussion 

Participants in all workshops agreed that there has 

been an explosion of regulations affecting how state and 

local governments deliver infrastructure services. Most of 

these regulations focus on process or technical standards 

rather than on infrastructure performance. Some participants at each workshop expressed the view that there are 

too many regulations that are often conflicting, are too 

costly, and perhaps are not always necessary. 

There were strong beliefs at all of the workshops that 

the federal government was: 

Shifting its participation in the infrastructure 

community from providing financial assistance to 

promulgating regulations; 

Often mandating specifications for delivering infrastructure services that are too rigid and could 

not be matched to many site-specific situations; 

and 

Not adequately balancing federal activity between promulgating regulations and providing financial assistance. 

14 U.S. Advisory Commission on Intergovernmental Relations 
Participants at all workshops expressed their views 

that something needs to be done to avoid regulatory gridlock. While no clear priorities emerged, proposals were 

made to address concerns about the increasing number 

and cost of regulations. These proposals included shifting 

from process and technical regulations to performance 

standards, using regulations as a sanction when performance standards are not satisfied, and requiring the federal 

government to share in the cost of implementing specific 

regulations. 

From the local perspective, there also was a concern 

about the independent nature of federal agencies in promulgating such regulations. As a result, when these regulations are applied at the local level, there are cases of 

inconsistencies, conflicts, and confusion. This was particularly true for the perceived conflict between environmental regulations and the need to provide infrastructure. The 

general view was that: 

The interaction between federal regulators and 

local officials needs to be improved. 

There needs to be better coordination among 

federal agencies (especially between those directly involved in infrastructure activities and the 

EPA). 

Local officials could improve the level and quality 

of infrastructure services if they had more flexibility in the use of funds. 

While there was agreement that the number and cost 

of regulations increased significantly during the 1980s, 

there was not much discussion of how to determine which 

regulations are appropriate, which are excessive, and 

when a regulation is too costly. It was suggested that improved benefit-cost analysis, with performance standards, 

might help this situation. 

Another theme that emerged during two workshops 

was the process of procuring infrastructure design, construction, and operation services. One concern was the 

impact of regulations on the time required to construct 

new facilities. Another major concern was that current 

federal procurement requirements mandate detailed 

technical requirements and selection of the lowest bidder 

for construction. It was felt that this process discourages 

innovation and removes accountability for system performance from the contractor. This process was contrasted with the European practice in which contractors 

are involved in developing design specifications and held 

responsible for the performance of the system after it is 

built. It was noted, however, that the European practice is 

more expensive in the short run, and would be politically 

difficult to follow in the United States, although it could 

save money in the long run. 

H 

H 

Potential Opportunities for Interagency Cooperation 

Strained relationships between the federal government and the state and local governments appear greatest 

in regulatory matters. The 1990 enactment of additional 

authority for all federal agencies to use negotiated regulation and administrative dispute resolution techniques appears to open new opportunities for easing these tensions. 

EPA, the U.S. Army Corps of Engineers, DOT, and perhaps 

other agencies have substantial experience with these mechanisms. The Administrative Conference of the United States 

is charged with promoting greater use of these techniques. It 

might be beneficial for federal infrastructure agencies to 

pool their experience and develop infrastructure-specific 

guidelines for applying this new authority. 

Guidelines for applying the “small governments” provisions of the Regulatory Fledbiliity Act to public works programs are badly needed. EPA has accumulated significant 

experience with this issue in recent years-experience that 

might be of benefit to other departments and agencies. 

Environmental regulations of many varieties frequently are the most difficult for state and local governments to comply with. The number, complexity, cost, and 

time delays of these regulations are increasing. The National Environmental Policy Act (NEPA) was supposed to 

provide linkages between these numerous regulations, 

but there has been difficulty in reaching that goal. The 

Council on Environmental Quality (CEQ), which oversees NEPA implementation, is offering workshops forfederal agencies to help them take fuller advantage of the law. 

This is of particular relevance to infrastructure agencies. 

Other regulatory issues on which federal infrastructure agencies might benefit from pooling their experience 

include the development of performance-standard regulations and principles for determining federal reimbursement responsibilities for federal mandates. 

111. New Technologies, Research, 

and Innovation 

Formal Issue Statement 

Potential. Xchnological, managerial, legal, institutional, 

and other innovations are needed to improve the nation’s 

infrastructure and keep America prosperous, competitive, 

productive, efficient, and a nation that offers a high quality of 

life. Research and development (R&D) programs have 

greater potential than is realized to contribute to such innovation. Some participants believe that a research strategy 

related to achieving widely held national goals could help to 

achieve more cost-effective innovation. 

Special Topics. Three types of innovation that need 

special attention are (1) the procurement process, (2) reducing or spreading the liabilities of trying new techniques 

and new technologies, and (3) accounting more precisely 

for the value and incidence of infrastructure benefits and 

pollution responsibilities. 

Federal Role. To achieve economies of scale in R&D 

and to make best use of the significant technical research 

capabilities of the federal government (including many 

laboratories, some of which can be expected to shift their 

focus from defense to domestic issues), the federal government has a major role to play in infrastructure R&D. 

This role, however, should not be top-down. The longestablished National Cooperative Highway Research Program provides an example of how state, federal, and other 

interests can work together creatively to establish effective and responsive national research priorities. 

U.S. Advisory Commission on Intergovernmental Relations 15 
Technology Transfer. R&D efforts, to be most effective, should be matched with technology transfer pro- grams designed to get the word out about innovations that 

have potential widespread applications. Some new technologies, however, are proprietary. Sharing them may be 

more difficult and/or more expensive. 

Working Groups 

Means of Influence Federal State-Local Research, etc. Provider 

A. R&D 

Workshop Discussion 

Participants in all the workshops agreed that there 

was a major federal role in promoting innovation, demonstration, evaluation, and dissemination of new technologies in the infrastructure area. This discussion reinforced 

the survey results that ranked research and technology 

transfer among the high priority infrastructure issues (see 

nble 2) and assigned great importance to the federal 

government’s role in these activities (see Table 4). 

A number of suggestions were made as to how the 

federal government could fulfill this leadership role in 

technological innovation and technology sharing. These 

recommendations included: 

Composite 

Rank 

Shifting from technical to performance standards 

and encouraging experimentation; 

Funding federal labs to develop expertise in these 

areas and share those innovations with infrastructure providers; 

Spreading the risk of new technologies so that 

innovative ideas and approaches can be tried; 

Providing tort reform so that local governments 

will be willing to experiment rather than feeling 

compelled to follow traditionally accepted engi- neering standards; 

Financing demonstration projects that will allow 

the evaluation of new technologies; 

Promoting technology sharing and dissemination 

of innovative approaches to infrastructure challenges; and 

(2) Information Technology 

(3) Management/Policy Approaches 

(4) Risk Analysis 

B. Technology ’kansfer 

C. Educationrnaining of Employees 

Cooperation and Coordination 

D. Intergovernmental/Interagency 

rn Creating an organization or entity to facilitate 

information sharing. 

