[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                        SURFACE TRANSPORTATION:
                    INVESTMENT NEEDS AND THE BUDGET

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, OCTOBER 25, 2007

                               __________

                           Serial No. 110-23

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html














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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
ROBERT E. ANDREWS, New Jersey        JOHN CAMPBELL, California
ROBERT C. ``BOBBY'' SCOTT, Virginia  PATRICK J. TIBERI, Ohio
BOB ETHERIDGE, North Carolina        JON C. PORTER, Nevada
DARLENE HOOLEY, Oregon               RODNEY ALEXANDER, Louisiana
BRIAN BAIRD, Washington              ADRIAN SMITH, Nebraska
DENNIS MOORE, Kansas                 [Vacancy]
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
[Vacancy]

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
           Patrick L. Knudsen, Acting Minority Chief of Staff






















                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, October 25, 2007.................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
    Hon. Paul Ryan, ranking minority member, House Committee on 
      the Budget.................................................     2
    Hon. Earl Blumenauer, a Representative in Congress from the 
      State of Oregon:
        Prepared statement of....................................     3
        Article: ``Unlocking the Gridlock,'' by Pete Ruane, the 
          Sunday [Washington] Times, dated October 7, 2007.......    24
    Hon. Adrian Smith, a Representative in Congress from the 
      State of Nebraska, prepared statement of...................     4
    Hon. Mary E. Peters, Secretary, U.S. Department of 
      Transportation.............................................     4
        Prepared statement of....................................     6
    Robert A. Sunshine, Deputy Director, Congressional Budget 
      Office.....................................................    30
        Prepared statement of....................................    32
    Janet F. Kavinoky, director of transportation infrastructure, 
      U.S. Chamber of Commerce and executive director, Americans 
      for Transportation Mobility Coalition......................    45
        Prepared statement of....................................    47
    Robert Puentes, fellow, metropolitan policy program, the 
      Brookings Institution......................................    54
        Prepared statement of....................................    57






















        SURFACE TRANSPORTATION: INVESTMENT NEEDS AND THE BUDGET

                              ----------                              


                       THURSDAY, OCTOBER 25, 2007

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt, Jr. 
[Chairman of the Committee] presiding.
    Present: Representatives Spratt, Doggett, Blumenauer, 
Etheridge, Moore, Ryan, Garrett, Hensarling, Porter, Alexander, 
and Smith.
    Chairman Spratt. The Committee will come to order and we 
will proceed with our hearing this morning, and, first of all, 
welcome our witnesses and thank them for coming.
    This is a hearing on the surface transportation system of 
this country, the investment needs and the budgetary resources 
to meet those needs.
    Our witnesses include the Honorable Mary Peters, who is the 
Secretary of U.S. Department of Transportation. And, Ms. 
Peters, to you particularly, we wish to thank you for taking 
time from your schedule to come.
    Robert Sunshine, the Deputy Director of the Congressional 
Budget Office, Janet Kavinoky, who is the Director of 
Transportation Infrastructure for the U.S. Chamber of Commerce, 
Robert Puentes, Fellow at the Brookings Institution 
Metropolitan Policy Program.
    We will hear from Secretary Peters first. You are a panel 
by yourself. Then we will have a second panel of the other 
witnesses, and we will have questions for each panel after your 
testimony.
    As this Committee continues to consider the nation's fiscal 
challenges, our nation's infrastructure, its highways, its 
bridges, its transit systems are a vitally important topic.
    Surface transportation programs affect our economy. They 
affect our safety. They affect our quality of life. So it is 
important to understand what the needs are and what the options 
are for meeting these needs. With a new highway bill on the 
not-too-distant horizon, these issues take on an even greater 
element.
    This Committee in particular will need to examine this 
issue when resolving our decisions about our fiscal year 2009 
budget resolution.
    The collapse of the I-35 bridge in Minneapolis in August 
raises the question of what level of resources do we need to be 
sure that our infrastructure is up to minimal standards. The 
collapse of the bridge was a gruesome reminder that when we 
talk about providing resources for public purposes, it is not 
merely a question of dollars and cents. It is not an abstract 
question. It is a question of decisions that have direct impact 
on the lives of our people.
    So we need to consider the question of the appropriate 
level of resources, but we also have to be sure that federal 
dollars are being spent wisely.
    We also today will focus on a looming budgetary issue, 
perhaps less traumatic, but important nevertheless, namely the 
projected imbalance in the Highway Trust Fund. Under current 
estimates, there will be a $4.3 billion shortfall in the year 
2009, not far away, between projected collections coming into 
the account by way of the Highway Trust Fund and projected 
outlays from that account.
    The shortfall is projected to grow to more than $26 billion 
in the year 2012. Clearly this imbalance, shortfall, call it 
what you will, raises critical questions of how and at what 
level we will fund our infrastructure needs and puts pressure 
on our ability to bring the federal budget into balance.
    I hope that today's hearing will bring this Committee up to 
speed on these important issues and some of the options for 
addressing them.
    Before turning to you, Secretary Peters, let us turn to Mr. 
Ryan for any opening statement he cares to make.
    Mr. Ryan.
    Mr. Ryan. Thank you, Chairman. Thank you for holding this 
hearing. I think it is a timely hearing that we talk about our 
transportation investment needs and the federal budget.
    Like most everyone, I believe that our transportation 
network is the backbone of our economy and it plays a vital 
role in the movement of people and goods. So it is obvious that 
we need a world-class transportation infrastructure that meets 
the challenges and conditions of the 21st century.
    I am concerned, however, that our current spending and 
revenue structure for surface transportation is not delivering 
that. It is essentially a revenue-sharing program with states 
and localities.
    One of the key problems of the current structure is that it 
lacks a clear federal mission and fails across most modes to 
ensure that scarce transportation dollars are wisely and 
effectively allocated.
    In other words, that careful use of taxpayer resources 
simply is not happening. Instead, as we have seen with the last 
three surface transportation authorization bills, the 
allocation of federal transportation dollars has as much, if 
not more, to do with politics as it does with actual need.
    And with the reauthorization of the Multi-Year Surface 
Transportation Bill just around the corner, which this 
Committee will be first to address in its budget resolution, we 
need to start the process of fundamentally reexamining our 
current path now. And that is why this hearing is very timely.
    I understand that our witness today will share the view 
that a comprehensive review of our current program and revenue 
structure is certainly a wise use of this Congress' time. I can 
think of no better example of what is wrong with our current 
structure and regrettably examples are plentiful from the 
bridge to nowhere to many earmarks.
    And if you take a look at the currently projected shortfall 
in the highway account of the Highway Trust Fund for which CBO 
recently projected a $4.3 billion shortfall in 2009 and which 
is rising thereon after, I think addressing this will be a good 
place to start as we reassess the federal government's role in 
surface transportation.
    Given the importance of transportation infrastructure to 
our economy and our way of life and given the magnitude of the 
challenges we face, I look forward to the testimony of the 
distinguished panelists and I am very happy to have Secretary 
Peters here with us as well.
    Thank you.
    Chairman Spratt. Thank you, Mr. Ryan.
    Now, a few housekeeping details before we get started. 
First of all, I want to acknowledge Mr. Earl Blumenauer who was 
one of those who instigated, initiated, and requested this 
hearing because of his long-term interest in the infrastructure 
of this country.
    Earl, we will give you some extra time to ask any questions 
you would like to ask.
    I also want to ask unanimous consent that all members be 
allowed to submit an opening statement for the record at this 
point.
    [The prepared statement of Mr. Blumenauer follows:]

    Prepared Statement of Hon. Earl Blumenauer, a Representative in 
                   Congress From the State of Oregon

    Over the past several years, Americans have witnessed the practical 
effects of the decline of American infrastructure: New Orleans remains 
a shadow of its former self since the floodwaters receded; the I-35 
bridge collapsed--just one of the 6,000 bridges on the National Highway 
System with a rating of ``structurally deficient;'' in our cities, 
steampipes explode and sinkholes form; and everywhere Americans are 
stuck in traffic for longer periods and with few options to avoid such 
congestion.
    Looming over these known challenges are the twin--and inter-
related--threats to our communities of global warming and energy 
supplies.
    In 2005, Congress passed SAFETEA-LU, which authorized the spending 
of $244.1 billion over five years on transportation infrastructure. Yet 
this Act, sizeable as it was, was woefully short of the Department of 
Transportation's own estimate of the need, which was $375 billion. DOT, 
however, failed to request that amount, undercutting its own programs. 
Today, the American Society of Civil Engineers estimates that an 
investment of $1.6 trillion is necessary to update our public 
infrastructure. At the same time, the balances in the Highway Trust 
Fund are eroding and will run a $4 billion deficit in 2009. The Mass 
Transit Fund will be exhausted by 2011.
    Leaders on both sides of the aisle agree that the United States 
must update its public infrastructure. The failure to do so puts all 
users of our transportation systems at risk, puts the nation's 
environment at risk, and puts the economic foundations of the country 
at risk.
    For all of these reasons, we face some critical questions: What are 
the appropriate levels our society should invest in transportation? How 
do we provide individuals with access and how are we going to move 
freight in an increasingly complex urban environment? How can we better 
allocate the billions of dollars in investments we make to better 
maximize our society's returns?
    Answering these challenges will call forth the best in American 
ingenuity, craftsmanship, and foresight. To harness these abilities, we 
must articulate a new national vision of transportation infrastructure. 
This vision must be sufficiently inclusive to meet the challenges 
presented by the threat of global warming, a growing population, and an 
expanding economy. Resolving these challenges will bring tremendous 
benefits. Reorienting our antiquated infrastructure around efficiency, 
sustainability and reduced greenhouse gas emissions represents one of 
the preeminent engines for innovation, job creation, and economic 
productivity growth in coming decades.
    Fortunately, America has surmounted similar challenges before. In 
1808, Albert Gallatin and the president he served, Thomas Jefferson, 
developed a plan that guided economic development for the 1800s. Almost 
exactly one hundred years ago, President Theodore Roosevelt recognized 
the need to invest in and preserve our natural resources and he called 
forth national efforts that guided land-use and transportation policy 
for decades beyond his presidency. Today, America faces similar 
challenges and requires similar leadership. Our hearing should be part 
of the effort for Congress to begin laying the groundwork for a vision 
that will guide infrastructure investment for this century that will 
overcome the challenges we face.

    [The prepared statement of Mr. Smith follows:]

 Prepared Statement of Hon. Adrian Smith, a Representative in Congress 
                       From the State of Nebraska

    Good morning and thank you, Mr. Chairman. This hearing is necessary 
and timely, and I am pleased we are holding it today.
    Safe and efficient transportation is tremendously important to the 
Nation's economy and to the Third District of Nebraska.
    The Federal surface transportation spending and revenue structure 
needs improvement. This is especially troubling to me since Nebraska is 
one of 25 donor states; putting more money in gas tax revenue into the 
Highway Trust Fund than we get back. As currently structured, funds are 
not targeted to most effectively address current and future challenges.
    Some of the these challenges in Nebraska relate to changing 
economic activity. For example, we still face significant 
transportation issues in the ethanol industry. As we see changes 
resulting from bioenergy development, transportation demands are 
changing and I question whether or not we are prepared to meet this 
challenge.
    I want to thank our witnesses for coming here today to provide 
testimony for the Committee, and I look forward to hearing from you.
    Mr. Chairman, I look forward to continuing to work with you, and I 
thank you for your time.

    And, finally, Secretary Peters and the other witnesses, we 
have your prefiled testimony. We will, if there is no 
objection, make those statements part of the record so that you 
can summarize them in any way you see fit.
    The floor is yours. Thank you again for coming. We look 
forward to your testimony.

STATEMENT OF HON. MARY E. PETERS, SECRETARY, U.S. DEPARTMENT OF 
                         TRANSPORTATION

    Secretary Peters. Mr. Chairman, thank you so much and thank 
you for the opportunity to be here.
    Chairman Spratt, Ranking Member Ryan, members of the 
Committee, it is truly an honor to appear before you here 
today.
    Since I had the opportunity to return to Washington last 
year, I have sought to ensure that the Department is focused on 
the most pressing transportation challenges facing our system. 
We must reverse the decline in overall transportation system 
performance. American families and American businesses pay a 
very high price for this decline by way of delays, 
unpredictability, wasted energy, and other costs.
    And we must continue to reduce transportation fatalities 
and injuries even as traffic volumes grow. We can do this by 
emphasizing comprehensive, data-driven approaches and new crash 
prevention technologies.
    This Committee will play a very important role, a vital 
role in reforming federal transportation spending policies and 
practices to respond to these challenges.
    The core problems plaguing America's aviation highway and 
public transportation systems are strikingly similar. The 
current federal tax and spending structure that underpins each 
is increasingly ineffective at targeting resources where they 
are needed the most to respond to growing transportation 
congestion.
    This is true for two basic reasons. First, federal 
transportation taxes are not direct user charges and do not 
reflect the true cost of using transportation facilities. And, 
second, federal transportation programs are not sufficiently 
focused on stimulating the type of innovation necessary to 
lower the cost of transportation.
    By relying on an array of taxes on gasoline, diesel, jet 
fuel, airline tickets, heavy truck sales, and truck tires, as 
well as general taxpayer funds, the federal government invests 
approximately $61 billion a year in highways, bridges, 
airports, transit systems, and in our air traffic control 
system.
    These taxes are then deposited into dedicated trust funds 
and reallocated based on formulas, special designations, and 
earmarks, a significant level of earmarks.
    Current programs, regulations, and policies discourage the 
proper pricing of transportation infrastructure. They fail to 
sufficiently reward innovation and technology development. They 
do not prioritize investments based on economic returns and 
they blur the relative responsibilities of federal, state, and 
local authorities and the private sector.
    Because transportation users do not pay directly for 
providing and managing the nation's transportation 
infrastructure, they have relatively little input into federal 
program and policy decisions and they are largely unaware of 
what it costs to provide transportation infrastructure or what 
they are paying to use it.
    This contrasts very sharply with the structure that the 
country has adopted for most other major network utilities such 
as telecommunications, electricity, pipelines, and railroads.
    The negative consequence of this flawed structure were not 
particularly important when our transportation infrastructure 
in this nation was greatly exceeded by travel demand. We had 
much more infrastructure than we had demand. However, thanks to 
the robust economy and population growth over many decades, 
transportation policy complacency is no longer acceptable.
    There is an intense focus right now on the sustainability 
of the federal trust funds that support this increasingly 
flawed model. On the highways and transit side, we currently 
spend billions more than we collect in tax revenue every year. 
And as a result, the highway account of the Highway Trust Fund 
is projected to experience a substantial cash shortfall the 
first time in 2009. The mass transit account will go negative 
in 2011.
    This impending shortfall should be viewed not as a crisis, 
but as an opportunity. It is an opportunity to redefine the 
federal government's role in surface transportation following 
the completion of the interstate system.
    And thanks to technology developments in the last five to 
ten years, it is also an opportunity to start to shift away 
from today's tax and spend model to a direct pricing and 
investment model. This model can and should embrace a larger 
role for the private sector in financing, managing, and 
operating the nation's infrastructure.
    In just the last three years literally billions of dollars 
of private capital have been amassed with the main purpose of 
investing in U.S. transportation infrastructure. These 
resources stand waiting for our country's political leadership 
to establish policies and parameters that would attract this 
investment.
    In the aftermath of the tragic collapse of the I-35W bridge 
in Minneapolis, several members of Congress have introduced 
legislation calling for an increased investment in highways and 
bridges. I strongly believe that any discussion about the 
amount of our investment would be misguided without a 
discussion about the quality of our investment and where we are 
spending money today.
    Contrary to the prevailing view, the DOT 2006 Conditions 
and Performance Report based on 2004 data indicates that the 
physical condition of our transportation infrastructure has 
been improving in recent years. Ninety-one percent of travel on 
the nation's highway system takes place on roads that are 
considered acceptable ride quality.
    Similarly, we have seen a noticeable decline in the 
percentage of bridges considered to be structurally deficient 
over the last ten years. The same does not hold true when it 
comes to congestion or overall system performance.
    Despite substantial increases in federal spending since 
1982, average rush hour delays in our nation's urban areas have 
increased from 14 hours to 38 hours. Rush hour is no longer a 
true term. It is rush hours. Total hours of delay in those 
areas have increased from 800 million to 4.2 billion hours.
    Increases in federal taxes and spending would likely do 
little, if anything, to reverse these trends without a much 
more basic change in how we analyze competing spending options 
and manage existing systems more efficiently.
    Mr. Chairman, I greatly appreciate the intense budgetary 
pressures that this Congress and this Committee are charged to 
address. With growing entitlement obligations and major 
national security needs, among other priorities, it is clear 
that this country will need to reassess many components of the 
federal budget and we have the opportunity to do so with 
transportation before us.
    Thank you, Mr. Chairman. I would be pleased to answer any 
questions that you have.
    [The prepared statement of Mary E. Peters follows:]

 Prepared Statement of Hon. Mary E. Peters, Secretary, U.S. Department 
                           of Transportation

