Surface Transportation: Restructured Federal Approach Needed for More Focused, Performance-Based, and Sustainable Programs
Published: 2008-03-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Surface transportation programs need to be reexamined in the context of the nation's current unsustainable fiscal path. Surface transportation programs are particularly ready for review as the Highway Trust Fund faces a fiscal imbalance at a time when both congestion and travel demand are growing. As you requested, this report (1) provides an overview of the federal role in surface transportation and the goals and structures of federal programs, (2) summarizes GAO's conclusions about the structure and performance of these programs, and (3) provides principles to assess options for focusing future surface transportation programs. GAO's study is based on prior GAO reports, stakeholder reports and interviews, Department of Transportation documents, and the views of transportation experts.
section_title: What GAO Found
paragraphs: Since federal financing for the interstate system was established in 1956, the federal role in surface transportation has expanded to include broader goals, more programs, and a variety of program structures. To incorporate additional transportation, environmental and societal goals, federal surface transportation programs have grown in number and complexity. While some of these goals have been incorporated as new grant programs in areas such as transit, highway safety, and motor carrier safety, others have been incorporated as additional procedural requirements for receiving federal aid. Broad program goals, eligibility requirements, and transfer provisions give states and local governments substantial discretion for allocating most highway infrastructure funds. For transit and safety programs, broad basic grant programs are augmented by programs that either require a competitive selection process or use financial incentives to directly target federal funds toward specific goals or safety activities. Many current programs are not effective at addressing key transportation challenges such as increasing congestion and freight demand. They generally do not meet these challenges because federal goals and roles are unclear, many programs lack links to needs or performance, and the programs often do not employ the best tools and approaches. The goals of current programs are numerous and sometimes conflicting. Furthermore, states' ability to transfer highway infrastructure funds among different programs is so flexible that some program distinctions have little meaning. Moreover, programs often do not employ the best tools and approaches; rigorous economic analysis is not a driving factor in most project selection decisions and tools to make better use of existing infrastructure have not been deployed to their full potential. Modally-stovepiped funding can impede efficient planning and project selection and, according to state officials, congressionally directed spending may limit the states' ability to implement projects and efficiently use transportation funds. A number of principles can help guide the assessment of options for transforming federal surface transportation programs. These principles include: (1) ensuring goals are well defined and focused on the federal interest, (2) ensuring the federal role in achieving each goal is clearly defined, (3) ensuring accountability for results by entities receiving federal funds, (4) employing the best tools and approaches to emphasize return on targeted federal investment, and (5) ensuring fiscal sustainability. With the sustainability and performance issues of current programs, it is an opportune time for Congress to more clearly define the federal role in transportation and improve progress toward specific, nationally-defined outcomes. Given the scope of needed transformation, it may be necessary to shift policies and programs incrementally or on a pilot basis to gain practical lessons for a coherent, sustainable, and effective national program and financing structure to best serve the nation for the 21st century.

section_title: Letter
paragraphs: Transportation programs, like all areas of federal involvement, need to be  viewed in the context of the nation’s fiscal position. Long-term fiscal  simulations by GAO, the Congressional Budget Office (CBO), and others  all show that despite a 3-year decline in the federal government’s unified  budget deficit, we still face large and growing structural deficits driven by  rising health care costs and known demographic trends. As the baby boom  generation retires, entitlement programs will grow and require increasing  shares of federal spending. Absent significant changes to tax and spending  programs and policies, we face a future of unsustainable deficits and debt  that threaten to cripple our economy and quality of life. Although the  long-term outlook is driven by health care costs, demographics and  revenues, other areas of government should also be re-examined. This  involves a fundamental reexamination of government programs and  commitments by reviewing their results and testing their continued  relevance and relative priority for the 21st century. This reexamination  offers an opportunity to address emerging needs by eliminating outdated  or ineffective programs, more sharply defining the federal role in relation  to state and local roles, and modernizing those programs and policies that  remain relevant.
The nation’s surface transportation programs are particularly ready for  reexamination. For example, the Highway Trust Fund (HTF) was created  in 1956 to finance the construction of the Interstate Highway System  because of the national interest in interstate mobility. That system is now  complete. However, the federal highway program’s financing and delivery  mechanisms have not substantially changed and their continued relevance  in the 21st century is unclear. In addition, without significant changes in  funding mechanisms or revenue sources, or reductions in planned  spending, the HTF is projected to begin incurring significant deficits in the  years ahead. As a result, in 2007, we added financing the nation’s federal  transportation infrastructure to GAO’s High Risk List.
Given the need to reexamine all government programs and the importance  of a sustainable federal role in the nation’s surface transportation system,  you asked us to examine the federal approach to surface transportation  programs—in particular, those financed by the HTF. This report (1)  provides an historical overview of the federal role in surface  transportation and the goals and structures of federal surface  transportation programs funded by the HTF, (2) summarizes conclusions  from our prior work on the structure and performance of these and other  federal surface transportation programs, and (3) identifies principles to  help assess options for focusing the future federal role and structure of  federal surface transportation programs.
To provide an historical overview of the federal role in surface  transportation and the goals and structures of federal surface  transportation programs funded by the HTF, we drew information from  statutes, regulations, budget documents, agency reports, and literature on  transportation policy by outside experts. We also interviewed officials in  the Office of the Secretary of Transportation and in the relevant  Department of Transportation (DOT) modal administrations. To  summarize conclusions from our prior work on the structure and  performance of federal surface transportation programs, we synthesized  relevant GAO reports on specific transportation programs, and reports  that looked at broader issues of performance measurement, oversight,  grant design, and other related issues. We also reviewed reports and other  materials from stakeholder groups and other organizations and sought the  views of transportation experts, including those who participated in a  forum on transportation challenges convened by the Comptroller General  in June 2007. To identify principles to help assess options for focusing the  future federal role and the structure of surface transportation programs,  we examined principles found in relevant GAO reports on specific  transportation programs, and reports that looked at broader issues such as  performance measurement, oversight, grant design, and other related  issues. We performed our work between April 2007 and February 2008 in  accordance with generally accepted government auditing standards. A  more extensive discussion of our scope and methodology is in appendix I.
subsections: section_title: Background
paragraphs: Since 1796, the federal government has had a role in developing and  funding surface transportation infrastructure such as roads and canals to  promote the nation’s economic vitality and improve the quality of life for  its citizens. In 1956, Congress substantially broadened the federal role in  road construction by establishing the Highway Trust Fund, a dedicated  source of federal revenue, to finance a national network of standardized  highways, known as the Interstate Highway System. This system, financed  and built in partnership with state and local government over 50 years, has  become central to transportation in the United States.
Currently most federal surface transportation programs funded by the  HTF span four major areas of federal investment: highway infrastructure,  transit infrastructure and operations, highway safety, and motor carrier  safety. Federal surface transportation funds are distributed either by a  formula or on a discretionary basis through several individual grant  programs. These grant programs are organized by mode and administered  by four of DOT’s operating administrations—the Federal Highway  Administration (FHWA), the Federal Transit Administration (FTA), the  National Highway Traffic Safety Administration (NHTSA), and the Federal  Motor Carrier Safety Administration (FMCSA). The modal administrations  work in partnership with the states and other grant recipients to  administer federal surface transportation programs. For example the  federal government currently provides financial assistance, policy  direction, technical expertise and some oversight, while state and local  governments are ultimately responsible for executing transportation  programs by matching and distributing federal funds and by planning,  selecting and supervising infrastructure projects and safety programs  while complying with federal requirements. Appendix II provides further  information on the current and historical operation of these federal  surface transportation programs. Additionally, the federal government  provides financial assistance for other surface transportation programs  such as intercity passenger rail, which has received over $30 billion of  federal support since its inception in 1971. However this program is  financed and operated separately from other surface transportation  programs and an in-depth discussion of federal intercity passenger rail  assistance is not included in this report.
Increases over the past 10 years in transportation spending at all levels of  government have improved the physical condition of highways and transit  facilities to some extent, but congestion has worsened and safety gains  have leveled off. According to the most recent DOT data, between 1997  and 2004 total highway spending per year by federal, state, and local  governments grew by 22.7 percent in constant dollars. During this time,  DOT reported some overall improvements in physical condition for road  systems and bridges. For example, the percentage of vehicle miles traveled  per year on “good” pavement conditions increased from 39.4 percent to  44.2 percent and the percentage of deficient bridges fell from 29.6 percent  in 1998 to 26.7 percent per year in 2004. At the same time, incidents such  as the Minneapolis bridge collapse in August 2007 indicate that significant  challenges remain. Furthermore, despite increases in investment levels  and some improvements in physical condition, operational performance  has declined. For example, during the same period the average daily  duration of travel in congested conditions increased from 6.2 hours to 6.6  hours, and the extent and severity of congestion across urbanized areas  also grew. Transportation safety has improved considerably over the past  40 years, and although motor vehicle and large truck fatality rates have  generally continued to fall modestly since the mid-1990s, the  improvements yielding the greatest safety benefits (e.g., vehicle  crashworthiness requirements and increases in safety belt use) have  already occurred, making future progress more difficult.
Furthermore, demand on transportation facilities nationwide has grown  considerably since our transportation systems were built and is projected  to increase in the coming decades as population, income levels, and  economic activity continue to rise. According to the Transportation  Research Board, an expected population growth of 100 million people  could double the demand for passenger travel by 2040. Similarly, freight  traffic is expected to climb by 92 percent from 2002 to 2035. These trends  have the potential to substantially deepen the strain on the existing  system, increasing congestion, and decreasing the reliability of our  transportation network—with potentially severe consequences ranging  from the economic impact of wasted time and fuel to the environmental  and health concerns associated with increased fuel emissions.
Moreover, at the current fuel tax rate, revenues to support the HTF may  not be sufficient to sustain it. Currently, trust fund receipts are growing  and will continue to grow with increased traffic. However, the purchasing  power of the dollar has declined with inflation, and the federal motor fuel  tax rate has not increased since 1993. In addition, more fuel-efficient and  alternative-fuel vehicles are using less taxable motor fuel per mile driven.  Recent legislation has authorized spending that is expected to outstrip the  growth in trust fund receipts. According to a recent estimate from CBO,  the remaining balance in the Highway Account of the Highway Trust Fund  will be exhausted in 2009, and in fiscal year 2009 projected highway  spending will exceed revenue by $4 to $5 billion.
In January 2008 the National Surface Transportation Policy and Revenue  Study Commission released a report with several recommendations to  place the trust fund on a sustainable path, as well as reform the current  structure of the nation’s surface transportation programs. The  recommendations include significantly increasing the level of investment  by all levels of the government in surface transportation, consolidating and  reorganizing the current programs, speeding project delivery, and making  the current program more performance- and outcome-based and mode- neutral, among other things. To finance the additional investment, the  Commission recommended raising the current federal fuel tax rate by 25  to 40 cents per gallon on an incremental basis equivalent to an increase of  5 to 8 cents per gallon per year for 5 years. It also said that states would  have to raise revenue from a combination of higher fuel taxes and other  sources. In addition to raising the fuel tax, the Commission recommended  a number of other user-based fees such as tolling, congestion pricing, and  freight fees to provide additional revenue for transportation  improvements.
Three members of the Commission disagreed with some of the findings  and recommendations of the Commission report. For example, the  minority view disagreed with the Commission’s recommendations on  expanding the federal role and increasing the federal fuel tax, among  others. Rather, the minority view proposed sustaining fuel taxes at the  current levels, refocusing federal investment on two areas of national  interest, and providing the states with greater regulatory flexibility,  incentives, and the analytical tools to allow adoption of market-based  reforms on their highway systems. We have ongoing work assessing the  Commission’s proposal and other reauthorization proposals and will be  issuing a report in 2008.
section_title: The Federal Role in Surface Transportation Has Expanded to Include Broader Goals, More Programs, and a Variety of Program Structures
paragraphs: Although most surface transportation funds are still directed to highway  infrastructure, the federal role in surface transportation has broadened  over the past 50 years to incorporate goals beyond highway construction,  and federal surface transportation programs have grown in number and  complexity. The resulting conglomeration of program structures reflects a  variety of federal approaches for setting priorities, distributing federal  funds, and sharing oversight responsibility with state and local partners  for surface transportation programs.
subsections: section_title: Federal Goals Have Broadened, and Programs Have Grown in Number and Complexity
paragraphs: The HTF was established in 1956 to provide federal funding for Interstate  highway construction and other infrastructure improvements based on the  “user-pay principle”— that is, users of transportation systems should pay  for the systems’ construction through highway user fees such as taxes on  motor fuels, tires, and trucks. However, since 1956, the federal role in  surface transportation has expanded beyond funding Interstate  construction and highway infrastructure to include grant programs that  address other transportation, societal, and environmental goals. For  example, although most HTF expenditures continue to support highway  infrastructure improvements (see fig. 1), Congress established new federal  grants for highway safety and transit during the 1960s and added a motor  carrier safety grant program during the 1980s.
Furthermore, Congress has since expanded the initial basic grant  programs in each of these areas to incorporate a variety of different goals.  For example, the highway program has expanded to include additional  programs to fund air quality improvements, Interstate maintenance, and  safety-related construction improvements (see fig. 2).
Federal transit assistance expanded from a single grant program that  funded capital projects to multiple programs that provide general capital  and operating assistance for urban and rural areas, as well as numerous  specialized grants with goals ranging from supporting transit service for  the elderly, persons with disabilities, and low-income workers to  promoting the use of alternative fuels (see fig. 3).
Federal safety assistance has also expanded from funding general state  highway and motor carrier safety programs and enforcement activities to  additionally funding many specialized grants to address specific issues.  For example, federal highway safety assistance currently includes several  grant programs to address specific accident factors (e.g., alcohol-impaired  driving) and safety data gaps (see fig. 4). Similarly, the number of federal  motor carrier assistance programs has increased to include several grants  for improving data collection, supporting commercial driver’s license  programs and funding border enforcement activities (see fig. 5).  Consequently, federal funds currently support a wide variety of goals and  modes beyond the initial federal focus on highway infrastructure, ranging  from broad support for transit in urban areas, to targeted grants to  increase seat-belt usage.
Furthermore, Congress has also expanded the scope of federal safety  goals to include specific legislative changes at the state level. For example,  in accepting certain federal-aid highway infrastructure funds, states must  enact certain laws to improve highway safety or face penalties in the form  of either withholdings or transfers in their federal grants. Over the past 30  years, penalty or incentive provisions have been used to encourage states  to enact laws that establish a minimum drinking age of 21 years, a  maximum blood alcohol level of 0.08 to determine impaired driving ability,  and mandatory seat belt usage, among others (see fig. 4), with transfer or  withholding penalties as high as 10 percent of a state’s designated highway  infrastructure funds. While most states have chosen to adopt laws that  comply with many of these provisions, some remain subject to certain  penalties. For example, as of January 2008, 11 states are penalized for not  enacting an open container law and 11 are penalized for not enacting a  repeat offender law.