Strategies for Improving the Performance 

of Public Works 

The surveys of constituent groups indicated that certain 

types of research are expected to play an increasingly important role in improving public works performance, while technology transfer is not expected to grow in importance quite 

so much. These findings are shown in lible 6, where the four 

groups ranked the growing importance of seven strategies 

for improving the performance of public works. This table 

also shows the composite ranking by all four groups. 

Overall, research and development on information 

technologies was felt to offer the most rapidly growing potential for improving public works performance. Neck and 

neck for the second and third ranks were intergovernmental/ 

interageng cooperation and coordination. and education 

and training for present and future employees. Thus, the top 

three ranks all went to what many people term the “soft 

side” factors. In fourth place was growth in the contributions 

of research and development on materials technoIogy, foIlowed by R&D for management and policy processes. Bring- ing up the rear were technology transfer strategies plus 

research and development on risk analysis techniques. The 

greatest consensus among the groups was on the top-ranked 

strategy (R&D for information technology) and bottom-ranked strategy (R&D on risk analysis). 

1 3 3 3 1 2 

6 6 1 4 5 5 

5 7 7 5 7 2 

7 5 4 7 6 3 

3 2 5 1 3 4 

2 1 6 2 2 5 

Potential Opportunities for Interagency Cooperation 

A strong beginning on developing a national cooperative infrastructure research agenda has been made by the 

Civil Engineering Research Foundation. Twelve federal 

agencies and 25 professional organizations are participating in this effort (see Figure 4, next page). The agenda of 

35 specific research projects, released in September 1991, 

is summarized in Figure 5 (see next page). It emphasizes 

revitalizing the nation’s public works, keeping America 

(1) Materials Technology 4 2 

1 your organization (agency)? 1 

16 U.S. Advisory Commission on Intergovernmental Relations 
Figure 4 

National Civil Engineering Research Needs Forum ~~~ 

Supported in Part by: 

3vil Engineering 

Research Foundation 

Jational Science Foundation 

Cosponsors: 

ATLSS Engineering Research Center 

Federal Aviation Administration 

Federal Highway Administration 

Federal Emergency Management Agency 

National Institute of Standards & Technology 

U.S. Air Force 

U.S. Army Corps of Engineers 

U.S. Department of Energy 

U.S. Department of Interior 

U.S. Environmental Protection Agency 

U.S. Navy 

Participating Organizations: 

4CEC Research & Management Foundation 

Associated General Contractors of America 

AWACSA Council on Architectural Research 

American Academy of Environmental Engineers 

American Association of Engineering Societies 

American Society of Civil Engineers 

ASFE/The Association of Engineering Finns 

Practicing in the Geosciences 

ASME Center for Research & Technical Development 

AWWA Research Foundation 

Building Officials & Code Administraton International 

Building Research Board 

Construction Industry Presidents Forum 

Earthquake Engineering Research Institute 

Foundation of the New Jersey Alliance for Action 

International Conference of Building Officials 

Institute of Transportation Engineers 

National Association of Corrosion Engineers 

National Conference of States on Building Codes 

National Institute of Building Sciences 

National Society of Professional Engineers 

Southern Building Code Congress International 

Technology Transfer Society 

Transportation Research Board 

WPCF Research Foundation 

Source: Civil Engineering Research Foundation, Setting a National Rerearch Agenda far the Civil Engineering Pmfmion, September 1001 

Figure 5 

A National Research Agenda for the Civil Engineering Profession 

.evitalization of Public Works 

Decisions 

Developing Tools to Make Smart Management 

rn Finding New Ways to Finance Infrastructure Investment 

rn Extending the Useful Life of the Infrastructure 

Protecting Bridges from Natural Hazards 

Identifymg Structural Problems through Diagnosis 

w Removing Institutional Barriers to Innovation 

Economic Benefits from Public Works Investments 

Improving %ter-Resource Systems Data 

= Mitigating Coastal Damage from Natural Hazards 

rn Protecting Dams against Earthquakes and Floods 

through New Technology 

mprovement of Competitiveness 

rn Integrated Computer-Aided Engineering 

Making Quality a Top Priority 

Alternate Ways to Bid Contracts 

B Making a Case for Innovation in Civil Engineering 

How to Organize for Innovation - n.--,- .L.. T-J..-*.-.?- IX--.X7-L...Ll- n,,,..,,... 

Enhancement of the Environment B lbrning Wastes into Treasures 

Improving our Water Quality 

Corralling Groundwater Pollutants 

A Universal Approach to Site Cleanup 

m Natural and Engineered Ecosystems 

for Eliminating Pollutants 

InSitu Remediation and Treatment 

Technological Innovation 

Automation Technologies for Construction Productivity 

rn Robotic Technologies for Man-Remote Missions 

Developing Super Construction Materials 

Setting Standards to Predict the Life of Materials 

Adapting New Materials to Civil Engineers 

Research to Application through Teamwork 

rn Clearing a Path to the Marketplace 

rn Breaking the Leal and Remulatow Bamers 

for the 2lst Century 

Technology Pansfer 

Y Y - reopie-inc inomny s 1~10~1 vaiu~u~c: ncauuiuz 

to Innovation 

Taking the Lead in Setting International Standards 

rn Bringing Engineering Standards into the Computer Agc 

m Identifymg the Right Way and Wrong Way 

Keeping Up-to-Date through Education 

iource: Civil Engineering Research Foundation, Setting u National Resemh Agenda for the Civil Engineering Profession, Septembe .n*. 

-_ 1YY - _. I. 

U.S. Advisory Commission on Intergovernmental Relations 17 
competitive, enhancing the environment, advancing technologies, and accelerating technology transfer. 

The increases in research funding under the new surface transportation program offer significant opportunities for many federal, state, and local infrastructure 

agencies. Interagency pooling of these research efforts 

might bring greater benefits to the nation than a more 

limited, transportation only, use of the research. For ex- ample, work on geographic information systems (GIS) 

could be beneficial to many programs. 

IV. Financing 

Formal Issue Statement 

Allme of Change. The 1980sproduced major changes 

in infrastructure finance. The federal government is moving spending toward other goals. Local tax revolts have 

limited the role of property taxes in infrastructure finance. 

The federal tax code encouraged privatization of infrastructure in the early 1980s but reversed that position in 

1986. Some federal trust funds established to support infrastructure programs have been hoarded rather than 

spent. Thus, the means of financing infrastructure are in 

flux. The following finance issues need attention in 1990s. 