    Chairman Spratt, Ranking Member Ryan, and Members of the Committee, 
I am honored to be here today.
    The United States has the world's largest and most capable 
transportation systems. Those systems have enabled unprecedented growth 
in domestic and international trade, have brought our diverse States 
closer together, and have provided a critical foundation for the 
amazing wealth creation and economic prosperity that have taken place 
in the U.S. and around the world in the last 60 years.
    When I returned to Washington last year, I sought to ensure that 
the Department was focused on the challenges that were most pressing 
and the solutions to those challenges that would have the most impact. 
In my view, those challenges are: 1) reversing the decline in overall 
transportation systems performance that is increasingly imposing costs 
on American families and businesses by way of delays, unpredictability, 
and wasted energy, among other costs, and 2) ensuring a continued 
reduction in transportation system fatalities and injuries, even as 
traffic volumes grow, by emphasizing comprehensive, data-driven 
approaches and new crash prevention technologies. We have made 
significant strides forward in the past year.
    I was excited to receive the opportunity to testify here because I 
believe this Committee can play a vital role in reforming Federal 
spending policies and practices to respond to these challenges. I will 
focus the bulk of my testimony on surface transportation, but the core 
problems plaguing America's aviation, highway, and public 
transportation systems are strikingly similar. All are plagued by a 
Federal tax and spending structure that is increasingly ineffective at 
targeting resources and addressing declining performance.
    This is true for two basic reasons. First, Federal transportation 
taxes are not direct user charges, and do not reflect the true costs of 
using transportation facilities, including the costs of congestion. 
Second, Federal transportation programs are not sufficiently focused on 
stimulating the type of innovation necessary to lower the costs of 
transportation.
    Relying on an array of taxes on gasoline, diesel, jet fuel, airline 
tickets, heavy truck sales, and truck tires, as well as general 
taxpayers, the Federal Government currently makes investments of 
approximately $61 billion in America's highways, bridges, airports, 
transit systems, and in our air traffic control system. These taxes are 
deposited into dedicated trust funds and then re-allocated based on 
formulas, special designations and earmarks. Over the last 20 years, we 
have witnessed substantial increases in Federal transportation spending 
and simultaneous deterioration in the performance of the systems that 
are intended to benefit from this spending.
    Today's Federal investment strategy for transportation often 
appears more focused on rewarding status quo constituencies than it 
does on improving the Nation's transportation infrastructure. Current 
programs, regulations, and policies discourage the proper pricing of 
transportation infrastructure, fail to sufficiently reward innovation 
and technology development, do not prioritize investments based on 
economic returns, and blur the relative responsibilities of Federal, 
State, and local authorities and the private sector. And of course, 
they encourage the 6,000 plus earmarks we witnessed in the 2005 Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU).
    Because transportation system users do not pay directly for the 
costs of providing and managing the nation's transportation 
infrastructure, they have relatively little input into Federal program 
and policy decisions. Polls confirm that users of our transportation 
systems are largely unaware of what it costs to provide transportation 
infrastructure or what they are paying to use it. This contrasts 
sharply with the structure the country has adopted for our other major 
network utilities such as telecommunications, electricity, pipelines, 
and railroads.
    For years, the negative consequences of this flawed structure were 
not particularly important as transportation infrastructure supply 
greatly exceeded travel demand. Thanks to robust economic and 
population growth over many decades, however, that era has ended. 
Transportation policy complacency is no longer acceptable if our 
transportation systems are to accommodate the type of growth that is 
projected for our economy.
    There is intense focus right now on the sustainability of the 
Federal trust funds that support this increasingly flawed model. On the 
highways and transit side, we are currently spending billions of 
dollars more than we collect in tax revenues. As a result, the Highway 
Account of the Highway Trust Fund is projected to experience a 
substantial cash shortfall for the first time in 2009. The Mass Transit 
Account will go negative in 2011.
    This impending shortfall should be viewed as an opportunity, not a 
crisis. By encouraging a shift away from a tax and spend model to a 
direct pricing investment model, dramatic transportation system 
improvements are possible. In fact, it is a rare moment indeed to have 
the chance to implement major economic policy changes that can benefit 
individuals, families, corporations, and the environment 
simultaneously.
    In the aftermath of the tragic collapse of the I-35W Bridge in 
Minneapolis, Minnesota, it is important that I provide an assessment of 
the overall condition of the Nation's highways and bridges and provide 
further detail on some of the issues raised above. Recently, several 
members of Congress have introduced legislation calling for increased 
investment in highways and bridges. While I agree with these members of 
Congress that our financial model needs to be reexamined, I strongly 
believe that any discussion of the amount of our investment would be 
misguided without a discussion of the quality of our investment.
    As a preliminary matter, it is important to understand that while 
we must do a better job of improving the Nation's transportation 
systems, the Nation's infrastructure is not crumbling when compared to 
previous periods. The DOT 2006 Conditions and Performance (C&P) Report, 
based on 2004 data, indicates the physical condition of our 
transportation infrastructure is good and has been improving. This 
report describes the current highway, bridge and transit systems and 
provides an assessment of the condition of these systems as of the 
relevant reporting year. Highways are assessed to determine what 
percentage of the highway system provides ride quality that is at least 
acceptable. Bridges are assessed to determine the percentage of bridges 
that are structurally deficient and/or functionally obsolete. Transit 
is assessed to determine the condition of each transit asset on a five-
point scale ranging from excellent to poor.
    The 2006 C&P Report indicates that the percentage of vehicle miles 
traveled on pavements with ``good'' ride quality rose from 39.4 percent 
in 1997 to 44.2 percent in 2004. Similarly, the percentage of bridges 
considered to be structurally deficient dropped from 16.0 percent in 
1998 to 13.1 percent in 2004. The 2006 C&P Report also indicates that 
physical conditions for most transit assets have improved.
    Despite these increases, the percentage of travel occurring under 
congested conditions rose from 27.4 percent in 1997 to 31.6 percent in 
2004. The average length of congested conditions per day rose from 6.2 
hours in 1997 to 6.6 hours in 2004. Since 1982, average rush hour 
delays in our nation's urban areas have increased from 14 hours to 38 
hours. Total hours of delay in those areas have increased from 800 
million to 4.2 billion hours. Because the underperformance in the 
highway sector is fundamental, not incremental, I have come to believe 
strongly that increases in Federal taxes and spending would likely do 
little, if anything, to reverse these trends without a more basic 
change in how we analyze competing spending options and in how we 
manage existing systems.
    A review of the 2006 C&P Report highlights the following numbers. 
In 2004, capital investments in highways and bridges (across all levels 
of government) amounted to $70.3 billion. The annual capital 
investments required from 2005 to 2024 to maintain these highways and 
bridges at roughly their current condition and performance level would 
be $78.8 billion and the maximum economically justifiable investment 
during this period would be $131.7 billion per year.
    Although not expressed this way, it is important to differentiate 
between the costs to maintain the quality of the Nation's 
infrastructure and the cost to improve the performance of the Nation's 
infrastructure. In order to ensure that existing infrastructure quality 
is maintained, DOT estimates that approximately $40 billion a year in 
properly targeted highway and bridge expenditures would be sufficient. 
In order to substantially improve existing highways and bridge quality, 
DOT estimates that approximately $60 billion a year in properly 
targeted highway and bridge expenditures would be sufficient. These 
estimates are based on construction costs from 2004. Substantial 
construction cost escalations since 2004 will probably result in 
significant increases in these estimates and will be reflected in the 
next C&P Report.
    Because advocates of higher taxes and spending frequently cite the 
C&P Report incorrectly, it is important to explain its limitations. One 
of the most important traditional limitations of the C&P Report has 
been that while it identified the amount of capital investment required 
to maintain or improve highway and transit systems, it has not directly 
assessed the impact that alternative financing mechanisms could have on 
the total amount of investment required.
    For example, increased funding for highways from gas taxes and 
other general revenue sources would have different implications than 
increased funding for highways from tolls or other direct user charges. 
While increased funding from taxes does little, if anything, to address 
congestion specifically, direct road pricing corresponding to the 
economic cost of congestion would reduce peak traffic volumes and 
increase net benefits to all users.
    To begin to address this limitation, the 2006 C&P Report includes a 
preliminary analysis of the application of universal congestion pricing 
to our highways and the effect this would have on the calculation of 
capital investment needs. Congestion pricing involves charging drivers 
more to use a facility or system during peak congestion periods. It 
works by shifting discretionary rush hour highway travel to other modes 
of transportation or to off-peak periods.
    As expected, the preliminary analysis included in the 2006 C&P 
Report confirmed that universal congestion pricing, by improving the 
performance of our current highway system, could significantly reduce 
the level of future highway investment that would be required to 
maintain or improve the condition of our highways. The 2006 C&P Report 
suggested that applying congestion tolls to all of the congested roads 
in the system could reduce the cost to maintain the system by $21.6 
billion per year, or 27.5 percent, leaving it at $57.2 billion, which 
is well below the current level of capital spending.
    This preliminary analysis affirms the Department's conviction that 
the costs of our Nation's transportation systems are intrinsically 
linked to the types of investments that we make. If we make investments 
that will increase system performance, such as congestion pricing, we 
can reduce costs and bring down the amount of investment required to 
maintain our system by billions of dollars.
    As the Committee on the Budget is aware, while cost-benefit 
analysis should be a minimum condition to investment, it is by no means 
sufficient to justify additional spending. Cost-beneficial highway 
projects need to be compared and prioritized with other investment 
options. A project with a benefit/cost ratio just above one is likely 
to rank very low when compared to other conceivable investment options. 
In fact, most private corporations employ ``hurdle rates'' that imply 
benefit/cost ratios far in excess of one.
    All levels of government, including the Federal Government, have 
limited resources to fund programs. Transportation spending needs to 
compete with health care, the environment, social services, and many 
other important programs. Moreover, all forms of government spending 
compete with private sector spending. We should not tax our citizens 
and spend the proceeds for government purposes--even those whose 
benefits exceed their costs--if taxpayers have even more compelling 
needs to spend those funds in the private sector.
    In addition, while the models used for the C&P Report assume that 
projects are prioritized based on their cost-benefit ratios, this 
assumption is not consistent with actual patterns of project selection 
and funding distribution that occur in the real world. As noted above, 
in the real world, major spending decisions often have nothing to do 
with underlying economics. Real world process and legal limitations 
also constrain the ability to make cost-beneficial investments. For 
example, a Federal Environmental Impact Statement currently takes over 
sixty months to complete, regardless of how cost-beneficial a certain 
project may be. In fact, many of the urban highway expansion projects 
that would be embedded in a $131.7 billion national cost-beneficial 
spending figure would not obtain the political support or environmental 
approvals needed to move the projects forward.
    Another important characteristic of the C&P Report is that while it 
suggests how much money could be spent cost-beneficially across all 
levels of government for capital investment in transportation, it does 
not make any recommendation as to the percentage of that investment 
that should be provided by the Federal Government. The 2006 C&P Report, 
in fact, reports that Federal highway capital investment is increasing 
more rapidly than State and local highway capital investment. Between 
1997 and 2004, Federal capital investments in highways rose 52.9 
percent, while State and local capital investment increased by only 
39.9 percent. The Federal Government's portion of total capital outlay 
increased from 41.6 percent in 1997 to 43.8 percent in 2004. In 2002, 
the Federal Government's portion of total capital outlays was 46.1 
percent, the highest level since 1986.
    This trend was noted by an August 2004 report from the Government 
Accountability Office (GAO), Federal Aid Highways: Trends, Effect on 
State Spending, and Options for Future Program Design (GAO-04-802). The 
GAO report noted that while ``the Nation's capital investment in its 
highway system has doubled in the last 20 years, and during that time 
period as a whole, state and local investment in highways outstripped 
federal investment in highways,'' nevertheless, ``since the early 
1990s, state and local investment in highways has increased at a slower 
rate than federal investment in highways.''
    According to the GAO report, from 1991 through 2002, State and 
local investment increased by 23 percent while Federal investment 
increased by 47 percent.
    The GAO report concluded that ``federal-aid highway grants have 
influenced state and local governments to substitute federal funds for 
state and local funds that otherwise would have been spent on 
highways.'' This substitution limits the effectiveness of Federal aid 
to achieve important highway program goals, because increases in 
Federal aid do not translate into increased overall highway capital 
investment.
    One way to improve the emphasis on investment quality and efficient 
system pricing is to expand the involvement of the private sector in 
the construction, financing, and operation of our transportation 
systems. Public-private partnerships (PPPs) for transportation projects 
reduce their costs, provide incentives for better pricing of 
transportation assets, accelerate project delivery, reduce public 
sector risk, and bring increased innovation and competition to the 
industry. To the extent capital investments in our highways and bridges 
facilitate PPPs, they are likely to reduce the total amount of 
investment required to maintain and improve our highways and bridges.
    There is no clearer evidence of this failure to prioritize spending 
than the disturbing evolution of the Federal highway program. This 
program has seen politically designated projects grow from a handful in 
the surface transportation bill enacted in the early 1980s to more than 
6,000 enacted in SAFETEA-LU. The cost of these earmarks totaled $23 
billion--a truly staggering figure.
    The real cost of these earmarks is much higher. Looking at a sample 
of various recent earmarks, we found that the Federal earmark amounts 
themselves comprised on average only 10% of the total project cost. 
Because of this, State departments of transportation will typically 
either delay the earmarked project indefinitely or re-allocate 
resources from higher priorities to fill the funding gap. In addition, 
earmarks present administrative burdens for States that must dedicate 
scarce personnel resources to managing lower priority projects that are 
subject to earmarking. In short, earmarks ripple through the entire 
Federal-aid program structure.
    In addition to earmarks, there are a number of special interest 
programs that have been created to provide funding for projects that 
may or may not be a State and local priority. As a former State DOT 
director, I have had first-hand experience with the difficulties 
created when Washington mandates override State priorities. While it is 
true that not all earmarks or special interest investments are 
wasteful, it is also true that virtually no comparative economic 
analysis is conducted to support these spending decisions. No business 
could survive for any meaningful period of time using a similar 
investment strategy. Not surprisingly, new economic literature reveals 
that the returns on our highway investments have plummeted into the low 
single digits in recent years.
    The Department is working with States to encourage them to 
regularly use benefit-cost analysis (BCA) when making project selection 
decisions. Currently, approximately 20 States make some use of BCA, 
while 6 States use the technique regularly. The GAO recently conducted 
two studies to identify the key processes for surface transportation 
infrastructure planning and decisionmaking, with a particular emphasis 
on the role of economic analysis methods and the factors that affect 
the use of such methods.
    These studies are Highway and Transit Investments: Options for 
Improving Information on Projects' Benefits and Costs and Increasing 
Accountability for Results (GAO-05-172); and Surface Transportation: 
Many Factors Affect Investment Decisions (GAO-04-744). The former 
report noted that ``the increased use of economic analytical tools, 
such as benefit-cost analysis, could improve the information available 
to decision makers and, ultimately, lead to better-informed 
transportation investment decision making'' (GAO-05-172, p. 6).
    Among other reasons, GAO cited ``political concerns'' for why BCA 
is not more widely used in U.S. public sector surface transportation 
decisionmaking. GAO observed that projects may be important for a 
particular interest group or constituency even though they are not 
efficient from an economic standpoint. At a minimum, BCA would provide 
additional transparency to decisions that are less cost-beneficial. 
Ideally, BCA would actually begin to prevent inefficient decisions from 
being made in the first place.
    GAO also noted that BCA results are rarely reviewed in light of 
actual project outcomes. In other words, not only is BCA underused in 
the project planning process, it is also rarely used to assess the 
efficacy of a previous investment. This is in stark contrast to typical 
capital investment models employed in the private sector. It is 
important that Congress and the Department work together to establish 
far more productive means to ensure that scarce resources are flowing 
to projects that benefit the public the most. BCA is likely to be one 
of our most effective tools to advance that objective.
    Moreover, since Federal transportation funding levels are not 
linked to specific performance-related goals and outcomes, the public 
has rightfully lost confidence in the ability of traditional approaches 
to deliver. The use of performance measures, by helping to identify 
weaknesses as well as strengths, can improve the transportation project 
selection process and the delivery of transportation services.
    In addition to an insufficient performance and cost-benefit focus, 
the current gas tax-dependent model does virtually nothing to address 
directly the growing costs of congestion and system unreliability. 
Taxes on gasoline, diesel fuel, motor vehicles, tires, property and 
consumer products--the dominant means of raising revenues for 
transportation--are levied regardless of when and where a driver uses a 
highway. This leads to a misperception that highways are ``free,'' 
which in turns encourages overuse and gridlock at precisely the times 
we need highways the most. Consistent with the views of almost every 
expert who has looked at the issue, GAO recently released a report 
arguing that gas taxes are fundamentally incapable of balancing supply 
and demand for roads during heavily congested periods.
    The data simply do not lie in this case. Relying extensively on gas 
and motor vehicle taxes, virtually every metropolitan area in the U.S. 
has witnessed an explosion in traffic delays over the last 25 years. 
Meanwhile, in recent years, the increase in surface transportation 
funding has significantly outpaced the overall growth of non-defense, 
non-homeland security Federal discretionary spending. And, since 1991, 
capital outlays at all levels of government have nearly doubled. 
Economists have long understood the connection between payment 
mechanisms and system performance, but technology and administrative 
complexities limited the ability of policymakers to explore 
alternatives. Today, those barriers no longer exist.
    This is one of the main reasons that our Department has been 
strongly supporting States that wish to experiment with electronic 
tolling and congestion pricing. Nationwide, the majority of projects in 
excess of $500 million currently in development are projected to be 
financed at least in part with electronic tolls. In the middle of 
August, we announced Federal grants of more than $800 million to some 
of the country's largest cities to explore fully the concept of 
electronic tolling combined with expanded commuter transit options and 
deployment of new operational technologies. Nationwide, the trends are 
inescapable and encouraging.
    We believe that, to the extent feasible, users should finance the 
costs of building, maintaining, and operating our country's highways 
and bridges. What is increasingly clear is that directly charging for 
road use (similar to the way we charge for electricity, water, and 
telecommunications services) holds enormous promise to generate large 
amounts of revenues for re-investment and to cut congestion. Equally 
important, however, prices send better signals to State DOTs, planners, 
and system users as to where capacity expansion is most critical. 
Prices are not simply about demand management; they are about adding 
the right supply.
    The current financial model is also contradictory to other critical 
national policy objectives. As a country, we are rightly exploring 
every conceivable mechanism to increase energy independence, promote 
fuel economy in automobiles, stimulate alternative fuel development, 
and reduce emissions. President Bush has urged Congress to pass laws 
that will substantially expand our alternative energy capabilities and 
increase Corporate Average Fuel Economy requirements for automobiles 
and light trucks. The Federal Government should be strongly encouraging 
States to explore alternatives to petroleum-based taxes and not to 
expand the country's reliance upon them.
    Before reaching the conclusion that additional Federal spending and 
taxes is the right path, we should critically examine how we establish 
spending priorities today. We need a data-driven, performance-based 
approach to building and maintaining our Nation's infrastructure 
assets--a process where we are making decisions based on safety first, 
economics second, and politics not at all. And we need an underlying 
framework that is responsive to today's and tomorrow's challenges, not 
those of the 1950s.
    I look forward to working with you and would be pleased to answer 
any questions you may have.