As federal goals have broadened, Congress has added new federal  procedural requirements for infrastructure projects and programs and  agencies have issued more complex rules to address these additional  federal goals. For example, Congress established cooperative urban  transportation planning as a matter of national interest and passed  legislation in 1962 requiring all construction projects to be part of a  continuing, comprehensive, and cooperative planning process between  state and local governments. In another example, grant recipients may be  required to conduct environmental assessments for many federally funded  transportation projects to comply with the federal environmental goals  established by the National Environmental Policy Act of 1969 (NEPA).   Other federal requirements may include compliance with the Americans  with Disabilities Act, nondiscrimination clauses in the Civil Rights Act of  1964, labor standards mandated by the Davis-Bacon Act, and Buy America  procurement provisions, among others.
Although behavior-oriented safety programs and activities are generally  not subject to construction-related requirements, Congress has required  that agencies address additional federal goals in safety-related rulemaking  processes. For example, to address national environmental objectives,  Congress expanded NHTSA’s regulatory scope in highway safety to  include establishing regulations for corporate average fuel economy  standards, in addition to issuing rules in areas such as tire-safety standards  and occupant-protection devices (e.g., seat belts). Similarly, to address  other areas of national concern, Congress has broadened FMCSA’s  regulatory authority in motor carrier safety to include household goods  movement, medical requirements for motor carrier operators, and greater  oversight of border and international safety. Furthermore, when  establishing federal standards in these areas, regulatory agencies such as  NHTSA and FMCSA may be subject to increasingly rigorous requirements  for analysis and justification associated with a wide range of federal  legislation and executive orders including NEPA, Executive Order 12866  requiring cost-benefit analysis for proposed rules, Executive Order 13211  requiring consideration of the effects of government regulation on energy,  and the Unfunded Mandates Reform Act of 1995, among others.
section_title: Current Program Structures Reflect a Variety of Federal Approaches to Surface Transportation
paragraphs: Program expansion over the past 50 years has created a variety of grant  structures and established different federal approaches for setting  priorities and distributing federal funds across surface transportation  programs. These approaches, which range from formula grants to  dedicated spending provisions, give state and local governments varying  degrees of discretion in allocating federal funds. As in the past, most  surface transportation programs are jointly administered by the federal  government in partnership with state or local governments, but in recent  years the federal government has increasingly delegated oversight  responsibility to state and local governments.
subsections: section_title: Federal Responsibility for Establishing Priorities and Directing Funds Varies across Programs
paragraphs: Federal approaches for setting priorities and distributing funds currently  range from giving state and local governments broad discretion in  allocating highway infrastructure funds to directly targeting specific  federal goals through the use of incentive grants and penalty provisions in  safety programs. In 1956 federal surface transportation funds were  distributed to the states through four formula grant programs that  provided federal construction aid for certain eligible highway categories  (e.g., Interstate, primary, and secondary highways and urban extensions).  The states in turn, matched and distributed funds at their discretion,  within each program’s eligibility requirements. Within the highway  program, this federal-state partnership has changed in response to  considerable increases in state and local authority and flexibility since  1956.
Largely because of revisions to federal highway programs in the 1990s,  state and local governments currently have greater discretion to allocate  the majority of their federal highway funds according to state and local  priorities. For example, core highway programs such as the Surface  Transportation Program and the National Highway System program have  broader goals and project eligibility requirements than earlier highway  infrastructure grant programs. Although funds continue to be distributed  by formula to the states for individual programs based on measures of  highway use or the extent of a state’s highway network, or other factors,  as figure 6 demonstrates, six core highway programs permit the states to  transfer up to 50 percent of their apportioned funds, with certain  restrictions, to other eligible highway programs. Furthermore, although  the process for calculating the distributions is complex for some  programs, the end result of most highway program formulas is heavily  influenced by minimum apportionment and “equity” requirements. For  fiscal year 2008, each state’s share of formula funds will be at least 92  percent of their relative revenue contributions to the Highway Account of  the Highway Trust Fund. According to FHWA estimates, the equity  requirements will provide approximately $9 billion in highway funds to the  states in addition to the amount distributed by formula through the  individual grant programs. Over $2 billion of these additional funds will  have the same broad eligibility requirements and transfer provisions of the  Surface Transportation Program. Moreover, flexible funding provisions  within highway and transit programs allow certain infrastructure funds to  be used interchangeably for highway or transit projects.
Major transit infrastructure grants currently range from broad formula  grants that provide capital and operating assistance, such as the Block  Grants Program (Urbanized Area Formula Grants), to targeted  discretionary grants for new transit systems, such as New Starts and Small  Starts, that require applicants to compete for funding based on statutorily  defined criteria. For example, projects must compete for New Starts funds  on the basis of cost-effectiveness, potential mobility improvements,  environmental benefits, and economic development effects, among other  factors. Additionally, smaller formula grants direct funds to general goals  such as supporting transit services for special populations like elderly,  disabled, and low-income persons. Unlike most surface transportation  funding, which is distributed through the states, most transit assistance is  distributed directly to local agencies, since transit assistance was  originally focused on urban areas.
Current major highway and motor carrier safety grants include formula  grants to provide general assistance for state highway safety programs and  improving motor carrier safety and enforcement activities, such as  Highway Safety Programs (402) and Motor Carrier Safety Assistance  Program (MCSAP) Grants. They also include targeted discretionary grants  such as Occupant Protection Incentive Grants and Border Enforcement  Grants. Additionally, they include penalty provisions, such as Open  Container Requirements (154) and Minimum Penalties for Repeat  Offenders for Driving While Intoxicated or Driving Under the Influence  (164), designed to address specific safety areas of national interest. Unlike  formula-based funding, some of the discretionary grants, such as the  Safety Belt Performance Grants, directly promote national priorities by  providing financial incentives for meeting specific performance or safety  activity criteria (e.g., enforcement, outreach). Additionally, penalty  provisions such as those associated with Open Container laws and MCSAP  Grants promote federal priorities by either transferring or withholding  state highway infrastructure funds from states that do not comply with  certain federal provisions. For example, in 2007, penalty provisions  transferred over $217 million of federal highway infrastructure assistance  to highway safety programs in the 19 states and Puerto Rico that were  penalized for failure to enact either open container or repeat offender  laws.
Finally, Congress provides congressionally directed spending for surface  transportation through specific provisions in legislation or committee  reports. While estimates of the precise number and value of these  congressional directives vary, observers agree that they have grown  dramatically. For instance, the Transportation Research Board found that  congressional directives have grown from 11 projects in the 1982  reauthorization act to over 5,000 projects in the 2005 reauthorization act.
section_title: State and Local Government Oversight Responsibilities Have Increased
paragraphs: Most federal surface transportation programs continue to be jointly  administered by the federal and state, or local governments, but the  federal government has increasingly delegated oversight responsibility to  state and local governments. This trend is most pronounced for highway  infrastructure programs; however, it has also occurred in federal transit  and safety programs. For example, when Interstate construction began,  the federal government fully oversaw all federally funded construction  projects, including approving design plans, specifications, and estimates,  and periodically inspecting construction progress. In 1973, Congress  authorized DOT to delegate oversight responsibility to states for  compliance with certain federal requirements for noninterstate projects.  During the 1990s, Congress further expanded this authority to allow states  and FHWA to cooperatively determine the appropriate level of oversight  for federally funded projects, including some Interstate projects.  Currently, based on a stewardship agreement with each state, FHWA  exercises full oversight over a limited number Federal-aid Highway  projects, constituting a relatively limited amount of highway mileage.  States are required to oversee all Federal-aid Highway projects that are not  on the National Highway System, which constitutes a large majority of the  road mileage receiving federal funds, and states oversee design and  construction phases of other projects based on an agreement between  FHWA and the state. Full federal oversight for transit projects is limited to  major capital projects that cost over $100 million, and grant recipients are  allowed to self-certify their compliance with certain federal laws and  regulations for other projects. Although state and local grant recipients  have considerable oversight authority, FHWA and FTA both periodically  review the recipients’ program management processes to ensure  compliance with federal laws and regulations.
State and local government responsibilities for overseeing transportation  planning processes have also grown in recent decades. Although such  responsibilities predate federal transportation assistance programs, since  1962, the federal government has made compliance with numerous  planning and project selection requirements a condition for receiving  federal assistance. During the 1970s, federal requirements grew in range  and complexity and, in some cases, specified how state and local  governments should conduct planning activities. However, since the 1980s,  state and local governments have had greater flexibility to fulfill federal  planning requirements. For example, in 1983, urban transportation  planning regulations were revised to reduce the level of direct federal  involvement in state and local planning processes, and state and local  agencies were allowed to self-certify their compliance with federal  planning requirements. Similarly, although the federal government  identified specific environmental and economic factors to be considered in  the planning process as part of the surface transportation program  legislation enacted in 1991 and subsequently amended in 1998, these  requirements give state and local governments considerable discretion in  selecting analytical tools to evaluate projects and make investment  decisions based on their communities’ needs and priorities.
The states have also been given greater oversight responsibility for safety  programs as federal agencies have shifted from direct program oversight  to performance-based oversight of state safety goals. For example, since  1998, NHTSA has not approved state highway safety plans or projects, but  instead focuses on a state’s progress in achieving the goals it set for itself  in its annual safety performance plan. Under this arrangement, a state  must provide an annual report that outlines the state’s progress towards  meeting its goals and performance measures and the contribution of  funded projects toward meeting its goals. If a state does not meet its  established safety goals, NHTSA and the state work cooperatively to  create a safety improvement plan. FMCSA uses a similar approach to  oversee state motor carrier safety activities. Starting in 1997, the states  were required to identify motor carrier safety problems based on safety  data analysis, target their grant activities to address these issues, and  report on their progress toward the national goal of reducing truck  crashes, injuries, and fatalities. Much as FHWA and FTA do for their grant  programs, both NHTSA and FMCSA periodically review state management  processes for compliance with federal laws and regulations.
section_title: Current Federal Surface Transportation Programs Do Not Effectively Address Identified Transportation Challenges
paragraphs: Many federal surface transportation programs do not effectively address  identified transportation challenges such as growing congestion. While  program goals are numerous, they are sometimes conflicting and often  unclear—which contributes to a corresponding lack of clarity in the  federal role. The largest highway, transit, and safety grant programs  distribute funds through formulas that are typically not linked to  performance and, in many cases, have only an indirect relationship to  needs. Mechanisms generally do not link programs to the federal  objectives they are intended to address, in part due to the wide discretion  granted to states and localities in using most federal funds. Furthermore,  surface transportation programs often do not employ the best tools and  approaches available, such as rigorous economic analysis for project  selection and a mode-neutral approach to planning and investment.
subsections: section_title: There Is No Clear, Consistent Federal Role in Surface Transportation
paragraphs: The federal role in surface transportation is unclear, in part because  program goals are often unclear. In some cases, stated goals may be  contradictory or may come into direct conflict. For example, it may not  be possible to improve air quality while spurring economic development  with new highway construction. With the proliferation of goals and  programs discussed in the previous section of this report, the federal role  varies from funding improvements in specific types of infrastructure (such  as the National Highway System) to aiming at specific outcomes (such as  reducing highway fatalities). At a recent expert panel on transportation  policy convened by the Comptroller General, experts cited the lack of  focus of the federal role in transportation as a problem, and some  stakeholders have also made similar criticisms.
In some policy areas, the federal role is limited despite consensus on  goals. For example, freight movement is widely viewed as a top priority,  yet no clear federal role has been established in freight policy. DOT’s draft  Framework for a National Freight Policy, issued in 2006, is a step toward  clarifying a federal role and strategy, but it lacks specific targets and  strategies and criteria for achieving them. Current approaches to  planning and financing transportation infrastructure do not effectively  address freight transportation issues—few programs are directly aimed at  freight movement, and funding is based on individual modes, but freight  moves across many modes. Similarly, despite statutes and regulations  that identify an intermodal approach that provides connections across  modes as a goal of federal transportation policy, there is currently only  one federal program specifically designed for intermodal infrastructure,  and all the funds available for the program are congressionally designated  for specific projects.
The federal government also lacks a defined role in or mechanism for  aiding projects that span multiple jurisdictions. The discretion and  differing priorities of individual states and localities can make it difficult to  coordinate large projects that involve more than one state or local  sponsor. There have been some successful multijurisdictional  transportation initiatives, such as the FAST Corridor across several  metropolitan areas in Washington State, but a lack of established political  or administrative mechanisms for cooperation, combined with the large  degree of state and local autonomy in transportation decision-making, is  an obstacle to such “megaprojects.” At a hearing of the National Surface  Transportation Policy and Revenue Study Commission in New York City,  an expert on the regional economy cited the Tappan Zee Bridge in New  York State as an example of the obstacles such projects can face.  Neighboring Connecticut wants the bridge’s capacity expanded, but there  is currently no established mechanism that allows Connecticut to help  move the project forward. In testimony for the Commission, stakeholders  such as the U.S. Chamber of Commerce and the American Association of  Port Authorities cited fostering interjurisdictional coordination as a key  federal role, and AASHTO has also highlighted the need for improved  multijurisdictional coordination mechanisms in its reports on the future of  federal transportation policy.
At times, DOT has undertaken new activities without assessing the  rationale for a federal role. For example, the agency made short sea  shipping of freight a priority, but did not first examine the effect of  federal involvement on the industry or identify obstacles to success and  potential mitigating actions. Without a consistent approach to identifying  the rationale for a federal role, DOT is limited in its ability to evaluate  potential investments and determine whether short sea shipping—or  another available measure—is the most effective means of enhancing  freight mobility.
section_title: Most Programs Do Not Link Funding to Performance and Lack Mechanisms to Ensure That Stated Objectives Are Met
paragraphs: Most federal surface transportation programs lack links between funding  and performance. Federal funding for transportation has increased  significantly in recent years, but because spending is not explicitly linked  to performance, it is difficult to assess the impact of these increases on the  achievement of key goals. During this period of funding increases, the  physical condition of the highway system has improved, but the system’s  overall performance has decreased, according to available measures of  congestion. DOT has established goals under the Government  Performance and Results Act (GPRA) of 1993 that set specific benchmarks  for performance outcomes such as congestion and highway fatalities.  However, these performance measures are not well-reflected in individual  grant programs because disbursements are seldom linked to outcomes— most highway funds are apportioned without relationship to the  performance of the recipients. The largest transit and safety programs also  lack links to performance. States and localities receive the same  disbursement regardless of their performance at, for example, reducing  congestion or managing project costs. As a result, the incentive to improve  return on investment—the public benefits gained from public resources  expended—is reduced.