Beneficiaries Pay. User fees and earmarked taxes are 

financing increased shares of infrastructure costs. This 

raises questions of equity when benefits accrue to others 

besides users. It also raises questions of affordability for 

some low-income members of society. In addition to beneficiaries, some costs can be attributed to persons responsible 

for creating costs (for example, polluters). Thus, allocating 

costs equitably is a complex task, full of controversy. 

Intergovernmental Financing. Allowable local revenues usually are too limited to fund all necessary infrastructure. In addition, some infrastructure has benefits 

that clearly extend beyond local communities. Some benefits are national in scope. At the same time, most infrastructure is owned and operated by state and local 

governments. 

Federal and state aid for infrastructure is common. 

During the 1980s, however, federal infrastructure aid declined proportionally while state aid played an increasing 

role. The proper roles of federal and state aid depend on 

judgments about the relative infrastructure roles and responsibilities of the federal, state, and local governments 

and the private sector. Further realignment in state and 

federal aid infrastructure programs may be needed. 

Revenue Diversification. The federal government 

and most state and local governments lack adequate funds 

to meet perceived infrastructure needs. Little or no 

growth is expected in the use of general funds and grants 

for this purpose. Alternative means of raising additional 

funds are being examined intensively. Increased use of 

user fees, earmarked taxes, trust funds, special districts, 

revolving loan funds, cost sharing, regulation, and 

privatization are the primary alternatives being used or 

considered. The need to consider a replacement for the 

per-gallon gasoline tax is becoming urgent in the minds of 

some observers because of energy and air quality policies 

designed to reduce the use of that fuel. 

The Tax Code. Federal income tax treatment of infrastructure investments by state and local governments, as 

well as by private investors, may increase or decrease the 

cost of these investments. The wide swing in tax policy 

between 1981 and 1986 illustrates the controversial nature 

of this issue. Much of the argument revolves around the 

definition of what constitutes legitimate public works and 

the extent to which there is a federal interest. Interest in 

readjusting some of the 1986 tax reforms affecting infrastructure investments is apparent among some constituencies. There also is substantial support for tax code 

simplification and the lessening of certain compliance 

burdens, especially in the area of tax-exempt financing. 

Workshop Discussion 

The federal role in financing the nation’s infrastructure was a major topic of discussion at each of the workshops. The key question concerned the impact of declining 

federal infrastructure financing on the federal interest and 

role in ensuring adequate levels and quality of infmstructure 

services. Most participants agreed that there should be stability in funding sources so that a long-term perspective 

could be taken in providing infrastructure services. 

Most participants conceded that the probability of a 

near-term resurgence in federal financing for infrastructure was low or nonexistent. It was pointed out that many 

infrastructure networks developed by the federal govern- ment are virtually completed. Many workshop partici- pants thought the limited resources allocated through 

these mechanisms could be used more efficiently iffedera1 grant programs were redesigned. For example, the current priority given by some federal grants to capital 

investment may bias local decisions against cost-effective 

maintenance and operational improvements. The Intennodal Surface Pansportation Eflciency Act of 1991 provides 

flexibility in highway and transit programs to overcome 

such biases. 

Participants at the state and local workshop raised 

questions about the matching ratios of federal infrastructure grants. In some cases, the participants thought the 

federal matching ratios may be too high, while in others 

they may be too low. Differences in such matching ratios 

change relative prices paid by local officials, thereby encouraging some behavior and discouraging other behavior. 

The participants felt that increased local discretion in allocating federal grant dollars would reduce any bias. In addition, there was some feeling that federal infrastructure grant 

programs limited to governmental entities may introduce 

bias against private providers of infrastructure services. 

Concern was expressed about federal restrictions on 

the use of tax-exempt financing for infrastructure over the 

last decade. Efforts to limit access to tax-exempt financing 

treats different types of infrastructure investment differ- ently. The general view was that there should be more 

consistency across categories of infrastructure, and the 

focus should be on making more investments eligible for 

tax-exempt financing. 

18 U.S. Advisory Commission on Intergovernmental Relations 
Pricing of infrastructure services also drew comment. 

Individual users of many infrastructure facilities can be 

identified, charged a price, and excluded if they do not pay 

that price. This is generally true for mass transit, water 

supply, and wastewater treatment, and for the collection, 

storage, and disposal of solid and hazardous wastes. Some 

infrastructure services are provided directlyby the private 

sector because of their pricing and profit potential. Exam- ples include energy supply, telecommunications, and wa- ter supply, and the collection, storage, and disposal of 

solid and hazardous waste. 

In such an environment, charging a price per unit of 

service consumed aligns the benefits received from infra- structure facilities with the price paid. Thus, pricing can 

increase the level and quality of infrastructure service 

being provided. The survey results indicated strong expectations by all four work groups that more use will be made 

of infrastructure pricing strategies in the future. 

Some concerns were expressed, however, about the 

general applicability of such pricing, for several reasons: 

m The beneficiaries of infrastructure facilities may 

not be limited to the users. Thus, pricing mechanisms designed to recover the full cost of provid- ing the service will overcharge the actual users. In 

such circumstances there may be a need for gen- eral fund support. 

If the efficiency gains attributed to such pricing 

strategies are to be realized, individuals must have 

sufficient income to make choices. This is not the 

case for families with limited incomes, so there is an 

important distribution issue to address. 

Pricing policies may inhibit innovation because 

the beneficiaries of new technologies may not be 

known and identified before such technologies 

are developed and tried. 

H 

H 

Working Groups 

vpe of Infrastructure Investment Federal State-Local Research, etc. Provider 

As reflected here, most of the discussion of financing 

issues focused on the strengths and weakness of various tools 

used by the federal government to provide financial support. 

Survey Findings on Infrastructure Financing 

Three questions in the survey related to finance: investment trends, influences on infrastructure spending, 

and the relative importance of various financing sources. 

These trend questions were designed to help assess 

changes that are likely to occur. The measure used in 

evaluating responses to these questions, therefore, is the 

ranking of expected degrees of change. 

Investment Trends. Tible 7 shows the median response 

in each work group and the average of these medians for 

present and expected spending on new construction; 

maintenance, reconstruction, and modernization; and op- erations. All four groups showed new construction hold- ing its own at the present time, but two of them expected it 

to grow in the future. For maintenance, reconstruction, 

and modernization, the research/advocacy/user group saw 

a present decline, the federal group saw spending holding 

the line, and state and local officials and public works 

providers saw current spending increases. AU saw moderate 

spending increases in the future. The four groups saw spend- ing on operations holding the line at present, but all except 

the federal group expected future increases. 

