The nation’s surface transportation systems facilitate mobility through an extensive network of infrastructure and operators, as well as through the vehicles and vessels that permit passengers and freight to move within the system. Maintaining the systems is critical to sustaining America’s economic growth. This is especially important given that projected increases in freight tonnage will likely place pressures on these systems. According to the Federal Highway Administration, domestic and international freight tonnage across all surface modes will increase 41 percent, from 14.4 billion tons in 1998 to 20.3 billion tons in 2010. According to the forecasts, by 2010, 15.6 billion tons are projected to move by truck, a 44 percent increase; 3 billion tons by rail, a 32 percent increase; and 1.5 billion tons by water, a 27 percent increase. Some freight may be moved by more than one mode before reaching its destination, such as moving by ship for one segment of the trip, then by truck to its final destination. Over 95 percent of the U.S. overseas freight tonnage is shipped by sea. The United States accounts for 1 billion metric tons, or nearly 20 percent of the world’s oceanborne trade. As the world’s leading maritime trading nation, the United States depends on a vast marine transportation system. In addition to the economic role it plays, the system also has an important role in national defense; serves as an alternative transportation mode to roads and rails; and provides recreational value through boating, fishing, and cruises. Traditionally, federal participation in the maritime industry has been directed mainly at projects related to “waterside” issues, such as keeping navigation channels open by dredging, icebreaking, or improving the system of locks and dams; maintaining navigational aids such as lighthouses or radio systems; and monitoring the movement of ships in and out of the nation’s coastal waters. Federal participation has generally not extended to “landside” projects related to ports’ capabilities, such as building terminals or piers and purchasing cranes or other equipment to unload cargo. These traditional areas of federal assistance are under pressure, according to a congressionally mandated report issued by the Department of Transportation in 1999, which cites calls to modernize aging structures and dredge channels to new depths to accommodate larger ships. Since this report, and in the aftermath of September 11, the funding focus has further expanded to include greater emphasis on port security. Many of the security improvements will require costly outlays for infrastructure, technology, and personnel. For example, when the Congress recently made $92.3 million in federal funding available for port security as part of a supplemental appropriations bill, the Transportation Security Administration received grant applications totaling almost $700 million. With growing system demands and increased security concerns, some stakeholders have suggested a different source of funding for the marine transportation system. For example, U.S. public port authorities have advocated increased federal funding for harbor dredging. Currently, funding for such maintenance is derived from a fee on passengers and the value of imported and domestic cargo loaded and unloaded in U.S. ports. Ports and shippers would like to see funding for maintenance dredging come from the general fund instead, and there was legislation introduced in 1999 to do so. Regarding funding for security, ports are seeking substantial federal assistance to enhance security in the aftermath of the events of September 11. In other work we have conducted on port security, port and private-sector officials have said that they believe combating terrorism is the federal government’s responsibility and that, if additional security is needed, the federal government should provide or pay for it. Unlike the funding approach used for the aviation and highway transportation systems, which are primarily funded by collections from users of the systems, the commercial marine transportation system relies heavily on general tax revenue. For all three transportation systems, most of the revenue collected from users of the systems was deposited into trust fund accounts. Figure 1 summarizes the expenditure and assessment comparisons across the three transportation systems. During fiscal years 1999 through 2001, federal agencies expended an average of $3.9 billion each year on the marine transportation system with about 80 percent of the funding coming from the general revenues. During the same period, federal agencies expended an average of $10 billion each year on the aviation system and $25 billion each year on the highway system. The vast majority of the funding for these expenditures came from trust fund accounts. (See app. II.) Federal agencies collected revenue from assessments on users of all three transportation systems during fiscal years 1999 through 2001. Collections from assessments on system users during this period amounted to an average of $1 billion each year from marine transportation system users, $11 billion each year from aviation system users, and $34 billion each year from highway system users. Most of the collections for the three systems were deposited into trust funds that support the marine, aviation, and highway transportation systems. (See app. III.) Trust funds that support the marine transportation system include the Harbor Maintenance Trust Fund and the Inland Waterways Trust Fund. Trust funds that support the aviation and highway transportation systems include the Airport and Airway Trust Fund and