Safety and some transit grants are more directly linked to goals than  highway infrastructure programs, and several incorporate performance  measures. Whereas highway infrastructure programs tend to focus on  improving specific types of facilities such as bridges, highway safety, and,  to a lesser extent, transit programs, are more often designed to achieve  specific objectives. For instance, the goal of the Job Access and Reverse  Commute transit program is to make jobs more accessible for welfare  recipients and other low-income individuals. Likewise, under the Section  402 State and Community Highway Safety Grant Program, funds must be  used to further the goal of reducing highway fatalities. To some extent,  transit and safety programs also have a more direct link to needs because  their formulas do not incorporate equity adjustments that seek to return  funds to their source. Furthermore, several highway safety and motor  carrier safety grants make use of performance measures and incentives.  For example, under the Motor Carrier Safety Assistance Program, some  funds are set aside for incentive grants that are awarded using five state  performance indicators that include, among others, large truck-involved  vehicle fatality rates, data sharing, and commercial driver’s license  verification.
Most highway transportation programs lack links to need as well as  performance. As discussed above, most grant funds are instead distributed  according to set formulas that typically have an indirect relation to need.  As a result, grant disbursements for these programs not only fail to reflect  performance, but they may also not reflect need. Some of the formula  criteria, such as population, are indirect measures of need, but the equity  bonus and minimum apportionment criteria are not related to need, and  exert a strong influence on formula outcomes. Certain programs, such as  the Highway Bridge Replacement and Rehabilitation Program, which  bases disbursements on the cost of needed repairs, use more direct  measures. In general, however, the link between needs and federal  highway funding is weak.
Besides lacking links between funding and performance, federal surface  transportation programs generally lack mechanisms to tie state actions to  program goals. DOT does not have direct control over the vast majority of  activities that it funds; instead, states and localities have wide discretion in  selecting projects to fund with federal grants. Federal law calls the  federal-aid highway program a “federally-assisted state program,” and  specifies that grant funds “shall in no way infringe on the sovereign rights  of the States to determine which projects shall be federally financed.” In  addition, states have broad flexibility in using more than half of federal  highway funds as a result of a combination of programs with wide  eligibility (such as the Surface Transportation Program) and the ability to  transfer some funds between highway programs. Furthermore, “flex  funding” provisions allow transfers between eligible highway and transit  programs; between 1992 and 2006, states used this authority to transfer  $12 billion from highway to transit programs. While these provisions give  states the discretion to pursue their own priorities, the provisions may  impede the targeting of federal funds toward specific national objectives.  Federal rules for transferring funds between highway programs are so  flexible that the distinctions between individual programs have little  meaning. To some extent, the Federal-aid Highway program functions as a  cash transfer, general purpose grant program, not as a tool for pursuing a  cohesive national transportation policy. Transit and safety grants, in  contrast, are more linked to goals because they do not allow transfers  among programs to the same degree. Safety grants are linked to goals  because states must use data on safety measures to create performance  plans that structure their safety investments, yet states are still able to set  their own goals, develop their own programs, and select their own  projects. Performance measures are also used in allocating funding in  several highway safety grant programs, providing an even more direct link  to goals.
section_title: Programs Do Not Employ the Best Tools and Approaches to Ensure Effective Investment Decisions
paragraphs: In some areas, federal surface transportation programs do not use the best  tools and approaches available. Rigorous economic analysis, applied in  benefit-cost studies, is a key tool for targeting investments, but does not  drive transportation decision-making. While such analysis is sometimes  used, we have previously reported that it is generally only a small factor in  a given investment decision. Furthermore, statutory requirements of the  planning and project selection processes—such as public participation  procedures or NEPA requirements that may be difficult to translate into  economic terms—can interfere with the use of benefit-cost analysis.  Decision makers often also see other factors as more important. In a  survey of state DOTs that we conducted in 2004 as part of that same study,  34 said that political support and public opinion are factors of great or  very great importance in the decision to recommend a highway project,  while 8 said that the ratio of benefits to costs was a factor of great or very  great importance. Economic analysis was more common for transit  projects, largely because of the requirements of the competitive New  Starts grant program, which uses a cost-effectiveness measure. However,  the New Starts program constitutes only 18 percent of transit funding  authorizations under the Safe, Accountable, Flexible, and Efficient  Transportation Equity Act – A Legacy for Users (SAFETEA-LU)  authorization. There are also few formal evaluations of the outcomes of  federally-funded projects. As a result, policymakers miss a chance to learn  more about the efficacy of different approaches and projects. Such  evaluations are especially important because highway and transit projects  often have higher costs and lower usage than estimated beforehand. New  Starts is also the only transportation grant program that requires before- and-after studies of outcomes.
The modal basis of transportation funding also limits opportunities to  invest scarce resources as efficiently as possible. Instead of being linked to  desired outcomes, such as mobility improvements, funds are “stovepiped”  by transportation mode. Although, as discussed above, states and  localities have great flexibility in how they use their funds, this modal  structure can still discourage investments based on an intermodal  approach and cross-modal comparisons. Reflecting the separate federal  transportation funding programs, many state and local DOTs are organized  into several operating administrations with responsibilities for particular  modes. Because different operating administrations oversee and manage  separate funding programs, these programs often have differing timelines,  criteria, and matching fund requirements, which can make it difficult for  public planners to pursue the goal—stated in law and DOT policy—of an  intermodal approach to transportation needs. For example, a recent  project at the Port of Tacoma (Washington) involved widening a road and  relocating rail tracks to improve freight movement on both modes, but it  was delayed because highway funding was available, but rail funding was  not. Moreover, despite the wide funding flexibility within the highway  program and between the highway and transit programs, many funds are  dedicated on a modal basis, and state and local decision makers may  choose projects based on the mode eligible for federal funding. Experts  on the Comptroller General’s recent transportation policy panel cited  modal stovepiping as a problem with the current federal structure, saying  that it inhibits consideration of a range of transportation options. State  officials have also criticized stovepiping, both in AASHTO policy  statements and individually. For instance, a state transportation official  told a hearing of the National Surface Transportation Policy and Revenue  Study Commission that modal flexibility should be increased to allow  states to select the best project to address a given goal.
The federal government is not equipped to implement a performance- based approach to transportation funding in many areas because it lacks  comprehensive data. Data on outcomes—ideally covering all projects and  parts of the national transportation network, as well as all modes—would  be needed in order to consider performance in funding decisions.  Presently, data on key performance and outcome indicators is often  absent or flawed. For example, DOT does not have a central source of data  on congestion—the available data are stovepiped by mode—and some  congestion information for freight rail is inaccessible because it is  proprietary and controlled by railroad companies. Likewise, FTA does  not possess reliable and complete data on transit safety. A partial  exception is highway safety, for which NHTSA and FMCSA have data on a  variety of outcomes, such as traffic fatalities. NHTSA employs this  information to help states set priorities, FMCSA uses it to target  enforcement activities, and both agencies use it to monitor states’ progress  toward achieving their goals and to award incentive grants. However, the  safety data that states collect are not always timely, complete, and  consistent. For example, a review of selected states found that some of the  information in their databases was several years old.
Tools to make better use of existing infrastructure have not been deployed  to their full potential, in part because their implementation is inhibited by  the current structure of federal programs. Research has shown that a  variety of congestion management tools, such as Intelligent Transportation  Systems (ITS) and congestion pricing are effective ways of increasing or  better utilizing capacity. Although such tools are increasingly employed  by states and localities, their adoption has not been as extensive as it  could be given their potential to decrease congestion. One factor  contributing to this slow implementation is the lack of a link between  funding and performance in current federal programs—projects with a  lower return on investment may be funded instead of congestion  management tools such as ITS. Furthermore, DOT’s measures of effects  fall short of capturing the impact of ITS on congestion, making it more  difficult for decision makers to assess the relative worth of alternative  solutions. State autonomy also contributes to the slowed rollout of these  tools. Even though federal funding is available to encourage investment in  ITS, states often opt for investments in more visible projects that meet  public demands, such as capacity expansion.
Federal investment in transportation may lead to the substitution of  federal spending for state and local spending. One strategy that Congress  has used to meet the goals of the Federal-aid Highway program has been  to increase federal investment. However, not all of the increased federal  investment has increased the total investment in highways, in part because  Congress cannot prevent states and localities from using some of their  own highway funds for other purposes when they receive additional  federal funds. We reported, on the basis of our own modeling and a review  of other empirical studies, that increased federal highway grants influence  states and localities to substitute federal funds for funds they otherwise  would have spent on highways. Specifically, we studied the period from  1983 through 2000 and our model suggests that over the entire time period,  states substituted about 50 cents of every dollar increase in federal  highways grants for funds they would have spent on highways from their  own resources. For the latter part of that period, 1992 through 2000, we  estimated a substitution rate of about 60 cents for every dollar increase in  federal aid. These results were consistent with other study findings and  indicate that substitution is reducing the impact of federal investment.  Federal grant programs have generally not employed the best tools and  approaches to reduce this potential for substitution—maintenance of  effort requirements and higher nonfederal matching requirements,  discussed in the next section of this report. One reason for the high rate of  substitution for the Federal-aid Highway program is that states typically  spend more than the amount required to meet federal matching  requirements—generally 20 percent. Thus, states can reduce their own  highway spending and still obtain increased federal funds.
Finally, congressionally directed spending may not be an ideal means of  allocating federal grant funds. Some argue that Members of Congress are  good judges of investment needs in their districts, and some congressional  directives are requested by states. However, officials from FHWA and FTA  have stated that congressional directives sometimes displace their priority  transportation projects by providing funds for projects that would not  have been chosen in a competitive selection process. For example, FHWA  officials stated that some congressional directives listed in the Projects of  National and Regional Significance program would not have qualified for  funding in a merit-based selection process. Officials from three state  departments of transportation also noted that inflexibilities in the use of  congressionally directed funds limit the states’ ability to implement  projects and efficiently use transportation funds by, for example,  providing funding for projects that are not yet ready for implementation or  providing insufficient funds to complete particular projects. However, an  official from one state department of transportation noted that although  congressional directives can create administrative challenges, they often  represent funding that the state may not have otherwise received.
section_title: Sustainability of Transportation Financing Threatened by Funding Imbalance and Long-Term Trends
paragraphs: The solvency of the federal surface transportation program is at risk  because expenditures now exceed revenues for the Highway Trust Fund,  and projections indicate that the balance of the Highway Trust Fund will  soon be exhausted. According to the Congressional Budget Office, the  Highway Account will face a shortfall in 2009, the Transit Account in  2012. The rate of expenditures has affected its fiscal sustainability. As a  result of the Transportation Equity Act for the 21st Century (TEA-21),  Highway Trust Fund spending rose 40 percent from 1999 to 2003 and  averaged $36.3 billion in contract authority per year, and the upward trend  in expenditures continued under SAFETEA-LU, which provided an  average of $57.2 billion in contract authority per year.
Congress also established a revenue-aligned budget authority (RABA)  mechanism in TEA-21 to help assure that the Highway Trust Fund would  be used to fund projects instead of accumulating large balances. When  revenues into the Highway Trust Fund are higher than forecast, RABA  ensures that additional funds are apportioned to the states. The RABA  provisions were written so that the adjustments could work in either  direction—going up when the trust fund had greater revenues than  projected and down when revenues did not meet projected levels.  However, when the possibility of a downward adjustment occurred in  fiscal year 2003 as a result of lower-than-projected trust fund revenues,  Congress chose to maintain spending at the fiscal year 2002 level. If the  RABA approach is kept in the future, allowing downward adjustments  could help with the overall sustainability of the fund.
While expenditures from the trust fund have grown, revenues into the fund  have not kept pace. The current 18.4 cents per gallon fuel tax has been in  place since 1993, and the buying power of the fixed cents-per-gallon  amount has since been eroded by inflation. The reallocation to the  Highway Trust Fund of 4.3 cents of federal fuel tax previously dedicated to  deficit reduction provided an influx of funds beginning in 1997. However,  this influx has been insufficient to sustain current funding levels. In  addition, if changes are not made in policy to compensate for both the  increased use of alternative fuels that are not currently taxed and  increased fuel economy, fuel tax revenues, which still account for the  majority of federal transportation financing, may further erode in the  future.
section_title: Principles Can Guide Assessment of Options to Restructure Federal Surface Transportation Programs
paragraphs: A sound basis for reexamination can productively begin with identification  of and debate on underlying principles. Through our prior work on  reexamining the base of government, our analysis of existing programs  and other prior reports, we identified a number of principles that could  help drive reexamination of federal surface transportation programs and  an assessment of options for restructuring the federal surface  transportation program. The appropriateness of these options will depend  on the underlying federal interest and the relative potential of the options  to develop sustainable strategies addressing complex national  transportation challenges. These principles are as follows:    Create well-defined goals based on identified areas of federal interest.
Establish and clearly define the federal role in achieving each goal.
Incorporate performance and accountability for results into funding  decisions.
Employ best tools and approaches to emphasize return on investment.
Ensure fiscal sustainability.
subsections: section_title: Create Well-Defined Goals Based on Identified Areas of Federal Interest
paragraphs: Determining the federal interest involves examining the relevance and  relative priority of existing programs in light of 21st century challenges  and identifying emerging areas of national importance. For instance,  increases in passenger and freight travel have led to growing congestion,  and this strain on the transportation system is expected to grow with  population increases, technology changes, and the globalization of the  economy. Furthermore, experts have suggested that federal transportation  policy should recognize emerging national and global imperatives such as  reducing the nation’s dependence on foreign fuel sources and minimizing  the impact of the transportation system on global climate change. Given  these and other challenges, it is important to assess the continued  relevance of established federal programs and to determine whether the  current areas of federal involvement are still areas of national interest. Key  to such an assessment is how narrowly or broadly the federal interest in  the nation’s transportation system should be defined and whether the  federal interest is greater in certain areas of national priority:    Should federal spending and programs be more focused on specific  national interests such as interstate freight mobility or on broad corridor  development?
Is there a federal interest in local issues such as urban congestion? If so,  are there more distinct ways in which federal transportation spending and  programs could address local issues that would enhance inherent local  incentives and choices?
To what extent should federal transportation policy address social  concerns such as mobility for disadvantaged persons and transportation  safety?
If environmental stewardship is part of the federal interest, how might  federal transportation policy better integrate national long-term goals  related to energy independence and climate change?