Overall, the trend seemed to be for moderate increases 

expected in spending for operations, maintenance, reconstruction, and modernization, but less increase for new 

construction. 

Influences on Infrastructure Spending. Tible 8 shows 

the rankings by each of the four groups and composite of 

the importance of ten different means of influencing infrastructure spending strategies. Overall, regular reporting of system andlor facility performance got the top 

Average Rank Strength 

Median of Increase 

0 0 0 0 

0 0 +1 +1 

A. New Construction 

Present 

w Future 

0.00 

+ 0.5 

Present 

Future 

3 

0 +1 -1 +1 + 0.25 

+1 +2 +1 +2 + 1.50 1 

and Modernization 

C. Operations 

Present 

Future 

ll 

0 0 0 0 0.00 

0 +1 +1 +1 + 0.75 2 

Composite Score +1 +4 +2 +5 + 3.00 

U.S. Advisory Commission on Intergovernmental Relations 19 
Means of Influence 

A. Strategic Planning 

B. Performance Rating 

Working Groups 

Federal State-Local Research, etc. Provider 

4 8 5 1 

2 

E. Capital Improvement Programming 

C. Needs Studies 

2 7 2 4 I 2 5 

8 

F. Available Resources 

G. Environmental Protection Requirements 

H. Citizen Participation 

I. Political Considerations 

J. Required Planning/Programming by 

Others 

CZnosite 1 Highihw 

Difference 

1 2 8 6 3 7 

5 6 10 3 6 7 

9 4 6 9 8 5 

5 9 10 9 

3 9 7 7 7 6 

* * 

D. Benefit-Cost Evaluations 

ranking for expected growth of importance in influencing 

expenditure strategies. The next fastest growing technique 

was capital improvement programming, followed by estimates of available resources, benefit-cost evaluations, and 

strategic planning. In the bottom half of the rankings were 

environmental protection requirements, required planning 

and programming by others, citizen participation, needs 

studies, and political considerations. It should be noted that 

political considerations are quite influential, and two groups 

(federal and public works providers) expected no change. 

Table 8 also shows a relatively large spread in how the 

groups ranked their expectations for the rising influence 

of these investment planning factors. The greatest divergence was on the question of political considerations, with 

state and local policymakers ranking this in the middle 

range of increasing influence, while the other three 

groups saw little change. Considerable diversity was also 

observed with respect to increases in strategic planning, 

benefit-cost evaluations, estimates of available resources, 

and environmental protection requirements. The narrowest 

differences were in expectations for increased use of performance reporting (expected to increase the most), needs 

studies, capital improvement programming, citizen participation, and required planning and programming by others. 

The growing influence of capital improvement pro- gramming was ranked second highest. Thus, there was a 

considerable degree of consensus among the groups on 

the rapid increase of the two top ranked techniques for 

influencing expenditure strategies. 

Importance of Financing Sources. Table 9 shows the 

expectations for shifts in financing sources in the future. 

The use of general funds was expected to decrease by all of 

the groups except the state and local policymakers. The 

use of federal and state grants was not expected to change 

overall. The other sources of funding were expected to 

grow in importance, with increased cost sharing taking the 

lead. Growth of user fees and the use of earmarked taxes, 

trust funds, and special districts were next. Shifting costs 

to others through regulation and tax incentives was expected to increase less. Overall, if these expectations were 

to be realized, they would strongly support the sixth most 

important issue identified in the open-ended question, 

namely, revenue diversification. 

Potential Opportunities for Interagency Cooperation 

One of the biggest financing challenges is assigning 

responsibilities for meeting costs. If governments were to 

follow the currently popular ‘beneficiaries pay” principle 

more closely, they would need better data on costs and 

benefits. Benefit accounting and cost accounting, when 

done at all, generally are limited to direct benefits and 

costs. Secondary benefits and costs also can be significant. 

In order to set fair and productive infrastructure service 

prices and to allocate intergovernmental aid properly, 

public accounting systems would have to be reformed 

fundamentally. Relative tax capacities and efforts also 

would figure into such calculations. The new Federal Accounting Standards Advisory Board might be a mechanism 

to help establish standards for use by public agencies to 

account for benefits and costs more accurately. 

Lessons learned from new financing initiatives should 

be shared widely. For example, federal promotion of state 

revolving loan funds for wastewater treatment facilities is 

now several years into implementation. The potential for 

applying this concept to other typesof infrastructure could 

be explored. 

20 US. Advisory Commission on Intergovernmental Relations 
I 

D. Federal and State Grants 

E. Shifting Financial Responsibilities to Others 

(1) by Regulation 

(2) by Increased Cost Sharing 

F. Tax Incentives 

~~ 

Table 9 

Importance of Financing Sources' 

*** 6 NA *** 6 

5 1 5 4 4 

1 4 2 3 1 

3** 7'* 3 1 5 

1 

I (rank order by growth in importance) I 

Federal Rofes 

~~ 

Working Groups Composite 

FederaI State-Local Research, etc. Provider Rank 

I A. General Fund 

~~ I* 5 * * IT 

I B. User Fees 12 2 4 2121 

1 Districts 14 3 1 5 13 I C. Earmarked Taxes, lkust Funds, and Special 

Another initiative to be watched might be the new 

authorization for mixing public and private funds under 

ISTEA. Similarly, experiences with the May 1992 executive order on privatizing public facilities acquired with 

federal funds also should be monitored. Model cost-sharing contracts between the public and private sectors might 

be explored. 

V. Management 

Formal Issue Statement 

Focus on Performance. Many infrastructure management practices have grown up around construction or 

maintenance of particular types of facilities. Traditionally, 

there has been little opportunity to transfer funds be- tween programs. These narrow programs focus on inputs 

rather than on outcomes for the user, and they limit the 

problem solving ability of management. 

Increasingly, infrastructure goals are being defined 

more broadly. For example: 

Mobility of persons is replacing highway construction. 

m Communication is becoming a clearer alternative 

to transportation. 

m Coordinated management and water conservation are becoming alternatives to building new 

dams. 

Landfills, incinerators, ocean dumping, and recycling are alternatives to each other, holding 

different implications for the cleanliness of land, 

water, and air resources. 

These broader goals require greater freedom to assess a range of alternatives and transfer funds where they 

are needed to achieve the best overall outcomes. Intermodal 

transfer authority is becoming more common in transpor- tation programs, but intermedia flexibility for environmental protection and exchanges of surface-water with 

groundwater are rare. 

The new congestion management systems required by 

ISTEA may provide a model for outcome-oriented man- agement. Congestion measurements and their effects on 

air quality will be the focus of attention rather than any 

single input such as a new lane of highway or a new bus 

route. Various combinations of construction, equipment, 

maintenance, operational, and demand reduction improvements should be tried until acceptable results are attained. 

