The safe, efficient, and convenient movement of people and goods depends on a vibrant transportation system. Our nation has built vast systems of roads, airways, railways, transit systems, pipelines, and waterways that facilitate commerce and improve our quality of life. However, these systems are under considerable strain due to increasing congestion and the costs of maintaining and improving the systems. This strain is expected to increase as the demand to move people and goods grows resulting from population growth, technological change, and the increased globalization of the economy. DOT implements national transportation policy and administers most federal transportation programs. Its responsibilities are considerable and reflect the extraordinary scale, use, and impact of the nation’s transportation systems. DOT has multiple missions—primarily focusing on mobility and safety—that are carried out by several operating administrations. (See table 1.) For fiscal year 2010, the President’s budget requested $72.5 billion to carry out these and other activities. DOT carries out some activities directly, such as employing more than 15,000 air traffic controllers to coordinate air traffic. However, the vast majority of the programs it supports are not under its direct control. Rather, the recipients of transportation funds, such as state departments of transportation, implement most transportation programs. For example, the Federal Highway Administration (FHWA) provides funds to state governments each year to improve roads and bridges and meet other transportation demands, but state and local governments decide which transportation projects have high priority within their political jurisdictions. We have previously reported that current surface transportation programs—authorized in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)—do not effectively address the transportation challenges the nation faces. As a result, we have called for a fundamental reexamination of the nation’s surface transportation programs to (1) have well-defined goals with direct links to an identified federal interest and federal role, (2) institute processes to make grantees more accountable by establishing more performance-based links between funding and program outcomes, (3) institute tools and approaches that emphasize the return on the federal investment, and (4) address the current imbalance between federal surface transportation revenues and spending. We have also called for a timely reauthorization of FAA programs that expired at the end of fiscal year 2007 and have continued under a series of funding extensions. Such short-term funding measures could delay key capital projects and may affect FAA’s current programs and progress toward the Next Generation Air Transportation System. Congress and the presidential administration have fashioned the American Recovery and Reinvestment Act of 2009 to help our nation respond to what is generally reported to be the worst economic crisis since the Great Depression. DOT received about $48 billion of these funds for investments in transportation infrastructure—primarily for highways, passenger rail, and transit—mostly for use through fiscal year 2010. (See table 2.) As with other executive agencies, DOT now faces the challenges of using these funds in ways that aid economic recovery, making wise funding choices while spending the money quickly, and ensuring accountability for results. The act largely provided for increased transportation funding through existing programs—such as the Federal-Aid Highways, the New Starts transit, and the Airport Improvement programs. Channeling funding through existing programs should allow DOT to jump start its spending of recovery funds. However, there is a need to balance the requirement in the recovery act to get funds out quickly to help turn around the economy with the equally powerful need to make sure that funds are spent wisely on infrastructure investments and are not subject to waste, fraud, and abuse. We have reported on important design criteria for any economic stimulus package including that it be timely, temporary, and targeted. This is a difficult challenge for transportation infrastructure projects. First, they require lengthy planning and design periods. According to the Congressional Budget Office (CBO), even those projects that are “on the shelf” generally cannot be undertaken quickly enough to provide a timely stimulus to the economy. Second, spending on transportation infrastructure is generally not temporary because of the extended time frames needed to complete projects. Third, because of differences among states, it is challenging to target stimulus funding to areas with the greatest economic and infrastructure needs. The act will substantially increase the federal investment in the nation’s surface transportation system. However, the current federal approach to addressing the nation’s surface transportation problems is not working well. Many existing surface transportation programs are not effective at addressing key challenges because goals are numerous and sometimes conflicting, roles are unclear, programs lack links to the performance of the transportation system or of the grantees, and programs in some areas do not use the best tools and approaches to ensure effective investment decisions and the best use of federal dollars. In addition, evidence suggests that increased federal highway grants influence states and localities to substitute federal funds for state and local funds