The proliferation of federal surface transportation programs has, over  time, resulted in an amalgam of policy interests that may not accurately  reflect current national concerns and priorities. Although policymakers  have attempted to clarify federal transportation policy in the past and an  FHWA Task Force has called for focusing federal involvement on activities  that clearly promote national objectives, current policy statements  continue to cover a wide spectrum of broadly defined federal interests  ranging from promoting global competitiveness to improving citizens’  quality of life. While these federal programs, activities, and funding flows  reflect the interests of various constituencies, they are not as a whole  aligned with a strategic, coherent, and well-defined national interest. In  short, the overarching federal interest has blurred. Once the federal  interest has been refocused and more clearly defined, policymakers will  have a foundation for allocating scarce federal resources according to the  level of national interest.
With the federal interest in surface transportation clearly defined,  policymakers can clarify the goals for federal involvement. The more  specific, measurable, achievable, and outcome-based the goals are, the  better the foundation will be for allocating resources and optimizing  results. Even though some federal transportation safety programs are  linked to measurable outcome-based goals, such as achieving a specific  rate of safety-belt use to reduce traffic fatalities, the formula funding for  general improvements to transit facilities or highway systems is generally  provided without reference to achieving specific outcomes for federal  involvement. For example, the guidelines for state and local recipients’ use  of the largest highway and transit formula grant funds, such as the Surface  Transportation Program or Block Grant Program (Urbanized Area  Formula Grants), are based on broad project eligibility criteria. These  criteria involve the type of highway or type of work (e.g., transit capital  investment versus operating assistance) rather than the achievement of  clearly defined and measurable outcomes. Furthermore, although DOT  has already established some outcome measures as part of its strategic  planning process, its agencywide goals and outcomes cover a vast array of  activities and are generally not directly linked to project selection or  funding decisions for most highway funding and the largest transit and  safety programs. Without specific and measurable outcomes for federal  involvement, policymakers will have difficulty determining whether  certain programs are achieving desired results.
section_title: Establish and Clearly Define the Federal Role in Achieving Each Goal
paragraphs: After identifying the federal interest and federal goals, policymakers can  clearly define the federal government’s role in working toward each goal  and define that role in relation to the roles of other levels of government  and other stakeholders. This would involve an examination of state and  local government roles, as well as of the federal role. Following such an  examination, the current relationship between the federal and other levels  of government could change. For example, in the federal-aid highway  program, the current “partnership” between the federal government and  the states is based on an explicit recognition of state sovereignty in the  conduct of the program, and the states have considerable flexibility in  moving funds within this program. By contrast, highway safety programs  operate under a grantor-grantee relationship and for transit the grantees  are largely local units of government, although the role of states has  grown. An examination of these programs could change these  relationships, since different federal goals may require different degrees  and types of federal involvement. Where the federal interest is greatest,  the federal government may play a more direct role in setting priorities  and allocating resources, as well as fund a higher share of program costs.  Conversely, where the federal interest is less evident, state and local  governments could assume more responsibility.
Functions that other entities may perform better than the federal  government could be turned back to the states or other levels of  government. Given the already substantial roles states and localities play  in the construction and operation of transportation facilities, there may be  areas that no longer call for federal involvement and funding could be  reassessed. Notably, we have reported that the modal focus of federal  programs can distort the investment and decision-making of other levels of  government and a streamlining of federal goals and priorities could better  align programs with desired outcomes. Turning functions back to the  states has many other implications. For example, states would likely have  to raise additional revenues to support the increased responsibilities.  While states might be freer to allocate funds internally without modally  stovepiped federal funding categories, some states could face legal funding  restrictions. For example, some states prohibit the use of highway funds  for transit purposes, so if a transit program were returned to the states,  alternative taxes would have to be raised or the laws would have to be  changed. Until a program or function is actually turned back to the states  or localities, it is uncertain how these other levels of government will  perform. For example, if highway safety programs were turned back to the  states, it is not known whether states would continue to target the same  issues that they currently choose to address under federally-funded  programs or would emphasize different issues. Likewise, if a program that  targets a specific area such as urban transit systems is turned back to the  states, there is no assurance that the states would continue to fund this  area. Turning programs back to the states would have far-reaching  consequences, as discussed in appendix III.
Observers have argued that certain issues, such as urban mobility, are  essentially metropolitan in character and therefore should be addressed by  metropolitan regions, rather than by states or cities. In addition, regional  organizations can promote collaborative decision-making and advance  regional coordination by creating a forum for stakeholders, address  problems of mutual concern, and engage in information and resource  sharing. Metropolitan Planning Organizations (MPO) currently perform  this function for surface transportation. While MPOs do receive some  federal funding for operations, they are not regional governments and  generally do not execute projects. Addressing these regional problems  remains difficult in the absence of more powerful regional governmental  bodies. The development of more powerful regional entities could create  new opportunities to address regional transportation problems.
section_title: Incorporate Performance and Accountability into Funding Decisions
paragraphs: Once federal goals and the federal role in surface transportation have been  clarified, significant opportunities exist to incorporate performance and  accountability mechanisms into federal programs. Tracking specific  outcomes that are clearly linked to program goals could provide a strong  foundation for holding grant recipients responsible for achieving federal  objectives and measuring overall program performance. In particular,  substituting specific performance measures for the federal procedural  requirements that have increased over the past 50 years could help to shift  federal involvement in transportation from the current process-oriented  approach to a more outcome-oriented approach. Furthermore, shifting  from process-oriented structures such as mode-based grant programs to  performance-based programs could improve project selection by removing  barriers to funding intermodal projects and giving grantees greater  flexibility to select projects based on the project’s ability to achieve  results. Directly linking outcome-based goals to programs based on clearly  defined federal interests would also help to clarify federal surface  transportation policy and create a foundation for a transparent and  results-based relationship between the federal government and other  transportation stakeholders.
Accountability mechanisms can be incorporated into grant structures in a  variety of ways. For example, grant guidelines can establish uniform  outcome measures for evaluating grantees’ progress toward specific goals,  and grant disbursements can depend in part on the grantees’ performance  instead of set formulas. Thus, if reducing congestion was an established  federal goal, outcome measures for congestion such as travel time  reliability could be incorporated into infrastructure grants to hold states  and localities responsible for meeting specific performance targets.  Similarly, if increasing freight movement was an established federal goal,  performance targets for freight throughput and travel time in key corridors  could be built into grant programs. Performance targets could either be  determined at the national level or, where appropriate, in partnership with  grantees—much as DOT has established state performance goals for  highway safety and motor carrier safety assistance.
Incentive grants or penalty provisions in transportation grants can also  create clear links between performance and funding and help hold  grantees accountable for achieving desired results. For example, the  current highway and motor carrier safety incentive grants and penalty  provisions can be used to increase or withhold federal grant funds based  on the policy measures that states enact and the safety outcomes they  achieve. Depending on the federal interest and established goals, these  types of provisions could also be used in federal infrastructure grants.
In addition, a competitive selection process can help hold recipients  accountable for results. For example, DOT’s competitive selection process  for New Starts and Small Starts transit programs require projects to meet a  set of established criteria and mandates post-construction evaluations to  assess project results. To better ensure that other discretionary grant  programs are aligned with federal interests and achieve clearly defined  federal transportation goals, Congress could establish specific project  selection criteria for those programs and require that they use a  competitive project selection process. For instance, key freight projects of  national importance could be selected through such a competitive process  that would identify those investments that are most crucial to national  freight flows. DOT also recently selected metropolitan areas for Urban  Partnership Agreements, which are not tied to a single grant program but  do provide recipients with financial resources, regulatory flexibility, and  dedicated technical support in exchange for their adoption of aggressive  congestion-reduction strategies. When a national competition is not  feasible, Congress could require a competitive selection process at the  state or local level, such as those required for the Job Access and Reverse  Commute Program. This program, however, lacks the statutorily defined  selection criteria used to select projects for the New Starts and Small  Starts programs.
section_title: Employ Best Tools and Approaches to Help Improve Return on Investment
paragraphs: The effectiveness of any overall federal program design can be increased  by promoting and facilitating the use of the best tools and approaches.  Within broader federal program structures that fit the principles we  discuss in this report, a number of specific tools and approaches can be  used to improve results and return on investment, which is increasingly  necessary to meet transportation challenges as federal resources become  even more constrained. We and others have identified a range of leading  practices, discussed below, however their suitability varies depending on  the level of federal involvement or control that policymakers desire for a  given area of policy.
Rigorous economic analysis is recognized by experts as a useful tool for  evaluating and comparing potential transportation projects. Benefit-cost  analysis gives transportation decision makers a way to identify projects  with the greatest net benefits and compare alternatives for individual  projects. By translating benefits and costs into quantitative comparisons to  the maximum extent feasible, these analyses provide a concrete way to  link transportation investments to program goals. However, in order for  benefit-cost analysis to be effective, it must be a key factor in project  selection decisions and not seen simply as a requirement to be fulfilled. A  complementary type of tool is outcome evaluation, which is already  required for New Starts transit projects. Such evaluations would be useful  in identifying leading practices and understanding project performance,  especially since the available information indicates that the costs of  highway and transit projects are often higher than originally anticipated.
It should be recognized, however, that benefit-cost comparisons and other  analyses do not necessarily identify the federal interest—many local  benefits from transportation investments are not net benefits in national  terms. For example, economic development may provide financial benefits  locally, but nationally the result may be largely a redistribution of  resources rather than a net increase. Accordingly, in emphasizing return  on federal investment, the relationship of investments to national goals  must be considered along with locally-based calculations of benefit and  cost.
Because current programs are generally based on specific modes, it is  difficult to plan and fund intermodal links and projects that involve more  than one mode, despite a consensus among experts and DOT itself that an  intermodal approach is needed. A number of strategies could be used to  move toward an intermodal approach. For example, policy could be  changed to allow a single stream of funding to pay for all aspects of a  corridor-based project—even if the improvements include such diverse  measures as highway expansion, transit expansion, and congestion  management. DOT recently created competitive Urban Partnership  Agreements, which award grants for initiatives that address congestion  through congestion pricing, transit, telecommuting, and ITS elements.  Finally, decision makers cannot make full use of cross-modal project  comparisons, such as those developed through benefit-cost analysis, if  funding streams remain stovepiped.
Better management of existing capacity is another strategy that has proved  successful, primarily on highways; it is useful because of the growing cost  and, in some cases the impracticality, of building additional capacity. We  have reported that implementing ITS technology can improve system  performance. Congestion pricing of highways, where toll rates change  according to demand, is another such leading practice. From an economic  perspective, congested highways are generally “underpriced.” Although  the social cost of using a roadway is much higher at peak usage times, this  higher cost is usually not reflected in what drivers pay. When toll rates  increase with demand, some drivers respond to higher peak-period prices  by changing the mode or time of their travel for trips that are flexible. This  tool can increase the speed of traffic and has the potential to increase  capacity as well—an evaluation of the variably priced lanes of State Route  91 in Orange County, California, showed that although the priced lanes  represent only 33 percent of the capacity of State Route 91, they carry an  average of 40 percent of the traffic during peak travel times. Although the  Value Pricing Pilot Program encourages the use of this tool, tolling is  prohibited on most Interstate highways by statute. Broader support in  policy could increase the adoption of congestion pricing, improving the  efficiency and performance of the system.
Public-private partnerships are another tool that may benefit public  sponsors by bringing private-sector financing and efficiencies to  transportation investments, among other potential advantages.  Specifically, private investors can help public agencies improve the  performance of existing facilities, and in some cases build new facilities  without directly investing public funds. At the same time, such  partnerships also present potential costs and trade-offs, but the public  sector can take steps to protect the public interest. For example, when  evaluating the public interest of public-private partnerships, the public  sector can employ qualitative public interest tests and criteria, as well as  quantitative tests such as Value for Money and Public Sector Comparators,  which are used to evaluate if entering into a project as a public-private  partnership is the best procurement option available. Such formal  assessments of public interest are used routinely in other countries, such  as Australia and the United Kingdom, but use of systematic, formal  processes and approaches to the identification and assessment of public  interest issues has been more limited in the United States. Since public  interest criteria and assessment tools generally mandate that certain  aspects of the public interest are considered in public-private  partnerships, if these criteria and tools are not used, then aspects of public  interest might be overlooked. Although these techniques have limitations,  they are able to inform public decision making—for instance, the Harris  County, Texas, toll authority conducted an analysis similar to a public- sector comparator, and the results helped inform the authority’s decision  not to pursue a public-private approach.
Tools can also be used in designing grants to help increase the impact of  federal funds. One such tool is maintenance of effort requirements, under  which state or local grantees must maintain their own level of funding in  order to receive federal funds. Maintenance of effort requirements could  discourage states from substituting federal support for funds they  themselves would otherwise have spent. However, our past work has  shown that maintenance of effort requirements should be indexed to  inflation and program growth in order to be effective. Matching  requirements are another grant design tool that can be adjusted to  increase the impact of federal programs. The allowable federal share  covers a substantial portion of project costs—often 80 percent—in many  transportation programs, especially for highways. Increasing the state  share can help induce recipients to commit additional resources. For  example, NHTSA’s Occupant Protection grant program provides 75  percent federal funding the first year, but reduces the federal share to 25  percent in the fifth and sixth years to shift the primary financing  responsibility to the states.
Data collection is a key tool to give policymakers information on how the  transportation system is functioning. Data on the system and its individual  facilities and modes are useful in their own right for decision making, but  are also essential to enable other effective approaches, such as linking  grant disbursements to grantees’ performance. As discussed previously,  DOT does not have complete data in some crucial areas; the effective use  of data in safety programs, despite problems, demonstrates the potential  of more comprehensive data gathering to improve evaluations and induce  improved performance in the surface transportation system.
A restructured federal program could increase the application of these and  other leading tools and approaches by providing incentives for or requiring  their use in certain circumstances. For example, in competitive  discretionary grant programs, the application of specific tools and  approaches could be considered in evaluating proposals, just as the use of  incentives or penalties could be considered in noncompetitive grant  programs. The Motor Carrier Safety Assistance Program already employs  this approach—one factor considered in awarding incentive funds is  whether states provide commercial motor vehicle safety data for the  national database. The use of certain tools and approaches could also  simply be required in order to receive federal funds under relevant  transportation grant programs. However, if federal programs were  restructured to be based on performance and outcomes, states would have  more incentive to implement such tools and approaches on their own.  Under such a scenario, an appropriate federal role could be to facilitate  their identification and dissemination.
section_title: Ensure Fiscal Sustainability
paragraphs: Transportation financing, and the Highway Trust Fund in particular, faces  an imbalance of revenues and expenditures and other threats to its long- term sustainability. In considering sustainable sources of funds for  transportation infrastructure, the user-pay principle is often cited as an  appropriate pricing mechanism for transportation infrastructure. While  fuel taxes do reflect usage, they are not an exact user-pay mechanism and  they do not convey to drivers the full costs of their use of the road. These  taxes are not tied to the time when drivers actually use the road or which  road they use. Taxes and fees should also be equitably assigned and reflect  the different costs imposed by different users. The trucking industry pays  taxes and fees for the highway infrastructure it uses, but its payments  generally do not cover the costs it imposes on highways, thereby giving  the industry a competitive price advantage over railroads, which use  infrastructure that they own and operate. An alternative to fuel taxes  would be to introduce mileage charges on vehicles—Oregon is pilot  testing the technology to implement this approach. Finally, the use of  congestion pricing to reflect the much greater cost of traveling congested  highways at peak times will help optimize investment by providing market  cues to policymakers.