Flexibility. Obviously, more than new performance 

monitoring and management techniques will be required 

for output-oriented performance management to work. 

Many inflexible regulations and funding restrictions will 

need to be reformed. For example, block grants rather 

than narrow categorical grants, or transfers of funds 

among categorical programs should be considered. They 

offer means of lowering arbitrary barriers to sound performance management practices. 

Incentives. When certain behaviors are clearly necessary but absent, an alternative to heavy-handed requirements and mandates is to offer economic incentives. For 

example, the maintenance of U.S. highway pavements, 

bridges, and transit facilities and equipment is now inadequate. In addition to requiring annual management plans 

for rectifying this situation, ISTEA provides special funding for these purposes. There also is a provision for special 

funding to encourage congestion management and air 

quality compliance. Similar approaches should be considered for other types of infrastructure. 

U.S. Advisory Commission on Intergovernmental Relations 21 
Capital Improvement Programming and Budgeting. 

This technique is used routinely by most state and local 

governments in preparing annual capital budgets. The 

federal budget has no separate section or subtotal for 

capital investments. There is only supplementary reporting on capital investments, such as OMB’s annual report 

required by the Public Works Improvement Act of 1984. 

There is a long history behind the difference in approach 

between the federal government and the state and local 

governments, and there is strong resistance to change. 

Nevertheless, long-term capital improvement programming and priority-setting, as distinct from actual budgeting, are used by some of the physical development 

departments and agencies of the federal government. 

There also is a growing public concern about declining 

infrastructure that may induce other agencies to consider 

capital improvement programming. 

The use of capital improvement programming is expected to become increasingly influential in setting federal, state, and local capital investment policies in the 

future. Providing a firmer, more analytical basis for capital 

improvement programming could help it live up to these 

high expectations. 

Training. Good management requires well trained 

employees. As the scope of infrastructure concerns expands, as the current wave of retirements bites deeper, as 

public budgets shrink, and as the issues to be addressed 

become more complex, an adequate supply of qualified public works employees is becoming more problematic. The 

training of existing and future employees needs attention. 

Workshop Discussion 

There was a consensus that more attention needs to 

be paid to the level and quality of infrastructure services 

being produced. It was felt that this is not being done now 

because the performance of infrastructure networks is 

difficult to quantify and because there are too few 

agreed-on standards to gauge performance. Better measures of infrastructure services need to be constructed so 

that performance standards can be developed. 

If better performance standards and measurements 

can be developed, then alternative service delivery approaches can be explored. In this context, workshop participants saw opportunities for infrastructure services to 

be provided in a manner that could maximize publicbenefits at the least cost to the private sector. 

Anumber of participants also thought it was critical to 

develop a system that rewards good management practices and provides incentives to focus on demand management issues in addition to new construction. If there were 

improved performance standards and measurements, 

there would be more incentives to seek the most effective 

and efficient management of existing facilities. 

Another major theme at each workshop was the need 

for better coordination and cooperation. Specifically, 

there needs to be improved coordination of federal agencies that have infrastructure related responsibilities; the 

Congress and federal agencies need to coordinate policy 

objectives across seemingly disparate programs; local officials need to be involved in the promulgation and development of federal regulations from the earliest possible 

moment; and infrastructure systems that extend beyond 

the political boundaries of state and local governments 

create a need for regional coordination. 

Discussion of these issues raised many questions. For 

example, participants at the federal workshop raised questions about the difficulties in motivating agencies with 

different objectives to coordinate their activities, and the 

need to provide institutional incentives that could promote coordinationkooperation both among federal agencies and with the state and local governments. 

Surve Findings on Importance 

of Fe J era1 Coordination 

nble 10 shows the survey responses of the four work 

groups, with a composite ranking, to five types of coordination within the federal establishment. Most important, 

overall, is coordination of research resources, results, and 

expertise. The federal and research work groups gave this 

top priority, while the other two groups ranked it second. 

This reinforces the relatively great importance of research 

and development as an issue on the open-ended survey 

question. 

In second place, overall, is the importance of coordinating planning and decisionmaking procedures. The 

state and local policymakers and public works providers 

felt especially strongly about this need, and their responses relate strongly to the high ratings given to the 

issue of flexibility in federal funding. 

In third place is the need for coordinating federal 

regulatory strategies. This reinforces the ranking of regulatory relief as the second most important issue overall. 

The fourth place finish of the need to coordinate 

federal program structures and grant conditions compares 

to the third place finish of administrative relief and flexibility among the most important overall issues. 

The need for coordinating federal funding strategies 

came in last. This relates to the fifth most important issue-intergovernmental funding. 

Potential Opportunities for Interagency Cooperation 

A key concept in improving infrastructure management is the focus on performance. This focus is strongly 

fixed in the new surface transportation program. Thus, 

other federal agencies have an opportunity to watch how 

the new required management systems play out in the 

DOT programs. The President’s Council on Management 

Improvement and the Competitiveness Council might 

want to consider nudging this process along. 

In addition, there are new opportunities in the data 

and accounting fields that should be explored. Good management systems are data dependent. The U.S. Geological 

Survey chairs two recently reformulated data committees 

of key interest to infrastructure agencies: the Federal 

Geographic Data Committee that is at the cutting edge of 

GIS operations, and the Water Information Coordination 

Program. Both are interagency and intergovernmental 

activities that could provide significant benefits to infrastructure agencies. 

22 U.S. Advisory Commission on Intergovernmental Relations 
I 

Table 10 

Importance of Federal Program/Agency Coordination’ 

(rank order of types of coordination) ~~ 

’ISTpes of Coordination 

A. Proaam Structures and Grant Conditions 

I B. Funding Strategies I 4 5 515 

Working Groups Composite 

Federal State-Local Research, etc. Provider Rank 

4 5 4 4 4 

I C. Regulatory Strategies 13 3 2 313 

~~ ~ I E. Planning and Decisionmaking Procedures 3 1 3 1 

2 

2 

On the accounting side, there is an opportunity to 

make some headway against one of the toughest problems-deferred maintenance of capital facilities. The 

solution may come through some form of capital asset 

accounting. This topic was broached a few years ago by the 

Governmental Accounting Standards Board, but is relatively dormant. The concept is to inspect capital facilities 

regularly, determine the cost of needed maintenance, and 

either make the repairs or report the financial amount of 

needed repairs not made as a liability in the annual financial report. Tracking this financial record annually would 

allow management, policymakers, and citizens to assess 

the status of infrastructure maintenance much more precisely and realistically than is possible now and would save 

money by avoiding the catastrophic failures of facilities 

that often trigger large replacement costs. The opportunity to reopen this issue is occasioned by creation of the 

Federal Accounting Standards Advisory Board. 