the Highway Trust Fund. The federal government assesses customs duties on goods imported into the United States and the majority of these collections are deposited into the U.S. Treasury’s general fund to be used for the support of federal activities. As can be seen in figure 2, the amounts from customs duties levied on imported goods carried through the marine transportation system are more than triple the combined amounts collected from customs duties levied on the goods carried through the aviation and highway systems. During fiscal years 1999 through 2001, customs duties on imported goods shipped through the transportation systems averaged $15.2 billion each year for the marine transportation system, $3.7 billion for the aviation system, and $928 million for the highway system. (See app. IV for details on customs duty collections by year.) Some maritime stakeholders, particularly port owners and operators, have proposed using a portion of the customs duties for infrastructure improvements to the marine transportation system. They point out that the marine transportation system is generating billions of dollars in revenue, and some of these funds should be returned to maintain and enhance the system. However, unlike transportation excise taxes, customs duties are taxes on the value of imported goods paid by importers and ultimately their consumers—not on the users of the system—and have traditionally been viewed as revenues to be used for the support of the general activities of the federal government. Notwithstanding the general trend, a portion of revenues from customs duties are currently earmarked for agriculture and food programs, migratory bird conservation, aquatic resources, and reforestation. It should be noted, however, that in these cases, some relationship exists between the goods being taxed and the uses for which the taxes are earmarked. Designating a portion of the remaining customs fees for maritime uses would not represent a new source of capital for the federal government, but rather it would be a draw on the general fund of the U.S. Treasury. This could lead to additional deficit financing, unless other spending were cut or taxes were increased. Some maritime industry stakeholders have suggested that substantial new investments in the maritime infrastructure by federal, state, and local governments and by the private sector may be required because of an aging infrastructure, changes in the shipping industry, and increased concerns about security. These growing and varied demands for increased investments in the maritime transportation system heighten the need for a clear understanding about the federal government’s purpose and role in providing funding for the system and for a sound investment approach to guide federal participation. In examining federal investment approaches across many national activities, we have found that issues such as these are best addressed through a systematic framework. As shown in figure 2, this framework has the following four components that potentially could be applied to all transportation systems: Set national goals for the system. These goals, which would establish what federal participation in the system is designed to accomplish, should be specific and measurable. Define clearly what the federal role should be relative to other stakeholders. This step is important to help ensure that federal participation supplements and enhances participation by others, rather than simply replacing their participation. Determine which funding tools and other approaches, such as alternatives to investment in new infrastructure, will maximize the impact of any federal investment. This step can help expand the capacity to leverage funding resources and promote shared responsibilities. Ensure that a process is in place for evaluating performance periodically so that defined goals, roles, and approaches can be reexamined and modified, as necessary. An initial decision for Congress when evaluating federal investments concerns the goals of the marine transportation system. Clearly defined national goals can serve as a basis for guiding federal participation by charting a clear direction, establishing priorities among competing issues, specifying the desired results, and laying the foundation for such other decisions as determining how assistance will be provided. At the federal level, measuring results for federal programs has been a longstanding objective of the Congress. The Government Performance and Results Act of 1993 has become the primary legislative framework through which agencies are required to set strategic and annual goals that are based on national goals, measure performance, and report on the degree to which goals are met and on what actions are needed to achieve or modify goals that have not been met. Establishing clear goals and performance measures for the marine transportation system is critical to ensuring both a successful and a fiscally responsible effort. Before national goals for the system can be established, however, an in- depth understanding of the relationship of the system to other transportation modes is required. Transportation experts highlight the need to view the system in the context of the entire transportation system in addressing congestion, mobility, and other challenges and, ultimately, investment decisions. For example, congestion challenges often occur where modes connect or should connect, such as ports where freight is transferred from one mode to another. The connections require coordination of more than one mode of transportation and cooperation among multiple transportation providers and planners.