Concerns about funding adequacy have led state and local governments to  search for alternative revenue approaches, including alternative financing  vehicles at the federal level, such as grant anticipation revenue vehicles,  grant anticipation notes, state infrastructure banks and federal loans.  These vehicles can accelerate the construction of projects, leverage  federal assistance, and provide greater flexibility and more funding  techniques. However, they are also different forms of debt financing. This  debt ultimately must be repaid with interest, either by highway users— through tolls, fuel taxes, licensing or vehicle fees—or by the general  population through increases in general fund taxes or reductions in other  government services. Highway public-private partnerships show promise  as an alternative, where appropriate, to help meet growing and costly  transportation demands. Highway public-private partnerships have  resulted in advantages, from the perspective of state and local  governments, such as the construction of new infrastructure without using  public funding, and obtaining funds by extracting value from existing  facilities for reinvestment in public transportation and other public  programs. However, there is no “free” money in public-private  partnerships. Highway financing through public-private partnerships also  is largely a new source of borrowed funds that must be repaid to private  investors by road users, over what could be a period of several  generations.
Finally, the sustainability of transportation financing should also be seen  in the context of broader fiscal challenges. In a time of growing structural  deficits, constrained state and local budgets, and looming Social Security  and Medicare spending commitments, the resources available for  discretionary programs will be more limited. The federal role in  transportation funding must be reexamined to ensure that it is sustainable  in this new fiscal reality. The long-term pressures on the Highway Trust  Fund and the governmentwide problem of fiscal imbalance highlight the  need for a more efficient, redesigned program based on the principles we  have identified. The sustainability of surface transportation programs  depends not only on the level of federal funding, but also on the allocation  of funds to projects that provide the best return on investment and address  national transportation priorities. Using the tools and approaches for  improving transportation programs that we have discussed could also help  surface transportation programs become more fiscally sustainable and  more directly address national transportation priorities.
section_title: Restructuring Principles Can Help Frame the Discussion of the National Commission Report and Dissent
paragraphs: The National Surface Transportation Policy and Revenue Study  Commission (National Commission) issued its final report in January  2008. The report recommended significantly increasing the level of  investment by all levels of government in surface transportation,  consolidating and reorganizing the current programs, speeding project  delivery, and making the current program more performance-based and  mode-neutral, among other things. However, several commissioners  offered a dissenting view on some of the Commission’s recommendations,  notably the level of investment, size of the federal role, and the revenue  sources recommended. The divergent views of the commission members  indicate that while there is a degree of consensus on the need to  reexamine federal surface transportation programs, there is not yet a  consensus on the form a restructured surface transportation program  should take. The principles that we discussed for examining restructuring  options are a sound basis on which this discussion can take place. These  principles do not prescribe a specific approach to restructuring, but they  do provide key attributes that will help ensure that a restructured surface  transportation program addresses current challenges.
section_title: Conclusions
paragraphs: The current federal approach to addressing the nation’s surface  transportation problems is not working well. Despite large increases in  expenditures in real terms for transportation the investment has not  resulted in a commensurate improvement in the performance of nation’s  surface transportation system, as congestion continues to grow, and  looming problems from the anticipated growth in travel demand are not  being adequately addressed. The current collection of flexible but  disparate programs grants that characterizes the existing approach is the  result of a patchwork evolution of programs over time, not a result of a  specific rationale or plan. This argues for a fundamental reexamination of  the federal approach to surface transportation problems. In cases where  there is a significant national interest, maintaining strong federal financial  support and a more direct federal involvement in the program may be  needed. In other cases, functions may best be carried by other levels of  government or not at all. There may also be instances where federal  financial support is desirable but a more results-oriented approach is  appropriate. In addition, it is important to recognize that depending on the  transportation issue and the desired goals, different options and  approaches may best fit different problems. Reforming the current  approach to transportation problems will take time, but a vision and  strategy is needed to begin the process of transforming to a set of policies  and programs to effectively address the nation’s transportation needs and  priorities. The current system evolved over many years and involves  different modes, infrastructure and safety issues, and extends widely into  the operations of state and local governments.
Given the proliferation of programs and goals previously discussed,  refocusing federal programs is needed to address the shortfalls of the  current approach. Focusing federal programs around a clear federal  interest is key. Well-defined goals based on identified areas of federal  interest would establish what federal participation in surface  transportation is designed to accomplish. A clearly defined federal role in  achieving these goals would give policymakers the ability to direct federal  resources proportionately to the level of national interest. Once this is  accomplished, a basis exists to reexamine the current patchwork of  programs, test their continued relevance and relative priority, potentially  devolve programs and policies that are outdated or ineffective, and  modernize those programs and policies that remain relevant.
Once those areas of federal interest are known, tying federal funds to  performance and having mechanisms to test whether goals are met would  help create incentives to state and local governments to improve their  performance and the performance of the transportation system. Both  incentive programs and sanctions are possible models for better tying  performance to outcomes. Having more federal programs operate on a  competitive basis and projects selected based on potential benefits could  also help tie federal funds to performance.
There also is a need to improve the use of analytical tools in the selection  and evaluation of the performance of projects. Better use of tools such as  benefit-cost analysis and using return on investment as a criterion for the  selection of individual projects can help identify the best projects.  Specifically, the use of a return on investment framework will help to  emphasize that federal financial commitments to transportation  infrastructure projects are, in fact, long-term capital investments designed  to achieve tangible results in a transparent fashion.
Finally, a fundamental problem exists in the fiscal sustainability of surface  transportation programs as a result of the impending shortfall in the  Highway Trust Fund. The trust fund is the primary source of federal  support to state and local governments across highways, transit, and  surface transportation safety programs. This fiscal crisis is fundamentally  based on the balance of revenues and expenditures in the fund, and thus  either reduced expenditures, increased revenues, or a combination of the  two is now needed to bring the fund back into balance. Finally, given the  scope of needed transformation, the shifts in policies and programs may  need to be done incrementally or on a pilot basis to gain practical lessons  for a coherent, sustainable, and effective national program and financing  structure to best serve the nation for the 21st century.
section_title: Matter for Congressional Consideration
paragraphs: To improve the effectiveness of the federal investment in surface  transportation, meet the nation’s transportation needs, and ensure a  sustainable commitment to transportation infrastructure, Congress should  consider reexamining and refocusing surface transportation programs to  be responsive to these principles so that they:    have well-defined goals with direct links to an identified federal interest  institute processes to make grantees more accountable by establishing  more performance-based links between funding and program outcomes, institute tools and approaches to that emphasize the return on the federal  investment, and    address the current imbalance between federal surface transportation  revenues and spending.
section_title: Agency Comments
paragraphs: We provided copies of a draft of this report to DOT for its review and  comment. In an email on February 22, 2008, DOT noted that surface  transportation programs could benefit from restructured approaches that  apply data driven performance oriented criteria to enable the nation to  better focus its resources on key surface transportation issues. DOT  officials generally agreed with the information in this report, and they  provided technical clarifications which we incorporated, as appropriate.
We will send copies of this report to interested congressional committees  and the Secretary of Transportation. Copies will also be available to others  upon request and at no cost on GAO’s Website at www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-2834, or heckerj@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We were asked to (1) provide an historical overview of the federal role in  surface transportation and the goals and structures of federal surface  transportation programs funded by the Highway Trust Fund, (2)  summarize conclusions from our prior work on the structure and  performance of these and other federal programs, and (3) identify  principles to help assess options for focusing the future federal role and  the structure of federal surface transportation programs.
We focused our work on programs funded by the Highway Trust Fund  (HTF) because it is the primary vehicle for federal financing of surface  transportation, receiving nearly all federal fuel tax revenue; it is also a  focus of most proposals to reform the current federal role. We examined  the Federal Highway Administration (FHWA), Federal Motor Carrier  Safety Administration (FMCSA), Federal Transit Administration (FTA) and  National Highway Traffic Safety Administration (NHTSA) as part of this  study; we did not look at two other DOT agencies that receive HTF funds,  the Research and Innovative Technology Administration (RITA) and the  Federal Railroad Administration (FRA). RITA was excluded because it  focuses on federal research, in contrast to our focus on federal-state  programs; FRA was excluded because the portion of HTF funds that it  receives is so small that it cannot be compared to the other operating  agencies.
To provide an historical overview of the federal role in surface  transportation and the goals and structures of federal surface  transportation programs, we drew information from statutes, especially  transportation authorization laws; regulations; budget documents; agency  reports; and literature on transportation policy by outside experts. We  interviewed officials in DOT’s modal administrations, including FHWA,  FMCSA, FTA, and NHTSA in order to help clarify agency goals, roles and  structures. We also interviewed representatives of stakeholder groups  such as the American Association of State Highway and Transportation  Officials (AASHTO) and the American Public Transit Association (APTA).
To describe conclusions that we and others have drawn about the current  structure and performance of these federal programs, we reviewed  relevant GAO reports on specific transportation programs, as well as  reports that looked at broader issues of performance measurement,  oversight, grant design, and other related issues. We also reviewed reports,  policy statements, and other materials from stakeholder groups and other  organizations. Additionally, we reviewed materials from hearings held by  the National Surface Transportation Policy and Revenue Study  Commission. Finally, we sought the views of transportation experts,  including the 22 who participated in a forum convened by the Comptroller  General in May 2007, that included public officials, private-sector  executives, researchers, and others.
To review policy options for addressing the federal role, we identified  options from previous proposals, both those originating in Congress and  presidential administrations, as well as those presented by stakeholder  groups such as AASHTO. We also reviewed options discussed in previous  GAO reports, as well as testimony and other materials generated by the  National Surface Transportation Policy and Revenue Study Commission,  which the Congress also tasked to examine the federal approach to  surface transportation programs.
In addition, to complement our appendix III discussion of the implications  of turning over responsibility for surface transportation to the states, we  analyzed the potential fiscal impact of turning over most elements of the  federal transportation program to the states. We obtained DOT data on  state grant disbursements and calculated total federal grant receipts for  each state and the District of Columbia. We limited our analysis to grant  programs funded by the HTF, because the federal fuel taxes that would be  eliminated or sharply reduced under this scenario are deposited almost  exclusively in the HTF. We also omitted discretionary grants because they  are a small portion of federal transportation grants and often vary  significantly from year to year in a given state. Separately, we obtained  state fuel consumption data from DOT. In order to calculate the extent to  which individual states would have to raise their fuel taxes to maintain the  same level of spending if federal grants were eliminated, we divided the  total grant receipts (as described above) for each state by the number of  gallons of highway fuel used in that state in the prior year. This calculation  yielded the per-gallon increase in state taxes that would be needed to  maintain spending, assuming it would be implemented evenly across all  types of fuel. Because diesel and gasoline are taxed at different federal  rates, and represent different shares of total usage in each state, we used a  weighted average to calculate the current effective per-gallon federal fuel  tax rate in each state. We then expressed the per-gallon tax rate results in  terms of change from the current federal tax rate. Where we had not  previously assessed the reliability of the source data, we conducted a  limited data reliability analysis and found the data suitable for the purpose  of this analysis.
We conducted this performance audit between April 2007 and February  2008 in accordance with Generally Accepted Government Auditing  Standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence that provides a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Overview of Federal Surface Transportation Programs
subsections: section_title: Federal Highway Infrastructure Assistance Since 1956
subsections: section_title: Current Programs
paragraphs: Federal assistance for highway infrastructure is distributed through  several grant programs, known collectively as the Federal-Aid Highway  Program. Both Congress and DOT have established multiple broad policy  goals for the Federal-Aid Highway Program, which provides financial and  technical assistance to states to construct, preserve, and improve eligible  federal-aid highways. The program’s current goals include safety,  efficiency, mobility, congestion relief, interstate and international  commerce, national security, economic growth, environmental  stewardship, and sustaining the nation’s quality of life.
The Federal-Aid Highway Program currently consists of seven core  formula grant programs and several smaller formula and discretionary  grant programs. The majority of Highway Trust Fund revenues are  distributed through the core formula grant programs to the states for a  variety of purposes, including road construction and improvements,  Interstate highway and bridge repair, air pollution mitigation, highway  safety, and equity considerations. Broad flexibility provisions allow states  to transfer funds between core highway programs and to the Federal  Transit Administration (FTA) for eligible transit projects. Highway Trust  Fund revenues are also distributed through the smaller formula and  discretionary grant programs, which cover a wide range of projects,  including border infrastructure, recreational trails, and safe routes to  schools. Congress has also designated funds for specific projects. For  example, according to the Transportation Research Board, SAFETEA- LU—the most recent reauthorization legislation—contained over 5,000  dedicated spending provisions.
The Federal-Aid Highway Program is administered through a federal-state  partnership. The federal government, through FHWA, provides financial  assistance, policy direction, technical expertise, and some oversight.  FHWA headquarters provides leadership, oversight, and policy direction  for the agency, FHWA state division offices deliver the bulk of the  program’s technical expertise and oversight functions, and five FHWA  regional service resource centers provide guidance, training, and  additional technical expertise to the division offices. In turn, state and  local governments execute the programs by matching and distributing  federal funds; planning, selecting, and supervising projects; and complying  with federal requirements. Currently, based on stewardship agreements  with each state, FHWA exercises full oversight on a limited number of  federal-aid projects. States are required to oversee all federal-aid highway  projects that are not on the National Highway System, and states oversee  design and construction phases of other projects based on an agreement  between FHWA and the state. FHWA also reviews state management and  planning processes. Many state and local government processes are driven  by federal requirements, including not only highway-specific requirements  for transportation planning and maintenance, but also environmental  review requirements and labor standards that are the result of separate  federal legislation designed to address social and environmental goals.
section_title: Changes over Time
paragraphs: Since its reauthorization under the Federal-Aid Highway Act of 1956, the  Federal-Aid Highway Program has grown in size, scope, and complexity as  federal goals for the program have expanded. In 1956, the primary focus of  the Federal-Aid Highway Program was to help states finance and construct  the Interstate Highway System to meet the nation’s needs for efficient  travel, economic development, and national defense. The Federal-aid  Highway Program made funds available to states for road construction and  improvements through four formula programs—one program for each of  four eligible road categories—with a particular focus on the Interstate  system. Yet the Federal-Aid Highway Program has also served as a  mechanism to achieve other societal goals. For example, the 1956 Act  requires that states adhere to federal wage and labor standards for any  state construction project using federal-aid funds. In successive  reauthorizations of the program, Congress has increased program  requirements to achieve other societal goals such as civil rights,  environmental protection, urban planning, and economic development.