    Chairman Spratt. Thank you, Madam Secretary.
    We have ten minutes to go vote. But before we do that, what 
I am going to do is yield my time and open time to Mr. 
Blumenauer to make a statement he cares to make and then we 
will go to you, Mr. Ryan, if that is agreeable.
    Mr. Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman. I appreciate your 
courtesy and I also appreciate your having this hearing.
    And what I would do is just briefly suggest a slight 
alternative to the vision that has been advanced by our 
distinguished witness because I think Congress is in the midst 
of a fundamental assessment of our role of infrastructure and 
the role that the three percent of the $2 trillion that is 
spent each year on transportation that is federal will play.
    Some say tax and spend. We have not kept pace with 
inflation with the gas tax. And the Department of 
Transportation itself gave us an assessment of what should have 
been in the last Transportation Bill, $375 billion, a figure, 
by the way, that was embraced unanimously by the Republicans 
and the Democrats in the House Transportation Bill.
    We are losing the infrastructure race in this country. The 
rest of the world is spending not tens of billions but 
trillions of dollars on modernizing a system of transportation, 
roads, bridges, mass transit, pipelines, aviation, looking at 
ways to integrate it.
    I would suggest that the bridge issues is just the tip of 
the iceberg. We have looming over us twin challenges, 
interrelated threats to our communities of global warming and 
energy supplies that are further going to throw our current 
system of transportation funding heavily reliant on a fixed gas 
tax into a downward spiral.
    We did SAFETEA-LU in 2005 at a $244 billion level when the 
Department itself in its analysis said we needed 375. The 
American Society of Civil Engineers estimates that an 
investment of $1.6 trillion is necessary to update our public 
infrastructure while, as the Secretary points out, the balances 
are eroding and we cannot even support the current level of 
system.
    We ought to be asking a fundamental question about the 
appropriate role for investing in infrastructure, how are we 
going to provide individuals with access, how are we going to 
move freight through an increasingly complex urban environment, 
how do we better allocate billions of dollars in investment to 
maximize returns.
    Congestion pricing and other mechanisms, I think, or market 
signals are appropriate, but they are certainly, I think, by no 
stretch of the imagination going to be sufficient.
    I hope that this hearing and the work that we can do looks 
at the big picture, not on a bike path or even the Republican 
bridge to nowhere, but what the big picture should be. How are 
we going to reorient our antiquated infrastructure around 
efficiencies, sustainability, reducing greenhouse gases?
    We have done this in the past. We are coming up on the 
200th anniversary of the Galiton plan from Thomas Jefferson 
that guided development for a century. Ninety-nine years ago, a 
Republican President, Teddy Roosevelt, convened a national 
conference on infrastructure that set the stage for decades to 
come on the interstate freeway system and dam construction, a 
whole host of other things.
    Mr. Chairman, I hope that our Committee continues out this 
bigger picture about what role that is going to play in both 
how we budget for it, the appropriate role, what it means, and 
how we deal with the big picture rather than slogans and 
ideology. We have got a massive problem before us and I am 
hopeful that this Committee can help unlock it by looking at it 
in a factual way.
    Chairman Spratt. Thank you, Mr. Blumenauer.
    And we have about five minutes to make it to the floor to 
vote on a motion to adjourn. That is not a good sign. I am not 
quite sure what is afoot today.
    But in any event, we have got to go vote and we will get 
back as quickly as possible. To the best of my knowledge, there 
is no vote following this, so we should be back shortly.
    The Committee stands in recess.
    [Recess.]
    Chairman Spratt. Thank you for your patience. I call the 
hearing and the Committee back to order.
    And we turn next to the Ranking Member, Mr. Ryan, for any 
questions he may have.
    Mr. Ryan.
    Mr. Ryan. Thank you, Chairman. I think just two areas I 
want to get into.
    Secretary Peters, the National Surface Transportation 
Policy and Revenue Study Commission was created by SAFETEA- LU. 
The Commission is tasked with creating the 50-year vision for 
our country's surface transportation system. Frank Busalacchi, 
our own Secretary of Transportation in Wisconsin, is a member 
of this 12-person Commission. It is my understanding that they 
are supposed to send their report to Congress December 31st of 
this year.
    I was wondering if you could share with us your views on 
the Committee's work to date and any sneak peek that you can 
give us. And then I have a question about earmarks I want to 
ask you as well.
    Secretary Peters. Thank you so much. Mr. Chairman, 
Congressman Ryan, yes, I would be happy to share.
    The Commission has been diligently working since May of 
last year and we have accomplished a lot. We have looked at a 
lot of research and draft report writing is now being 
developed.
    What the Commission is looking at are a variety of areas. 
One is what the federal role should be vis-a-vis state, local 
government, and private sector roles, what various funding 
sources might be and what the yield of those funding sources 
would be over time, and then also looking at governance, how 
should this system be managed in the future, who should make 
recommendations and decisions on how much funding, where the 
funding should go, things like that, and then, finally, looking 
toward the future, 50 years out, what are going to be the best 
methods for financing and managing the system during that time.
    I will tell you we have had very robust policy 
conversations within the Commission and we are not all on the 
same page yet, which I think is good to have that kind of 
robust conversation. But, again, we are committed to issuing a 
report to Congress by the end of this year.
    Mr. Ryan. No consensus has yet been reached then about----
    Secretary Peters. No, sir. And perhaps it is a little early 
because we are just in draft report writing right now. Some of 
the things we are discussing are whether or not we have a 
specific recommendation or set of recommendations or options. 
And if we are not able to reach consensus, I suspect it will be 
the latter.
    Mr. Ryan. Okay. On to earmarks. How many earmarks do we 
have in SAFETEA-LU? Sixty-three hundred----
    Secretary Peters. Yes.
    Mr. Ryan [continuing]. Earmarks in SAFETEA-LU. Is it not 
true that many of these earmarked projects are never obligated 
or advance at a slower rate than usual because they were not 
ready to move forward when the money was earmarked in the 
Highway Bill? That is question one.
    Question two, can you give us just sort of a summary of the 
Clyburn report, the IG report, and give us your views, which 
you touched on in your opening statement, on whether or not 
this is the right way to go given the fact that we have all of 
these infrastructure problems as highlighted from the bridge 
collapse in Minnesota and whether priorities could be met 
otherwise, in better ways than the earmark process?
    Secretary Peters. Congressman, I would be happy to. And I 
would be very happy to address those areas.
    I think misallocation of resources is one of the biggest 
problems we have today and it is something we really have to 
look at before we say we do not have enough money.
    And the earmarking, as you pointed out, takes a substantial 
amount of the program. Some $23 billion were associated with 
those over 6,000 earmarks.
    But the what I call the dirty little secret of earmarking 
is several things. One, it usually only represents about ten 
percent of the total cost of a project. And so what the total 
value of funding that is pulled out of the process is well in 
excess of what the actual earmarks are.
    Mr. Ryan. So that $23 billion of earmarks that were 
actually in the bill leveraged about $230 billion----
    Secretary Peters. That is correct.
    Mr. Ryan [continuing]. Of earmarks away from other priority 
projects?
    Secretary Peters. That is correct. That is based on our 
analysis. And as you said, in many cases, these projects are 
not ready to go. They are not on the state's priority 
transportation list, the TIP or the STIP.
    And as a former administrator in the State of Arizona, I 
can attest to that fact that when we got an earmark for a 
project that was not included in the priority list but there 
was an expectation that that project would be funded, then we 
had to go find money from other projects that had already been 
prioritized and move them to that project.
    Let me move now to the IG's findings and a report on 
earmarks that had been requested by Congressman Clyburn. The IG 
found several things. He identified over 8,000 earmarked 
projects within the DOT programs that had received more than 
$8.54 billion just since fiscal year 2006. And 99 percent of 
the earmarks that they studied were either not subject to 
agency review or the selection process bypassed the state's 
normal planning and programming process.
    Earmarks can reduce the funding that states have for core 
transportation programs because, as I said earlier, they pull 
funding away from other prioritized projects. Airports do not 
always coincide with strategic goals, especially research 
goals. In fact, none of the 46 earmarked projects valued at $40 
million in FTA's National Research Program addressed FTA's 
research goals to deliver solutions and improve public 
transportation.
    Many low priority earmarked projects are funded over high 
priority earmarked projects. Many, many times that is the case. 
And earmarks provide funds, and this is very important, for 
projects that would otherwise be ineligible. Sometimes the 
earmark comes with a notwithstanding any other provision of law 
phrase and it funds projects that would not even be legally 
eligible for funding under the earmarked categories.
    And so these are just a top level look at what the problem 
with earmarking is.
    Mr. Ryan. All right. Thank you.
    Chairman Spratt. We just had the bell ring for another 
vote. I am not going to that vote. I am going to miss the vote. 
So members who would like to stay and ask questions can run, 
vote, and come back.
    In the meantime, I will recognize Mr. Doggett because he is 
next on the pecking order.
    Mr. Doggett. Well, thank you, Mr. Chairman.
    And thank you, Madam Secretary, for your testimony and your 
service.
    I must say that I am a bit surprised by your use of the 
term tax and spend because, of course, as you know from your 
long career, the tax and spend approach had its origin under 
Dwight David Eisenhower who felt the ``National Interstate and 
Defense Highways Act'' should be paid for as you go and that 
the pay as you go approach was the appropriate one as the 
``Highway Revenue Act'' was enacted at the same time in 1956.
    It is true that in the last seven years, on everything, 
this Administration has preferred a borrow and spend approach 
for all of our national needs, but it would seem to me that the 
more fiscally responsible one is to pay for our highways as we 
determine we need them.
    Now, there is an alternative model that Texas has really 
been pioneering with. And as you know, we have a Governor in 
Texas who seems to have never met a highway that he did not 
think he could toll. If he had his way, we would have toll 
roads blossoming in Texas like the wild flowers in the spring.
    I have some concerns about the fact that the Administration 
in its budget proposal really seems to want to incentivize more 
toll roads such as by its proposal to tax and spend for grants 
for high-tech electronic toll booths that would encourage 
states to use that means of finance.
    Let me ask you if you support the requirement that no 
tolling occur on federal highways in the State of Texas or 
anywhere else.
    Secretary Peters. Congressman, I would be happy to answer 
your question. The answer is, no, the Administration does not 
support that provision and let me explain why.
    Mr. Doggett. Well, because my time is short, and I will 
give you an opportunity to elaborate at the end, but do you 
support prohibiting states from buying back federal highways 
that the taxpayers have already paid for in order to toll those 
highways?
    Secretary Peters. Congressman, we prefer to let states make 
those decisions. And I think one of the fundamental problems 
that we have today is decision making in too many cases has 
been moved away from state and local governments and decisions 
are being made at the federal level.
    Mr. Doggett. Well, I guess the concern is that these 
highways were paid for with federal tax dollars. You are 
proposing in your budget to encourage the states to toll more 
highways and you just indicated by your answers that you do not 
support restricting tolls on federal taxpayer financed highways 
and that you approve of the practice of the states coming and 
buying back highways taxpayers have already paid for and 
tolling them.
    And I find that to be very problematic and something that I 
am hearing from many people in Texas is not the way to go. And 
the partner to the toll way on every highway that the taxpayers 
have already paid for in Texas is, of course, the very 
controversial trans-Texas corridor where the same Governor is 
proposing to take swaths of land as wide as ten miles that 
would separate someone's century-owned farm or ranch home from 
their pastures and their field. This has been a very secretive 
process. As you know, the House has also passed bipartisan 
language concerning the trans-Texas corridor.
    Is there any federal money of any type going into the 
planning of the trans-Texas corridor at present?
    Secretary Peters. Congressman, I will have to check on 
that. I know at one time, there was, but let me check on that 
and get back to you.
    Mr. Doggett. All right. The approach of doing so much of 
this in secret and treating our farmers and ranchers as just so 
much road kill when it comes to participation in the process is 
one that I know bothered not only me but bothers members on 
both sides of the aisle here. That is why the House 
overwhelmingly approved legislation directed to the so-called 
NAFTA super highway.
    I know the Administration does not concede there is such a 
highway. But as relates to participation in working groups 
concerning the trans-Texas corridor and the NAFTA super highway 
if it is to extend beyond Texas, does the Administration 
support the amendment that the House overwhelmingly approved in 
that regard?
    Secretary Peters. Congressman, I would say that we have not 
taken a position on that issue yet, but let me explain----
    Mr. Doggett. We passed it a long time ago. Do you plan to 
take a position as this measure moves through conference one 
way or the other? Do you object to the restrictions that the 
House approved by a vote of 362 to 63 in July concerning this 
matter?
    Secretary Peters. Congressman, we believe that state 
government should have much more latitude than they have today 
to make decisions.
    Mr. Doggett. So it sounds to me like you want to give them 
the authority to have a secretive process to build a ten-mile 
wide highway, tearing up farms and ranches and rural 
communities where these people will not even be able to access 
the toll way perhaps built by a foreign firm, that as long as 
that is the state decision, you are content to let them do 
whatever they want to do.
    I think we have some responsibility for federal tax dollars 
to try to safeguard property rights and involve the public in 
participation in these decisions.
    Let me just close, because I can see my time is up and I 
know the vote is underway, by also commenting about what you 
call your dirty little secret on earmarks. It is not a dirty 
little secret that both of the Federal transportation 
authorization acts were approved by Republican Congresses with 
Republican Chairs, that the so-called bridge to nowhere was the 
project, a totally Republican project.
    There is not one earmark in either of these transportation 
acts that would be there if this Administration and the 
Republican leadership had wanted to cut them out.
    Why is it that the Administration has been so quiet for so 
long and has not done anything about these earmarks until the 
fact that we now finally have a Democratic Congress?
    Secretary Peters. Congressman, let me take two answers. 
First of all, with all respect, you misinterpreted my comments 
about the trans-Texas corridor. Second, there is no NAFTA super 
highway. There is no NAFTA super highway at all. And we 
certainly believe in public disclosure as projects are 
developed.
    This Administration also has a long record, a long, long 
record in speaking out against earmarks, speaking out against 
using the public's money in a way that is not publicly 
disclosed. And we will continue to stand behind that 
opposition.
    Mr. Doggett. Just specifically on the NAFTA super highway 
then, is there any things that you believe in letting the 
states do essentially whatever they want in this area to 
prevent the trans-Texas corridor when it goes from Mexico to 
the Oklahoma border from being connected to a trans-Oklahoma 
corridor and then a trans-Kansas corridor all the way up to the 
Canadian border?
    Secretary Peters. Congressman, there are restrictions about 
connecting to interstate highways, access points to interstate 
highways. Any time that a road accesses or intersects with an 
interstate highway, that does have to be approved.
    Mr. Doggett. But you have put money in the past into the 
trans-Texas corridor.
    Secretary Peters. As I said, sir, I will research that and 
get back to you.
    Mr. Doggett. I think you said you had done it in the past. 
You were not sure if you were doing it now.
    Secretary Peters. I said I thought we had, sir.
    Mr. Doggett. And you said that I have not correctly 
interpreted your comments about the trans-Texas corridor. Would 
you just elaborate on what your position is on the trans-Texas 
corridor?
    Secretary Peters. I would be happy to, sir. We believe that 
there should be a full disclosure process, a process that 
involves not only the potential users of a highway but those 
who are affected by the highway. This is required by the 
``National Environmental Protection Act'' and those types of 
processes, those open public processes, so the public has an 
opportunity to participate in decision making is absolutely 
something that we do support.
    Mr. Doggett. Thank you very much.
    Thank you, Mr. Chairman.
    Thank you, Madam Secretary.
    Chairman Spratt. Mr. Garrett.
    Mr. Garrett. Thank you, Mr. Chairman.
    And before I begin, are there any other points that you 
wish to clarify on the question that was just made?
    Secretary Peters. Congressman Garrett, thank you so much. 
And I would like to briefly clarify on that.
    When the interstate highway system was proposed, actually 
Dwight David Eisenhower proposed it be a toll system, but the 
technology did not exist at that time. But that type of taxing 
collected on a cost to complete basis the interstate highway 
system at that point in our nation's history was appropriate.
    It is not appropriate today. It is not appropriate today to 
have 40 some odd highway programs and 20 some odd highway 
programs that divert this money in many, many different ways 
from where the American public believes it should be spent.
    Mr. Garrett. I appreciate that.
    And I will say this on one point. I do agree, I think, 
where Mr. Doggett is going with regard to his concern about 
earmarks. As a conservative on these earmark issues over the 
last five years, I have stood out and spoken out against them.
    I understand the President has a difficult time in vetoing 
an entire bill where this percentage of the bill is earmarks 
and the rest of the bill is something that everybody else in 
the Congress and the country wants.
    I will suggest, however, that the other side of the aisle 
repeatedly is given the opportunity. As you well know, we have 
a champion in this cause in the form of Congressman Jeff Flake 
who goes to the floor on a daily basis when the appropriation 
bills are here, puts up amendments to strike down some of these 
earmarks.
    And generally speaking, and I cannot speak to where Mr. 
Doggett is on this, we get no support from the other side of 
the aisle when Mr. Flake is on the floor to try to strike down 
some of these earmarks.
    And if he was here today, I am sure he would extend an 
invitation to the other side of the aisle the next time we have 
an appropriation bill up and next time we have an amendment to 
try to strike any of these earmarks, we will be looking now to 
see whether they will support him in this cause.
    I would like, first of all, to thank you again for coming 
here. And I would just like to get your thoughts on something 
actually that Mr. Blumenauer was saying before, that the big 
picture, and I think his comment was, we need to take a step 
back and look at the appropriate federal role for 
infrastructure investment.
    The idea that I would like to get your opinion on was once 
championed years ago back in 1996 by a former Chairman of this 
Committee, John Casik. In 1996, Chairman Casik and also the 
current Appropriations Committee Chairman Obey proposed a bill 
at that time which would basically phase out essentially a 
majority, almost all of the federal government's role in our 
nation's highway system by phasing out almost all of the 
federal gasoline tax.
    I have now submitted a bill that takes a varying form of 
that. I call it the ``State Act,'' H.R. 3497, and it does not 
totally eliminate the federal gasoline tax for the entire 
country. What it does instead, though, is to allow a state the 
opportunity to opt out of the system. So if my state wants to 
opt out and the other 49 wants to stay in, they can do so.
    The reason for this idea is a couple-fold. As you know, it 
is not an equitable and fair system as far as the distribution 
of transportation dollars. Some states such as Massachusetts, 
Pennsylvania get well over a dollar. I will not tell you how 
much Alaska gets for every dollar that they contribute. While 
other states like Texas and Georgia and Florida only get back 
90 cents or less on every dollar, around 90 cents on every 
dollar that they contribute. So there is not a fair 
distribution of the dollars in and the dollars back.
    Additionally, there is a question of the efficiencies of 
the dollars going into Washington through the great hands of 
your Administration, of your agency, and then coming back with 
red tape and strings and what have you attached.
    And we know, thirdly, on top of all that, there is in 
federal law a mandate of around ten percent, so that comes to 
around $3.9 billion, of the surface transportation programs go 
to enhancements. And these are some of the things I think that 
Jeff Flake talks about sometimes.
    Enhancement programs are landscaping, flower planting, 
historic preservation, hiking trails, river walks, and that 
sort of thing, all great things, but not addressing the 
fundamental issues, I think, that Mr. Blumenauer would talk 
about as the infrastructure of our transportation.
    So I could go on on some of the other problems that we have 
as to the equity and the fairness and the efficiency of the 
program, but where would you come down on the idea of allowing 
a state the opportunity to simply opt out and keep our funds 
but still have a system in place where we have an 
interconnectivity and a standard basis?
    Secretary Peters. Congressman, I would support that. The 
Administration has not taken a position. But if you will check 
my comments over the past years, I absolutely would support 
that.
    And I think one of the fundamental problems with the 
federal surface transportation programs today is that they lack 
a federal focus. When the interstate highway system was being 
built, there was a compelling national interest in building 
that system. But since its completion, as you said, these funds 
have been spun off in many, many different directions.
    In fact, today only about 60 percent of the total funds 
that are collected for federal surface transportation actually 
go to highway and bridge uses. Another about 20 percent go to 
transit projects, but the remainder go into a variety of 
projects, as you have talked about.
    I do believe that the closest that we can get decision 
making and taxing authority to the people, we have the best 
projects. I believe that if we get a price and invest model 
instead of a tax and spend model, it is better.
    And I believe that my own agency has too much emphasis on 
process, too little emphasis on performance, and this program 
has become very complex, lots of strings attached to every 
dollar you spend in the federal government today. And I 
absolutely believe that there is a much more efficient way to 
do this.
    Mr. Garrett. I appreciate it. And if I can just give one 
comment back, I remember my first year I was here I was 
contacted by some of our county engineers, the Road Department, 
and they were complaining about a program in place at that time 
with regard to guardrail improvements on roads and 
straightening of roads. And these were old county roads that we 
were getting federal dollars for and our county engineer said, 
you know, the roads are not that crooked. We really do not need 
to straighten them out and we certainly do not need guardrails 
along all of the cornfields. But because we are in this federal 
program, we needed it.
    When I raised that question to one of your predecessors or 
someone from the Administration, they said, well, we have the 
engineers down here in Washington and we are in a better 
position to make those determinations. And I just reminded them 
that the engineers down here in Washington quite honestly were 
not going to be driving on that road. My local engineer drives 
on that road every single day. His family does. My constituents 
do.
    So if there is anyone who is going to have a keen interest 
to make sure that road is appropriately safe, but not 
excessively so as far as those dollars being spent, more 
worthwhile on bridge repairs, what have you, I think it is our 
local engineers who are educated, trained, and can make those 
decisions by themselves.
    Secretary Peters. I absolutely agree. Central planning 
rarely yields the best results.
    Mr. Garrett. I appreciate it and appreciate the Chairman's 
forbearance for the extra time.
    Chairman Spratt. Thank you, Mr. Garrett.
    Madam Secretary, you referred in your testimony to direct 
road pricing and universal congestion policies. Would you take 
just a minute to explain, number one, what those mean and, 
number two, how we can take those concepts and apply them in 
practice across the millions of cars and drivers that use the 
highways of our country every day?
    Secretary Peters. Mr. Chairman, I would be pleased to and 
thank you for the opportunity.
    What direct road pricing means is that the price you pay 
for using that road is assessed based on when and how you use 
that road, what time of day. It could be assessed on the weight 
of your vehicle, the number of occupants in your car, and a 
variety of other things.
    Technology today has eliminated the barriers that in the 
past made it very difficult to make that direct connection 
between the use of the road, the cost of the road, and then how 
that road performs.
    An example I would give you is on State Route 91 in 
southern California, roughly Riverside County going into Orange 
County, there are some lanes, express lanes that are 
dynamically priced. And by that, I mean people pay for the use 
of those lanes, not on a per mile basis, but on a charge based 
on how much traffic is using the road at any given time. If the 
traffic is braking down and slowing down, the price goes up 
incrementally. On the other hand, if there are too few vehicles 
on the lanes, the price goes down incrementally.
    Chairman Spratt. Are these charges electronically imposed?
    Secretary Peters. Yes, sir, they are. They are 
electronically imposed.
    Chairman Spratt. Every vehicle would have to have some sort 
of transponder, receiver, admitter, or something like that?
    Secretary Peters. That is correct, sir. That is correct. 
And these transponders can be very much like the EZ Pass if you 
have seen those on the I-95 corridor. They can be something as 
thin as that little cellophane piece that is put on your 
windshield after you get your oil changed. And so either one of 
those technologies work today. In the future, that technology 
will be built into vehicles.
    Chairman Spratt. We are collecting a substantial sum, not 
enough as it is. I want to ask you about that momentarily.
    But I believe the collection of the Highway Trust Fund 
receipts and revenues is about $39 billion----
    Secretary Peters. Correct.
    Chairman Spratt [continuing]. This year. Would you propose 
to make up for those revenues or would you simply add to those 
revenues by the pricing methods you are talking about?
    Secretary Peters. Sir, under current circumstances, my 
recommendation would be that they supplement those current 
revenues. However, in the future, as you discussed earlier, the 
highway account of the Highway Trust Fund will go into deficit 
likely by 2009. We hope we can make it through 2009. And so in 
the future, I believe that those types of revenues could 
supplant some other revenues that are coming in today.
    But as I spoke to earlier, I do believe that we need to 
very carefully, and I appreciate this Committee looking at it 
so early, redefine what the federal role is. And then the 
federal government should only collect those revenues that 
support that role and the balance of the revenues would be left 
to the discretion of the states to use gas taxes, I do believe 
the gas taxes are neither responsive nor sustainable in the 
future, or a variety of other methods to collect them.
    And I absolutely believe that private sector revenues can. 
In fact, a 2005 report by HLB Decision Economics indicated that 
tolling of the interstates and the freeway alone could generate 
between 84 and $105 billion. And that was in 2002 dollars. So 
there is a substantial amount of money that could be invested 
where the roadways would warrant it due to congestion or 
overuse.
    Chairman Spratt. So in your testimony, you speak rather 
disparagingly of the gasoline tax, but I just heard you 
acknowledge that we are destined to keep it for some time to 
come because we do not have any ways, any immediate ways to 
make up for $40 billion in revenues, much less $50 billion 
which is probably what we are going to need in the fairly 
foreseeable future.
    Secretary Peters. Congressman, I do believe that there are 
a number of problems with the gas tax as a revenue sources 
today, but I do not believe that it is going to go away 
tomorrow. I do believe, though, especially in the next 
authorization act, that we really have to challenge ourselves 
to wean ourselves off, if you will, of the gas tax over time 
and implement new ways, better ways of investing and financing 
our roadways.
    Some of the problems with the user fees today are because 
they do not bear a direct relation to how and when people use 
the system. They are perceived as being free. And, of course, 
we know that is not the case.
    Chairman Spratt. Let us talk just a minute about the 
imminent shortfall in the Highway Trust Fund. Number one, what 
is your assessment of why we are experiencing this shortfall?
    Secretary Peters. Mr. Chairman, the reason that we are 
experiencing this shortfall is in blunt terms, we are spending 
more than we are taking in into the account. In fact, we are 
spending up to $5 billion a year more than we are taking in.
    Now, when SAFETEA-LU spending levels were set, the intent 
was to spend down the current receipts and the balance that had 
been accumulated into the trust fund. It was widely discussed 
at that time that those balances would have to be carefully 
monitored and adjustments made over time.
    But the fact is that the sustainability of the trust fund 
is indeed in serious jeopardy. And because we are spending so 
much more than we are taking in, we believe that we will have a 
deficit according to the mid-session review of as much as $4.3 
billion by 2009. That is something that we are all going to 
have to work at together.
    In fact, when the Administration submitted our 2008 budget, 
we proposed a budget that would have addressed the federal fund 
deficit at that time. And we proposed that we not allocate the 
RABA dollars. We proposed that spending restraint and 
prioritization be implemented.
    The appropriators, unfortunately, not only ignored our 
proposal, which would have withheld some monies, but they added 
a billion dollars for bridge repairs, and they also added 
several billion dollars in earmarks to what has been passed to 
date. So we do have very serious concerns about the fund 
balance.
    Chairman Spratt. So your preferred solution at least for 
now would be to reduce spending to the level of receipts?
    Secretary Peters. Sir, I think that would be very difficult 
and we will be proposing, the Administration will propose some 
solutions. I know others have talked about solutions to at 
least get us through 2009. But I do believe we have to exercise 
spending restraint and prioritization.
    Chairman Spratt. Let me ask you generally about the 
infrastructure of this country since we have become much more 
concerned about that as a result of the collapse of the bridge 
in Minneapolis.
    What is your assessment of the infrastructure? Do we need a 
program specially focused on infrastructure improvements or do 
we put more attention on operations and maintenance and repairs 
in particular as opposed to new capital improvements? What do 
you think we should be doing and just how serious is the 
structural deficiency of many of our sensitive infrastructure 
projects like interstate bridges?
    Secretary Peters. Mr. Chairman, very good question. And 
following the very tragic events in Minneapolis, we have looked 
very closely at the bridge program. I have asked, in fact, our 
Inspector General to do a very good scrub-up of that program.
    The NTSB still has not issued a finding in terms of what 
happened. However, I did issue two advisories as a result of 
the bridge collapse. One, I asked that all similar bridges be 
reinspected and 97 percent of those have been accomplished to 
date. I also issued an advisory cautioning state and local 
governments that if they were doing repair or reconstruction on 
bridges that they be mindful of the loading of construction 
materials and equipment on the bridges.
    That said, nationally, bridge conditions are improving. In 
fact, the 2006 Conditions and Performance Report which was 
referred to earlier would indicate that the overall condition 
of our highways, bridges, and transit systems are good and 
improving.
    For example, on structurally deficient bridges, that figure 
was at 19 percent in the 1990s. It is at 12 percent today. So 
we are seeing modest, if you will, improvements. Do we need to 
still invest in maintaining and operating our infrastructure? 
Absolutely we do.
    But I believe, sir, that if we properly target money that 
we are collecting today that there would not be a problem in 
not having enough money to maintain and repair our bridges.
    Chairman Spratt. Let me ask you one final question. Going 
back to the issue of tolls on new roads as opposed to old 
roads, as I am sure you are aware, there is an interstate 
system called I-73, Interstate 73, and it branches into 73 and 
74 as it comes to its terminus in the Carolinas.
    Would that type of road, new interstate road be eligible 
for tolling to support some of its capital costs?
    Secretary Peters. Mr. Chairman, a newly built road, and I 
had the opportunity to visit that area fairly recently, yes, 
would qualify. Under existing roads, existing interstate 
highways, there are only three pilot programs allowed to toll 
any kind of existing interstate. And those tolling interstates 
would have to repair or refurbish the road and it would have to 
be demonstrated that there were not other funds available to do 
that.
    Chairman Spratt. So there is a limitation now for three 
pilot projects on----
    Secretary Peters. Existing interstates, sir.
    Chairman Spratt [continuing]. Existing interstates?
    Secretary Peters. But newly built----
    Chairman Spratt. A new interstate, however, is there any 
limitation on new interstates?
    Secretary Peters. No, sir, other than meeting the 
interstate standards, of course.
    Chairman Spratt. Okay. I believe you were in Myrtle Beach 
at the request of one of your Committee members, Henry Brown, 
and you indicated a favorable attitude towards the possibility 
of tolling the new construction.
    Secretary Peters. Yes, we did, sir.
    Chairman Spratt. Okay. Let me turn now to Mr. Blumenauer.
    Mr. Blumenauer. And, again, Secretary Peters, we appreciate 
your patience with our running back and forth here.
    I think for purposes here, I will just agree to disagree 
about the funding level, although, Mr. Chairman, I would like 
to enter into our record an opinion piece authored by Pete 
Ruane, the President of the American Road and Transportation 
Builders Association, that talks about the infrastructure 
problem and the need for more resources.
    Chairman Spratt. Without objection, it will be made part of 
the record.
    [The attachment follows:]

    
    
    Mr. Blumenauer. Thank you very much.
    I guess I want to go back and look a little at some of the 
concepts that you are talking about because I do think that 
there is some notion of having more market forces at work.
    Currently it costs the same for somebody to use a piece of 
roadway for high value freight, a stressed mom in the morning 
commute, and somebody who has just decided that they want to go 
downtown for a latte. All of them can use the same space and 
bear the same cost to the public, although wildly different 
value.
    And we have actually in the northwest, as you know, in 
Oregon, we have been looking at ways to explore helping shift 
some of the costs like a mileage-based registration fee. And we 
are part of the study that is being done looking at congestion 
pricing because we want to make sure all of those options are 
on the table. And our region is very interested in working with 
the Department on that.
    I was curious if you have given some thought to applying 
those principles of pricing to the federal government itself.
    It is hard sometimes to work through all of the nuances and 
these are very complex, as you know, if we are going to try and 
put in the new technology, deal with the shifts in traffic 
patterns, get the public along with it, and make sure that we 
are dealing with everybody equitably.
    But we would suffer no such disability with the federal 
government. For instance, I am assuming that there are a vast 
array of employees who work for the Department of 
Transportation, EPA, the Department of Defense, who are treated 
much differently in terms of their transportation costs. Some 
get free parking. Some pay for parking. Some have the transit 
benefit that we have mandated so that it is not just free 
parking for them, but they get transit, so that we help level 
the playing field.
    Although to the best of my knowledge, people who walk get 
no help, even though they put the least stress and we have not 
done that very much for bicycles, although we are trying to get 
some legislation that would at least have a minuscule commuter 
benefit.
    Have you given some thought to having the federal 
government practice what it is preaching by having its 
employees all treated the same for transportation benefits so 
that the invisible hand of the market will guide those choices 
and we will not have a system that skews their decisions and 
that this might be a model that you could use, therefore, to 
extend this concept?
    Secretary Peters. Congressman, I would. In fact, the DOT 
just moved into a new building that this Congress helped us get 
established over in the southeast part of the city. And we do 
give our employees transit benefits. I am very pleased to see 
that a number of employees do use transit.
    We also endorse telecommuting and we----
    Mr. Blumenauer. Excuse me. Let me rephrase my question. I 
understand that. My question is, have you taken the next step 
to level the playing field so that all employees are treated 
the same with an identical transportation benefit that he or 
she may then choose to use to bike, use transit, or park, but 
that you do not weight it by giving a disproportionate benefit 
to one mode over another?
    Secretary Peters. I see what you mean, sir. I would be very 
happy to explore that with you, yes.
    Mr. Blumenauer. I would really love to do that because I 
think if it is a good idea, it ought to be a good idea for the 
federal government to do it and we can lead by example.
    And the last time I checked, there was no uniform policy 
for how we treated commuting costs, transit, cycling, parking. 
Some provided free parking for some. Others charged. No uniform 
policy whatsoever and we are missing an opportunity. I would 
love to explore that with you.
    I cannot let this opportunity, though, pass without just 
making one little footnote because I was appalled listening to 
NPR, to hear you talking about bike paths as somehow a symbol 
of egregious waste and earmarking because it has been my 
experience that the cycling earmarks have been extraordinarily 
popular, very cost effective, very much in keeping with what is 
going on regionally, happened quickly, and make up for a lack 
of aggressive federal policy dealing with something in my 
community. As you know, because you have been there, over five 
percent of the people cycle. And there is a disproportionate 
rate of injury for pedestrian and cyclists.
    And so I was just kind of taken aback that I would hear the 
Secretary of Transportation signaling out bike paths as an area 
of abuse.
    Secretary Peters. Well, Congressman, I heard from thousands 
of other bicyclists as well about that comment. And I regret 
that I misstated what I was talking about that day.
    What I was talking about was prioritizing and focusing on 
what should be the federal government's role versus state and 
local government roles. There are many meritorious purposes 
including bicycle paths that federal transportation dollars are 
spent on today.
    But I do disagree that the federal government should, as 
another member of this Committee just suggested, collect all 
that money and then allocate it out into these many different 
programs. I believe that state and local government officials 
are much better positioned to make those decisions to collect 
and spend that money than is the federal government.
    Mr. Blumenauer. Mr. Chairman, I appreciate your courtesy 
and I will wait for another cycle here.
    But I would just conclude by noting the Administration 
trumpeted the earmarks in the legislation that it passed. I 
mean, President Bush when he was in Illinois signing it pointed 
out one of Speaker Hastert's earmarks as an example that is 
going to provide economic development and he signed all the 
Republican bills that have far more earmarks than we are 
talking about now.
    And I find it a little disorienting to have the 
Administration now pointing to, as my good friend, Mr. Ryan, 
was talking about, the Republican bridge to nowhere. I think 
poor Don Young and the Republican delegation in Alaska have 
really paid the price for that.
    But the Administration signed all these Republican bills 
that had the earmarks shooting up and when we are actually 
moving to reduce them, I think to somehow suggest that further 
earmark reform is going to solve a multi-billion dollar problem 
every single year strikes me as being a little out of sync with 
what I have been watching for the last 12 years.
    Thank you, Mr. Chairman.
    Chairman Spratt. Thank you, Mr. Blumenauer.
    Mr. Garrett, do you have further questions?
    Mr. Garrett. I will just follow-up on that, if I may, just 
for a quick question.
    And I will extend to the gentleman as I did when you were 
out of the room the next time Congressman Flake is to the floor 
with his earmark striking amendments to join with us to strike 
those earmarks because I concur with you that many times they 
are for not necessarily worthwhile purposes.
    One question that he did raise and then a final question. 
On the bike paths, because that is something my constituents 
ask me about sometimes, we do not have bike paths up in my neck 
of the woods. And those that we do have are in parks and are 
recreational in nature.
    The bike paths that are funded by the federal government, 
can you delineate for me how much of them really are for 
transportation purposes, people who are transporting goods via 
the bikes or people who are transporting themselves by going to 
work or to the A&P or something like that versus bike paths 
that are done in a park or along the road for purely 
recreational purposes?
    Secretary Peters. Congressman, federal revenues pay for 
both types of bike paths today, those which are recreational 
purposes, rails to trails, things like that, as well as those 
that are along highways that may be used for commuting.
    I do not have that data with me today, but I will get it 
back to you. It is a relatively small percent of people who use 
bicycling to commute to and from work.
    Mr. Garrett. Yeah, because I assume we would have other 
programs from various other agencies and what have you that 
deal with the recreational needs of Americans versus what you 
are looking at which is transportation.
    And one other clarification for me. One of the earlier 
questions talked about, and you brought it up, I think, with 
earmarks in general, you get the price of the earmark that we 
discussed on the floor and then you said there was an extension 
of that because of the project.
    I did not know that was the case because I thought if I was 
lucky enough, so to speak, to get an earmark for $100,000 to 
start a project, I would not necessarily be guaranteed that the 
federal government would then actually finish that project for 
us.
    Secretary Peters. Let me clarify. Let us say hypothetically 
there is a $100,000 earmark on a $900,000 project. That other 
$800,000 generally state governments have to take that from 
other sources that they have. A good part of those sources may 
be federal revenues, federal revenues that they have discretion 
over where to spend them or it could be state or local revenues 
as well.
    Mr. Garrett. Got you. Thanks. I appreciate the 
clarification.
    Chairman Spratt. Thank you, Mr. Garrett.
    Mr. Blumenauer. Mr. Chairman.
    Chairman Spratt. Mr. Blumenauer.
    Mr. Blumenauer. Can I just have one last question?
    Chairman Spratt. The gentleman is recognized for one last 
question.
    Mr. Blumenauer. And just a comment to Mr. Garrett. We do 
not distinguish in auto use for commuting or recreation, 
business. In fact, in terms of the total amount of traffic in 
most metropolitan areas, the daily commute is a small and 
declining percentage of vehicle miles traveled.
    There are things that are other, business and recreation 
that go on in the course of the day. We do not do that for 
cars. We are trying to integrate them, at least in communities 
that are serious about cycling, we are trying to integrate them 
both.
    Mr. Garrett. If the gentleman will yield. I appreciate 
that. And I guess you can make the small case of the person who 
is just out traveling and seeing the sights as opposed to even 
if I am driving to the library or to the movies, that maybe you 
can classify as being recreational use of the transportation 
purposes as opposed to traveling to work. But it is still a 
transportation purpose.
    Mr. Blumenauer. I would suggest you talk to your local 
cyclists and you will find that they think that their cycling 
to go to the library is important or people who cycle to go out 
to lunch.
    Mr. Garrett. And that is the information she is going to 
get for us.
    Mr. Blumenauer. Okay. Great.
    The question I wanted to pose to the Secretary dealt with 
how we squeeze more value out of the system. And I understand 
you want to further squeeze earmarks and I understand given the 
abuse that we have seen under what I think we are going to do 
better, why you want to zero in and see if we can squeeze some 
value.
    One of the areas that I am interested in squeezing value is 
out of the federal process. We treat different modes 
differently. There are different mechanisms for cost 
effectiveness that people with a transit project--for example, 
I do a lot of work, as you know, with people around the country 
with light rail which for the last 20 years, we--you have been 
to our rail dilution conference. We bring people. Those people 
go through a different process. It is more extensive. There is 
a different cost, you know, in terms of accountability that 
somebody who wants to drop down an intersection, a freeway 
exchange actually usually getting more federal money, they do 
not do that at all, that we have a different match mode.
    I am curious what you and the Administration are doing to 
squeeze value out of what appears to be a cumbersome, outmoded, 
stovepipe-driven process where a light rail project deals with 
one set of rules, one set of financing. People who are going to 
put an interchange are not held to a standard of proving that 
it is going to reduce congestion and the delays that people 
face, particularly on the transit side of the equation. As you 
well know from your past experience, transportation related 
inflation is two or three or four times the regular rate of 
inflation.
    What is the Administration doing to have a uniform system 
and one that squeezes everybody the same so that the system is 
not determining the transportation decision and that we are 
getting as much value as possible in a time/money sense?
    Secretary Peters. Congressman, you are right. We do use a 
cost-effectiveness rating for transit projects and I think that 
is very good. And I think the federal government should be 
investing where things are cost effective.
    But on the highway side of the business where I have spent 
most of my career, it is more process driven than outcome 
driven. We do not do those same kind of analyses and that is 
exactly what I mean by saying a price and invest model, a price 
and invest model that would look at the cost effectiveness of 
all projects, not just transit projects. And I do again believe 
that when we are spending federal dollars, we ought to only 
invest in those projects that are most cost effective.
    Mr. Blumenauer. Let me just interrupt because I want to be 
clear. What I am saying is why can't we use the same process 
for cost effectiveness for road, for transit, and have the same 
match ratio? Make it a lower match ratio if you are trying to 
stretch dollars. Why should the federal bureaucrats pick and 
choose the local transportation decision based on the formula 
and the process people go through? Would it not be better if we 
treated everybody the same?
    Secretary Peters. Sir, I think it would be better if we let 
state and local governments make those decisions and, again, 
only collect those revenues at the federal level that are truly 
attributable to a federal purpose.
    Mr. Blumenauer. If it is good for the state and local 
people to make the decisions for roads, why should they not 
make those decisions for transit?
    Secretary Peters. Sir, I am agreeing with you. We are 
following the law of the current bill right now. But in the 
next bill, as I said earlier, we have a tremendous opportunity 
to do things differently. And, again, I do not think federal 
bureaucrats ought to be making those decisions. I just think 
state and local governments ought to be making those decisions.
    Mr. Blumenauer. Mr. Chairman, thank you for your patience. 
I would just put one of the things I hope we can explore is the 
impact of having the system itself drive local decisions.
    Fifty years ago, we gave free money for highways, 92 
percent, and they had to pay for transit on their own. So 
everybody decided that they were going to build freeways. If we 
treated everybody uniformly, it might shift that process. And I 
hope we can explore that.
    Chairman Spratt. Madam Secretary, thank you for coming. 
Thank you for your testimony and your forthright answers. We 
very much appreciate it. And I have a feeling we will be seeing 
you again as we deal with the problems that are imminent in the 
Highway Trust Fund. Thank you very much, though, for your 
testimony.
    Now, we have a decision here to make. We have eight minutes 
to get to the floor to vote if we care to vote. Do you wish to 
vote, Mr. Blumenauer?
    Mr. Blumenauer. I will run and come right back. I got 
tackled by a reporter. I apologize. I will come right back.
    Chairman Spratt. Okay.
    I will ask our next panel to come on up. We will go vote 
quickly and we beg your pardon, but this is the nature of this 
institution, particularly when it gets into disputes about how 
a bill is going to be brought to the floor.
    This panel consists of Mr. Robert Sunshine, who is the 
Deputy Director of the Congressional Budget Office; Ms. Janet 
Kavinoky, Director of Transportation with the Chamber of 
Commerce; and Robert Puentes, who is a Fellow at Brookings.
    We will be back shortly. Thank you very much for your 
indulgence and forbearance.
    [Recess.]
    Chairman Spratt. I call the meeting back to order, and I 
ask our next panel to take their seats.
    We do not make the decisions to put all these obstacles in 
our way, but we very much appreciate you coming even under 
these circumstances. And why don't we begin with Mr. Sunshine 
because he has got an overview of the highway programs and his 
very useful summary.
    So bear in mind that by previous order, your prefiled 
testimony was made part of the record, so you can summarize it 
as you see fit.