Other management techniques that might benefit 

from pooled federal agency development and coordination efforts with a special infrastructure emphasis are 

capital improvement programming, priority setting, and 

budgeting; benefit-cost analysis; administrative dispute 

resolution; and negotiated rulemaking. 

Based on current involvement and expertise, DOT 

might take the lead on the first; the U.S. Army Corps of 

Engineers might lead the second; and the other two might 

involve EPA, DOT, the Corps, and the Administrative 

Conference. 

Conclusion 

ACIR conducted a year-long consultation process 

on improving the nation’s infrastructure with working 

groups representing federal, state, and local govemments, public works providers and users, and research, 

professional, and advocacy organizations. This report 

documents that process, which sought to identifyopportunities for federal interagency cooperation and coordination to help improve public works. A number of such 

opportunities were found. 

Coordination within the federal establishment can 

benefit state and local governments in a variety of ways, 

including (1) improving technical and managerial practices and (2) providing consistency among federal agencies in 

their approaches to the administrative and regulatory requirements that state and local governments must meet. 

Based on the results of the initial consultation process, ACIR recommends that the process continue with a 

strong focus on developing specific opportunities for improvements. 

U.S. Advisory Commission on Intergovernmental Relations 23 
24 U.S. Advisory Commission on Intergovernmental Relations 
RECOMMENDATION 

The Commission finds that maintaining, expanding, 

and modernizing America’s infrastructure is essential to 

the nation’s continued economic and environmental 

health and to raising the quality of life for every American. 

The Commission finds, furthermore, that fiscal stresses in 

federal, state, and local budgets, along with growing competition from other nations, demand urgent efforts to 

improve investment efficiency, program coordination, and 

economic productivity in the nation’s infrastructure programs. Finally, the Commission finds that numerous timely 

opportunities exist to improve the nation’s infrastructure 

by these means. 

The Commission recommends, therefore, that the na- tion’s state and local governments, and the several federal 

infiastructure agencies, work more closely together, and in 

cooperation with the private sector, to take advantage of opportunities to make the nation’s infrastructure more efficient, 

better coordinated, and more highly productive. The opportunities that should be considered in working toward thesegoals 

include: 

(a) Establishing programs to educate the general public, 

public oficials, and public works professionals about the importance of public works to the nation and the innovations 

that are needed to keep America’s infiastructure systems 

among the world’s most productive; 

@) Developing improved methods for preparingper$ormance-based infrastructure needs studies reflecting strategic I objectives; 

(c) Establishing infrastructure-specific guidelines for ap- plying the Federalism Executive Order, the “small govemments” provisions of the Regulatory Flexibility Act, the 

Administrative Dispute Resolution Act of 1990, and the 

Negotiated Rulemaking Act of 1990; 

(d) Making greater use of the National Environmental 

Policy Act as an interagency focus to combine reviews and 

streamline the process for issuing environmentally sound infrastructure permits; 

(e) Pooling federal agency erperiences in using performance-standard regulations and mandate reimbursement practices; 

&I Developing a national cooperative infrartructure research program, including a strong technology transfer component; 

(‘ Removing or minimizing the bartiers and risks confronted when innovating new technologies and practices; 

(h) Establishing principles and guidelines for public 

agency benefit, cost, and deferred maintenance accounting; 

(i) Evaluating the benefits and limitations of innovative 

financing techniques-including user fee qstems, state revolving loan funds, tax erempt financing, andprivatization techniques-and publicizing successful innovations; 

ti) Improving the methods and practices of capital improvement programming and benefit-cost analysis; and 

(k) Promoting geographic data coordination. 

I 

US. Advisory Commission on Intergovernmental Relations 25 
26 U.S. Advisory Commission on Intergovernmental Relations 
APPENDIX 

Executive Order 1261 2, Federalism 

President Ronald Reagan 

October 26,1987 

(Federal Register, Vol. 52, No. 21 0, 

October 30,1987, p. 41 685) 

(c) The constitutional relationship among sovereign 

governments, State and national, is formalized in and 

protected by the Tenth Amendment to the Constitution. 

(d) The people of the States are free, subject only to 

restrictions in the Constitution itself or in constitutionallv 

authorized Acts of Congress, to define the moral, polit;- 

cal, and legal character of their lives. By the authority vested in me as President by the 

Constitution and laws of the United States of America, 

and in order to restore the division of governmental re- sponsibilities between the national government and the 

States that was intended by the Framers of the Constitu- tion and to ensure that the principles of federalism estab- lished by the Framers guide the Executive departments 

and agencies in the formulation and implementation of 

policies, it is hereby ordered as follows: 

(e)In most areas of governmental concern, the States 

uniquely possess the constitutional authority, the re- sources, and the competence to discern the sentiments of 

the people and to govern accordingly. In Thomas Jeffer- son’s words, the States are “the most competent adminis- trations for our domestic concerns and the surest bulwarks 

against antirepublican tendencies.” 

Section 1. Definitions. For purposes of this Order: 

(a) “Policies that have federalism implications” refers 

to regulations, legislative comments or proposed legisla- tion, and other policy statements or actions that have 

substantial direct effects on the States, on the relationship 

between the national governments and the States, or on 

the distribution of power and responsibilities among the 

various levels of government. 

@) “State” or “States” refer to the States of the 

United States of America, individually or collectively, 

and, where relevant, to State governments, including 

units of local government and other political subdivisions 

established by the States. 

(f) The nature of our constitutional system encour- ages a healthy diversity in the public policies adopted by 

the people of the several States according to their own 

conditions, needs, and desires. In the search for enlightened 

public policy, individual States and communities are free to 

experiment with a variety of approaches to public issues. 

(g) Acts of the national government-whether legis- lative, executive, or judicial in nature-that exceed the 

enumerated powers of that government under the Consti- tution violate the principle of federalism established by 

the Framers. 

(h) Policies of the national government should recog- nize the responsibility of -and should encourage opportu- nities for-individuals, families, neighborhoods, local 

governments, and private associations to achieve their 

personal, social, and economic objectives through cooperative effort. 

Section 2. Fundamental Federalism Principles. In formulating and implementing policies that have federalism implications, Executive departments and agencies shall be 

bided by the following fbndamental fedehism principles: 

(a) Federalism is rooted in the knowledge that Our 

political liberties are best assured by limiting the She and 

scope of the national government. 

(b) The people of the States created the national 

government when they delegated to it those enumerated 

governmental powers relating to mattersbeyond the competence of the individual States. All other sovereign powers, save those expressly prohibited the States by the 

Constitution, are reserved to the States or to the people. 