they otherwise would have spent on highways. In 2004, we estimated that states used roughly half of the increases in federal highway grants since 1982 to substitute for state and local highway funding, and that the rate of substitution increased during the 1990s. Our work has also shown that there is still room for improved oversight in surface transportation programs including the Federal-Aid Highway program. For example, we and the DOT Inspector General have each recommended that FHWA develop the capability to track and measure the costs of federally-aided projects over time. Among other things, the act gives our office the responsibility of reporting to Congress bimonthly on how selected states and localities are using the recovery funds. We will work with the department’s Office of Inspector General and with the state and local audit community to coordinate our activities. We also anticipate that committees of jurisdiction will request that we assess specific issues related to the department’s use of recovery funds. We look forward to working with this subcommittee and others to meet Congress’s needs. DOT and Congress will be faced with numerous challenges as they work to reauthorize the surface transportation and aviation programs. In particular, the department and Congress will need to address challenges in (1) ensuring that the nation’s surface transportation and aviation systems have adequate funding, (2) improving safety, (3) improving mobility, and (4) transforming the nation’s air traffic control system. Surface transportation program funding is one of the issues on our high-risk list. Revenues from motor fuels taxes and truck-related taxes to support the Highway Trust Fund—the primary source of funds for highway and transit—are not keeping pace with spending levels. This fact was made dramatically apparent last summer when the Highway Account within the trust fund was nearly depleted. The balance of the Highway Account has been declining in recent years because, as designed in SAFETEA-LU, outlays from the account exceed expected receipts over the authorization period. Specifically, when SAFETEA-LU was passed in 2005 estimated outlays from Highway Account programs exceeded estimated receipts by about $10.4 billion. Based on these estimates, the Highway Account balance would have been drawn down from $10.8 billion to about $0.4 billion over the authorization period. This left little room for error. Assuming all outlays were spent, a revenue shortfall of even 1 percent below what SAFETEA-LU had predicted over the 5-year period would result in a cash shortfall in the account balance. In fact, actual Highway Account receipts were lower than had been estimated, particularly for fiscal year 2008. Account receipts were lower in fiscal year 2008 due to a weakening economy and higher motor fuel prices that affected key sources of Highway Trust Fund revenue. For example, fewer truck sales, as well as fewer vehicle miles traveled and correspondingly lower motor fuel purchases resulted in lower revenues. As a result, the account balance dropped more precipitously than had been anticipated and was nearly depleted in August 2008—1 year earlier than the end of the SAFETEA-LU authorization period. In response, Congress passed legislation in September 2008 to provide $8 billion to replenish the account. However, according to CBO, the account could reach a critical stage again before the end of fiscal year 2009. Without either reduced expenditures or increased revenues, or a combination of the two, shortfalls will continue. In the past, we have reported on several strategies that could be used to better align surface transportation expenditures and revenue. Each of these strategies has different merits and challenges, and the selection of any strategy will likely involve trade-offs among different policy goals. The strategies related to funding sources are also included in the recent report from the National Surface Transportation Infrastructure Financing Commission. Altering existing sources of revenue. The Highway Account’s current sources of revenue—motor fuel taxes and truck-related taxes—could be better aligned with actual outlays. According to CBO and others, the existing fuel taxes could be altered in a variety of ways to address the erosion of purchasing power caused by inflation, including increasing the per-gallon tax rate and indexing the rates to inflation. Ensure users are paying fully for benefits. Revenues can also be designed to more closely follow the user-pay concept—that is, require users to pay directly for the cost of the infrastructure they use. This concept seeks to ensure that those who use and benefit from the infrastructure are charged commensurately. Although current per-gallon fuel taxes reflect usage to a certain extent, these taxes are not aligned closely with usage and do not convey to drivers the full costs of road use—such as the costs of congestion and pollution. We have reported that other user-pay mechanisms—for example, charging according to vehicle miles traveled, tolling, implementing new freight fees for trucks, and introducing congestion pricing (pricing that reflects the greater cost of traveling at peak times)—could more equitably recoup costs. Supplement existing revenue sources. We have also reported on strategies to supplement existing revenue sources. A number of alternative financing mechanisms—such as enhanced private-sector participation—can be used to help state and local governments finance surface transportation.