      STATEMENTS OF ROBERT A. SUNSHINE, DEPUTY DIRECTOR, 
  CONGRESSIONAL BUDGET OFFICE; JANET F. KAVINOKY, DIRECTOR OF 
TRANSPORTATION INFRASTRUCTURE, U.S. CHAMBER OF COMMERCE; ROBERT 
           PUENTES, FELLOW, THE BROOKINGS INSTITUTION

                STATEMENT OF ROBERT A. SUNSHINE

    Mr. Sunshine. Thank you, Mr. Chairman, Congressman 
Blumenauer. Thank you for the opportunity to appear before you 
today to discuss some of the issues facing the Congress with 
regard to the nation's surface transportation infrastructure.
    The Congress faces some important policy decisions over the 
next two years with regard to surface transportation. And in 
addressing those decisions, it is useful to consider some of 
the broader questions of what total spending ought to be and 
what role the federal government ought to play in financing 
that spending.
    The first set of questions I would suggest deal with how 
effectively money is spent. Are the funds that the federal 
government is currently collecting and spending for surface 
transportation going to their best uses? Could some needs be 
met at least in part by better targeting spending to its most 
productive uses?
    If more money is raised from transportation related taxes 
or fees, what steps ought to be taken to ensure that those 
funds are used to meet the highest priority needs?
    Other questions deal with determining the appropriate role 
for the federal government. For example, if more money is 
needed, should the federal government raise taxes to collect it 
or should states which ultimately determine how much of the 
funds are spent bear the responsibility for imposing and 
collecting the necessary taxes or fees?
    If the federal government collects the money, how much 
flexibility should states have in determining how to spend the 
federal dollars? To what extent does federal funding just 
substitute for spending that would otherwise be undertaken by 
other levels of government?
    And what is the appropriate role for the private sector in 
the financing of transportation infrastructure? Should the 
federal government facilitate a greater private sector role 
and, if so, how?
    The answers to those questions are not necessarily clear or 
straightforward, but they are relevant in determining both the 
funding and financing strategies for surface transportation.
    Now a little context for addressing those questions. In 
2007, the federal government spent about $50 billion, almost 
two percent of the federal budget, for surface transportation, 
mostly for roads. The federal government and state and local 
governments play very different roles in the financing of 
surface transportation infrastructure.
    For the most part, the federal government pays for capital 
investments, building and rehabilitating roads and bridges, for 
example, and it provides close to half of total governmental 
funding for those purposes.
    In contrast, state and local governments allocate most of 
their infrastructure funds to operation and maintenance 
activities and they bear almost the entire cost of those 
activities.
    Combining the two, the federal government is supplying 
about one-quarter of all public funding for surface 
transportation infrastructure.
    Most of the federal government spending for this comes from 
the Highway Trust Fund. The two accounts, one for highways and 
one for transit, track receipts from gasoline and other taxes 
against spending for the trust fund's programs. And annual 
spending from that fund is largely controlled by obligation 
limits set in the appropriation acts.
    The balances in the trust fund rose rapidly in the late 
1990s, but spending began to exceed receipts starting in 2001. 
And since then, balances in the trust fund have been falling.
    CBO projects that the highway account will run out of money 
in 2009 and the transit account by 2012. These projections 
assume that obligations continue at the amounts set in the most 
recent highway and transit authorization bill, SAFETEA-LU, 
adjusted for inflation after 2009.
    The continuing mismatch between revenues and outlays in the 
highway account which we estimate will average about $8 billion 
from 2009 to 2017 could be remedied by a reduction of 40 
percent of obligations in 2009 and about 20 percent in 
subsequent years.
    It would take a sharp change in the funding levels and the 
spending levels to bridge that gap. Alternatively, it would 
take about a five cent per gallon increase in the gas tax or 
some combination of the two to accomplish the same result.
    The Joint Committee on Taxation estimates that each penny 
on the gas tax would raise slightly less than $2 billion a year 
on average over the next ten years.
    While this is going on, demands on the system are growing. 
Passenger travel and the volume of freight carried on trucks 
are growing at two percent or more a year which does not seem 
like a lot, but if those rates continue, such growth would 
increase traffic volume by 20 to 25 percent over a ten-year 
period.
    Congestion is growing. Department of Transportation 
projects that traffic on a substantial portion of the 
interstate highway system will exceed the system's capacity by 
2020. But most of the existing taxes are a fixed number of 
cents per gallon and they do not increase with inflation.
    Even though revenues credited to the highway account in 
2006 were 47 percent higher than the amounts accrued in 1998, 
eight years earlier, the price of goods and services used in 
highway construction has risen much more so that the annual 
receipts credited to the highway account provided about 15 
percent less in purchasing power for construction purposes than 
they did eight years earlier.
    In assessing ways to finance transportation spending 
whether at the federal level or state and local levels, it is 
useful to consider not only how much various financing 
approaches might raise but what kinds of incentives they 
provide to users of the transportation system.
    As we have discussed earlier, there is a strong rationale 
for charging users of that infrastructure because they reap 
substantial benefits from it and to encourage efficient use of 
the system.
    Such charges could help measure the value of investing in 
increased capacity and help pay for the construction of new 
infrastructure in the right places and at the right time. A 
number of such fees already exist at state and local levels. 
They include tolls that vary by time of day, fees based on 
mileage that might depend on both location and time of day, 
fees based both on weight and mileage, and congestion related 
fees that are higher in times or places with heavy traffic.
    Widespread use of such systems may not be practical in the 
short term, but they might be worth considering over the longer 
term, particularly if technological developments continue to 
make them more feasible. They offer some possibility of getting 
more bang for our transportation buck during a period when the 
long-term pressures on the federal budget will pose an 
increasing challenge to the nation's fiscal well-being.
    Thank you, Mr. Chairman, and I will be happy to answer any 
questions later on.
    [The prepared statement of Robert Sunshine follows:]

      Prepared Statement of Robert A. Sunshine, Deputy Director, 
                      Congressional Budget Office

    Chairman Spratt, Congressman Ryan, and Members of the Committee, 
thank you for the invitation to discuss public spending on surface 
transportation infrastructure. The Congressional Budget Office (CBO) 
projects that the balance in the Highway Trust Fund will be exhausted 
at some point during fiscal year 2009. In addition, the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU) expires at the end of that fiscal year. 
Consequently, the Congress will face important policy questions about 
how much to invest in surface transportation systems; how to apportion 
that spending among roads, rail, transit, and other modes of 
transportation; how best to finance that spending; and which levels of 
government are best positioned to make those decisions.
    To shed light on those issues, my statement today describes recent 
trends in public spending for infrastructure at all levels, the role of 
Highway Trust Fund in accounting for such spending, and some options 
for financing future spending on transportation infrastructure.
    In my testimony, I will make the following points:
     Spending on surface transportation infrastructure by all 
levels of government in 2004 was $191 billion (in 2006 dollars), or 1.5 
percent of gross domestic product (GDP). The federal government 
provided about one-quarter of those funds, and states and localities 
provided the rest. Those funds were split about equally between 
spending for capital projects and operation and maintenance. Most of 
that spending was for roads.
     Federal outlays are directed almost entirely to capital 
projects and account for slightly less than one-half of all public 
spending on such projects. In contrast, state and local governments 
provide virtually all of the public spending to operate and maintain 
the surface transportation infrastructure.
     Most of the federal spending for infrastructure comes from 
excise taxes on gasoline and diesel fuel and other taxes that are 
credited to the Highway Trust Fund. In recent years, spending from the 
highway account of the trust fund has consistently exceeded its income. 
According to CBO's projections, if annual spending continues at its 
currently authorized levels (adjusted for inflation after 2009), the 
highway account of the trust fund will be exhausted at some point 
during fiscal year 2009; the mass transit account will have sufficient 
revenues to cover its expenditures until 2012.
     Over the 2009-2017 period, policymakers face a growing 
differential between expected revenues in the highway account and 
spending from that account that could occur if obligations continue at 
the levels authorized in SAFETEA-LU, adjusted for inflation. 
Eliminating that differential would require a cut in spending authority 
of 40 percent below projected levels during 2009 and about 20 percent 
annually thereafter through 2017; an increase in revenues of about 20 
percent over the period; or some combination of the two approaches.
     The current system of generating revenues to fund surface 
transportation projects relies primarily on various excise taxes. Under 
current law, those taxes are not sufficient to pay for rising highway 
construction costs or to account for the external costs of pollution or 
congestion. To balance the trust fund's spending and revenues, tax 
rates could be increased or indexed. However, because the taxes are not 
linked to the use of specific roads, they do not provide signals to 
policymakers indicating which are most valuable to users.
     As an alternative to the current system, existing taxes 
could be replaced or supplemented with charges to users based on the 
costs that they impose on the system and the external costs of 
pollution and congestion. For example, tolls or fees based on mileage 
or vehicle weight may provide users a clearer signal of the costs that 
they impose on the system. Even so, such user charges by themselves may 
not be able to finance the entire highway system, and their 
administrative feasibility over a nationwide system of roads has not 
yet been demonstrated.
   trends in public spending on surface transportation infrastructure
    The federal government and state and local governments devote 
substantial resources to building, operating, and maintaining the 
nation's surface transportation infrastructure. During 2004, which is 
the most recent year for which comprehensive data are available, total 
public spending on surface transportation infrastructure was $191 
billion (measured in 2006 dollars), or 1.5 percent of GDP. Those 
figures include spending by federal, state, and local governments on 
roads, rail, mass transit, and water transportation. Since 1956, annual 
public spending on such infrastructure has ranged between 1.4 percent 
and 2.0 percent of GDP.\1\
    In 2004, about half of total public spending on surface 
transportation infrastructure went to capital projects, for example, 
building or rehabilitating physical infrastructure. The other half was 
spent on operating and maintaining that infrastructure. The shares of 
capital expenditures and operation and maintenance expenditures within 
the total have been fairly stable since the mid-1980s. Before then, 
capital expenditures usually exceeded spending on operation and 
maintenance (see Figure 1).



    Measured in 2006 dollars, spending for operation and maintenance 
has trended steadily upward over the past 50 years. Measured the same 
way, capital spending for surface transportation peaked in the late 
1960s (in part because of the construction of the Interstate Highway 
System), declined through the early 1980s, and has grown steadily since 
then.
    Spending priorities on surface transportation infrastructure vary 
by level of government. In 2004, federal outlays--almost entirely in 
the form of grants and loans to states and localities--principally 
funded capital projects; 92 cents of every federal dollar spent on such 
infrastructure was for capital projects rather than operation and 
maintenance. In contrast, the majority of state and local spending (64 
percent) was allocated to operation and maintenance. The federal 
government provided almost one-half (46 percent) of total public 
funding for surface transportation capital projects, and states and 
localities accounted for virtually all (96 percent) of public spending 
to operate and maintain that infrastructure.\2\
    Among types of surface transportation, roads account for the 
largest share of infrastructure spending by any level of government 
(see Figure 2). About 80 percent of capital spending on surface 
transportation infrastructure by the federal government and state and 
local governments (net of federal grants and loan subsidies) goes to 
roads. Roads also account for a large portion of spending to operate 
and maintain surface transportation infrastructure, though that share 
is considerably larger at the state and local levels than at the 
federal level (64 percent versus 30 percent, respectively).



    Federal spending on surface transportation infrastructure in 2007 
was about $50 billion.\3\ The federal government supplied about one-
quarter of all public funding for surface transportation 
infrastructure, with state and local governments providing the rest. 
That share has been roughly stable over the past several decades.
    In addition to government, private entities play a limited role in 
providing surface transportation infrastructure beyond simply supplying 
services under contract to a government agency. Such participation by 
the private sector, which is often referred to as public--private 
partnerships, has so far constituted only a relatively small amount of 
infrastructure funding. Under the Transportation Infrastructure Finance 
and Innovation Act (TIFIA) of 1998 (Public Law 105-178), the federal 
government has encouraged private investment to improve the nation's 
surface transportation system by providing direct loans at below-market 
rates and loan guarantees--at a cost of $240 million through 2006.
                   overview of the highway trust fund
    The federal government's surface transportation programs are 
financed mostly through the Highway Trust Fund (certain transit 
programs receive appropriations from the U.S. Treasury's general fund). 
Those surface transportation programs are administered by the Federal 
Highway Administration (FHWA) and the Federal Transit 
Administration.\4\
    The Highway Trust Fund is an accounting mechanism in the federal 
budget. The fund comprises two separate accounts, one for highways and 
one for mass transit. It records specific cash inflows (revenues from 
certain excise taxes on motor fuels and trucks) and cash outflows 
(spending on designated highway and mass transit programs). By far, the 
largest component of the trust fund is the Federal-Aid Highway program 
(see Table 1).



    Spending from the Highway Trust Fund is not automatically triggered 
by tax revenues credited to it. Authorization acts provide budget 
authority for highway programs, mostly in the form of contract 
authority (the authority to incur obligations in advance of 
appropriations). Annual spending from the fund is largely controlled by 
limits on the amount of contract authority that can be obligated in a 
particular year.
    Such obligation limitations are customarily set in annual 
appropriation acts. The most recent authorization law governing 
spending from the trust fund--SAFETEA-LU--was enacted in 2005 and is 
due to expire at the end of 2009. The law provides specific amounts of 
contract authority over the 2005--2009 period and authorizes 
appropriations for certain programs that are not funded through 
contract authority. It also specifies annual obligation limitations, 
which may be superseded each year by limitations set in appropriation 
acts.
    The largest source of revenues credited to the Highway Trust Fund 
is the tax of 18.3 cents per gallon on gasoline and gasohol. Under 
current law, such taxes are scheduled to expire in 2011. The gas and 
gasohol tax currently produces about two-thirds of the fund's total 
revenues (see Table 2). The second largest source is the levy of 24.3 
cents per gallon on diesel, which accounts for about one-quarter of the 
revenues. Thus, taxes on motor fuels generate about 90 percent of the 
trust fund's total revenues. The rest come from a retail sales tax on 
certain trucks, a tax on the use of certain heavy vehicles, and a tax 
on truck tires. About 2.8 cents per gallon of all fuel taxes credited 
to the Highway Trust Fund is dedicated to the mass transit account, or 
about 13 percent of all trust fund revenues. That account received 
about $4.9 billion in 2006.



       history of the highway trust fund's revenues and spending
    The Highway Trust Fund was established in 1956. Since then, there 
have been several notable changes to the program, including the 
addition of an account dedicated to transit programs in 1983. Since 
1983, many further changes have been made to the highway program, to 
the taxes dedicated to the Highway Trust Fund, and to trust fund 
operations. One of the most significant changes occurred in the 
Taxpayer Relief Act of 1997, which increased amounts deposited into the 
trust fund by 4.3 cents per gallon of gasoline sold, in addition to the 
14.0 cents per gallon previously allocated to the fund.\5\
    Over the past 15 years, spending for programs funded through the 
Highway Trust Fund has increased as a share of nondefense spending. 
Over the 1992--1996 period, spending from the trust fund was about 1.8 
percent of nondefense spending; over the past five years, it has 
increased to 2.1 percent (see Table 3). When considered as a percentage 
of GDP, spending from the trust fund has also increased.



    Spending from the trust fund started increasing rapidly in 1999, 
resulting from changes enacted in the Transportation Equity Act for the 
21st Century (TEA-21), which provided budget authority and contract 
authority of $218 billion over the 1998--2003 period (an average of 
$36.3 billion per year). Consequently, annual outlays rose by 40 
percent from 1999 to 2003. SAFETEA-LU, which provided contract 
authority of $286 billion (an average of $57.2 billion per year) over 
the 2005--2009 period, represented a further significant increase in 
funding over previous authorizations.
    Balances in the highway account were steady during the 1980s and 
the first half of the 1990s, in the vicinity of $10 billion. Receipts 
substantially exceeded outlays from 1996 to 2000, and the unexpended 
balance in the highway account (sometimes called the cash balance) grew 
from $10 billion in 1995 to a peak of about $23 billion in 2000 (see 
Figure 3). Revenues fell sharply in 2001, but have increased steadily 
since then--at an average rate of about 3.4 percent per year through 
2007.\6\ Nevertheless, spending, boosted by TEA-21, has generally 
exceeded revenues since 2001. As a result, unspent balances in the 
highway account declined to about $8.0 billion by the end of 2007. In 
general, balances in the mass transit account also have been falling 
since 2000, although at a slower rate than those in the highway 
account. At the end of 2007, the balance in the mass transit account 
totaled about $7.9 billion.



appropriations from the general fund for transit programs and emergency 
                                 relief
    A portion of transit spending is appropriated from the general 
fund. From 1998 (and the enactment of TEA-21) to 2006, transit programs 
have received about $18 billion in general fund appropriations, or 
about $2 billion per year. (Such general fund appropriations totaled 
about 30 percent of the contract authority for transit programs over 
the same time period.) By far, the largest component of such 
appropriations is the Capital Investment Grants (CIG) program, which 
accounted for about $10 billion of that spending over the 1998--2006 
period. The CIG program provides capital assistance for certain 
programs to create, expand, or modernize certain rail, bus, and ferry 
facilities. The second largest component of such appropriations--about 
$7 billion--was a program of formula grants for transit operations that 
has been funded through the Highway Trust Fund since 2005. 
Appropriations from the general fund also pay for research programs and 
administrative expenses of transit programs.
    Since 2005, certain appropriations for FHWA's Emergency Relief 
program have come from the general fund. That program provides for the 
reconstruction of certain highways and bridges that have suffered 
serious damage as a result of natural disasters or catastrophic 
failures from an external cause. Annually, $100 million is set aside in 
the Highway Trust Fund for such programs. Before 2005, additional 
budget authority was appropriated from the trust fund as needed. From 
1999 to 2004, such appropriations totaled more than $3 billion. 
However, starting in 2005, the Congress has appropriated additional 
money for emergency relief from the general fund: about $4.3 billion 
since that year.
     projections of the highway trust fund's revenues and spending
    The status of the Highway Trust Fund is generally assessed by 
projecting the balances in it, which indicate whether the expected 
revenues will be sufficient to cover the anticipated spending. Those 
balances represent the cumulative difference between revenues and 
outlays over the life of the fund and indicate how much the fund has 
available, at any particular time, to meet its current and future 
obligations.
                   the highway trust fund's balances
    CBO has estimated the trust fund's future balances by projecting 
revenues and outlays independently of each other because they have 
different bases. Revenues depend on the collection of various taxes, 
and outlays depend on the obligation limitations set in appropriation 
acts as well as the timing of spending for obligations that have been 
made in prior years. For those projections, CBO assumes that 
policymakers will continue to control spending through such 
limitations. Further, for the purpose of these estimates, the agency 
assumes that appropriation acts will set obligation limitations equal 
to the amounts specified in SAFETEA-LU plus any adjustments for what is 
termed revenue-aligned budget authority (RABA), a funding mechanism 
contained in the 2005 law that is designed to strengthen the 
relationship between the highway account's revenues and spending.\7\
               projections of highway trust fund revenues
    If the current taxes are extended beyond their 2011 expiration 
date, revenues credited to the Highway Trust Fund will rise at an 
average annual rate of about 2 percent per year over the coming decade, 
CBO projects. Total trust fund revenues will grow from about $39 
billion in 2006 to about $40 billion in 2009--at a slower rate than 
nominal GDP, which CBO expects to rise at an average annual rate of 4.6 
percent over the next 10 years. (In large part, the difference exists 
because fuel tax collections depend on the quantity of fuel consumed 
rather than on the price of gasoline.) As a result, trust fund revenues 
are projected to decline from 0.25 percent of GDP in 2007 to 0.19 
percent of GDP in 2017 if the current taxes are extended.
               projections of highway trust fund outlays
    CBO bases its estimates of trust fund outlays primarily on 
historical spending patterns, which reflect states' multiyear projects 
to plan and build roads, bridges, and other transportation 
infrastructure. In the case of the fund's highway account, most of the 
obligations involve capital projects on which money is spent over a 
number of years. For example, the Federal-Aid Highway program typically 
spends about 27 percent of its budgetary resources in the year they are 
made available for spending and the rest over the next several years. 
Most of the highway programs' existing obligations will therefore be 
met using future tax revenues because those obligations far exceed the 
amounts now in the account. At the end of fiscal year 2007, the balance 
of the highway account stood at $8.0 billion, whereas the outstanding 
obligations of highway programs totaled about $45 billion.
    If lawmakers set obligation limitations at the amounts authorized 
in SAFETEA-LU and add RABA adjustments (as estimated by CBO), outlays 
from the trust fund's highway account will gradually increase from 
about $35.0 billion in 2007 to about $42 billion in 2009, CBO 
estimates, if amounts in the trust fund are sufficient. Those outlays 
would exceed revenues by $5 billion in 2008 and more than $6 billion in 
2009. In addition, CBO anticipates that about $2 billion from the 
highway account will be transferred to the mass transit account over 
that period.\8\ By CBO's estimates, balances in the highway account 
will be exhausted during fiscal year 2009, falling short of amounts 
needed to meet estimated obligations coming due in that year by $4 
billion to $5 billion, or about 10 percent of the projected spending.
    For projections of outlays after 2009, CBO assumes that SAFETEA-LU 
spending levels grow at the rate of inflation, a practice consistent 
with the agency's usual procedures for baseline projections. Under that 
assumption, the differential between revenues and projected outlays 
would be larger in 2010 and beyond (see Figure 4). Under an assumption 
that revenues remain at projected levels through 2017, outlays from the 
highway account, if unconstrained, would exceed revenues by a total of 
about $67 billion (or 17 percent) over the 2009--2017 period.