Besides increasing compliance requirements, Congress has authorized  new grant programs to achieve expanded program objectives. For  example, Congress authorized new core grant programs to address  Interstate highway maintenance, environmental goals, and safety. In  response to controversy over the distribution of highway funds between  states that pay more in federal taxes and fees than they receive in federal- aid (donor states) and states that receive more in federal-aid than they  contribute (donee states), Congress established and strengthened equity  programs that guarantee states a minimum relative return on their  payments into the Highway Account of HTF. Additionally, Congress has  further expanded the program’s scope by authorizing highway funds for  additional purposes and uses, such as highway beautification, historic  preservation, and bicycle trails.
The federal-state partnership has evolved as programs have changed to  give states and localities greater funding flexibility. For example, in 1991,  when Interstate construction was nearly complete, Congress restructured  the Federal-aid Highway Program to promote a more efficient and flexible  distribution of funds. Specifically, under the Intermodal Surface  Transportation Efficiency Act of 1991 (ISTEA), Congress substantially  increased flexibility by consolidating road-category grant programs,  creating a surface transportation block grant, and establishing broad  flexible fund transfer provisions between highway programs and transit— a structure that remains today. At the same time, Congress altered the  established federal-state partnership by increasing the authority of  metropolitan planning organizations—local governmental planning  bodies—in federally mandated planning processes.
The federal-state partnership has further evolved as Congress has  delegated federal oversight responsibilities to state and local governments,  but has assumed a greater role in project selection. When Interstate  construction began, the federal government provided direct oversight  during the construction and maintenance phases of projects and ensured  that the states complied with federal requirements. By 1973, states could  self-certify compliance with most federal grant requirements, and during  the 1990s, Congress further expanded this authority to allow states and  FHWA to cooperatively determine the appropriate level of oversight for  federally funded projects, including some Interstate projects. While  reducing the federal role in oversight, Congress has increased its role in  project selection—traditionally a state and local responsibility—through  congressional directives. For example, according to the Transportation  Research Board, there were over 5,000 directives in the latest  reauthorization from 2005, up from 1,850 in 1998 and 11 in 1982.
As the Federal-Aid Highway Program has grown in size and complexity, so  too has the federal administrative structure although some shifting or  consolidation of responsibilities has occurred. Before FHWA was created  in 1967, its predecessor, the Bureau of Public Roads, established a  decentralized administrative structure and a field office in each state,  reflecting the close partnership between the federal government and the  states. Moreover, as the number of the Federal-Aid Highway Program  requirements and the scope of the program increased, the agency, which  initially had an engineering focus, hired a wide range of specialists  including: economists, landscape architects, planners, historians,  ecologists, safety experts, civil rights experts, and others. When DOT was  formed in 1967, new motor carrier and traffic and vehicle safety functions  were assigned to FHWA. These functions have since shifted to NHTSA and  FMCSA, although FHWA continues to collaborate on these issues and  retains responsibility for highway infrastructure-related safety projects  and programs. In 1998, FHWA consolidated its organization by eliminating  its nine regional offices and establishing regional service resource centers,  as well as devolving responsibility for state projects and programs entirely  to the FHWA division offices in each state. For fiscal year 2009, FHWA  requested funding for 2,861 full-time equivalent staff divided between  headquarters, 5 regional service resource centers and 55 division offices.
section_title: Federal Transit Assistance
subsections: section_title: Current Programs
paragraphs: Both Congress and DOT have established multiple broad policy goals for  FTA, which provides financial and technical assistance to local and state  public agencies to build, maintain, and operate mass transportation  systems. FTA’s current statutory goals include (1) promoting the  development of efficient and coordinated urban transportation systems  that maximize mobility, support economic development, and reduce  environmental and energy consumption impacts, and (2) providing  mobility for vulnerable populations in both urban and rural areas. DOT’s  six strategic goals also apply to FTA: safety, congestion mitigation, global  connectivity, environmental stewardship, security and preparedness, and  organizational excellence.
Currently, FTA divides its major capital and operating assistance programs  into two categories: formula and bus grants, which are funded entirely  from HTF’s Mass Transit Account, and capital investment grants, which  are financed using general revenue. The formula and bus grants provide  capital and operating assistance to transit agencies and states through a  combination of seven relatively large and five smaller formula and  discretionary grants. Under these grants, the federal government generally  provides 80 percent of the funding and the locality provides 20 percent,  with certain exceptions. The capital investment grants provide  discretionary capital assistance for the construction of new fixed- guideway and corridor systems and extensions of existing systems. Funds  for new fixed-guideway systems are distributed through the New Starts  and Small Starts grant programs and are awarded to individual projects  through a competitive selection process. Although the statutory federal  match for the New Starts and Small Starts programs is 80 percent, agency  officials stated the actual federal match is closer to 50 percent due to high  levels of state and local investment and the competitive selection process  that favors projects that require a lower federal match. FTA also provides  financial support for research and planning activities. Funds for research  are allocated on a discretionary basis out of the General Fund, and  planning funds are taken from the Mass Transit Account of the Highway  Trust Fund and distributed to states by formula. In addition to the funding  they obtain through these programs, states may transfer a portion of  certain highway program funds to FTA for eligible transit expenses.  According to the most recent DOT data, in 2004, 28.1 percent of the  funding for transit was system-generated through fares or other charges,  and the remaining funds came from local (34.6 percent), state (19.7  percent), and federal (17.6 percent) sources. Approximately 75 percent of  federal transit assistance is directed to capital investments, and the  remainder is directed to other eligible expenses such as operating  expenses.
In contrast to federal highway infrastructure programs, which are  administered through a federal-state partnership, federal transit programs  are generally administered through a federal-local partnership, although  rural programs are administered at the state level. The federal government,  through FTA headquarters and 10 FTA regional offices, provides financial  assistance, establishes requirements, performs oversight, and conducts  research. Grant recipients such as local transit agencies are responsible  for matching federal funds and for planning, selecting, and executing  projects while complying with federal requirements. The degree of federal  oversight varies across programs and among grant recipients. Currently,  full federal oversight is limited to major capital projects that cost over  $100 million, and local and state grant recipients are allowed to self-certify  their compliance with certain federal laws and regulations. For example,  FTA conducts periodic reviews of program management processes for  recipients of Block Grants Program (Urbanized Area Formula Grants)  funds and provides direct project management oversight for recipients of  New Starts funding. In addition, FTA conducts discretionary reviews of  grantees’ compliance with requirements in other areas such as financial  management or civil rights and uses a rating system to determine the level  of oversight needed for each grantee. FTA employees work with external  contractors to conduct project management and program management  process reviews. For fiscal year 2009, FTA requested funding for 526 full- time-equivalent staff, divided among its 10 regional offices and  headquarters.
section_title: Changes over Time
paragraphs: From the modern transit program’s inception as part of the Urban Mass  Transportation Act of 1964 (UMTA), Congress justified federal funding for  mass transportation capital improvements as a means to address pressing  urban problems such as urban decay, traffic congestion, and poor  development planning. Federal capital assistance was distributed to local  governments on a discretionary basis to help urban areas improve and  expand urban mass transportation systems. Congress also established  federal transit programs to achieve other societal goals. For example,  UMTA required grant recipients to provide labor protections for transit  employees and relocation assistance for individuals displaced by transit  projects. Later federal legislation increased grant requirements to achieve  other societal goals such as civil rights, environmental protection, and  economic development.
In addition to increasing compliance requirements, Congress has  authorized new grant programs and broadened program eligibility  requirements to promote expanding objectives. For example, federal  transit assistance expanded during the 1970s to include grant programs  designed to meet social and transportation-related goals such as:  improving mobility in rural areas and making public transportation more  accessible for the elderly and the disabled. More recently, Congress has  further broadened the scope of programs to include making transportation  to jobs more accessible for welfare recipients and low-income individuals  and providing transit service within public parks and lands. Although  federal transit funding was initially provided on a discretionary basis from  the General Fund of the Treasury, many of the newer programs make  funds available through formulas, and highway user fees have replaced  general revenues as the major source of transit assistance since the  creation of the Mass Transit Account of the Highway Trust Fund in 1983.  In addition, Congress has broadened the scope of federal transit assistance  to include operating expenses and capital maintenance as well as capital  expenses. For example, concerns about growing operating deficits among  transit agencies led Congress to authorize the use of federal funds for  transit operating expenses in 1974. Although federal support for operating  expenses in urbanized areas has since declined, operating assistance is  still available for areas with a population of less than 200,000.
The federal-local relationship in transit has evolved as Congress has  expanded federal involvement in transit and increased state and local  government authority and flexibility in using federal funds. For example,  in 1978, Congress expanded federal transit assistance to rural areas and  made state governments responsible for receiving and distributing these  funds. According to agency officials, states previously played a limited role  in transit projects because the federal government worked directly with  urban areas and transit agencies. In 1991, Congress increased local  authority by expanding the role of metropolitan planning organizations in  project selection and transportation planning. At the same time, Congress  substantially increased state and local authority to transfer funds between  highway and transit programs. The combination of additional transfer  authority and the gradual shift toward apportioning funds through  formulas rather than individual project awards has increased flexibility for  both state and local transit grant recipients. In addition, state and local  government oversight responsibilities have increased for federal transit  grants, much as they have for federal highway infrastructure grants, with  self-certification procedures for compliance with federal laws and  regulations, and additional federal compliance requirements such as those  for environmental review.
section_title: Federal Highway Safety and Motor Carrier Safety Assistance
subsections: section_title: Current Programs
paragraphs: Federal highway safety and motor carrier safety assistance programs are  separately administered by NHTSA and FMCSA. The primary statutory  policy goals of these programs are directed to reducing accidents, and the  bulk of NHTSA’s and FMCSA’s financial support and research, education,  rulemaking, and enforcement activities fall under DOT’s strategic goal of  improving safety. Although FHWA and FTA exercise rulemaking authority  in the administration of their programs, rulemaking and enforcement are  primary tools that NHTSA and FMCSA use to reduce accidents and their  associated damages.
Highway safety and motor carrier safety grant programs are similarly  organized. Both use a basic formula grant to provide funding to states for  safety programs, enforcement activities, and related expenditures, coupled  with several targeted discretionary grants. Currently, almost 40 percent of  authorized federal highway safety assistance is distributed by formula to  states through the State and Community Highway Safety Grant Program  (Section 402), which supports a wide range of highway safety initiatives at  the state and local level. This basic program is augmented by several  smaller discretionary grant programs that mostly target funds to improve  safety through the use of measures such as seat belts and child safety  restraints, among others. Most of these discretionary grants provide  states with financial incentives for meeting specific performance or safety  activity criteria. For example, to be eligible for Alcohol-Impaired Driving  Countermeasures Incentive grants, most states must either have a low  alcohol fatality rate or meet programmatic criteria for enforcement,  outreach, and other related activities. In addition to discretionary grants,  Congress has authorized highway safety provisions that penalize states by  either transferring or withholding state highway infrastructure funds from  states that do not comply with certain federal provisions. These penalty  provisions can provide a substantial amount of additional funding for state  safety activities. For example, in 2007, penalty provisions transferred over  $217 million of federal highway infrastructure assistance to highway safety  programs in the 19 states and Puerto Rico that were penalized for failure  to meet federal criteria for either open container requirements or  minimum penalties for repeat offenders for driving while intoxicated or  under the influence.
The majority of federal motor carrier safety funds are distributed by  formula to states through the Motor Carrier Safety Assistance Program  (MSCAP), which provides financial assistance to states for the  enforcement of federal motor carrier safety and hazardous materials  regulations. In addition, several smaller discretionary programs are  targeted to achieve specific goals such as data system improvements and  border enforcement, among others. Some of these grants require states to  maintain a level of funding for eligible motor carrier safety activities to  reduce the potential for federal funds to replace state financial support.  Finally, FMCSA sets aside MCSAP funds to support high-priority areas  such as audits of new motor carrier operations. Unlike the highway safety  grants, most of these discretionary programs do not have statutorily  defined performance or outcome-related eligibility criteria, and funds are  allocated at the agency’s discretion. States that do not comply with  federal commercial driver licensing requirements may have up to 5 percent  of their annual highway construction funds withheld in the first fiscal year  and 10 percent in the second fiscal year of violation. However, these  withheld funds, unlike the funds withheld or transferred under some  highway safety penalty provisions, are not available to the penalized states  for motor carrier safety activities.
Like highway infrastructure grants, most federal highway safety and motor  carrier safety grants are jointly administered through a federal-state  partnership. Through NHTSA and FMCSA, the federal government  provides funds, establishes and enforces regulations, collects and analyzes  data, performs oversight, conducts research, performs educational  outreach, and provides technical assistance. In turn, states provide  matching funds, develop and execute safety and enforcement plans and  programs, distribute funds to other governmental partners, collect and  analyze data, and comply with federal grant and reporting requirements.  Both NHTSA and FMCSA use a performance-based approach to grant  oversight. Each agency reviews state safety plans, which establish specific  performance goals, and then monitors states’ progress towards achieving  their goals. Because these efforts rely on the accuracy and completeness  of state safety data, both NHTSA and FMCSA emphasize state data  collection and analysis in the administration of their grant programs. In  addition to their annual safety performance reviews, NHTSA and FMCSA  conduct periodic management and compliance reviews of grant recipients.
NHTSA and FMCSA also each have a substantial regulatory role. NHTSA  establishes and enforces safety standards for passenger vehicles in areas  such as tire safety, occupant protection devices, and crashworthiness, as  well as issuing fuel economy standards. FMCSA establishes and enforces  standards for motor carrier vehicles and operations, hazardous materials,  household goods movement, commercial vehicle operator medical  requirements, and international motor carrier safety. NHTSA conducts  testing, inspection, analysis, and investigations to identify noncompliance  with vehicle safety standards, and if necessary, initiates a product recall.  FMCSA conducts compliance reviews of motor carriers’ operations at  their places of business as well as roadside inspections of drivers and  vehicles, and can assess a variety of penalties including fines and cessation  orders for noncompliance. Both NHTSA and FMCSA rely on data to target  their enforcement activities.
