Transportation programs, like other federal programs, need to be viewed in the context of the nation’s fiscal position. Long-term fiscal simulations by GAO, the Congressional Budget Office, 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 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. This looming fiscal crisis requires a fundamental reexamination of all government programs and commitments. Although the long-term outlook is driven by rising health care costs, all areas of government should be re-examined. This involves reviewing government programs and commitments and testing their continued relevance and relative priority for the 21st century. Such a reexamination offers an opportunity to address emerging needs by eliminating outdated or ineffective programs, more sharply defining the federal role in relation to state and local roles, and modernizing those programs and policies that remain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. We are currently working with Congress to develop a variety of tools to help carry out a reexamination of federal programs. The nation’s surface transportation programs are particularly ready for reexamination. This would include asking whether existing program constructs and financing mechanisms are relevant to the challenges of the 21st century, and making tough choices in setting priorities and linking resources to results. We have previously reported on the following factors that highlight the need for transformation of the nation’s transportation policy. Future demand for transportation will strain the network. Projected population growth, technological changes, and increased globalization are expected to increase the strain on the nation’s transportation system. Congestion across modes is significant and projected to worsen. National transportation goals and priorities are difficult to discern. Federal transportation statutes and regulations establish multiple, and sometimes conflicting, goals and outcomes for federal programs. In addition, federal transportation funding is generally not linked to system performance or to the accomplishment of goals or outcomes. Furthermore, the transportation program, like many other federal programs, is subject to congressional directives, which could impede the selection of merit-based projects. The federal government’s role is often indirect. The Department of Transportation (DOT) implements national transportation policy and administers most federal transportation programs. While DOT carries out some activities directly, it does not have control over the vast majority of the activities it funds. Additionally, DOT’s framework of separate modal administrations makes it difficult for intermodal projects to be integrated into the transportation network. Future transportation funding is uncertain. Revenues to support the Highway Trust Fund—the major source of federal highway and transit funding—are eroding. Receipts for the Highway Trust Fund, which are derived from motor fuel and truck-related taxes (e.g., truck sales) are continuing to grow. However, the federal motor fuel tax of 18.4 cents per gallon has not been increased since 1993, and thus the purchasing power of fuel tax revenues has eroded with inflation. Furthermore, that erosion will continue with the introduction of more fuel-efficient vehicles and alternative-fueled vehicles in the coming years, raising the question of whether fuel taxes are a sustainable source of financing transportation. In addition, funding authorized in the recently enacted highway and transit program legislation is expected to outstrip the growth in trust fund receipts. Finally, the nation’s long-term fiscal challenges constrain decision makers’ ability to use other revenue sources for transportation needs. Recognizing many of these challenges and the importance of the transportation system to the nation, Congress established The National Surface Transportation Policy and Revenue Study Commission (Commission) in the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU). The mission of the Commission was, among other things, to examine the condition and future needs of the nation’s surface transportation system and short and long- term alternatives to replace or supplement the fuel tax as the principal revenue source to support the Highway Trust Fund. In January 2008, the Commission released a report with numerous recommendations to place the trust fund on a sustainable path and to reform the current structure of the nation’s surface transportation programs. Congress also created the National Surface Transportation Infrastructure Financing Commission in SAFETEA-LU and charged it with analyzing future highway and transit needs and the finances of the Highway Trust Fund and recommending alternative approaches to financing transportation infrastructure. This Commission issued its interim report this past week, and its final report is expected by spring of 2009. In addition, various transportation industry associations and research groups have issued, or plan to issue in the coming months, proposals for restructuring and financing the surface transportation program. Through our prior analyses of existing programs, we identified a number of principles that could help drive an assessment of proposals for restructuring the federal surface transportation programs. These principles include (1) defining the federal role based on identified areas of national interest, (2) incorporating performance and accountability for results into funding decisions, and (3) ensuring fiscal sustainability and employing the best tools and approaches to improve results and return on investment. Our previous work has shown that identifying areas of national interest is an important first step in any proposal to restructure the surface transportation program. In identifying areas of national interest, proposals should consider existing 21st century challenges and how future trends could have an impact on emerging areas of national importance—as well as how the national interest and federal role may vary by area. For example, 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. Once the various national interests in surface transportation have been identified, proposals should also clarify specific goals for federal involvement in the surface transportation program as well as define the federal role in working toward each goal. Goals should be specific and outcome-based to ensure that resources are targeted to projects that further the national interest. The federal role should be defined in relation to the roles of state and local governments, regional entities, and the private sector. Where the national 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 national interest is less evident, state and local governments, and others could assume more responsibility. For example, efforts to reduce transportation’s impact on greenhouse gas emissions may warrant a greater federal role than other initiatives, such as reducing urban congestion, since the impacts of greenhouse gas emissions are widely dispersed, whereas the impacts of urban congestion may be more localized. The following illustrative questions can be used to determine the extent to which proposals to restructure the surface transportation program define the federal role in relation to identified areas of national interest and goals. To what extent are areas of national interest clearly defined? To what extent are areas of national interest reflective of future trends? To what extent are goals defined in relation to identified areas of national interest? To what extent is the federal role directly linked to defined areas of national interest and goals? To what extent is the federal role defined in relation to the roles of state and local governments, regional entities, and the private sector? To what extent does the proposal consider how the transportation system is linked to other sectors and national policies, such as environmental, security, and energy policies? Our previous work has shown that an increased focus on performance and accountability for results could help the federal government target resources to programs that best achieve intended outcomes and national transportation priorities. 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 current federal procedural requirements could help make the program more outcome-oriented. For example, if reducing congestion were an established federal goal, outcome measures for congestion, such as reduced travel time could be incorporated into the programs to hold state and local governments responsible for meeting specific performance targets. Furthermore, directly linking the allocation of resources to the program outcomes would increase the focus on performance and accountability for results. Incorporating incentives or penalty provisions into grants can further hold grantees and recipients accountable for achieving results. The following illustrative questions can be used to determine the extent to which proposals to restructure the surface transportation program incorporate performance and accountability mechanisms. Are national performance goals identified and discussed in relation to state, regional, and local performance goals? To what extent are performance measures outcome-based? To what extent is funding linked to performance? To what extent does the proposal include provisions for holding stakeholders accountable for achieving results? To what extent does the proposal create data collection streams and other tools as well as a capacity for monitoring and evaluating performance? We have previously reported that the effectiveness of any overall federal program design can be increased by incorporating strategies to ensure fiscal sustainability as well as by promoting and facilitating the use of the best tools and approaches to improve results and return on investment. Importantly, given the projected growth in federal deficits, constrained state and local budgets, and looming Social Security and Medicare spending commitments, the resources available for discretionary programs will be more limited—making it imperative to maximize the national public benefits of any federal investment through a rigorous examination of the use of such funds. The federal role in transportation funding must be reexamined to ensure that it is sustainable in this new fiscal reality. A sustainable surface transportation program will require targeted investment, with adequate return on investment, from not only the federal government, but also state and local governments, and the private sector. The user-pay concept—that is, users paying directly for the infrastructure they use—is a long-standing aspect of transportation policy and should, to the extent feasible and appropriate, remain an essential tenet as the nation moves toward the development of a fiscally sustainable transportation program.