    Under SAFETEA-LU and including transfers from the highway account, 
the obligation limit for mass transit would grow from $8.3 billion in 
2007 to $9.4 billion in 2009. By CBO's estimates, outlays would exceed 
revenues by about $500 million in 2008 and by almost $2 billion in 
2009. With obligation limits adjusted for inflation after 2009, the 
mass transit account would have sufficient resources to meet estimated 
spending until 2012, according to CBO's estimates. Subsequently, CBO 
estimates, projected spending from the transit account would exceed 
estimated receipts by $3 billion to $4 billion a year.
    CBO's projections of the rate of spending from the trust fund are 
based on historical averages, but those rates might vary from year to 
year in accordance with factors such as states' construction schedules 
and plans. Also, changes in oil prices, the economy, and the fuel 
efficiency of vehicles can all cause future revenues to differ from 
CBO's projections. Small deviations from those projections would not 
significantly affect the future status of the Highway Trust Fund and 
the expected imbalance between obligations and resources.
  options to address the differential in the highway account between 
                expected revenues and projected spending
    If the balances in the highway account fell to zero, the 
Administration would have to take some action to constrain spending 
because the trust fund is not authorized to borrow money or to incur 
negative balances.
                 possible actions by the administration
    Without a change to current law, CBO anticipates that by 2009 the 
Administration will need to act to remedy the imbalance between 
revenues and outlays in the trust fund--probably by constraining the 
use of contract authority. Although the Administration has not yet 
stated how it will address that eventuality, a variety of options 
exist. The Department of Transportation may have to suspend the current 
practice of immediately reimbursing states for spending on highway 
programs and, instead, require states to wait for reimbursement until 
additional receipts are credited to the trust fund. At that time, the 
Administration may choose to reimburse states on a ``first-in, first-
out'' basis. The Administration could also use the Emergency Relief 
program as a model and divide the available funds among all states 
requesting reimbursement, or it could develop another way to allocate 
the resources in the trust fund.
   legislative options to reduce the difference between revenues and 
                                spending
    To balance revenues and spending, lawmakers could reduce future 
obligation limitations and budget authority below the levels assumed in 
CBO's projections, increase revenues to accommodate future spending 
levels, or pursue a combination of the two. The examples below provide 
some of many alternatives available to the Congress.
    Reducing Outlays. One option available to lawmakers is to reduce 
federal spending on highway programs. To do so, the Congress would need 
to cut the obligation limitations that control spending on those 
programs. For example, to constrain outlays to the revenues available 
in 2009, lawmakers would need to reduce the obligation limitation for 
that year in SAFETEA-LU by about $16 billion--roughly a 40 percent 
decrease. Subsequently, relative to obligation limitations growing at 
the rate of inflation, cuts in those limitations would need to average 
about $9 billion annually from 2010 through 2017, for a total of $79 
billion over the 2009--2017 period--a reduction of about 20 percent.\9\
    Increasing Revenues. To maintain spending on highway programs at 
SAFETEA-LU levels, the Congress could choose to raise additional 
revenues through an increase in the gas tax or through other 
mechanisms. According to estimates from the Joint Committee on 
Taxation, a one-cent increase in the gas tax, effective October 1, 
2008, would raise slightly less than $2 billion for the trust fund 
annually over the next 10 years.\10\ About 87 percent of those funds 
accrue to the highway account.
    CBO estimates that receipts to the highway account in 2009 will 
total $35.3 billion. To cover all obligations that will probably come 
due that year if they continue at SAFETEA-LU levels, revenues credited 
to that account would have to increase by between $4 billion and $5 
billion. A gas tax increase of about 3 cents per gallon of fuel sold 
would raise that amount for the highway account and about $600 million 
for the transit account.
    Over the 2010--2017 period, with increases in obligation rates 
assumed to reflect inflation, revenues credited to the highway account 
would have to be about 20 percent, or $8 billion, above current 
projections for each year, to meet obligations that would become due in 
each year. To generate such a sum for the highway account, revenues 
would need to increase by about $9 billion per year, requiring an 
increase in the gas tax of about 5 cents per gallon, effective October 
1, 2010.\11\ Resulting increases in revenues to the mass transit 
account, about $1 billion per year, would maintain positive balances in 
that fund until 2014.
    A Combination of Reducing Outlays and Increasing Revenues. 
Lawmakers could also choose to both reduce spending and increase 
revenues. For example, if the Congress chose to decrease spending from 
the highway account by 10 percent (relative to SAFETEA-LU levels 
inflated)--about $40 billion--over the 2009--2017 period, revenues 
would also have to increase by about 10 percent compared with the level 
in CBO's projections. Of that increase, under current law about $34 
billion would be credited to the highway account and $5 billion to the 
mass transit account. A gas tax increase of about 2.5 cents per gallon 
of fuel sold, beginning in 2009, would generate such a revenue stream.
            future funding of transportation infrastructure
    By many indications, the nation's surface transportation system 
will require substantial investments in coming decades. The number of 
vehicle-miles traveled has been growing by about 2 percent a year, and 
trucks are carrying increasing amounts of freight. As a result, 
congestion is growing; the Department of Transportation projects that 
traffic on a substantial percentage of the Interstate Highway System 
will exceed its capacity by 2020. The department recently estimated 
that $78.8 billion per year (in 2004 dollars) will be needed over the 
next 20 years to maintain the nation's highway system in its current 
condition, and another $15.8 billion will be needed to maintain transit 
systems in their current condition.
    Empirical research indicates that, as a whole, public investment in 
transportation infrastructure makes a positive contribution to the 
economy, but determining the appropriate level of government spending 
on that infrastructure is difficult. For example, identifying the 
amount of spending necessary is difficult at the aggregate level 
because individual infrastructure projects have varying costs and 
benefits depending upon their age, type of construction, intensity of 
use, and other factors. Economic returns from infrastructure will also 
vary significantly among projects because those returns depend upon a 
number of factors, including the amount of infrastructure already in 
place. For example, analysts have found that the initial construction 
of the Interstate Highway System from the late-1950s through early-
1970s increased the productivity of those industries relying on the 
nation's roadways to acquire materials and distribute their products. 
Subsequent investments to expand or rehabilitate the nation's roads 
have apparently had a much smaller economic impact, although they 
provide other important benefits--such as ensuring the safety and 
reliability of existing infrastructure--that are probably not fully 
captured by estimates of purely economic returns.
    In assessing the future status of the Highway Trust Fund and what 
actions might be necessary to ensure a balance between its income and 
spending, it is useful to address the broader questions of what total 
spending ought to be and what role the federal government ought to play 
in financing that spending. Some of the relevant questions include:
     Are the funds that the federal government is currently 
collecting and spending for surface transportation programs going to 
their best uses? Could the potential imbalance between the trust fund's 
revenues and spending be remedied, at least in part, by better 
targeting spending to its most productive uses? If so, what rules or 
procedures would be most effective in that regard?
     If more money is raised from transportation-related taxes, 
what steps ought to be taken to ensure that those funds are used to 
meet the highest-priority needs?
     What is the appropriate role for the federal government in 
the financing of transportation infrastructure? If more money is 
needed, should the federal government raise taxes to collect it, or 
should states, which ultimately determine how most of the funds are 
spent, bear the responsibility for imposing and collecting the 
necessary taxes or fees? If the federal government collects the money, 
how much flexibility should states have in determining how to spend the 
federal dollars?
     To what extent does federal funding substitute for 
spending that would otherwise be undertaken by other levels of 
government?
     What is the appropriate role for the private sector in the 
financing of transportation infrastructure? Should the federal 
government facilitate a greater private-sector role, and if so, how?
    The answers to those questions are not necessarily clear or 
straightforward, but they are relevant in determining funding and 
financing strategies for the surface transportation system.
                financing transportation infrastructure
    In assessing ways to finance transportation spending--whether at 
the federal level or at the state and local levels--it is useful to 
consider not only how much various financing approaches might raise but 
also what kinds of incentives they provide to users of the 
transportation system. There is a strong rationale for charging users 
for the costs of transportation infrastructure because they reap 
substantial benefits that the system provides. Designing and 
implementing a financing system that charges users of transportation 
infrastructure for the costs that they impose on the system can 
encourage efficient use of existing roads, rails, and other 
transportation infrastructure. It can also help in identifying needs 
and paying for the construction of new infrastructure in the right 
places at the right time. The charges users pay for the costs that they 
impose on the system provide a measure of the value of investment in 
increased capacity.
                           the current system
    Under the current system, receipts from various excise taxes, most 
notably those on the sale of gasoline, diesel, and other motor fuels, 
are collected and credited to the Highway Trust Fund. The Congress 
determines how much money each state receives from the fund. Most of 
that determination reflects existing apportionment formulas provided in 
law, but some spending is based on specific allocations to states in 
legislation. The formulas determine which types of projects are 
undertaken, but each state determines which specific projects to 
undertake. The federal government then reimburses states from the 
Highway Trust Fund for the federal share of those projects.
    The current system for funding bridges and roads collects the funds 
used for that infrastructure from users of the system, though not 
always in proportion to the costs they impose on the system. The fuel 
taxes, which CBO estimates funded about 90 percent of federal highway 
spending in 2006, are partially related to the wear and tear that 
driving inflicts on roads, bridges, and other transportation 
infrastructure. For example, vehicles that travel farther burn more 
fuel and pay more in taxes. Heavier vehicles that do more damage to 
pavement and bridges also burn more fuel and pay more in taxes, but 
probably not in proportion to the damage they cause. For example, a 
heavily loaded truck uses somewhat more fuel and pays somewhat more in 
taxes than a comparatively light automobile but does much greater 
damage to pavement and bridges. However, the current system is also 
demonstrably workable. Collection costs are low, and evading the taxes 
is difficult.
    The long-run economic viability of the existing financing system is 
in question, however. Existing taxes on gasoline, diesel fuel, and 
ethanol are a fixed number of cents per gallon and thus do not increase 
with inflation. However, construction costs continue to rise. The 
Federal Highway Administration's Composite Bid Price Index, which 
measures contract prices for goods and services commonly used in 
highway construction, increased by 74 percent since the enactment of 
TEA-21 in 1998.\12\ That average annual increase is over 7 percent, 
which is well above other broader measures of inflation, such as the 
change in the Consumer Price Index. The increase in construction prices 
contributes to the long-term decline in the purchasing power of 
revenues accruing to the Highway Trust Fund. For example, the 2006 
revenues credited to the highway account are 47 percent more than the 
1998 revenues in dollar terms, but those revenues provide about 15 
percent less in purchasing power for highway construction. Policymakers 
could choose to restore the Highway Trust Fund's purchasing power by 
indexing fuel taxes to account for inflation. But even so, increased 
fuel efficiency, hybrid vehicles, or alternative fuels could serve to 
limit the trust fund's receipts in the future.
    In addition, current taxes do not account for the costs of 
pollution and congestion caused by driving. For example, a driver on a 
congested road uses a little more fuel and pays a little more in taxes 
than he or she would driving on an uncongested road but imposes much 
greater costs on other drivers in terms of delay.
alternatives based on charges to users of transportation infrastructure
    The federal government, as well as states and localities, could 
choose to replace or supplement existing fuel taxes with taxes or user 
fees intended to both recover more of the costs imposed by users of 
transportation infrastructure and to charge specific users fees that 
are more directly in line with the costs of their use. A number of such 
fees already exist in the current financing system at the state and 
local levels. Widespread use of some such systems may not be practical 
in the short term, but they might be worth considering over the longer 
term, particularly if technological developments continue to make them 
more feasible.
    Mileage-based road use fees charge users specifically for road use. 
Because such fees can vary by location, vehicle type, and time of day, 
they have the capability to closely match the actual costs imposed by 
specific users. One form of such fees that are already commonly used on 
major highway facilities, tolls can be economically efficient because 
they can vary by vehicle type and therefore can reflect the costs 
imposed by various classes of vehicles. Many tolls vary by time of day 
and therefore can reflect the congestion costs imposed on other users. 
It has long been recognized that tolls that reflect the costs users 
impose on the system provide a measure of the value of investment in 
increased capacity.\13\ However, the administrative costs of collecting 
some tolls could be higher than the administrative costs of collecting 
current motor fuel taxes. Moreover, because tolls currently apply only 
to some major roads, relying solely on tolls from those roads would not 
be efficient, equitable, or adequate to pay for the entire highway 
system.
    In response to concerns about the long-term viability of fuel 
taxes, some states are currently studying the feasibility of mileage-
based user fees that apply to all roads, not just major highways. For 
example, Oregon recently conducted a one-year experiment in which 
drivers paid a mileage-based fee instead of fuel taxes when they filled 
up at the gas station. The fee was intended to replace the fuel tax as 
the primary source of revenues for the state's roads, as well as 
incorporating congestion pricing based on both location and time of 
travel. In addition, the state of Washington recently evaluated a 
system using global positioning system (GPS) technology in vehicles. 
Drivers were charged different prices per mile depending on both the 
location and time of travel, thereby incorporating congestion pricing. 
Expanded use of such systems would overcome some of the practical 
difficulties of collecting tolls over a broad system of roads but would 
require addressing other considerations--for example, many cars do not 
yet have GPS systems--and resolving varied privacy concerns about the 
government having access to data about who was driving when and where.
    Generalized mileage-based fees for the use of roads have several 
attractive characteristics. Because the fees can vary by vehicle type, 
time of day, and location, they have the capability to closely match 
the actual costs that users impose on the system. The fees are 
equitable for the various classes of users because revenues are raised 
in proportion to the costs imposed. They send price signals to drivers 
about the costs that they impose on the system, thus helping to reduce 
demand, and to transportation planners about the value of adding 
capacity, thus promoting long-run efficiency. However, while increasing 
use of electronic monitoring and payment systems has reduced 
transactions costs, there are still unresolved questions about the 
degree to which generalized mileage-based road-use charges are 
technically and administratively feasible when applied to large, 
complex road systems.
    Weight-distance fees charge vehicles based on their weight and 
configuration of axles and annual miles traveled. Those user fees can 
be economically efficient at recovering infrastructure costs because 
vehicles pay in direct proportion to the estimated wear and tear they 
cause on infrastructure. Consequently, different classes of vehicles 
are treated equitably. However, weight-distance fees do not reflect 
congestion costs. A heavy vehicle currently pays the same weight-
distance fee whether it travels on a congested road or an uncongested 
road. Furthermore, weight-distance fees may be more difficult to 
administer and easier to evade than charges under the current system. 
While 11 states had weight-distance fees in 1989, today only four 
states (Kentucky, New Mexico, New York, and Oregon) have them.
    Congestion fees charge drivers for the delay that their choice to 
drive imposes on other drivers. Such fees are higher in times or places 
with heavy traffic, lower in times or places with light traffic. They 
are already used at a variety of highways, bridges, and tunnels 
throughout the United States.\14\ For example, on State Route 91 in 
Orange County, California, congestion fees vary hour to hour in order 
to maintain a free flow of traffic in the priced lanes. The fees 
promote efficient use of existing infrastructure by allocating it those 
who value it most (namely, those most willing to pay the charge). They 
are also efficient at reducing congestion costs because each vehicle 
pays for the delay caused to other users. To the extent that some 
drivers choose to use other modes or routes or to travel at less 
congested times of the day rather than pay the fee, congestion is 
reduced. Congestion fees also send price signals about the need to add 
capacity, thus promoting long-run efficiency. Electronic technology 
makes the fees inexpensive to administer on the largest, most congested 
roads. In many recent applications of congestion pricing, such as I-394 
outside Minneapolis, Minnesota, overhead sensors read electronic 
transponders in vehicles, eliminating the need for drivers to stop or 
even slow down. Moreover, London and Stockholm have successfully 
imposed charges on driving in the center of those cities to reduce 
congestion.
    Congestion fees have some drawbacks. It may not be equitable to 
have users of congested roads pay some or all of the cost of the road 
system while users of uncongested roads pay little or none. In 
addition, charging high tolls could raise concerns about the impact on 
low-income users. Last, the administrative feasibility of congestion 
fees in a broad variety of applications found throughout the highway 
system is not yet clear.
                                endnotes
    \1\ Additional detail on infrastructure spending is available in 
Congressional Budget Office, Trends in Public Spending on 
Transportation and Water Infrastructure, 1956 to 2004 (August 2007). 
Supplemental data tables and a methodological appendix include data 
sources and definitions. The paper addresses public spending on surface 
transportation and other types of infrastructure: aviation, water 
resources (such as dams and levees), and water supply and wastewater 
treatment. Public spending on all transportation and water 
infrastructure in 2004 was $312 billion, in 2006 dollars.
    \2\ State and local spending on operation and maintenance reflects 
in part conditions that the federal government places on grants and 
loan subsidies that it provides. Those funds often may not be used for 
those purposes.
    \3\ Those federal outlays for infrastructure do not include several 
types of financial support for infrastructure: first, the revenues 
forgone by the federal government through the tax exemptions on income 
from bonds issued by state and local governments to finance 
infrastructure and, second, sizable outlays by the Department of 
Homeland Security to protect infrastructure. See Congressional Budget 
Office, Trends in Public Spending on Transportation and Water 
Infrastructure.
    \4\ Other agencies within the Department of Transportation also 
receive funding from the Highway Trust Fund, including the Federal 
Motor Carriers Administration and the National Highway Transportation 
Safety Administration. In 2007, the Federal Motor Carriers 
Administration and the National Highway Transportation Safety 
Administration received a total of about 3 percent of the budgetary 
resources from the Highway Trust Fund.
    \5\ The total gas tax is 18.4 cents per gallon. Of that, 18.3 cents 
is deposited in the Highway Trust Fund, and 0.1 cents goes to the 
Leaking Underground Storage Trust Fund. (The 1993 Omnibus Budget and 
Reconciliation Act increased the gas tax by 4.3 cents; the added 
receipts were not initially deposited into the trust fund, but into the 
general fund of the Treasury.)
    \6\ Revenues recorded to the Highway Trust Fund were especially 
strong in 2005, following changes in the tax treatment of certain 
fuels. The American Jobs Creation Act of 2004 modified the subsidy for 
ethanol production by establishing a tax credit paid from the 
Treasury's general fund. That credit replaced a lower tax rate for 
gasoline containing ethanol. The law also included other provisions to 
increase revenues to the Highway Trust Fund.
    \7\ That assumption differs from the one underlying CBO's baseline 
budget projections, which are governed by the rules set forth in the 
Balanced Budget and Emergency Deficit Control Act. In its most recent 
baseline, CBO projected highway spending over the next decade by 
assuming that the budget authority and obligation limitations in future 
years would equal those enacted in the 2007 appropriation act for the 
Department of Transportation, adjusted for inflation. With that 
projection method, baseline funding levels for highways are lower than 
the levels specified in SAFETEA-LU.
    \8\ Under SAFETEA-LU, states are allowed to use some of their 
highway funds for transit projects; funds are transferred from the 
highway account to the transit account when states choose to use such 
flexibility.
    \9\ Because the spending that is estimated to occur each year is 
only partly from new spending authority, that authority would need to 
be reduced substantially in 2009 to ensure a sufficient reduction in 
spending in that year.
    \10\ Because excise taxes reduce the tax base of income and payroll 
taxes, higher excise taxes would lead to reductions in income and 
payroll tax revenues. The estimates shown here do not reflect those 
reductions. Those reductions would amount to an estimated 25 percent of 
the estimated increase in excise tax receipts.
    \11\ All revenue estimates are provided by the Joint Committee on 
Taxation.
    \12\ Federal Highway Administration, Price Trends for Highway 
Construction, Fourth Quarter, 2006.
    \13\ See William S. Vickery, ``Congestion Theory and Transport 
Investment,'' American Economic Review, vol. 59, no. 2, (May 1969), pp. 
259--260.
    \14\ For a list of current and planned congestion-pricing projects, 
see Federal Highway Administration, Office of Transportation 
Management, Value Pricing Project Quarterly Reports, available at 
http://ops.fhwa.dot.gov/tolling--pricing/value--pricing/
quarterlyreport/index.htm.

    Chairman Spratt. Thank you, Mr. Sunshine.
    Ms. Kavinoky.
    Ms. Kavinoky. Kavinoky, sir.
    Chairman Spratt. Kavinoky.
    Ms. Kavinoky. Yes.
    Chairman Spratt. Ms. Kavinoky, thank you for coming. Thank 
you for your participation and we welcome you to make your 
statement at this point.

                 STATEMENT OF JANET F. KAVINOKY

    Ms. Kavinoky. Thank you. Mr. Chairman, Congressman 
Blumenauer, thank you very much for the opportunity to testify 
on the investments needed in our nation's transportation 
system.
    My name is Janet Kavinoky. I am the Director of 
Transportation Infrastructure at the U.S. Chamber of Commerce.
    And over the past several months, the nation has seen 
abundant evidence that America's infrastructure is not only 
showing its age but showing that it lacks capacity to handle 
the volume of people and goods moving today.
    Now is the time to move on a robust, thoughtful, and 
comprehensive plan to build, maintain, and fund a world- class, 
21st century infrastructure. We cannot afford to delay. What is 
at stake is simple and stark.
    If we fail to address our challenges, we will lose jobs and 
industries to other nations. If we fail to act, we will pollute 
our air and destroy the free mobile way of life we cherish. 
And, ultimately, if we fail to increase investment, we will see 
more senseless deaths on our bridges and roads, not to mention 
our rails and waterways.
    And it is all likely to get much worse. We have a system 
that is overworked, underfunded, increasingly unsafe, and 
without a strategic vision.
    While the events of August shone a spotlight on the state 
of the nation's bridges, it is important to recognize that we 
have a much larger infrastructure problem in this country. And 
so it is time to create a new era in transportation.
    This country's current approach to delivering 
transportation infrastructure is not set up for today's robust 
economy or the economy of the future. We need a national plan.
    As Congressman Mica aptly articulated this year, the 
federal government must take a lead role in developing a 
national strategic transportation plan for the next 50 years 
that makes the most efficient use of every transportation mode 
and incorporates the expertise and resources of both private 
and public sectors.
    Although every level of government must step up to the 
plate, the federal government must bear a significant part of 
the responsibility to ensure that national needs are met, 
legacy assets are maintained and improved guaranteeing 
continued nationwide connectivity, and infrastructure 
investment is aligned with the needs that arise from the global 
economy, trade policies, and the flow of interstate commerce.
    When it comes to funding and financing, every option must 
be considered to address both the enormous problems of 
inadequate capacity and aging transportation infrastructure.
    The Chamber looks forward to the evaluation of needs, 
policies, and funding and financing alternatives in the report 
that will be released this winter of the National Surface 
Transportation Policy and Revenue Study Commission.
    In addition, we believe that the findings of the National 
Transportation Infrastructure Financing Commission could also 
add to the debate on the federal role in the future of surface 
transportation program and project delivery in this country.
    But even without the findings of these commissions, the 
Chamber is confident in saying that there is the need to 
increase the systemic funding available for investment in 
infrastructure.
    And although it is clear that chronic underinvestment is a 
major contributing factor to problems across all modes of 
transportation, we must also address the misuse of funding, 
lack of resource prioritization, and poor comprehensive 
planning that marks current federal transportation programs.
    As we all prepare for SAFETEA-LU reauthorization, the 
Chamber encourages Congress to examine ways to spend 
infrastructure dollars more wisely, to ensure that states do 
not divert their transportation funding away from intended uses 
in the name of flexibility, to invest in new technologies, to 
attract more private investment for projects, and to encourage 
public-private partnerships at the state and local levels.
    However, before we get to SAFETEA-LU reauthorization, 
Congress has another urgent issue to address, the Highway Trust 
Fund shortfall that is expected in 2009. The Bush 
Administration and the Congressional Budget Office forecast 
that revenues for the highway account will fall short of 
meeting these SAFETEA-LU guaranteed commitments by between 4.3 
and $5 billion during fiscal year 2009.
    As a result of the multi-year outlay pattern of the Highway 
Trust Fund, the resulting cut in the 2009 Federal Aid Highway 
Program would be much larger than this shortfall, approximately 
four times larger.
    State Departments of Transportation and metropolitan 
planning organizations have developed long-term investment 
plans based on anticipated SAFETEA-LU guaranteed funding levels 
and a reduction in funds would disrupt projects already 
underway.
    Therefore, we strongly encourage Congress to ensure that 
the Highway Trust Fund revenues are sufficient to support the 
guaranteed funding levels in SAFETEA-LU and we believe that 
Congress should not ensure the solvency of the Highway Trust 
Fund by cutting the obligation limitation for the Federal Aid 
Highway Program.
    The Chamber is committed to lead the way in tackling our 
nation's infrastructure challenges. We have launched a major 
multi-million dollar initiative called Let us Rebuild American 
that has four goals.
    First, to document the problem with solid research; second, 
to educate the public, the business community, and policy 
makers; third, to spur private investment in critical 
infrastructure of all types; and, finally and perhaps most 
importantly, to foster an honest dialogue on how to find the 
public money to meet critical infrastructure needs.
    And, again, let me emphasize that there is no single answer 
to that question which means all of the funding and financing 
options must be on the table.
    Mr. Chairman, Congressman Blumenauer, the question facing 
America is this: Are we still a nation of builders, are we 
still a can-do society, are we still the kind of people who can 
rally to a great cause with a shared sense of mission and 
national purpose?
    To succeed, we need all transportation and infrastructure 
stakeholders at the table, all modes, all industries, builders, 
carriers, users, and shippers alike. It is time for us all to 
roll up our sleeves and go to work.
    Surely we ought to be able to create the vision, forge the 
consensus, secure the resources, and find the political courage 
to make this happen. I believe that we can and I believe that 
we will and business will lead the way.
    Thank you very much for the opportunity to be here today 
and I look forward to answering your questions.
    [The prepared statement of Janet Kavinoky follows:]