NHTSA and FMCSA use different organizational structures to administer  their grant programs. NHTSA has both a headquarters office and 10  regional offices. Headquarters staff develop policy and programs and  provide technical assistance to regional staff. Regional staff review and  approve state safety plans, and provide technical assistance. According to  agency officials, since NHTSA does not provide the same level of technical  assistance as FHWA, a regional rather than a state division structure is  appropriate to NHTSA’s needs. For fiscal year 2009, NHTSA requested  funding for 635 full-time-equivalent staff divided among its headquarters  and regional offices. Similar to FHWA, FMCSA has a field structure of 4  regional service centers and 52 division offices. Headquarters staff  establish and communicate agency priorities, issue policy guidance, and  carry out financial management activities. Regional service centers act as  an intermediary between headquarters and division offices by clarifying  policy and organizing training and goal-setting meetings for MSCAP grants.  Division offices have primary responsibility for overseeing state motor  carrier safety programs and work closely with the states to develop  commercial vehicle safety plans. These offices also monitor state progress  and grant expenditures. For fiscal year 2009, FMCSA requested funding for  1119 full-time equivalent staff divided among its headquarters and field  offices.
section_title: Changes over Time
paragraphs: In broad terms, both federal highway safety and motor carrier safety  programs have followed a similar path since their inception. Both federal  highway safety and motor carrier safety activities were components of the  federal highway program before separate modal agencies were established  within DOT. Both state-assistance programs began as a single basic  formula grant that was then expanded to include smaller targeted  discretionary grants. Additionally, Congress has given states greater  flexibility to set their own priorities within the parameters of national  safety goals, and both NHTSA and FMCSA have adopted a performance- based approach to grant oversight. Although broader environmental and  social goals have had less of an impact on federal safety grant programs,  the scope and administrative complexity of highway safety and motor  carrier safety regulatory functions has expanded to incorporate these  goals.
Because of growing concerns about vehicle safety and traffic accidents,  the National Traffic and Motor Vehicle Safety Act and Highway Safety Act  established highway safety as a separate grant program and regulatory  function in 1966. Two major grants provided federal highway safety  assistance in 1966: the State and Community Highway Safety (Section 402)  grants and Highway Safety Research and Development (Section 403)  grants. Section 402 grants distributed federal assistance to states by  formula to support the creation of state highway safety programs and the  implementation of countermeasures to address behavioral factors in  accidents. State safety programs were required to meet several uniform  federal standards to be eligible for funding and avoid withholding  penalties. Section 403 grants provided discretionary federal funding for  research, training, technical assistance, and demonstration projects.  Although originally administered by the Department of Commerce, federal  highway safety grants and regulatory authority were transferred to the  Federal Highway Administration (FHWA) upon its creation in 1967. In  1970, FHWA’s National Highway Safety Bureau became a separate agency  within DOT and was renamed the National Highway Traffic Safety  Administration.
Since 1966, Congress has increased state and local government authority  and flexibility to set and fund safety priorities by removing some federal  grant requirements and restrictions, and by relying more on incentive- based discretionary grants to achieve national safety goals. For example,  the uniform federal standards first established in 1966 for state highway  safety programs funded by Section 402 grants became guidelines in 1987,  and in 1998, Congress amended federal oversight procedures from direct  oversight of state safety programs to selective oversight of state safety  goals based on state performance. Additionally Congress has removed  dedicated spending restrictions on Section 402 funds and replaced some of  them with separate incentive grant programs. For example, provisions that  required a percentage of Section 402 funds to be dedicated to 55 mph  speed limit enforcement, school bus safety, child safety restraints, and  seat belt use have been discontinued. Some of the priorities addressed by  these spending restrictions have become separate incentive programs  designed to reward state performance and activities in these areas rather  than limit the availability of Section 402 funds. However, in certain  priority areas, Congress has provided additional incentives for state  compliance by authorizing penalty provisions to withhold or transfer state  highway infrastructure funds for failure to meet specific safety criteria.
Unlike federal highway and transit infrastructure grants, NHTSA’s grants  have not been as directly affected by emerging national social and  environmental goals, although Congress has incorporated these goals into  NHTSA’s regulatory processes. States must comply with several broad  federal requirements such as nondiscrimination policies to receive federal  safety funds. However, these requirements have not increased the  administrative complexity of highway safety grants to the same extent as  infrastructure grants because most safety activities funded through  NHTSA do not require construction. For example, state safety activities  such as enforcement of traffic laws and accident data collection are  generally not subject to construction-related requirements such as  environmental assessments and construction contract labor standards  which apply to highway and transit infrastructure programs. Similarly,  Congress has added only one targeted highway safety grant program to  specifically address a social goal unrelated to safety—the reduction of  racial profiling in law enforcement—and one grant provision requiring  states to ensure accessibility for disabled persons on all new roadside  curbs. In contrast, federal social and environmental goals have had a  greater impact on NHTSA’s regulatory processes. For example, in  response to the energy crisis during the 1970s, Congress gave NHTSA  authority to set corporate average fuel economy standards. Furthermore,  the agency’s rulemaking process is subject to executive orders and  regulations designed to meet legislatively established social and  environmental goals such as NEPA, the Paperwork Reduction Act, energy  effects, and unfunded mandates.
Before FMCSA was established as a separate modal administration within  DOT in 1999, federal motor carrier safety functions were administered by  both the former Interstate Commerce Commission and FHWA. Until 1982,  the federal government regulated motor carrier safety but did not provide  financial assistance to states for enforcement. The Surface Transportation  Act of 1982 authorized the Secretary of Transportation to make grants to  the states for the development or implementation of state programs to  enforce federal and state commercial motor vehicle regulations. This  authorization became the foundation for the basic MCSAP grant. Since  1982, Congress has expanded the number and scope of motor carrier grant  programs and requirements to meet emerging areas of concern, including  border enforcement, vehicle and driver information systems, commercial  driver license oversight, and safety data collection. Congress has also set- aside grant funds for purposes such as high-priority areas and new entry  audits. Additionally, grant eligibility requirements have increased. For  example, state enforcement plans must meet 24 criteria to be eligible for a  basic MCSAP grant today, compared with 7 criteria when the program  started in 1982. Although grant requirements have increased, Congress has  given states some flexibility to set enforcement priorities by restructuring  the programs to become performance-based and allowing states to tailor  their activities to meet their particular circumstances, provided these  activities work toward national goals. Additionally, FMCSA follows a  performance-based approach to grant oversight.
Like highway safety grant programs, motor carrier safety grant programs  have undergone fewer structural and administrative changes in response  to emerging national social and environmental concerns than have federal  highway and transit infrastructure grant programs. Although states must  adhere to broad requirements to receive federal funds, some of these  requirements, such as those calling for environmental assessments, are not  relevant for safety activities that do not involve construction.  Furthermore, Congress has not added any specific grant programs or grant  requirements exclusive to motor carrier safety assistance that directly  address other social and environmental goals.
FMCSA’s regulatory and enforcement scope has expanded considerably  over time. Much of this expansion is related directly to safety, but  Congress has also incorporated other policy goals into FMCSA’s  regulatory functions. For example, hazardous materials transport,  commercial driver licensing programs, and operator medical requirements  have become additional areas of FMCSA regulation and enforcement that  directly relate to safety. However, Congress has also given FMCSA  regulatory authority for consumer protection in interstate household  goods movement, which does not specifically address reducing motor  carrier-related fatalities. Additionally, FMCSA’s rulemaking process is  subject to executive orders and regulations designed to meet legislatively  established social and environmental goals.
section_title: Appendix III: Implications of “Turning Back” Surface Transportation Programs and Revenues to the States
paragraphs: A fundamental reexamination of surface transportation programs begins  with identifying issues in which there is a strong federal interest and  determining what the federal goals should be related to those issues. Once  the federal interest and goals have been identified, the federal role in  relation to state and local governments can be clearly defined. For issues  in which there is a strong federal interest, ongoing federal financial  support and direct federal involvement could help meet federal goals. But  for issues in which there is little or no federal interest, programs and  activities may better be devolved to other levels of government or to other  parties.
In some cases, it may be appropriate to “turn back” activities and  programs to state and local governments if they are best suited to perform  them. Many surface transportation programs have a dedicated source of  funding, that is, they are funded from a dedicated fund—the Highway  Trust Fund. Devolving federal responsibility for programs could entail  simultaneously relinquishing the federal revenue base, in this case,  revenues that go into the Highway Trust Fund. A turnback of federal  programs, responsibilities, and funding would have many implications and  would require careful decisions to be made at the federal, state, and local  levels. These implications and decisions include the following:    At the federal level, it would need to be determined (1) what functions  would remain and (2) how federal agencies would be structured and  staffed to deliver those programs. In deciding what functions would  remain, the extent of federal interest in the activity compared to the extent  of state or local interest should be considered. Furthermore, in deciding  how to staff and deliver programs, for agencies with a large field presence,  like FHWA and FMCSA, it would have to be determined what their  responsibilities would be.
At all levels of government, it would need to be determined how to handle  a variety of other federal requirements that are tied to federal funds, such  as the requirements for state highway safety programs related to impaired  driving and state and metropolitan planning roles. At the federal level,  Congress would have to decide whether to keep the requirements, and if  so, how to ensure that they are met without federal funds to provide  incentives or to withhold with sanctions. If the effect of a turnback is to  relinquish requirements, then states and localities would have to decide  what kind of planning and other requirements they want to have and how  to implement them.
At the state and local levels, it would need to be determined (1) whether to  replace revenues with state taxes and (2) what type of programs to  finance. Deciding whether to replace federal revenues with state taxes  may be difficult because states also face fiscal challenges and replacing  revenues would have different effects on different states. For example, if  states decided to raise fuel taxes, some states could simply replace the  current federal tax with an equivalent state tax, but other states might  have to levy additional state taxes at a much higher level than the current  federal tax. States would also have options of using other revenue sources  such as vehicle registration fees or expanded use of tolling. With states  deciding what type of programs to continue there is no way to predict  which federal programs would be replaced with equivalent state programs.  Finally, while states may gain flexibility in how they deliver projects, in  some cases states could actually lose some flexibility they currently have  using federal funds—for example, the flexibility to move funds between  highway and transit programs.
subsections: section_title: A Turnback Would Require Deciding What Federal Functions Would Remain and How Federal Agencies Would Be Structured to Deliver Those Functions
paragraphs: The functions that would remain at the federal level would be determined  by the level of federal interest. Some functions are financed from the  Highway Trust Fund but exist because of broader commitments. For  example, the federal government owns land managed by agencies such as  the Bureau of Land Management, Bureau of Indian Affairs, and the Forest  Service. The responsibility for funding and overseeing construction of  these roads is within DOT, specifically within FHWA’s federal lands  division. It is unlikely that the federal government would assign the  responsibilities to construct roads on federal lands to state or local  government. Thus, the decision may be whether, in a restructured federal  program, to continue to finance this responsibility from federal gas taxes  or shift responsibility to the managing agency, but not whether the  responsibility would be turned over to another level of government. In  another area, the federal government takes a defined role in response to  disasters, as exemplified in the Robert T. Stafford Disaster Relief and  Emergency Assistance Act. Similarly, the Emergency Relief program  provides funds to states and other federal agencies for the repair or  reconstruction of federal-aid highways that have been damaged or  destroyed by natural disasters or catastrophic failures. This is a long- established federal function and Congress has provided funds for the  emergency repair of roads since at least 1928. Given the ongoing federal  commitment to respond to disasters it is likely that emergency relief  would remain a federal function. Devolving other programs would depend  on how the federal interest and the federal role were defined. For  example, maintaining systems such as Interstate highways or the National  Highway System could be designated as part of the national interest.
The effect of various turnback scenarios on DOT modal agencies would  depend on how expansively the federal role is defined. For example,  FHWA in fiscal year 2008 had about 1,400 personnel in field offices, or  about half of its total staff. FHWA maintains a division office in each state  that provides oversight of state programs and projects as defined in a  stewardship agreement between the state and the division office. The  division offices may provide project-level oversight in some cases or  delegate that responsibility to the state. Division offices also review state  DOTs’ programs and processes to ensure that states have adequate  controls in place to effectively manage federally assisted projects. Thus, if  a substantial portion of federal highway programs is turned back to the  states, the greatest effect might be felt at the division office level, as the  oversight activities of these offices might largely be considered for  elimination. However, certain functions and offices could remain, such as  the Office of Federal Lands Highways, which provides funding and  oversight for highways on federal lands and constitutes, including both  headquarters and field, about one-fourth of all FHWA staff. Other  functions, such as Emergency Relief program or environmental oversight,  might remain and require a field office presence of some type. A reduced  or eliminated division office structure might be warranted, or residual  functions might suggest a regional structure. Even under an extensive  turnback scenario, FHWA might retain a technical support function, along  with its five existing resource center locations. Effects on other DOT  agencies of a general turnback of transportation grants would vary and  would hinge on what activities the agencies would continue to perform.  For example, assuming FMCSA’s inspection activities continue, the  significant numbers of field staff required to perform those functions  would remain. If NHTSA’s safety grants to the states for purposes such as  reducing impaired driving or increasing seat belt use were turned back,  the functions of NHTSA field staff would need to be reviewed, as these  staff would no longer be needed for grant oversight. However, NHTSA  could still retain its regulatory and research responsibilities, such as those  related to fuel economy standards, automotive recalls, and crash testing,  among others, and might need to retain those staff.
section_title: The Status of Other Federal Requirements Tied to Federal Funds Would Need to Be Decided
paragraphs: In some programs, federal funding is contingent on actions taken by  states. In the highway safety area the federal government has applied both  incentives and sanctions based on state actions. In the past these  strategies have been used to encourage states to enact laws that establish  a minimum drinking age of 21 years and a maximum blood alcohol level of  0.08 to determine impaired driving ability. In addition, Safety Belt  Performance Grants promote national priorities by providing financial  incentives for meeting certain specific performance or safety activity  criteria. Penalty provisions such as those associated with Open Container  laws and Motor Carrier Safety Assistance Program grants promote federal  priorities by transferring or withholding the state’s federal funds if states  do not comply. If such programs were turned back to the states and if  these incentive and sanction programs were eliminated, there would not  appear to be a substitute basis for the federal government to influence  state actions.
Extensive state and metropolitan planning requirements could be affected  by a turnback of the highway program. Federal laws and requirements  specify an overall approach for transportation planning that states and  regional organizations must follow in order to receive federal funds. This  approach includes involving numerous stakeholders, identifying state and  regional goals, developing long- and short-range state and metropolitan  planning documents, and ensuring that a wide range of transportation  planning factors are considered in the process. Without this structure, it is  not clear what form planning processes might take at the state level, or  what role, if any, the federal government would have in relation to  planning activities. At the local level, metropolitan planning organizations  (MPO) came into being largely as result of federal planning requirements,  and MPO activities are in part funded through the current federal-aid  program. In general, the role MPOs would play after a turnback of the  federal program is unclear and would need to be redefined. The status of  existing planning requirements and the amount of federal funding for  metropolitan planning organizations (MPOs), if any, would have to be  determined. If the effect of a turnback is to relinquish requirements, then  states and localities would have to decide what kind of planning and other  requirements they want to have and how to establish those requirements  as a matter of policy.