(i) In the absence of clear constitutional or statutory 

authority, the presumption of sovereignty should rest with 

the individual States. Uncertainties regarding the legiti- mate authority of the national government should be re- solved against regulation at the national level. 

Section 3. Federalism Policymaking Criteria. In addition 

to the fundamental federalism principles set forth in sec- tion 2, Executive departments and agencies shall adhere, 

to the extent permitted by law, to the following criteria 

when formulating and implementing policies that have 

federalism implications: 

U.S. Advisory Commission on Intergovernmental Relations 27 
(a) There should be strict adherence to constitutional 

principles. Executive departments and agencies should 

closely examine the constitutional and statutory authority 

supporting any Federal action that would limit the 

policymaking discretion of the States, and should carefully 

assess the necessity for such action. To the extent practicable, 

the States should be consulted before any such action is 

implemented. Executive Order No. 12372 (“Intergovern- mental Review of Federal Programs”) remains in effect for 

the programs and activities to which it is applicable. 

(b) Federal action limiting the policymaking discretion of the States should be taken only where constitution- al authority for the action is clear and certain and the 

national activity is necessitated by the presence of a prob- lem of national scope. For the purposes of this Order: 

(1) It is important to recognize the distinction 

between problems of national scope (which may justi- fy Federal action) and problems that are merely com- mon to the States (which will not justify Federal 

action because individual States, acting individually or 

together, can effectively deal with them). 

(2) Constitutional authority for Federal action is 

clear and certain only when authority for the action 

may be found in a specific provision of the Constitu- tion, there is no provision in the Constitution prohib- iting Federal action, and the action does not encroach 

upon authority reserved to the States. 

(c) With respect to national policies administered by 

the States, the national government should grant the 

States the maximum administrative discretion possible. 

Intrusive, Federal oversight of State administration is nei- ther necessary nor desirable. 

(d) When undertaking to formulate and implement 

policies that have federalism implications, Executive de- partments and agencies shall: 

(1) Encourage States to develop their own poli- cies to achieve program objectives and to work with 

appropriate officials in other States. 

(2) Refrain, to the maximum extent possible, 

from establishing uniform, national standards for pro- grams and, when possible, defer to the States to estab- lish standards. 

(3) When national standards are required, con- sult with appropriate officials and organizations rep- resenting the States in developing those standards. 

Section 4. Special Requirements for Preemption 

(a) To the extent permitted by law, Executive depart- ments and agencies shall construe, in regulations and 

otherwise, a Federal statute to preempt State law only 

when the statute contains an express preemption provi- sion or there is some other firm and palpable evidence 

compelling the conclusion that the Congress intended 

preemption of State law, or when the exercise of State 

authority directly conflicts with the exercise of Federal 

authority under the Federal statute. 

(b) Where a Federal statute does not preempt State 

law (as addressed in subsection (a) of this section), Execu- tive departments and agencies shall construe any authori- zation in the statute for the issuance of regulations as 

authorizing preemption of State law by rulemaking only 

when the statute expressly authorizes issuance of preemp- tive regulations or there is some other firm and palpable 

evidence compelling the conclusion that the Congress 

intended to delegate to the department or agency the 

authority to issue regulations preempting State law. 

(c) Any regulatory preemption of State law shall be 

restricted to the minimum level necessary to achieve the 

objectives of the statute pursuant to which the regulations 

are promulgated. 

(d) As soon as an Executive department or agency 

foresees the possibility of a conflict between State law and 

Federally protected interests within its area of regulatory 

responsibility, the department or agency shall consult, to 

the extent practicable, with appropriate officials and orga- nizations representing the States in an effort to avoid such 

a conflict. 

(e) When an Executive department or agency pro- poses to act through adjudication or rulemaking to 

preempt State law, the department or agency shall pro- vide all affected States notice and an opportunity for ap- propriate participation in the proceedings. 

Section 5. Special Requirements for Legislative Propos- als. Executive departments and agencies shall not submit 

to the Congress legislation that would: 

(a) Directly regulate the States in ways that would 

interfere with functions essential to the States’ separate 

and independent existence or operate to directly displace 

the States’ freedom to structure integral operations in 

areas of traditional governmental functions; 

(b) Attach to Federal grants conditions that are not 

directly related to the purpose of the grant; or 

(c) Preempt State law, unless preemption is consistent 

with the fundamental federalism principles set forth in 

section 2, and unless a clearly legitimate national purpose, 

consistent with the federalism policymaking criteria set 

forth in section 3, cannot otherwise be met. 

Section 6. Agency Implementation. 

(a) The head of each Executive department and 

agency shall designate an official to be responsible for 

ensuring the implementation of this Order. 

(b) In addition to whatever other actions the desig- nated official may take to ensure implementation of this 

Order, the designated official shall determine which pro- posed policies have sufficient federalism implications to 

warrant the preparation of a Federalism Assessment. 

With respect to each such policy for which an affirmative 

determination is made, a Federalism Assessment, as de- scribed in subsection (c) of this section, shall be prepared. 

The department or agency head shall consider any such 

Assessment in all decisions involved in promulgating and 

implementing the policy. 

(c) Each Federalism Assessment shall accompany any 

submission concerning the policy that is made to the Of28 U.S. Advisory Commission on Intergovernmental Relations 
fice of Management and Budget pursuant to Executive 

Order No. 12291 or OMB Circular No. A-19, and shall: 

(1) Contain the designated official’s certification 

that the policy has been assessed in light of the princi- ples, criteria, and requirements stated in sections 2 

through 5 of this Order; 

(2) IdentG any provision or element of the policy 

that is inconsistent with the principles, criteria, and re- quirements stated in sections 2 through 5 of this Order; 

(3) Identify the extent to which the policy imposes 

additional costs or burdens on the States, including 

the likely source of funding for the States and the 

ability of the States to fulfill the purposes of the 

policy; and 

(4) Identify the extent to which the policy would 

affect the States’ ability to discharge traditional State 

governmental functions, or other aspects of State sov- ereignty. 

Section 7. Governmentwide Federalism Coordination and 

Review 

(a) In implementing Executive Order No. 12291 and 

OMB Circular No. A-19, the Office of Management and 

Budget, to the extent permitted by law and consistent with 

the provisions of those authorities, shall take action to 

ensure that the policies of the Executive departmentsand 

agencies are consistent with the principles, criteria, and 

requirements stated in sections 2 through 5 of this Order. 

(b) In submissions to the Office of Management and 

Budget pursuant to Executive Order No. 12291 and OMB 

Circular A-19, Executive departments and agencies shall 

identify proposed regulatory and statutory provisions that 

have significant federalism implications and shall address 

any substantial federalism concerns. Where the depart- ments or agencies deem it appropriate, substantial federalism concerns should also be addressed in notices of 

proposed rulemaking and messages transmitting legisla- tive proposals to the Congress. 