  Prepared Statement of Janet F. Kavinoky, Director of Transportation 
   Infrastructure, U.S. Chamber of Commerce and Executive Director, 
            Americans for Transportation Mobility Coalition

                              introduction
    Mr. Chairman, Mr. Ranking Member and distinguished members of the 
House Committee on Budget, thank you very much for the opportunity to 
testify from the perspective of the business community on the 
investments required to meet the needs of our nation's transportation 
system and specifically, highway and public transportation 
infrastructure.
    My name is Janet Kavinoky, and I am the Director of Transportation 
Infrastructure at the U.S. Chamber of Commerce and the Executive 
Director of the Americans for Transportation Mobility Coalition. The 
U.S. Chamber is the world's largest business federation representing 
more than three million businesses and organizations of every size, 
sector, and region.
    Over the past several months the nation has seen abundant evidence 
that America's infrastructure is not only showing its age, but showing 
that it lacks capacity to handle the volume of people and goods moving 
today. From exploding steam pipes under New York streets, to record 
level flight delays in the skies across the country, it is evident that 
now is the time to move on a robust, thoughtful, and comprehensive plan 
to build, maintain, and fund a world-class 21'' century infrastructure. 
There can be no more delay.
    We--Congress, state and local governments, and the private sector--
cannot treat infrastructure like other problems or programs where you 
can wait until the very last minute and then write a big check. 
Infrastructure projects require foresight and years of careful 
planning.
    The Chamber appreciates the opportunity to provide the ``user's 
perspective'' and will emphasize just how critical America's 
transportation infrastructure is to the businesses that rely on fast, 
cost effective, and reliable transportation of goods and people.
    This testimony covers three topics:
    1. The role of transportation in our economy;
    2. What is at stake from the business community's perspective; and
    3. What can be done in the short term and our recommendations for 
addressing long term issues.
  the role of transportation in our economy freight and goods movement
    Manufactured goods and cargo move through the United States on a 
system primarily consisting of ports, roads, rail and inland waterways. 
Bridges serve as critical links in the system. The supply chain is 
viewed from initial point of origin to the final destination, with 
frequent junctures in between. To keep competitive domestically and 
internationally, many U.S. businesses have developed complex logistics 
systems to minimize inventory and ensure maximum efficiency of their 
supply chains. However, as congestion increases throughout the U.S. 
transportation system, these supply chains and cargo shipments are 
frequently disrupted and the cost of doing business increases.
    The growth in international trade is overwhelming U.S. intermodal 
freight capacity. Over the next 30 years, domestic freight volume is 
forecast to double and international freight volume entering U.S. ports 
may quadruple, according to the American Association of State Highway 
and Transportation Officials (AASHTO).
    According to the Federal Highway Administration's (FHWA) recent 
report, An Initial Assessment of Freight Bottlenecks on Highways, ``If 
the U.S. economy grows at a conservative annual rate of 2.5 to 3 % over 
the next 20 years, domestic freight tonnage will almost double and the 
volume of freight moving through the largest international gateways may 
triple or quadruple. * * * Without new strategies to increase capacity, 
congestion * * * may impose an unacceptably high cost on the nation's 
economy and productivity.''
    Labor shortages and increased security requirements born from 9/11 
are compounding these capacity constraints and increasing congestion at 
key entry, exit, and throughput points throughout the country.
    In Memphis, TN, at a hearing of the National Surface Transportation 
Policy and Revenue Study Commission, on November 15, 2006, Doug Duncan, 
CEO of FedEx Freight and a Chamber member, summed up the freight 
community's acute interest in infrastructure: ``I'm afraid if things 
don't turn around soon, we'll begin turning the clock back on many of 
the improvements that these supply chains have made and begin to 
restrain commerce instead of support commerce.''
             passenger transportation and personal mobility
    Employers rely on transportation systems to connect them to their 
workforce, and to connect that workforce with suppliers and customers 
around the country and the world. Unfortunately, increasing congestion 
is disrupting these important connections and imposing additional costs 
on the workforce and employers alike.
    Public transportation, such as buses, rapid transit, and commuter 
rail systems, are important solutions to the growing congestion crisis 
in the United States, but chronic underinvestment is leaving these 
systems strained under increasing use. Americans took 10.1 billion 
trips on local public transportation in 2006. From 1995 through 2006, 
public transportation ridership increased by 30 %, a growth rate higher 
than the 12 % increase in U.S. population and higher than the 24 % 
growth in use of the nation's highways over the same period. The 
Federal Transit Administration (FTA) estimates $14.8 billion is needed 
annually to maintain current conditions, while $20.6 billion is needed 
to improve to ``good'' conditions.
                            what is at stake
    What's at stake is simple and stark:
    As Caterpillar Group President, and former Chamber Chairman, Gerry 
Shaheen, stated at the New York field hearing of the National Surface 
Transportation Policy and Revenue Study Commission on November 15, 
2006: ``Transportation in this country is breaking down.''
    If we fail to address our transportation infrastructure challenges, 
we will lose jobs and industries to other nations. Our global 
competitors are building and rebuilding while America is standing 
still. China, India, and the developing world are building at a 
staggering pace. China spends 9% of its GDP on infrastructure; India, 
5% and rising. While they started well behind us, they are catching up 
fast. The United States has spent less than 2% on average as a 
percentage of GDP since 1980. We cannot expect to remain competitive 
with that level of investment.
    If we fail to act, we will pollute our air and destroy the free, 
mobile way of life we cherish. Thirty-six percent of America's major 
urban highways are congested. Congestion costs drivers $63 billion a 
year in wasted time and fuel costs. Americans spend 3.7 billion hours a 
year stuck in traffic. And while their car engines are idling, they are 
pumping thousands of tons of pollution into the air every day.
    If we fail to increase investment, we will see more senseless 
deaths on our bridges and roads, not to mention on our rails and 
waterways. Americans need to know that 33% of our major roads are in 
poor or mediocre condition. Shoddy road conditions result in $67 
billion in extra vehicle repairs and operating costs per year. More 
important, poorly maintained roads contribute to a third of all highway 
fatalities. That's more than 14,000 deaths every year--a national 
disgrace.
    It is all likely to get much worse. We have a system that is 
overworked, under-funded, increasingly unsafe, and without a strategic 
vision.
    According to TRB's National Cooperative Highway Research Program's 
(NCHRP) study Future Financing Options to Meet Highway and Transit 
Needs, there is an average annual gap of over $50 billion in capital, 
operations and maintenance funding to maintain the nation's highway and 
transit systems from 2007 to 2017, and an average annual gap of over 
$100 billion to ``improve'' these systems.
    The cost of materials used to fix pavements has increased 33% in 
the past three years. Steel, oil, and concrete are all more expensive.
    Yet despite these growing needs and costs, the Highway Trust Fund 
will be $4 billion in the hole in just two years, and the user fees on 
fuels that are the primary source of resources at the federal level 
have not been increased since 1993.
    These figures do not even address other critical elements of our 
transportation infrastructure, freight and passenger rail, inland 
waterways, ports and other maritime needs, and, of course, aviation. 
The American Society of Civil Engineers says that our civil 
infrastructure needs add up to some $1.6 trillion over the next five 
years including transportation systems, clean water and wastewater 
facilities, schools and recreational facilities.
    How did we arrive at the situation we face today?
    Decades ago we built the best infrastructure system the world has 
ever known and then proceeded to take it for granted. As a nation, 
we've allowed governments at all levels to pile on complex and 
overlapping regulations. It takes years, even decades, to bring 
projects on line. Red tape and lawsuits can bring the most common sense 
improvements to a grinding halt.
    Decision-makers have refused to make tough choices or set common 
sense priorities. We have failed to plan, failed to innovate, and 
failed to invest. We've allowed money to be wasted and have permitted 
federal and state lawmakers to divert infrastructure dollars to other 
purposes. We've seen construction and land costs go up while letting 
revenue sources stagnate and decline.
                         where we go from here
    It is time to address these issues and create a new era in 
transportation.
The Next Era in Transportation
    This country's current approach to delivering transportation 
infrastructure is not set up for today's robust economy or the economy 
of the future.
    In spite of the multi-modal and intermodal needs of transportation 
system users, the planning, construction, and financing of 
infrastructure has been separated by public and private entities and 
has focused on individual locations and modal stovepipes.
    The Chamber believes that this next era in surface transportation 
requires a multi-modal and intermodal vision that supports competition 
in the global economy and emphasizes the important role of the federal 
government.
    We need a national plan. As House Committee on Transportation and 
Infrastructure Ranking Republican Member John Mica aptly articulated in 
an Op-Ed in The Hill earlier this year, ``[T]he federal government must 
take a lead role in developing a national strategic transportation plan 
for the next 50 years that makes the most efficient use of every 
transportation mode and incorporates the expertise and resources of 
both private and public sectors.'' The Chamber appreciates Ranking 
Member Mica's continued vision and leadership on this issue.
    Every level of government must step up to the plate and make 
commitments to expand capacity through better utilization of existing 
infrastructure and creation of additional infrastructure. The federal 
government, however, bears a significant part of the responsibility 
when ensuring that:
     National needs are met;
     Legacy assets, including the Interstate Highway System, 
are maintained and improved to guarantee continued nationwide 
connectivity;
     Utilization of existing networks is maximized; and
     Infrastructure investment is aligned with the needs that 
arise from the global economy, trade policies, and the flow of 
interstate commerce. There is a federal role in prioritizing investment 
in new capacity and operational improvements in global gateways and 
trade corridors.
    The federal government must perform a critical role:
     Working through difficult intergovernmental relationships;
     Providing resources for complex, multi-state or multi 
jurisdictional projects; and
     Encouraging the public and private sectors to pursue 
innovations that improve infrastructure performance, financing or 
development.
                   need for a comprehensive approach
    The I-35W bridge collapse in August shone a spotlight on the state 
of the nation's bridges, which are critical components of the nation's 
transportation network. For example, South Carolina alone has a $2.9 
billion bridge-repair backlog. It is important to recognize that the 
nation has a much larger infrastructure problem. The poor condition of 
the nation's infrastructure is not confined to bridges alone. As I 
outlined earlier, the business community looks holistically at 
transportation infrastructure. So, in addition to bridges we must 
address:
     Road traffic has already shot up 40% between 1990 and 2005 
and is expected to skyrocket in coming years while capacity has 
increased just 2%.
     Our transit systems earned a D+ rating from the American 
Society of Civil Engineers. Transit investment is falling even as 
transit use increased faster than any other mode of transportation--up 
21%--between 1993 and 2002. As the Committee discusses bridge needs, it 
is important to note that according to the 2006 Conditions and 
Performance Report issued by USDOT the percentage of elevated transit 
structures in adequate or better condition decreased from 91 % in 2002 
to 84 % in 2004, and the percentage in substandard or worse condition 
increased from 9 to 16 %.
     The antiquated air traffic control system that is a 
contributing factor to a third of all U.S. flights being cancelled or 
delayed in July this year. U.S. airlines could have one billion 
customers by 2015 and more passengers mean more planes. The use of 
smaller regional jets and the growth in business and general aviation 
are also factors in congestion. The costs of inaction are steep--
aviation delays cost $9 billion in 2000 and are on target to hit more 
than $30 billion by 2015. There is also the cost no one likes to talk 
about--the potential for significant loss of life in midair or on 
overcrowded runways.
     Ports that are straining under the weight of cargo volumes 
that are doubling or tripling. By 2020, every major U.S. container port 
is projected to at least double the volume of cargo it was designed to 
handle. Select East Coast ports will triple in volume, and some West 
Coast ports will quadruple.
     Rail infrastructure requires nearly $200 billion over the 
next 20 years to maintain existing infrastructure and to accommodate 
freight growth.
     Our inland waterways need serious attention--removing 
obstructions, widening channels, and replacing locks. The number of 
dams deemed unsafe by our civil engineers has risen 33% to more than 
3,500 since 1998.
     AASHTO has estimated that intercity passenger rail 
corridors will require $60 billion in capital investment over the next 
20 years to maintain existing infrastructure and to expand capacity.
    What can the federal government do specifically with regard to the 
freight transportation system?
     Improve road connections between ports and intermodal 
freight facilities and the national highway system;
     Improve connectivity and capacity so that railroads can 
efficiently and reliably move cargo between ports and inland points;
     Develop a national intermodal transportation network so 
that cargo can flow at speed among multiple alternative routes; and
     Help prioritize infrastructure improvements of long-term 
network plans and projects of national significance and then reserve 
funding for such projects.
    When it comes to funding and financing, every option must be 
considered to address the enormous problems of the aging transportation 
infrastructure. At the federal level, user fees on fuel and truck sales 
and use are the principal sources of revenue for the Highway Trust 
Fund. Public transportation is funded on a pay-as-you-go basis with a 
combination of user fees and general funds. At the state and local 
levels, a myriad of funding sources are used, and sometimes those 
revenue streams are leveraged through fmancing structures that include 
both public and private debt and equity investment. The NCHRP report 
Future Financing Options to Meet Highway and Transit Needs effectively 
summarizes revenue sources used across the country and is a good 
resource for the Committee.
    The Chamber looks forward to the evaluation of needs, policies and 
funding and financing options in the report of the National Surface 
Transportation Policy and Revenue Study Commission this winter. In 
addition, we believe that the fmdings of the National Transportation 
Infrastructure Financing Commission could also add to the debate on the 
federal role in the future of surface transportation program and 
project delivery in this country. Even without the findings of these 
Commissions, the Chamber is confident in saying that there is a need to 
increase the systemic funding available for capital investment in 
infrastructure. In 2005 a National Chamber Foundation report titled 
Future Highway and Public Transportation Financing Study concluded as 
much, and several subsequent studies including U.S. DOT's own 
Conditions and Performance Report quantify the significant gap between 
needs and available resources.
    It is clear that chronic underinvestment is a major contributing 
factor to the problems across all modes of transportation; however, 
misuse of funding, a lack of resource prioritization, and poor 
comprehensive planning must also be addressed. As Congress prepares for 
SAFETEALU reauthorization, the Chamber encourages Congress to spend 
infrastructure dollars more wisely, ensure that states do not divert 
their transportation funding away from its intended use in the name of 
``flexibility,'' invest in new technologies, attract more private 
investment for projects, and encourage public-private partnerships at 
the state and local levels.
                      highway trust fund shortfall
    I would be remiss if I did not mention to this Committee the 
urgency of addressing the Highway Trust Fund shortfall that is expected 
in 2009. SAFETEA-LU guaranteed at least $223 billion for federal 
highway program investments through FY2009. This investment level was 
predicated on a forecast of anticipated revenues collected for the 
Highway Trust Fund's Highway Account over the life of SAFETEA-LU.
    The Bush administration and the Congressional Budget Office now 
forecast that revenues for the Highway Account will fall short of 
meeting these commitments by between $4.3 and $5.0 billion during 
FY2009, the last year of SAFETEA-LU authorizations. As a result of the 
multi-year outlay pattern of the Highway Trust Fund, the resulting cut 
in the 2009 Federal-aid Highway Program would be much larger than this 
shortfall--approximately four times larger.
    The nation's highway system has significant capital, operating and 
maintenance needs and state departments of transportation and 
metropolitan planning organizations have developed long term 
transportation investment plans based on anticipated SAFETEA-LU 
guaranteed funding levels and a reduction in funds would disrupt 
projects already underway.
    Therefore, as a result, we strongly encourage Congress to ensure 
that Highway Trust Fund revenues are sufficient to support the 
guaranteed funding levels in SAFETEA-LU. Congress should not ensure the 
solvency of the Highway Trust Fund by cutting obligation limitation for 
the Federal-aid Highway Program.
            the chamber's commitment: let's rebuild america
    Permit me to address briefly what the nation must do to meet the 
enormous and urgent challenge that I have just outlined and tell you 
what the Chamber intends to do.
    Those of us who have worked on infrastructure for many years have 
learned that on this issue, public attention spans are short. 
Government decision making is slow and diffuse. Politicians rarely look 
beyond the needs of their own states and districts. The news media 
mostly yawn unless there is a tragedy.
    If we really want to move this country off the dime and build a 
modern and safe infrastructure, then the business community must step 
up to the plate and lead.
    The Chamber will organize, fund, and lead this critical effort. We 
already launched a major, multimillion dollar initiative called ``Let's 
Rebuild America.''
    We will put money, people, research, programs, and strong political 
action around a sustained, long-term campaign to rebuild the economic 
platform of our nation. We will employ every resource at our disposal--
our policy expertise, our lobbying clout, our grassroots capabilities, 
and our communications channels. We will appeal to all Americans who 
are sick of pollution, tired of congestion, fed up with rising costs, 
and concerned about their own safety.
    To succeed, we need all transportation and infrastructure 
stakeholders at the table--all modes, all industries, builders, 
carriers, users, and shippers alike. It is time for us all to roll up 
our sleeves and go to work. The business community will lead this 
effort, but to do so all of the infrastructure providers, passenger and 
freight carriers, and the traveling public and shippers must be united. 
We must put an end to the intramural squabbles that have divided 
stakeholders--mode versus mode, shipper versus carrier, urban versus 
rural, and region versus region. We will all lose unless we rally and 
unite around an urgent and compelling mission--to rebuild America.
    Four key goals will define the mission and underpin the work of our 
Let's Rebuild America initiative.
       documenting the problem with solid, indisputable research
    First, we will document in a factual and comprehensive way the 
totality of America's infrastructure needs--not just what is required 
to patch things up, but what we must do to move our country and economy 
forward in a competitive world.
    Our experience tells us that putting a credible body of facts on 
the table and gaining widespread agreement on those facts are critical 
first steps to forging consensus and forcing action.
    We have joined with others in asking the RAND Corporation to 
prepare a definitive report that documents the current state of our 
infrastructure and outlines the future needs of a $13 trillion economy 
that will grow to $20 trillion by 2020, given a 3% growth rate. 
Researchers will also break out their findings state-by-state so that 
we can put an infrastructure report card in front of every governor and 
state legislature in the country. Perhaps, then, they will see the 
light--and feel the heat!
 educating americans about the benefits of infrastructure and the cost 
                               of failure
    Our second goal is to educate the public, the business community, 
policymakers, and government at all levels about the benefits of 
investing in infrastructure and the cost of failure.
    Using the RAND study and other research--and backed by an 
aggressive communications program--we will widely disseminate a series 
of compelling messages to build grassroots support for infrastructure.
    The people of our country must know, and be reminded again and 
again, that we can create good American jobs, clean the air, succeed in 
a global economy, preserve a good quality of life, and save innocent 
lives by investing in our infrastructure.
             spurring private investment in infrastructure
    Our third goal is to unleash and unlock the potentially hundreds of 
billions of dollars in private investment just waiting to be spent on 
critically needed power plants, pipelines, refineries, transmission 
lines, broadband lines, port facilities, railroads, airports, and 
privately constructed roadways.
    The money is there--ready, willing, and able--if government and 
regulators would just get out of the way.
    No one objects to timely environmental reviews, and we all support 
strong health and safety protections. But the red tape, lawsuits, and 
mind-numbing regulations we have imposed on our infrastructure systems 
and transportation modes defy common sense.
    The Chamber's Let's Rebuild America initiative will identify and 
seek to reform those rules and policies that threaten the efficiency of 
our logistics system and obstruct positive investments in our nation's 
future.
            fostering an honest dialogue on public financing
    Yet even with these approaches, there is no question that as a 
nation, we are going to have to fmd and invest more public dollars in 
our infrastructure.
    Our fourth goal is to foster an honest national dialogue on how and 
where we are going to find the public money to meet critical 
infrastructure needs. There is no single answer to that question--and 
that's good. It means we have options, but all the options must be on 
the table.
    First, we must do more to ensure that public dollars are spent 
wisely. That means ending waste and targeting the highest priority 
projects. It means a sensible mix of projects based on actual needs and 
not on politics or ideologies--for example, more road construction in 
some communities, more investment in mass transit in others.
    It also means ending the practice of diverting money intended for 
infrastructure to other programs. Politicians should start paying a 
price when they skim money from dedicated transportation funds to pay 
for projects of their own choosing. It breaks trust with the taxpayers 
who expect their user fees to go toward their intended purposes.
    Both the federal and state governments are guilty of this practice. 
U.S. Secretary of Transportation Mary Peters says that only 60% of 
federal highway funds actually are spent on ``core'' needs--highways 
and bridges. In Texas, the legislature's budget for the next two fiscal 
years will divert $1.6 billion in infrastructure funding to other 
needs. That amount is up 15% from the previous budget cycle and a major 
step in the wrong direction. And Texas is hardly alone among the 
states.
    The Federal Aviation Administration is even poaching its capital 
budget to pay for operations. That's shortsighted, dangerous, and 
wrong.
    In addition to cutting waste and ensuring that infrastructure 
dollars are spent as promised, we can also stretch public dollars by 
tapping the growing interest in public-private partnerships and other 
innovative fmancing arrangements.
    Then, we are going to have to face this fundamental fact we are a 
growing people and a growing country with aging infrastructure. We have 
to fix what we have, and then, if we want a new road, a new runway, or 
a new transit system, we've got to buy it. No one is giving them away 
for free.
    Therefore, along with other options, we are going to have to 
consider an increase in the federal gasoline user fee. This could take 
the form of a straightforward increase in a fee that hasn't been raised 
in 14 years--as long as the proceeds are dedicated to transportation.
                               conclusion
    Mr. Chairman, Mr. Ranking Member, and members of the Committee, I 
hope each of you will closely follow the announcements we will make in 
the coming weeks as we roll out our Let's Rebuild America initiative. 
We welcome your ideas, your expertise, and your criticisms. We will do 
the critical research, build an irrefutable case, and educate and 
mobilize the American people. We will tell a compelling story so that 
policy makers spur private investment by removing regulatory 
roadblocks, embracing innovation and technology, and supporting 
increases of public investment in infrastructure along with measures to 
ensure that the money is spent wisely and efficiently.
    The question facing America is this: Are we still a nation of 
builders? Are we still a can-do society? Are we still the kind of 
people who can rally to a great cause with a shared sense of mission 
and national purpose?
    It's worth recalling that after the great wars of the last century, 
the challenge facing America was to rebuild other countries, countries 
that were in ruins--even our former enemies. And we did it. Our 
challenge today is to rebuild our own country--a country that is hardly 
in ruins, but which has serious unmet needs.
    Surely we ought to be able to create the vision, forge the 
consensus, secure the resources, and find the political courage to make 
this happen.
    I believe that we can, and I believe that we will. And business 
must lead the way.
    Thank you very much for the opportunity to be here today. I'll be 
happy to answer any questions you may have.

    Chairman Spratt. Thank you very much.
    Before asking questions, let us now complete our panel with 
a presentation from Mr. Puentes, who has submitted a statement 
which is entitled Not So Fast: Key Policy Consideration for 
Surface Transportation Investment Needs.
    Mr. Puentes, thank you for coming. Thank you for submitting 
your statement and the floor is yours.