In addition, a turnback of federal surface transportation programs would  necessitate a review of which federal requirements still apply. As a  condition of receiving federal funds, states must adhere to federal  regulations such as those covering contracting practices. For example,  under the current highway program states must comply with the  provisions of the Disadvantaged Business Enterprise Program, which  requires that a certain percentage of contracts be awarded to socially or  economically disadvantaged firms such as minority and women-owned  businesses. Yet another area requiring review would be the applicability  of federal environmental requirements. Federal laws not predicated on the  receipt of federal funds would still apply and in some cases states have  environmental regulations requiring their own environmental process.
section_title: States and Localities Would Have to Decide Whether to Replace Revenues with State Taxes and What Types of Programs to Finance
paragraphs: States would have to decide whether to replace revenues with state taxes.  This decision would have different impacts on different states because  some states contribute more in taxes than they get back in program funds  and vice versa. In the highway context, these states are referred to as  donor and donee states. However, a turnback might require states to  replace Highway Trust Fund revenues for transit programs and safety  grants as well as highways. For some states replacing federal revenues  with state taxes sufficient to continue to fund existing federal programs  would result in a net decrease in fuel taxes in that state while in others a  net increase in fuel taxes—in some cases a substantial increase. This  raises questions whether surface transportation programs would continue  at the same funding level under a turnback because states face their own  long-term fiscal challenges, and the fiscal capacity of states varies. Other  factors could affect outcomes at the state level. For example, there is no  way to reliably predict the extent to which “tax competition” between  states—efforts to keep taxes lower as a way of attracting business—would  occur.
We considered the implications of a relatively complete turnback of  federal grant programs, including highway, transit and safety grants. In the  following example, almost all federal surface transportation programs  funded through the Highway Trust Fund would be turned back to the  states, with the exception of Federal Lands and Emergency Relief. In  order to provide a consistent basis for comparison, we assumed that states  would substantially continue current programs and activities that now  receive federal funding, and that states would raise their fuel taxes to  provide the additional revenues needed to cover the cost of these  programs and activities. However, if a turnback of the federal program  were to actually occur, the outcome would almost certainly differ from  these results, because states would not necessarily elect to replace all  current federal programs or finance the same programs and activities from  their own resources. Furthermore, states might not elect to replace federal  revenue with state fuel taxes as states have options for raising revenue  other than fuel taxes. For example, a state might choose to raise vehicle  registration fees or increase the use of tolling.
The illustrative analysis of this turnback scenario showed that 27 states  could achieve the same funding level as they currently receive through  federal transportation grants with taxes lower than the existing federal  tax, while 23 states and the District of Columbia would require taxes  higher than the existing federal tax, or other revenue sources, to achieve  full replacement value.
Figure 1 lists the net change in per-gallon fuel taxes that would occur if the  federal fuel tax were eliminated and states replaced Highway Trust Fund  grants with their own fuel taxes. States in table 1 with a negative value  would need to raise state taxes less than the current federal tax level, and  states with a positive value would need to raise state taxes more than the  current federal tax level, or obtain other revenue sources.
Although table 1 shows that a similar number of states would likely  require net increases and net decreases, the range is much wider among  states that would require a net increase. While some states, such as  Virginia and Arizona, would likely end up with modest net decreases in  fuel taxes of up to 6 cents per gallon under this scenario, nine states and  the District of Columbia would face increases of more than twice that— Mississippi and Alaska would all require comparatively extreme net  increases of more than 30 cents per gallon, and the District of Columbia  over $1 per gallon. These results reflect a cumulative effect of many  factors, such as the “donor-donee” distinctions between states, equity and  minimum apportionment adjustments from the Highway Trust Fund, the  various allocations made to states for safety, and allocations to states and  localities for transit programs.
section_title: States Would Have Flexibility in Funding Programs
paragraphs: In general, states would have great flexibility in how they use funds under  a turnback approach. States would have greater flexibility to develop their  own programs and approaches without being limited to the current federal  program categories, and would have greater discretion to define and fund  projects that best suit their needs. In addition, there would be no  congressionally directed spending. To the extent that federal programs  affect the targeting of funds, states might shift funds to different projects.  However, the current federal-aid program already gives states great  discretion in setting priorities and selecting projects. In contrast, the  current federal program may provide some states with flexibility they  otherwise would not have. For example, some federal highway programs  provide that funds may be transferred (flexed) between highway and  transit programs. However, under a turnback of surface transportation  programs, this flexibility could be lost in some states. For example, some  states have constitutional provisions that require all fuel taxes to be spent  solely on roads, thus making transit and safety programs ineligible barring  constitutional change. Such states would have to revise certain laws and  constitutional provisions or develop alternative sources of revenue in  order to replace federal funds.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, other key contributors to this  report were Steve Cohen, Assistant Director; Lauren Calhoun; Robert  Ciszewski; Jay Cherlow; Elizabeth Eisenstadt; Teague Lyons; Josh  Ormond; and Lisa Van Arsdale.
section_title: Related GAO Products
paragraphs: The following are GAO products pertinent to the issues discussed in this  report. Other products may be found at GAO’s Web site at www.gao.gov.
subsections: section_title: Federal Roles and Goals
paragraphs: Surface Transportation: Preliminary Observations on Efforts to  Restructure Current Program. GAO-08-478T. Washington, D.C.: February  6, 2008.
Freight Transportation: National Policy and Strategies Can Help  Improve Freight Mobility. GAO-08-287. Washington, D.C.: January 7, 2008.
Highlights of a Forum: Transforming Transportation Policy for the 21st  Century. GAO-07-1210SP. Washington, D.C.: September 19, 2007.
Railroad Bridges and Tunnels: Federal Role in Providing Safety  Oversight and Freight Infrastructure Investment Could Be Better  Targeted. GAO-07-770. Washington, D.C.: Aug. 6, 2007.
Motor Carrier Safety: Preliminary Information on the Federal Motor  Carrier Safety Administration’s Efforts to Identify and Follow Up with  High-Risk Carriers. GAO-07-1074T. Washington, D.C.: July 11, 2007.
Intermodal Transportation: DOT Could Take Further Actions to Address  Intermodal Barriers. GAO-07-718. Washington, D.C.: June 20, 2007.
Intercity Passenger Rail: National Policy and Strategies Needed to  Maximize Public Benefits from Federal Expenditures. GAO-07-15.  Washington, D.C.: November 13, 2006.
Freight Railroads: Industry Health Has Improved, but Concerns about  Competition and Capacity Should Be Addressed. GAO-07-94. Washington,  D.C.: October 6, 2006.
Public Transportation: New Starts Program Is in a Period of Transition.  GAO-06-819. Washington, D.C.: August 30, 2006.
Freight Transportation: Short Sea Shipping Option Shows Importance of  Systematic Approach to Public Investment Decisions. GAO-05-768.  Washington, D.C.: July 29, 2005.
Rail Transit: Additional Federal Leadership Would Enhance FTA’s State  Safety Oversight Program. GAO-06-821. Washington, D.C.: July 26, 2006.
Intermodal Transportation: Potential Strategies Would Redefine Federal  Role in Developing Airport Intermodal Capabilities. GAO-05-727.  Washington, D.C.: July 26, 2005.  21st Century Challenges: Reexamining the Base of the Federal  Government. GAO-05-325SP. Washington, D.C.: February, 2005.
Homeland Security: Effective Regional Coordination Can Enhance  Emergency Preparedness. GAO-04-1009. Washington, D.C.: September 15,  2004.
Freight Transportation: Strategies Needed to Address Planning and  Financing Limitations. GAO-04-165. Washington, D.C.: December 19,  2003.
Surface and Maritime Transportation: Developing Strategies for  Enhancing Mobility: A National Challenge. GAO-02-775. Washington,  D.C.: August 30, 2002.
Highway Infrastructure: Interstate Physical Conditions Have Improved,  but Congestion and Other Pressures Continue. GAO-02-571. Washington,  D.C.: May 31, 2002.
section_title: Performance and Accountability; Best Tools and Approaches
paragraphs: Highway Public-Private Partnerships: More Rigorous Up-front Analysis  Could Better Secure Potential Benefits and Protect the Public Interest.  GAO-08-44. Washington D.C.: February 8, 2008.
Federal-Aid Highways: Increased Reliance on Contractors Can Pose  Oversight Challenges for Federal and State Officials. GAO-08-198.  Washington D.C.: January 8, 2008.
A Call For Stewardship: Enhancing the Federal Government’s Ability to  Address Key Fiscal and Other 21st Century Challenges. GAO-08-93SP.  Washington, D.C.: December 2007.
Public Transportation: Future Demand Is Likely for New Starts and  Small Starts Programs, but Improvements Needed to the Small Starts  Application Process. GAO-07-917. Washington, D.C.: July 27, 2007.
Surface Transportation: Strategies Are Available for Making Existing  Road Infrastructure Perform Better. GAO-07-920. Washington, D.C.: July  26, 2007.
Motor Carrier Safety: A Statistical Approach Will Better Identify  Commercial Carriers That Pose High Crash Risks Than Does the  Current Federal Approach. GAO-07-585. Washington, D.C.: June 11, 2007.
Public Transportation: Preliminary Analysis of Changes to and Trends  in FTA’s New Starts and Small Starts Programs. GAO-07-812T.  Washington, D.C.: May 10, 2007.
Older Driver Safety: Knowledge Sharing Should Help States Prepare for  Increase in Older Driver Population. GAO-07-413. Washington, D.C.: April  11, 2007.
Older Driver Safety: Survey of States on Their Implementation of  Federal Highway Administration Recommendations and Guidelines, an  E-Supplement. GAO-07-517SP. Washington, D.C.: April 11, 2007.
Performance and Accountability: Transportation Challenges Facing  Congress and the Department of Transportation. GAO-07-545T.  Washington, D.C.: March 6, 2007.
Transportation-Disadvantaged Populations: Actions Needed to Clarify  Responsibilities and Increase Preparedness for Evacuations. GAO-07-44.  Washington, D.C.: December 22, 2006.
Federal Transit Administration: Progress Made in Implementing  Changes to the Job Access Program, but Evaluation and Oversight  Processes Need Improvement. GAO-07-43. Washington, D.C.: November 17,  2006.
Truck Safety: Share the Road Safely Pilot Initiative Showed Promise, but  the Program’s Future Success Is Uncertain. GAO-06-916. Washington,  D.C.: September 8, 2006.
Public Transportation: Preliminary Information on FTA’s  Implementation of SAFETEA-LU Changes. GAO-06-910T. Washington,  D.C.: June 27, 2006.
Intermodal Transportation: Challenges to and Potential Strategies for  Developing Improved Intermodal Capabilities. GAO-06-855T.  Washington, D.C.: June 15, 2006.
Federal Motor Carrier Safety Administration: Education and Outreach  Programs Target Safety and Consumer Issues, but Gaps in Planning  and Evaluation Remain. GAO-06-103. Washington, D.C.: December 19,  2005.
Large Truck Safety: Federal Enforcement Efforts Have Been Stronger  Since 2000, but Oversight of State Grants Needs Improvement. GAO-06- 156. Washington, D.C.: December 15, 2005.
Highway Safety: Further Opportunities Exist to Improve Data on  Crashes Involving Commercial Motor Vehicles. GAO-06-102. Washington,  D.C.: November 18, 2005.
Transportation Services: Better Dissemination and Oversight of DOT’s  Guidance Could Lead to Improved Access for Limited English-Proficient  Populations. GAO-06-52. Washington, D.C.: November 2, 2005.
Highway Congestion: Intelligent Transportation Systems Promise for  Managing Congestion Falls Short, and DOT Could Better Facilitate Their  Strategic Use. GAO-05-943. Washington, D.C.: September 14, 2005.
Highlights of an Expert Panel: The Benefits and Costs of Highway and  Transit Investments. GAO-05-423SP. Washington, D.C.: May 6, 2005.
Federal-Aid Highways: FHWA Needs a Comprehensive Approach to  Improving Project Oversight. GAO-05-173. Washington, D.C.: January 31,  2005.
Highway and Transit Investments: Options for Improving Information  on Projects’ Benefits and Costs and Increasing Accountability for  Results. GAO-05-172. Washington, D.C.: January 24, 2005.
Highway Safety: Improved Monitoring and Oversight of Traffic Safety  Data Program Are Needed. GAO-05-24. Washington, D.C.: November 4,  2004.
Surface Transportation: Many Factors Affect Investment Decisions.  GAO-04-744. Washington, D.C.: June 30, 2004.
Highway Safety: Better Guidance Could Improve Oversight of State  Highway Safety Programs. GAO-03-474. Washington, D.C.: April 21, 2003.
Executive Guide: Leading Practices in Capital Decision Making.  GAO/AIMD-99-32. Washington, D.C.: December 1998.
section_title: Fiscal Sustainability/ Financing the Nation’s Transportation System
paragraphs: Congressional Directives: Selected Agencies’ Processes for Responding to  Funding Instructions. GAO-08-209. Washington, D.C.: January 31, 2008.
Highway and Transit Investments: Flexible Funding Supports State and  Local Transportation Priorities and Multimodal Planning. GAO-07-772.  Washington, D.C.: July 26, 2007.
State and Local Governments: Persistent Fiscal Challenges Will Likely  Emerge within the Next Decade. GAO-07-1080SP. Washington D.C.: July  18, 2007.
Highway Emergency Relief: Reexamination Needed to Address Fiscal  Imbalance and Long-Term Sustainability. GAO-07-245. Washington, D.C.:  February 23, 2007.
High Risk Series: An Update. GAO-07-310. Washington, D.C.: January  2007.
Highway Finance: States’ Expanding Use of Tolling Illustrates Diverse  Challenges and Strategies. GAO-06-554. Washington, D.C.: June 28, 2006.
Highway Trust Fund: Overview of Highway Trust Fund Estimates.  GAO-06-572T. Washington, D.C.: April 4, 2006.
Federal-Aid Highways: Trends, Effect on State Spending, and Options  for Future Program Design. GAO-04-802. Washington, D.C.: August 31,  2004.
U.S. Infrastructure: Funding Trends and Federal Agencies’ Investment  Estimates. GAO-01-986T. Washington, D.C.: July 23, 2001.
Federal Budget: Choosing Public Investment Programs. GAO/AIMD-93- 25. Washington, D.C.: July 23, 1993.