Section 8. Judicial Review. This Order is intended only to 

improve the internal management of the Executive 

Branch, and is not intended to create any right or benefit, 

substantive or procedural, enforceable at law by a party 

against the United States, its agencies, its officers, or any 

person. 

Memorandum on Federalism Executive Order 

for the Heads of Executive Departments 

and Agencies 

President George Bush 

February 16,1990 

I wish to take this opportunity to reaffirm an impor- tant Executive order, issued when I served as Vice Presi- dent, and call for your personal commitment in ensuring 

your department’s or agency’s compliance with its provi- sions. This order, which is entitled “Federalism” (No. 

12612, October 26, 1987), establishes fundamental princi- ples and criteria to guide you in developing and imple- menting policies that have substantial direct effects on 

States and local governments. Let me note a few of the 

order’s more important provisions: 

In most areas of governmental concern, the 

States uniquely possess the constitutional au- thority, the resources, and the competence to 

discern the sentiments of the people and to govem accordingly. 

The nature of our constitutional system encour- ages a healthy diversity in the public policies 

adopted by the people of the several States ac- cording to their own conditions, needs, and desires. 

In the search for enlightened public policy, individ- ual States and communities are free to experiment 

with a variety of approaches to public issues. 

Federal action limiting the policymaking discre- tion of the States should be taken only where 

constitutional authority is clear and certain and 

the national activity is necessitated by a problem 

of national scope. 

With respect to national policies administered by 

the States, the national Government should 

grant the States the maximum administrative dis- cretion possible. 

When undertaking to formulate and implement 

policies that have Federalism implications, Fed- eral executive departments and agencies should 

(1) encourage States to develop their own policies 

to achieve program objectives and to work with 

appropriate officials in other States; (2) refrain, 

to the maximum extent possible, from establish- ing uniform national standards for programs and, 

when possible, defer to the States to establish 

standards; and (3) when national standards are 

required, consult with appropriate officials and 

organizations representing the States in develop- ing those standards. 

The Executive order has special requirements dealing 

with preemption and with legislative proposals. It also 

requires that, when aproposedpolicy has sufficient Feder- alism implications, the agency must prepare a Federalism 

Assessment. This assessment is intended to provide the 

agency and the Administration with an evaluation of the 

extent to which the policy imposes additional costs or 

burdens on States and local governments. You are to 

consider the Federalism Assessment before adopting and 

implementing the policy. 

The order also requires that you designate an official 

to be responsible for ensuring your agency’s implementa- tion of the order. Please ensure that your agency has 

provided the name of the designated official to the Direc- tor of the Office of Management and Budget. 

I want to stress that the principles of this order are 

central to my Administration. I ask that each of you per- sonally review the provisions of Executive Order No. 

12612and assure that the mechanisms necessary to ensure 

their implementation are in place. 

US. Advisory Commission on Intergovernmental Relations 29 
Recent ACIR Publications 

Medicaid: Intergovernmental Bends and Options. A.119. 1992 .................................... $10.00 

Local Boundary Commissions: Status and Roles in Forming. Adjusting and Dissolving 

Local Government Boundaries. M.183. 1992 ................................................. $8.00 

Characteristics of Federal Grant-in-Aid Programs to State and Local Governments: 

Grants Funded FY 1991. M.182. 1992 ...................................................... $10.00 

Significant Features of Fiscal Federalism. 1992 Edition Volume I. M.180. 1992 ...................... $20.00 

Metropolitan Organization: The Allegheny County Case. M.181. 1992 ................................ $10.00 

State Taxation of Interstate Mail Order Sales. M.179. 1992 ....................................... $10.00 

The Changing Public Sector: Shifts in Governmental Spending and Employment. M.178. 1991 ........ $15.00 

Coordinating Water Resources in the Federal System: The Groundwater-Surface Water Connection. 

Changing Public Attitudes on Governments and Taxes: 1991. S.20. 1991 .............................. $10.00 

Interjurisdictional Tax and Policy Competition: Good or Bad for the Federal System? M.177. 1991 .... $10.00 

State-Local Relations Organizations: The ACIR Counterparts. A.117. 1991 ......................... $10.00 

The Structure of State Aid to Elementary and Secondary Education. M.175. 1990 ................... $10.00 

Representative Expenditures: Addressing the Neglected Dimension of Fiscal Capacity, M.174. 1990 ....... $20.00 

Mandates: Cases in State-Local Relations. M.173. 1990 .......................................... $10.00 

State Constitutional Law Cases and Materials. M.159S. 1990 ..................................... $30.00 

Intergovernmental Regulation of Telecommunications. A.115. 1990 ................................ $10.00 

1988 Fiscal Capacity and Effort. M.170. 1990 ................................................... $20.00 

State and Local Initiatives on Productivity, Technology. and Innovation. A.114. 1990 .................... $25.00 

Local Revenue Diversification: 

Rural Economies. SR.13. 1990 ............................................................. $8.00 

Local Sales Taxes. SR.12, 1989 ............................................................. $8.00 

Local Income Taxes. SR.lO. 1988 ........................................................... $5.00 

User Charges. SR.6. 1987 ................................................................. $5.00 

State Taxation of Banks: Issues and Options. M.168. 1989 ........................................ $10.00 

State Regulation of Banks in an Era of Deregulation. A.llO. 1988 .................................. $10.00 

State Constitutions in the Federal System: Selected Issues and Opportunities for State Initiatives. 

Residential Community Associations: 

A.118. 1991 ............................................................................. $15.00 

A.113. 1989 .............................................................................. $15.00 

Private Governments in the Intergovernmental System? A.112. 1989 ........................... $10.00 

Questions and Answers for Public Officials. M.166. 1989 ....................................... $5.00 

Disability Rights Mandates: Federal and State Compliance with Employment Protections 

and Architectural Barrier Removal. A.111. 1989 ............................................. $10.00 

Assisting the Homeless: State and Local Responses in an Era of Limited Resources. M.161. 1988 ..... $10.00 

M.160. 1988 .............................................................................. $5.00 

Devolution of Federal Aid Highway Programs: Cases in State-Local Relations and Issues in State Law, 

State-Local Highway Consultation and Cooperation: The Perspective of State Legislators. SR.9. 1988 . . 

Devolving Selected Federal-Aid Highway Programs and Revenue Bases: A Critical Appraisal. 

5.00 

A.108. 1987 .............................................................................. $10.00 

The Organization of Local Public Economies. A.109. 1987. ....................................... $5.00