                  STATEMENT OF ROBERT PUENTES

    Mr. Puentes. Well, thank you very much. Mr. Chairman, 
Congressman Blumenauer, Congressman Ryan, I am pleased to 
appear before you this morning and I very much appreciate the 
invitation.
    As we have heard today, we know that the fact is around the 
federal program is that now the interstate highway system is 
completed, but there is no coherent national vision for 
addressing a complex and conflicting set of transportation 
challenges.
    The fuel taxes which feed the highway account of the 
transportation trust fund are distributed to states without any 
kind of purpose, oversight, or accountability nor are those 
funds tied to any kind of goals such as keeping bridges in good 
repair, mitigating the rise in congestion, improving air 
quality, or connecting workers to jobs and education.
    Mr. Chairman, I sincerely believe that additional 
transportation investments are desperately needed to bring the 
nation's infrastructure up to date for the 21st century. But my 
overall theme is that the discussion about surface 
transportation needs and the budget should start first with a 
clear articulation of the goals and objectives of the federal 
program and the desired outcomes.
    The program should be structured to get to those outcomes 
and only then should additional revenues be considered. This is 
consistent, I think, with the goals for fiscal discipline and 
responsibility that have been expressed by the Committee.
    The problem is that while there is a clearly pervasive 
desire to invest, there is little precision about what the 
national needs are. There are two oft-cited sources for 
transportation investment needs as you have heard today, the 
American Society of Civil Engineers Infrastructure Report Card 
and the U.S. Department of Transportation's Conditions and 
Performance Report.
    Estimates for roadways suggest that between $79 and $132 
billion are needed each year. For transit, the figures are 
between $24 and $50 billion annually in investments. Numbers 
like these are frequently cited because while they are 
compelling and because the task of assessing national 
investments is a very difficult job for anyone other than the 
U.S. DOT, so there are few sources and original numbers to 
reference.
    However, as a tool for determining the national needs, 
these analyses by their own admonition really are limiting. For 
one thing, they only include bridges, highways, and transit. 
They ignore intermetropolitan modes, freight and passenger 
rail, and intermodal transportation facilities.
    Further, the analysis focuses on capital expenditures and 
excludes the cost for maintaining and operating the new 
facilities once they are in place.
    But they also do not take into consideration investments 
that could obviate the need for future investments. They do not 
consider land use impacts or effects. By separating highways 
and transit investments, the potential for the modes to work 
together is missed.
    The analyses also ignore other national concerns around 
transportation investments such as environmental, equity, and 
economic development impacts.
    Simply put, the limited focus on the condition of 
infrastructure without regard to the desired outcomes is the 
wrong approach to determining national investment needs. 
Without a clear definition of what the federal role should be 
and what it should endeavor to do, a true determination of the 
optimal level of investment will remain elusive for us.
    Now, as the Committee has heard, driving the conversation 
about transportation today is the current predicament with the 
federal transportation trust fund and the broad understanding 
that the outlays are estimated to continue to outpace the 
revenues flowing into the account. You have heard the details. 
I do not need to reiterate those.
    But the critical subset of that problem, of course, is that 
since the federal gas tax has not been raised since 1993, even 
to keep pace with inflation, it is having less of an impact as 
it could.
    In fiscal year 2005, nearly 90 percent of the federal 
revenue that went into the federal transportation trust fund 
was derived from fuel taxes. So as the rate effectively 
declines, there clearly is an impact.
    Related to the concerns about the effectiveness of the fuel 
taxes as a revenue source is the increasing fuel efficiency of 
the vehicle fleet. Less gas consumed means less gas tax paid. 
Now, while American cars are being driven further and further 
and more often than ever, the long-term impacts really are 
unclear.
    In recent years, the increase in vehicle miles traveled for 
the country as a whole has actually begun to level off. While 
VMT does continue to increase nationally, it is slowing down 
considerably.
    In fact, recent metro level data shows that 20 of the 50 
largest metro areas saw VMT declines between 2000 and 2002. 
Metro areas such as Charlotte, Portland, Dallas, Los Angeles, 
and Milwaukee saw some of the largest drops.
    What is often lost in this discussion, especially around 
finance and the budget, is that these trends are extremely 
positive for the nation as a whole. Lower fuel consumption is 
vital to our energy security which coupled with the leveling 
off of VMT is important for the health of our metropolitan 
areas and for mitigating the challenges associated with climate 
change.
    Indeed, VMT reduction should be an integral part of the 
conversation around investment needs. Yet, all this has not 
changed the fact that the gas tax is a critically important 
revenue source and will continue to be for the foreseeable 
future.
    Between 2001 and 2005, only tolls and bond revenues grew at 
a faster rate than fuel taxes in terms of all funds used for 
highways. However, these other sources still make up a very 
small share of total revenues. Fuel taxes still dominate at 
nearly 40 percent of the total. Revenues from fuel taxes also 
rose faster than any other source since 2001 and in nominal 
terms, they are still rising as a share of national total.
    No doubt there are many excellent reasons to move 
aggressively to expand tolling and to explore revenue sources 
such as mileage-based fees, but they are clearly less effective 
as solutions for funding challenges in the short term.
    So my message here is that these ideas should not be 
motivated by the desire to avoid the necessary task of a more 
comprehensive and inclusive discussion around transportation, a 
discussion that includes accountability, overall intent, and 
connection to broader goals of economic growth and personal 
mobility. This is of critical importance today.
    The Federal Transportation Program provides little in the 
way of oversight and no accountability for how federal funds 
are spent. As a result, the GAO recently found that it is 
functioning to some extent as a cash transfer, general purpose 
grant program.
    In addition to this laxity, there are three other critical 
problems. First, as we have heard, spending is not targeted to 
achieve certain outcomes. The federal government takes an 
almost agnostic approach to where funds are spent and as a 
result, analysis shows a disproportionate amount of investment 
is happening away from the places that matter most for the 
prosperity of the nation. The emphasis is on consensus building 
where funds are distributed broadly and thinly rather than on 
fixing national problems.
    Second, there is little attention to reducing the demand 
for spending. The formulas for allocating the federal Highway 
Trust Fund dollars are largely made on the basis of roadway 
mileage and use which sets up an insatiable desire for more 
funding as the roadway networks expand.
    There is no reward for reducing consumption in any of these 
formulas. Thus, any investment in transit or promotion of land 
use strategies to reduce VMT, reduce fuel consumption, or to be 
a substitute for lane miles is antithetical for how states 
continue to receive funds.
    Third, as we have heard, the system is not priced 
correctly. Economists have long criticized the current system 
of roadway pricing. They contend user fees should be structured 
such as those levied on different classes of vehicles, reflect 
the cost borne by governments, and provide those vehicles with 
an opportunity to travel.
    So what can be done? One thing is certain. Billions and 
billions of dollars of additional federal investments without 
significant reform will do precious little to fix our rusting 
bridges, expand our overcrowded transit systems, or unclog our 
ports.
    There are three critical areas that demand federal 
attention. First, we really need to rebuild the public trust. 
To regain credibility and open the door to proposals for 
increased funding, the federal government must make sure the 
transportation program is transparent, that spending is 
accountable and subject to performance measures, and that we 
are learning and improving on past mistakes.
    Secondly, we need to develop a coherent national purpose in 
target spending. We need to update our 1950s era transportation 
program to the realities of the 21st century. As such, the 
federal program needs a true national priority program that 
focuses on congested areas, on gateways and corridors, and on 
freight hubs.
    But in addition to just focusing on increasing revenues for 
transportation, the nation deserves a real conversation about 
cutting the demand for spending. States could be rewarded for 
increase in their own funding or for meeting performance goals.
    And, third, we need to unleash the market dynamics to 
address finance demand and operational efficiencies. The 
federal government should augment efforts to use state-of- the-
art technology and communications to encourage market responses 
such as road pricing and where appropriate should provide 
oversight and advice on the monetization of infrastructure 
assets like toll roads. The pervasive market demands for 
development around rail stations also should be exploited.
    In conclusion, history has shown us that to be effective, 
significant increases in revenue should be tied to meaningful 
updates and upgrades to the federal program. During their 
times, President Dwight Eisenhower and Senator Daniel Patrick 
Moynihan both had bold new visions for transportation as well 
as a revenue stream for implementation. Significant gas tax 
increases accompanied the major reforms in both 1956 and 1991.
    Looking at it another way, no major federal transportation 
reform has ever occurred without a major increase in revenues. 
Mr. Chairman, I believe this should be one of those times.
    Congress should seize the opportunity provided by the 
finance and funding discussion to put forth a bold new vision 
for transportation that truly puts America on the path to 
competitive, sustainable, and inclusive growth in the 21st 
century.
    Thank you very much for the opportunity to appear before 
you today. I will be happy to take questions.
    [The prepared statement of Robert Puentes follows:]

   Prepared Statement of Robert Puentes, Fellow, Metropolitan Policy 
                   Program, the Brookings Institution

    Mr. Chairman and members of the Committee, I am pleased to appear 
before you this morning and very much appreciate your invitation.
    The purpose of my testimony today is to provide some context to the 
conversation on surface transportation investment needs and the current 
conversations around finance and funding.
                            i. introduction
    There is no question that in the wake of the Minneapolis bridge 
collapse, reports of ever-increasing congestion, and new concerns 
around climate change, our nation's transportation policy has suddenly 
been thrust into the national spotlight. This infrastructure epiphany 
is long overdue.
    The United States is currently undergoing a transformation of 
dramatic scale and complexity comparable to what it experienced at the 
beginning of the last century--another period characterized by the 
radical reshaping of the American landscape.
    Massive demographic, economic, and social changes are already 
having major spatial effects on the nation. But rather than dispersing 
randomly all this population and economic activity is shifting and re-
aggregating in major metropolitan areas, both domestically and 
internationally. These forces are restructuring the American economy 
and are revaluing the assets of the cities and urban cores within 
metropolitan areas.
    In short, we are a metropolitan nation. Supplier networks and 
customer relationships are regional rather than local in nature. Labor 
markets and commuting patterns cross jurisdictional and state lines. 
Firms make decisions on location and expansion based on regional 
advantages and amenities. Metropolitan areas are where most Americans 
live, work, and produce the majority of the nation's economic output. 
The services and revenues they generate drive state economies.\1\
    Just the 100 largest metropolitan areas claim more than 65 percent 
of our population, 75 percent of our most educated citizens, and 75 
percent of our national economic output, driving and dominating the 
leading edges of our economy: technology, business, finance, and 
professional services. They are also our immigrant gateways, our ports 
of trade--truly our centers of knowledge and innovation.
    Unfortunately, our nation's transportation policy does not 
recognize the primacy of metropolitan areas and--I would argue--on net 
actually undermines these vital places. Yet for the nation to thrive, 
our largest metropolitan areas must thrive. This is a lesson long 
understood by foreign competitors in Western Europe, South America, and 
now in Asia. The rest of the world understands these assets but in the 
U.S. metropolitan areas remain hidden in plain sight.
    This blunt criticism stems from the fact that our national 
government takes a bloated and outmoded approach to the realities and 
challenges of the modern metropolis and, by extension, to the economic 
competitiveness of the nation. Today the major transportation debates 
are all around money: spending more and more on the same product rather 
than where, on what, and how to spend that money better.
    The sad fact is that now that the Interstate Highway System is 
completed there is no coherent national vision for addressing a complex 
and conflicting set of transportation challenges. As a result, 
America's transportation policy is adrift with no clear goals, purpose, 
or ability to meet these challenges.
    The federal government appears to lack a theory of its role and is 
absent or agnostic when it comes to where highway funds are spent. Fuel 
taxes feed the highway account of the transportation trust fund which 
is distributed to states without any kind of purpose, oversight or 
accountability. Nor are the funds tied to any goals such as keeping 
bridges in good repair, mitigating the rise in congestion, improving 
air quality, or connecting workers to jobs and education.
    Mr. Chairman, I sincerely believe additional transportation 
investments are needed to bring the nation's infrastructure up to date 
for the 21st century. But my overall theme is that the discussion about 
surface transportation needs and the budget should start first with a 
clear articulation of the goals and objectives of the federal program, 
and the desired outcomes. The program should then be structured to get 
to those outcomes. Only then should additional revenues be considered. 
This is consistent with the goals for fiscal discipline and 
responsibility expressed by this committee.
    ii. determining national surface transportation investment needs
    Whether raising new revenues, borrowing, or fighting over the 
existing pot of funds, paying for transportation--both in the short and 
long term--has emerged as a major concern among policy makers. These 
concerns are so prevalent today that they spawned two national 
commissions, and the U.S. Government Accountability Office recently 
added transportation financing to its annual list of high-risk areas 
suggested for oversight by the current Congress.\2\
    The problem is that while there is a pervasive desire to invest 
there is little precision about national needs.
    There are several oft-cited sources for transportation investment 
needs: the American Society of Civil Engineers' Report Card for 
America's Infrastructure and the U.S. Department of Transportation's 
(U.S. DOT) Status of the Nation's Highways, Bridges, and Transit: 
Conditions and Performance Report to Congress (C&P report). The latter 
is commonly referred to as the national ``needs'' statement by many 
constituency groups. Analysts from the U.S. DOT testify and update 
these figures regularly--but with caveats as described below.
    For roadways, the U.S. DOT estimates that the maximum investment 
level required to eliminate the project backlog for bridges and to 
implement all proposed highway improvements is $131.7 billion per year 
for the next 20 years. Analysts at the department report that this 
figure represents the ``investment ceiling'' and that spending should 
not exceed this level, even assuming unlimited funding availability. 
The cost per year just to maintain current highway and bridge 
conditions is estimated to be about $78.8 billion.\3\ Between $2.6 and 
$1.6 trillion is needed over 20 years based on these estimates.
    The investment needs projected for transit are substantial as well. 
The estimated average annual investment required to maintain the same 
physical conditions and operating performance of the nation's transit 
systems by replacing and rehabilitating deteriorated assets and 
expanding capacity to accommodate expected transit passenger growth is 
$15.3 billion. The cost to improve conditions and performance is 
estimated to be $24.0 billion. The overwhelming majority of these needs 
(85 percent) are estimated to be in urbanized places of over 1 million 
people--essentially referring to the 50 largest metropolitan areas.\4\
    Numbers such as these are frequently cited because they are 
compelling and because the task of assessing national investments is a 
very difficult job for anyone other than the U.S. DOT so there are few 
sources and original numbers to reference. The basis for the C&P report 
is the Highway Economic Requirements System (HERS) which is an 
engineering model used to suggest improvements to a particular stretch 
of highway. The Federal Transit Administration uses the Transit 
Economic Requirements Model (TERM) to estimate future transit capital 
investment needs.
    However, as a tool for determining the level of national ``needs'' 
these analyses, by their own admonition, are limiting.
    For one thing, they only include highways, bridges and public 
transit, and ignore intermetropolitan modes, freight and passenger 
rail, and intermodal transportation facilities. Further, the analyses 
focus on capital expenditures and exclude the costs for maintaining and 
operating the new facilities once they are in place.
    But they also do not take into consideration investments that could 
obviate the need for future investments. They do not consider land use 
impacts or effects. By separating highway and transit investments the 
potential for the modes to work together is missed and, indeed, often 
these modes represent alternative investments in the same corridor. The 
analyses also ignore other national concerns regarding transportation 
investments such as some environmental, equity, and economic 
development impacts.
    Simply put, the limited focus on the condition of infrastructure 
without regard to desired outcomes is the wrong approach to determining 
national investment needs.
    The U.S. DOT recognizes these shortcomings and clearly states that 
linking investment needs analysis to federal funding alternatives 
requires an intermediate step to, as I suggested, define the federal 
role and responsibilities.\5\ Currently there is no effort to do that. 
As such the C&P report itself states in no uncertain terms that it 
``makes no recommendations concerning future levels of federal 
investment.'' \6\ Yet that is precisely what many groups and advocates 
for a larger federal program do.
    My central point is that without a clear definition of what the 
federal role should be and what it should endeavor to do, a true 
determination of the optimal level investment will remain elusive.
      iii. current state of the federal transportation trust fund
    Driving the conversation about transportation spending today is the 
current predicament with the federal transportation trust fund and the 
broad understanding that the outlays are estimated to continue to 
outpace the revenues flowing into the account. While this situation has 
been going on since 2001 the problem now is that the reserves, or 
balance, of funds in the account are close to being spent down. Yet 
this does not mean the fund is insolvent. It simply means the federal 
government has committed to disburse too much money to states and 
localities.\7\
    A recent report from the GAO illustrates this problem by examining 
the estimates in receipts and outlays from both the Congressional 
Budget Office (CBO) and the U.S. DOT. They estimate that receipts into 
the highway account of the transportation trust fund will continue to 
increase by 13.8 and 10.3 percent, respectively from 2006 through 
2011.\8\ Figure 1 below shows that revenues have remained consistently 
steady since the fund was split into highway and transit accounts in 
1983. What has clearly changed is that outlays have increased at a 
rapid rate. As a result, whenever outlays outpace revenues it drains 
the reserves in the account. Since 2001 the reserves have dropped 
precipitously. The transit program is projected to be oversubscribed to 
where revenues available reach a zero balance in 2011.\9\



    The critical subset of that problem, of course, is that since the 
federal gas tax has not been raised since 1993 even to keep pace with 
inflation it is having less of an effect as it could. In FY 2005, 
nearly 90 percent of the federal revenue that went into the federal 
transportation trust fund was derived from fuel taxes so as the rate 
effectively declines, there is clearly an impact.\10\ As reflected in 
Figure 2 below, the real gas tax rate and the real revenues have fallen 
together since 1993. (It is worth noting that receipts from the federal 
gas tax leaped by $5.5 billion between 2004 and 2005.)
    Related to the concerns about the effectiveness of fuel taxes as a 
revenue source is the increasing fuel efficiency of the vehicle fleet. 
The fuel economy for cars and light trucks has not been this high since 
1991.\11\ As Figure 3 shows, gasoline consumption dropped by about 20 
billion gallons per year from 2002 to 2004.\12\ And while American cars 
are being driven further and more often than ever the long term trends 
are unclear. In recent years, the increase in vehicles miles traveled 
(VMT) for the country as a whole has begun to level off. The average 
yearly increase in VMT during the 1960s was 4.4 percent. During the 
1970s, 1980s, and 1990s it was 4.3, 3.2, and 2.5 percent respectively. 
So far in the 2000s the average yearly increase is only 1.8 percent. 
While VMT does continue to increase it is slowing down considerably. In 
fact, recent data shows that 20 of the 50 largest metropolitan areas 
saw VMT declines between 2000 and 2002.\13\ Metropolitan areas such as 
Charlotte, Portland (OR), Dallas, Los Angeles, and Milwaukee saw some 
of the largest declines.



    But what is often lost in this discussion--especially around 
finance--is that these trends are extremely positive for the nation as 
a whole. Lower fuel consumption is vital to our energy security which, 
coupled with the leveling off of VMT, is important for the health of 
our metropolitan areas and for mitigating the challenges associated 
with climate change. Indeed VMT reduction should be an integral part of 
the conversation around investment needs.
    Yet this does not change the fact that the gas tax is a critically 
important revenue source and will continue to be for the foreseeable 
future. Between 2001 and 2005 only tolls and bond ``revenues'' grew at 
a faster rate than fuel taxes in terms of all funds used for highways 
(Figure 4). However, these other sources still made up a very small 
share of total revenues--fuel taxes still dominate at nearly 40 percent 
of the total. Revenues from fuel taxes also rose faster than any other 
source since 2001 in nominal terms and are still rising as a share of 
the national total.



    There are many excellent reasons to move aggressively to expand 
tolling and to explore revenue sources such as mileage-based fees. For 
example, the expanded use of these mechanisms is an effective and 
practical solution for mitigating the growth in congestion. But they 
are clearly less effective as solutions to the funding challenges in 
the short term.
    Three other items warrant discussion here because they are citied 
as a primary cause of, and the potential solution to, our 
transportation finance and funding predicament.
    One is the issue of the transportation earmarks. The current 
federal law is infamously known for the 6,300 priority projects 
identified in the legislation. Analysts have been quick to pounce on 
projects like the ``bridge to nowhere'' as the root of the nation's 
transportation woes. Now without a doubt it is difficult to argue that 
the entropic nature of these thousands of projects add up to any 
coherent national program. However, this misses the bigger picture. 
Even though the $20 billion that comes from the thousands and thousands 
of earmark projects is a lot of money by any measure, this is only 
about 5 percent of the overall federal transportation program. While 
some of the earmarked projects are wasteful and inefficient they 
probably have a relatively small impact compared to the major 
structural flaws articulated above.
    Another issue is that of governments leasing or selling their 
infrastructure assets to private investors. Two specific deals at the 
south end of Lake Michigan--in Chicago and Illinois--have sparked this 
movement. Such arrangements have the potential to raise a considerable 
amount of additional investment capital (not always linked to 
transportation). But this is not a silver bullet and, in the end, it is 
only a small sliver of a comprehensive conversation we should be having 
about transportation in America today.\14\
    The third issue is that of establishing a national capital budget. 
This is an idea that has been raised many times in the past and 
continues to receive its share of attention. Without a doubt discussing 
this option for transportation is important for Congress and the nation 
to consider. But to paraphrase the 1999 Report of the President's 
Commission to Study Capital Budgeting: there are critical components of 
the process that should be considered first. They include setting 
priorities, reporting and evaluating decisions, and providing 
appropriate information in order to 1) spend money better and 2) be 
held accountable for those decisions.\15\ As I've maintained, this is a 
far cry from how we approach transportation decision making today.
    So my message here is that these ideas should not be motivated by 
the desire to avoid the necessary task of a more comprehensive and 
inclusive discussion about transportation--a discussion that includes 
accountability, overall intent, and connection to broader goals of 
economic growth and personal mobility.
                          iv. policy problems
    The federal transportation program allows the states to define 
their own priorities and prioritizations and provides little in the way 
of oversight and no accountability for how federal funds are spent. As 
a result, the GAO found that it is functioning to some extent as a 
``cash transfer, general purpose grant program.'' \16\
    Despite separate bureaucratic programs that lay out a framework for 
funding different activities, the federal government has virtually no 
discretion (other than the questionable earmark process) in determining 
which transportation projects get built or how states spend their 
transportation dollars. In fact, the U.S. code neuters the federal role 
and states specifically that the appropriation of highway funds ``shall 
in no way infringe on the sovereign rights of the States to determine 
which projects shall be federally financed.'' \17\
    This program's laxity is astonishing for several reasons. One is 
due to the sheer size of the program: nearly $50 billion federal 
dollars every year. Another is the inconsistency with other recently 
reformed federal programs such as welfare and education. Congress 
established a management assessment system for public housing agencies 
and created a performance measurement and reward system in the 1996 
welfare reform law. The transportation system of governance and finance 
shares many similarities with these other areas of domestic policy.
    In addition, the U.S. DOT outlined appropriate performance measures 
as required by the Government Performance Results Act, yet the 
department does not hold the recipients of federal highway funding 
accountable for their performance nor is funding linked to success.
    Unfortunately, the breakdown in transportation politics comes at 
the precise time when discipline and accountability and focus are most 
needed. There are three critical problems:
    1. Spending is not targeted to achieve certain outcomes. Instead of 
focusing on how much money it should spend, Washington should focus 
instead on how that money will be spent and how that spending affects 
our nation and its metropolitan areas. Unlike many other nations in 
Western Europe and parts of Asia, the U.S. is continuing to grow. Most 
of this growth will be accommodated in the nation's 50 largest 
metropolitan areas. Yet funds are not targeted to these growing and 
complex places. Rather, the federal government takes an almost agnostic 
approach to where funds are spent and as a result analysis shows a 
disproportionate amount of investment is happening away from the places 
that matter most to the prosperity of the nation.\18\ The emphasis is 
on consensus building through logrolling where funds are distributed 
broadly and thinly rather than on fixing national problems.
    2. There is little attention to reducing demand for spending. While 
additional sources are important, little attention is being given to 
managing the demand for revenues, how existing funds are spent and for 
what purpose, or how these spending decisions affect cities, suburbs, 
and metropolitan areas. The formulas for allocating federal highway 
trust fund dollars are largely made on the basis of roadway mileage and 
use. While this may seem intuitive on some level, it also presents 
obvious problems in that it sets up an insatiable desire for more 
funding as the roadway networks expand. There is no reward for reducing 
consumption in any of these formulas. Thus, any investment in transit 
or promotion of land use strategies to reduce VMT, reduce fuel 
consumption, or to be a substitute for lane miles is antithetical to 
how states receive funds. Within many metropolitan planning 
organizations, transportation plans are based on centrifugal growth 
projections that many consider to be unsustainable and undesirable.
    3. The system is not priced correctly. Economists have long 
criticized the current system of roadway pricing. They contend user 
fees should be structured such that those levied on different classes 
of vehicles reflect the costs borne by governments to provide those 
vehicles with the opportunity to travel.\19\ One such study found that 
single-unit trucks weighing more than 50,000 pounds contribute in user 
fees only 40 percent of the estimated costs of their use. Autos 
contribute 70 percent of their costs; pickup trucks and vans, 90 
percent; and single-unit trucks weighing less than 25,000 pounds 
contribute 150 percent of their costs through the taxes and fees that 
they pay.\20\ If charges were levied fairly in proportion to the costs 
imposed by vehicle type and those charges vigorously enforced, and if 
roads were constructed to more demanding standards, savings in road 
maintenance and replacement costs over time would be great enough to 
permit lower user fees for all classes of vehicles. But getting the 
prices right also means taking into account the range of impacts such 
as social costs and environmental impacts on climate change, for 
example.
                       v. policy recommednations
    So what can be done? One thing is certain: billions and billions of 
dollars of additional federal investments, without significant reform, 
will do precious little to fix our rusting bridges, expand our 
overcrowded transit systems, or unclog our ports.
    The bottom line is that--with very little to show for the largest 
public works investment in our nation's history--the nation can no 
longer afford a hands-off federal program. The federal government needs 
to make the preservation, maintenance, and modernization of the 
existing system a national priority and it needs to take a lead role in 
holding the states accountable for doing so. Objectives like safety 
should be assumed, not hoped for.
    There are three critical areas that demand federal attention:
    1. Rebuild the public trust before raising taxes. To regain 
credibility and open the door to proposals for increased funding, the 
federal government must make sure the transportation program is 
transparent, that spending is accountable and subject to performance 
measures, and that we are learning and improving on past experiences. 
Rather than writing blank checks, the federal government should restore 
fiscal discipline and responsibility and should have some say in how 
federal transportation funds are spent. Aside from considering 
environmental impacts all projects that involve new capacity must be 
reviewed for their impacts on outcomes such as employment, operating 
efficiency, cost effectiveness, land use policies, and level of local 
funding commitment.
    2. Develop a coherent national purpose and target spending. This is 
not about picking winners or losers. It is about updating the 1950's 
era transportation program to the realities of the 21st century. As 
such the federal program needs a true national priority program that 
focuses on congested areas, gateways and corridors, and freight hubs. 
But in addition to just focusing on increasing revenues for 
transportation the nation deserves a real conversation about curbing 
the demand for spending. The federal government could, for example, 
reduce the federal matching requirements for highway projects to 50 
percent like it is for new transit projects to promote better project 
selection. States could also be rewarded for increasing their own 
funding and for meeting performance goals.\21\ At the same time, the 
federal government should help states and metropolitan areas fund 
nationally significant projects by acting as a guarantor of debt 
through a national transportation infrastructure bank similar to the 
European Investment Bank. In addition to addressing the financing issue 
such an effort could, if carefully constructed to ensure transparency 
and accountability, help prioritize projects that are critical to the 
nation's competitiveness. If nothing else, this idea needs to be 
amplified and aired in the halls of transportation power and research.
    3. Unleash market dynamics to address finance, demand, and 
operational efficiencies. The mounting transportation pressures on 
metropolitan areas occur at a time of severe fiscal constraint, 
pervasive frustration with congestion, and increasing opposition to 
road expansion. This demands a firm national commitment to make maximum 
use of existing road capacity and expand transportation alternatives. 
The federal government should, therefore, augment efforts to use state-
of-the-art technology and communications to encourage market responses 
such as road pricing and provide oversight and advice, where 
appropriate, on the monetization of infrastructure assets like toll 
roads. The pervasive market demands for development around rail 
stations should be exploited.
    The conversation about transportation's impact on the nation must 
go beyond the current narrow debate about spending levels. The 
simplistic ``transportation spending = economic growth'' calculation 
does not fit the complexities of metropolitan America today. From a 
public policy perspective we also need to know where, on what, and how 
to invest that dollar.\22\
                             vi. conclusion
    History has shown that, to be effective, significant increases in 
revenue should be tied to meaningful updates and upgrades of the 
federal program. During their times, President Dwight Eisenhower and 
Senator Daniel Patrick Moynihan had both bold new visions for 
transportation as well as a revenue stream for implementation. 
Significant gas tax increases accompanied major transportation reforms 
in both 1956 and 1991. Looking at it another way: no major federal 
transportation reform has ever occurred without a major increase in 
revenues.\23\
    Mr. Chairman I believe that this should be one of those times: 
Congress should seize the opportunity provided by the finance and 
funding discussion to put forth a bold new vision for transportation 
that truly puts America on the path to competitive, sustainable, and 
inclusive growth in the 21st century.

    The views expressed in this testimony are those of the author alone 
and do not necessarily represent those of the staff, officers, or 
trustees of The Brookings Institution.
                                endnotes
    \1\ Alan Berube, ``MetroNation: How U.S. Metropolitan Areas Fuel 
American Prosperity,'' Brookings, November 2007.
    \2\ Two other new high risk areas are national security and food 
safety. See: U.S. Government Accountability Office, ``High-Risk Series: 
An Update,'' GAO-07-310, 2007.
    \3\ Ross Crichton, ``Highway Investment Scenario Estimates: Impacts 
of Analytical Assumptions,'' Briefing for the National Surface 
Transportation Revenue and Policy Study Commission, July 2006.
    \4\ U.S. Department of Transportation, ``Status of the Nation's 
Highways, Bridges, and Transit: Conditions and Performance Report to 
Congress,'' 2006, exhibit 7-10.
    \5\ Susan Binder, ``Limitations of the USDOT Investment Analysis,'' 
Briefing for the National Surface Transportation Revenue and Policy 
Study Commission, July 2006.
    \6\ U.S. DOT, 2006, exhibit ES-13.
    \7\ Laura Ziff, ``Highway Trust Fund Cash Balances,'' Briefing for 
the National Surface Transportation Revenue and Policy Study 
Commission, March 2007.
    \8\ U.S. Government Accountability Office, ``Overview of Highway 
Trust Fund Estimates,'' GAO-06-572T, 2006.
    \9\ Gary Maring, ``Future Financing Options to Meet Highway and 
Transit Needs,'' Prepared for the Regional Plan Association National 
Roundtable on Surface Transportation, Tarrytown, New York, February 20-
22, 2007.
    \10\ Federal Highway Administration, Highway Statistics 2005, table 
FE-10.
    \11\ The Car Corporate Average Fuel Economy (CAFE) estimate for 
cars and light trucks combined was 25.4 miles per gallon in 2006. Stacy 
Davis and Susan Diegel, Transportation Energy Data Book, 26th ed. (Oak 
Ridge: Center for Transportation Analysis, Oak Ridge National 
Laboratory, 2007), table 4.17.
    \12\ Davis and Diegel, table 2.11.
    \13\ That is the most recent year for which VMT data is available. 
It is available since then for urbanized areas but the data used here 
is county level data aggregated up to current metropolitan areas 
definitions.
    \14\ Robert Puentes, ``Cashing in on the BP Beltway,'' Hartford 
Courant, March 1, 2007.
    \15\ Report of the President's Commission to Study Capital 
Budgeting, Washington, 1999.
    \16\ U.S. Government Accountability Office, ``Federal-Ad Highways: 
Trends, Effect on State Spending, and Options for Future Program 
Design,'' GAO-04-802, 2004.
    \17\ Code of Federal Regulations 23, sec. 145(a).
    \18\ Robert Puentes and Linda Bailey, `` Improving Metropolitan 
Decision Making in Transportation: Greater Funding and Devolution for 
Greater Accountability,'' in Taking the High Road: A Metropolitan 
Agenda for Transportation Reform, B. Katz and R. Puentes, eds., 
Brookings, 2005.
    \19\ See e.g., Kenneth Small, Clifford Winston, and Carol A. Evans, 
Road Work: A New Highway Pricing and Investment Policy Brookings, 1989.
    \20\ Martin Wachs, ``Improving Efficiency and Equity in 
Transportation Finance,'' in Taking the High Road: A Metropolitan 
Agenda for Transportation Reform, B. Katz and R. Puentes, eds., 
Brookings, 2005.
    \21\ The GAO recently pointed out that states simply substitute 
federal funds for spending they would have otherwise had to generate 
themselves. In other words, instead of funding transportation projects 
the federal money is, in effect, paying for state tax relief or general 
state spending. U.S. GAO, ``Federal-Ad Highways: Trends, Effect on 
State Spending, and Options for Future Program Design,'' GAO-04-802, 
2004.
    \22\ ``Key Transportation Indicators: Summary of a Workshop,'' 
Janet Norwood and Jamie Casey, eds. National Research Council, 2002.
    \23\ Mortimer Downey, ``Legislative Considerations for Long Term 
Policy Change,'' Prepared for the Regional Plan Association National 
Roundtable on Surface Transportation, Tarrytown, New York, February 20-
22, 2007.

    Chairman Spratt. Thank you for your presentation.
    I yield my time to Mr. Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman, for your courtesy.
    And again, I appreciate the panel's patience in sticking 
with us. And I just thought that the testimony here was 
spectacular.
    I wish that our colleagues could have this tattooed not 
indelibly but just for a while on their forearms because what 
we have heard in terms of the assessment of the problem, what 
we have heard that there is a consensus coming from the 
business community of the need to forge a coalition to deal 
meaningfully with the competitiveness, efficiency, Mr. Puentes 
talking about some of the policy problems, I truly believe, Mr. 
Chairman and Mr. Ryan, that there is an opportunity here.
    We get into lots of partisan unpleasantness here in part 
because it is our job and there is a role for that. But the 
testimony we are hearing here does not need to be partisan. It 
is not. And what we heard was I thought very balanced in terms 
of here is the problem, here are legitimate areas that need to 
be explored in terms of squeezing more value out of the system, 
but that we do not want to get hung up in ideology and we do 
not want to ignore the problems.
    And I am hopeful that, Mr. Chairman, with you and the 
Ranking Member that there is actually a possibility for us to 
explore this further because I think this is a very powerful 
concept. It has absolutely got to happen in a very short time 
frame because as Janet pointed out, because of the vagaries of 
what is going to happen with the federal funding rules, we are 
going to be doing some pretty draconian stuff if the trust fund 
is exhausted and it is going to magnify the downside, while it 
is going to make it harder to get these big issues before us.
    And I am hopeful. You know, I would love to take both of 
you to dinner and just talk about whether this could be one of 
the areas that we can fashion, that we can fashion a way to 
talk about it----
    Chairman Spratt. For the record, we decline the dinner on 
the basis it may violate the ``Ethics Act,'' but go ahead.
    Mr. Blumenauer. No. We can do that. We can do that.
    Chairman Spratt. Okay.
    Mr. Blumenauer. Yeah. Anyway, I want to put three things on 
the table and invite reactions, but I do want to come back. I 
mean, I really appreciate this hearing. I think it is important 
and I think it is something that can get us past the politics 
in a way that is unique around here. And I think it will help 
us with other stuff.
    One, Mr. Puentes, there are a couple of things you did not 
say that was in your testimony about issues of a capital 
budget, the failure of privatization to be a magic silver 
bullet, and the fact that for all the hoopla about earmarks, 
and we do beat up on our Republican friends for having given us 
those, it is a relatively minor portion of the overall problem 
and it does not have that much distortion in terms of the end 
of the day.
    So we can talk about reform, but that is not going to get 
us to what we are talking about here. I would just note and 
invite attention to page eight of your testimony.
    Three things that I am interested in comments. One is the 
focus of federal investment in metropolitan areas to deal with 
where most of the problem is in terms of congestion, economic 
activity, and freight difficulty.
    The second is a point that I raised with Secretary Peters 
about whether part of a new vision for transportation is that 
we have uniform match requirements and we have the same 
standard of accountability for any transportation project, that 
we are not going to pick winners and losers, we are not going 
to have some people jump through big hoops, some people jump 
through little hoops, some people do not jump through hoops at 
all.
    And the third notion here is the extent to which we can 
merge this discussion with what we are going to be doing in a 
carbon constrained economy.
    If any of you three care to comment on a metropolitan focus 
where the problem is, leveling the playing field right now, and 
the impact of this other larger conversation that we are 
having.
    Mr. Puentes. Thank you, Congressman Blumenauer. I will jump 
in. Just quickly, I appreciate your framing. I think that you 
are exactly right.
    And the reality is that now here in the 21st century that 
we are a metropolitan nation, that metropolitan areas are where 
the bulk of our economic activity are. They are where most of 
our population lives. They are hubs for immigration. They are 
where all transit activity is. It is where freight is being 
moved. So the focus on the metropolitan level is absolutely 
critical to the nation going forward.
    The Federal Transportation Program back in 1991 actually 
was very innovative in this regard by holding up metropolitan 
areas, giving more authority to MPOs, metropolitan playing 
organizations, to do more things, gave them more funding, but 
it also dealt them a rather weak hand.
    We made some nods to metropolitan decision making, but we 
still have the same structure in place that was designed to 
build the interstates. We really need to shift the program so 
it really does invest in those places that matter most to the 
national economy which is our metropolitan areas.
    We know from some analysis that we have done that when it 
is left up the states that they actually disproportionately 
spend money away from metropolitan areas. These studies are 
very difficult to do because we do not know exactly where 
states are spending for the most part. But in the states where 
we have done this analysis, we see that most of the spending is 
going away from these metros.
    We have the donor donee debate on the federal level. It is 
surprising that we do not have that on the state level. I do 
not think we necessarily should, but I think if metro areas 
knew that the same issue was going on within their states, we 
would have a very different conversation.
    Mr. Blumenauer. Your analysis, I think it was Brookings 
that did the analysis of the donor donee regions, I thought was 
great fun. We had difficulty engaging people in the 
Transportation Committee about that donor donee.
    Ms. Kavinoky, I guess we are getting where we are winding 
down, but do you have any comment on leveling the playing 
field, the focus?
    Ms. Kavinoky. Sure. Let me make a comment on the focus of 
federal investment in metro areas because clearly that is where 
business is concentrated.
    But in addition to focusing on investment, perhaps we are 
talking primarily about highways and transit, we have to 
remember that the transportation system connects the nation. 
And in doing that connection, some of those connections go 
through places like my home state of Wyoming where, in fact, I 
am not sure there are metro areas, at least above 50,000 
people.
    So I think you are right in pointing out that we need to 
pay attention especially to congestion issues and where these 
are really the hubs of the economy but continue to ensure 
connectivity nationwide while we are doing that.
    I think that the extent to which we merge the discussion in 
terms of carbon constrained economy is a broader discussion 
that the entire community needs to have about the interplay 
between transportation, energy, and the environment.
    And certainly with the U.S. Chamber, we are exploring that 
discussion now of how we have consistent policies to expand our 
energy production, to expand our transportation system, but to 
do so in a way that is very conscious of the awareness we now 
have of carbon issues. And I think there will be more coming 
out in that area.
    You specifically ask about the uniform match requirements 
and I think you make an interesting point. I am not sure 
without really being able to think it through where the Chamber 
would come down on this, but, in fact, I think in general, the 
process should not favor one over the other, that if you have 
got to have a level playing field in decision making, if you 
are going to have true alternatives, it would be logical to say 
what do we do about things like match requirements. But that is 
certainly something we will have to explore a little further.
    Mr. Blumenauer. Thank you.
    Mr. Sunshine, anything?
    Mr. Sunshine. I think the theme that has been resonating 
around the room here about having people pay the full cost of 
what they impose on society by driving or whatever it is that 
they are doing is similar in the carbon charge situation as it 
is in the transportation situation.
    And the question a number of people have raised is are 
people making the right decisions from an economic and 
efficiency point of view in their transportation choices if we 
do not charge them somehow or other the full cost of what they 
are doing which is really the same thing that carbon charges 
are aimed at doing. And the philosophy of the two is the same 
thing.
    And the broad economic cost of people's transportation 
choices are very significant and having them bear those costs 
or at least understand what those costs are can affect their 
behavior just as the carbon charges do.
    In terms of the investment in metropolitan areas, the 
political process as it works tends to sort of spread money 
around to all kinds of places. I think it is hard to focus and 
say, all right, the most important national priority in terms 
of the economy and the well-being of our people is to focus on 
this particular area or these particular types of areas and we 
have to dedicate substantial sums of money to those.
    And it would be nice if we as a nation could say to focus 
our investment on the most important areas. We tend to spread 
stuff around a lot and we tend to have trouble making those 
judgments.
    Mr. Blumenauer. And I would just conclude, Mr. Chairman, by 
saying I think that is a product which our other witnesses have 
alluded to of not having a valid, functioning national vision 
now. In the absence of something that we are for, then we have 
a reflex towards the way we have always done it. We have a 
reflex to enable people to get in because there is no rational 
way on the State Departments of Transportation or the other 
actors and actresses in the system to be able to make 
decisions.
    My experience in having these transportation conversations 
around the country in a wide variety of different communities 
is that actually the public is pretty much in accord. The 
public does believe in connectivity. They understand that. The 
public has a tendency towards fixing it first, not have bridges 
collapse before you start doing exotic expansions to the 
infrastructure that you do not have money to support in terms 
of operations and maintenance.
    My experience is that when people get in that framework, 
they actually find a great deal of common ground and it is not 
as fractured. It is the political process that does not have 
the guidance of the overarching concept.
    And, Mr. Chairman, I would just conclude by saying how much 
I appreciate this discussion, your patience and that of the 
people who have testified today. I would like to work with you 
to see if there is a way that we can provide a framework, work 
with our friends, Ranking Member, and others on the Minority 
side to see if there is a way to expand while we focus this 
decision because I think the things that we heard from the 
Chamber, what we heard from our friends at Brookings on the 
policy side, we could get the same thing from the American 
Enterprise Institute and the Truckers Association and a half 
dozen unions and environmentalists.
    I think there is an emerging consensus, and our Committee, 
I think, is strategically placed to be able to get into the big 
picture because we are facing a crisis and there is a huge, I 
think, federal opportunity.
    So, Mr. Chairman, I would just conclude by thanking you for 
allowing this hearing to proceed and hope that there is a way 
that we might fine tune some of this discussion and put it on 
the agenda before we move into the next budget cycle which is 
going to bring this to a head.
    Chairman Spratt. Well, clearly for us, our Committee, this 
discussion has just begun. We have limited jurisdiction, but we 
can at least propose ideas to the primary Committee of 
jurisdiction. And I think given your lead, that is something we 
should be giving serious consideration to.
    Whenever you see the Chamber of Commerce come here and 
testify and say, number one, we have chronic underinvestment 
that is contributing to problems across all modes of 
transportation; number two, to ensure the Highway Trust Fund is 
sufficient to support the guaranteed funding levels in SAFETEA-
LU, Congress should not ensure the solvency of the Highway 
Trust Fund by cutting obligation limits for the federal highway 
department, that means you are for sustaining existing spending 
if not more.
    And then on page ten, yet, even with these approaches, 
there is no question as a nation, we are going to have to find 
and invest more public dollars in our public infrastructure.
    You all said that, but to have the Chamber say that and 
sort of unabashedly recognize the need for robust funding as 
part of the solution, I know you are saying different ways of 
funding, different ways of rationalizing the problem, but 
nevertheless you are not backing away from the need to have 
adequate funding and to avoid cuts, spending cuts.
    Now, the Secretary would not give us an answer to the 
question, and I can understand why. Both of us being 
politicians, we do not always want to give the hard answer, but 
she was rather disparaging of gasoline taxes in her testimony. 
When I asked is there any reasonable substitute in the near 
term, I think the answer was implicitly no.
    Do you feel the same way, that primarily we are going to 
have to rely upon gasoline taxes for the lion's share of our 
transportation funding for some time into the future? All three 
of you, the panel.
    Ms. Kavinoky. Well, Mr. Chairman, I will start, and thank 
you for your kind words towards the Chamber.
    We fully believe that infrastructure investment is not a 
matter of tax and spend as it has been characterized at times 
during this hearing, but it is about investing and growing in 
the economy. This is one area where the government does bear 
responsibility.
    To answer your direct question, the gas tax which is really 
the closest approximation we have to a user fee is not dead. 
The encouragement of hybrid vehicles or increased fuel 
efficient vehicles is not expected for quite some time. And 
currently user fees on fuel are the simplest, fairest, most 
understandable way to collect revenues.
    And as they do produce about 90 percent of the revenue into 
the Highway Trust Fund, I think at least for the next surface 
transportation authorization bill, that is where we have to 
look for the principal source of funding.
    Chairman Spratt. Mr. Puentes.
    Mr. Puentes. Thank you, Mr. Chairman.
    I also agree. I think that in the short term, the gas tax 
is still the dominant source of revenues that go into the 
federal transportation trust fund. It is still rising. There is 
no question about it. It is still generating more and more 
revenue each year.
    We do know that in the future, as more fuel efficient 
vehicles take hold and as vehicle miles traveled begins to 
plateau and level off and decline in some cases, that there is 
a long-term challenge that we are facing. And I think that as a 
nation, we have already begun that discussion, which is very 
positive, to look at other sources in the long term.
    But for the short term, I do not think there is any 
question that the gas tax is going to remain the dominant 
revenue source not just on the federal level but within states 
all across the country. It is the dominant source in most 
states.
    Some states do have tolls as the dominant source or some 
states have federal revenues as the dominant sources, but the 
gas tax is ubiquitous all across the country. And I do not 
think there is any doubt that it will continue to play a role.
    The interesting thing about the gas tax is that as was 
mentioned, it also has other benefits as well, that when we 
have conversations around climate change and living in a carbon 
constrained world, the gas tax could have a profound impact on 
that in terms of reducing the amount of driving, perhaps 
changing travel patterns a little bit, and strengthening the 
metropolitan areas by helping to stem the tide of massive 
decentralization that exists all across the country.
    So it is not hyperbole to say the gas tax is going to be 
the source of funding for the near future and it is going to be 
a long time before it is replaced.
    Chairman Spratt. Director Sunshine.
    Mr. Sunshine. I agree with the general responses. I mean, 
the problem is that the gas tax at its current amount is not 
going to be sufficient to even pay for the level of spending 
that we are already at, much less any increase, so that if you 
want to go with the gas tax as the primary funding mechanism, 
it has got to change.
    I think these other techniques offer some promise in the 
future and I think it is useful for the government to think of 
ways to encourage experiments in these areas to see what kinds 
of things work and what kinds of things do not work in various 
places in the country so that when we get to the point a decade 
or more into the future, perhaps where we as a nation want to 
go to one of these different kinds of systems, we have had some 
experimentation going on to see how they work.
    Chairman Spratt. It is hard to believe you can do even in 
the foreseeable future differential pricing of all the major 
transportation nexuses and systems in this country. It is just 
hard to believe that you could put that in place. You could do 
it in the center of London. You could do it in the center of 
Manhattan. But it would be hard to do in 50 different states in 
numerous different ways.
    Down to practical details. What happens when the trust fund 
is short of funding to meet its obligation limits? Legally what 
happens if the trust fund, if there is a deficit in the Highway 
Trust Fund?
    Mr. Sunshine. I believe that the Department of 
Transportation would have to stop reimbursing states for the 
funds that they have spent. The trust fund does not have the 
authority to borrow. There are no other resources available to 
it.
    So obligations would have to be constrained and the federal 
government would not have the resources, the legal authority to 
reimburse the states which lay out the money initially for the 
various projects.
    Chairman Spratt. Does that mean to avoid that problem, we 
have to rescind contract authority or outstanding contract 
authority which has not been used up or change the obligation 
limits?
    Mr. Sunshine. The most immediate tool in terms of affecting 
the cash flow are the obligation limits. But the money in the 
fund spends out pretty slowly. If you reduce an obligation in 
2009, it is going to save you very little in outlays in 2009.
    These are capital projects, a lot of them, and less than 
20, maybe 20 percent or so, depending on whether it is transit 
or highway, you would actually save in outlays in the first 
year.
    Mr. Blumenauer. One of you said 40 percent?
    Mr. Sunshine. Yeah. You have to have a big cut, 40 percent 
or so, in 2009 in order to save actually even a relatively 
small amount of outlays. And so that is the other problem. And 
we are already into 2008.
    Chairman Spratt. Ms. Kavinoky, one of the biggest opponents 
of tolls has been the trucking and transportation industry, the 
surface transportation industry. Am I correct? How does the 
Chamber stand on tolls of existing roads or tolls of new roads 
that would be partially funded by financing based upon the toll 
revenue?
    Ms. Kavinoky. Mr. Chairman, we have run into an interesting 
fact as we look at our own policies within the Chamber and that 
is that they have not been updated for several years. So our 
official policy positions do not even address tolling.
    I will tell you that we are engaged in a conversation with 
all of our members and that includes the American Trucking 
Associations and our members there, the business community, the 
shippers, and Chambers of Commerce to decide what exactly we do 
need to say about tolling.
    We do have some principles, however, in our policies that I 
think will stand which is that revenues that are collected from 
the use of infrastructure need to go back to benefit the use of 
that infrastructure. So you should not be collecting tolls and 
then sending that money off to some other program in a 
community or in a state.
    And I believe we will also encourage that if tolls are 
collected at some point that those who are paying tolls 
actually see the benefits of them and not just a promise of 
benefits, but true benefits.
    In my conversations with our colleagues in the trucking 
community, they have said, you know, we can understand tolls, 
but we want to make sure that we actually get something out of 
what we are paying, not that we are being punished for driving.
    Chairman Spratt. Mr. Puentes.
    Mr. Puentes. I cannot speak to the reactions from the 
trucking community, but I will say that the interesting thing, 
again tying it to the conversation around the gas tax, is a lot 
of the interest in tolling nowadays in Manhattan and some other 
places has been not to raise revenues but has been to get to 
some other goals and objectives.
    I was surprised the Secretary did not talk about the 
congestion program that they have now at the DOT where they are 
awarding funds to certain metropolitan areas that are trying to 
look at some of these market mechanisms to mitigate the growth 
in traffic congestion and trying to get some other challenges 
as well.
    So how tolling intersects with, again, time of day travel, 
with congestion relief, with the climate change, and carbon 
issues as we talked about earlier, these are really where some 
of the more powerful benefits for tolling are. And we just in 
this country really have not exploited them as much as we can.
    Your example of London is a good one. There are dozens of 
places that are experimenting with this across the country and 
the U.S. is really far behind in that regard.
    Chairman Spratt. Mr. Blumenauer, have you any further 
questions?
    Mr. Blumenauer. No.
    Chairman Spratt. Thank you once again for your testimony, 
for your presentations. We look forward to working with you.
    I ask unanimous consent that all members who did not have 
the opportunity to put questions to our witnesses have seven 
days to submit questions for the record.
    Thank you very much for coming.
    The Committee is now adjourned.
    [Whereupon, at 1:20 p.m., the Committee was adjourned.]

                                  
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