[Senate Hearing 110-1149]
[From the U.S. Government Publishing Office]






                                                       S. Hrg. 110-1149

 MOVING PASSENGERS AND FREIGHT INTO THE FUTURE: A REVIEW OF THE REPORT 
    OF THE NATIONAL SURFACE TRANSPORTATION POLICY AND REVENUE STUDY 
                               COMMISSION

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 22, 2008

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
















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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            GORDON H. SMITH, Oregon
BILL NELSON, Florida                 JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington           JOHN E. SUNUNU, New Hampshire
FRANK R. LAUTENBERG, New Jersey      JIM DeMINT, South Carolina
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director and General Counsel
                  Paul Nagle, Republican Chief Counsel














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 22, 2008...................................     1
Statement of Senator Hutchison...................................     3
Statement of Senator Pryor.......................................     1
Statement of Senator Smith.......................................     5
Statement of Senator Stevens.....................................     3
    Prepared statement...........................................     3
Statement of Senator Thune.......................................    38

                               Witnesses

Busalacchi, Hon. Frank J., Commissioner, National Surface 
  Transportation Policy and Revenue Study Commission; Secretary, 
  Department of Transportation, State of Wisconsin; and Chairman, 
  States for Passenger Rail Coalition............................    13
    Prepared statement...........................................    15
Heminger, Steve, Commissioner, National Surface Transportation 
  Policy and Revenue Study Commission and Executive Director, 
  Metropolitan Transportation Commission.........................    20
    Prepared statement...........................................    22
Quinn, Patrick E., Co-Chairman and President, U.S. Xpress 
  Enterprises, Inc. and Commissioner, National Surface 
  Transportation Policy and Revenue Study Commission.............    34
    Prepared statement...........................................    36
Rose, Matthew K., President and CEO, BNSF Railway Company, and 
  Commissioner, National Surface Transportation Policy and 
  Revenue Study Commission.......................................    26
    Prepared statement...........................................    30
Schenendorf, Jack, Vice Chair, National Surface Transportation 
  Policy and Revenue Study Commission and Of Counsel, Covington & 
  Burling LLP....................................................     6
    Prepared statement...........................................     8

                                Appendix

Response to written questions submitted by Hon. Daniel K. Inouye 
  to Jack Schenendorf............................................    53

 
                   MOVING PASSENGERS AND FREIGHT INTO
                 THE FUTURE: A REVIEW OF THE REPORT OF
                  THE NATIONAL SURFACE TRANSPORTATION
                  POLICY AND REVENUE STUDY COMMISSION

                              ----------                              


                        TUESDAY, APRIL 22, 2008

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:36 p.m. in room 
SR-253, Russell Senate Office Building, Hon. Mark Pryor, 
presiding.

             OPENING STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARKANSAS

    Senator Pryor. The hearing will come to order, and I thank 
everyone for being here. We are going to have several Senators 
come today, we think, so I thought what I would go ahead and do 
is dive in with opening statements. I'll have a few moments on 
my opening statement and if Senator Stevens or his designee 
comes, we'll certainly allow them to offer an opening 
statement, and then we'll go down the list for our witnesses 
and give you all 5 minutes.
    And also, Mr. Heminger has a plane to catch--is that right? 
So, I'll try to make sure that whatever Senators are here, 
we'll try to pummel you with questions first, and then let you 
get on your way.
    Let me go ahead and say welcome. I'd like to thank 
everybody on the Committee, but certainly Senator Inouye and 
Senator Lautenberg for allowing me to chair this full Committee 
hearing.
    We're here today to talk about ``Moving Passengers and 
Freight into the Future.'' The focus of this hearing will be to 
review the report of the National Surface Transportation Policy 
and Revenue Study Commission, as required under Section 1909 of 
the Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users, that we call here SAFETEA-LU, 
and that's what I'm going to call it from here on out--I'm not 
going to go through the long, proper name of the legislation.
    This hearing will serve as the kickoff for the Commerce 
Committee's deliberations on the upcoming reauthorization of 
the Federal surface transportation programs. As the Committee 
with jurisdiction over the entire transportation system, it 
will be particularly important for us to consider the impact of 
any proposed changes. While other Committee's will be focused 
on the discrete changes to their portions of the Federal 
surface transportation program, we have the responsibility of 
ensuring that the entire transportation system--including our 
aviation, maritime, and surface systems--all work together.
    During the development of SAFETEA-LU, from 2003 to 2005, 
Congress became increasingly aware that the Nation's surface 
transportation system, and the Federal programs that support 
it, were under significant stress. We had several hearings to 
that extent, by the way, during those years. And increasing 
congestion, dwindling capacity, aging infrastructure, 
persistent safety challenges and declining Federal 
transportation revenues all pointed to a crisis ahead. 
Recognizing the need to review the current Federal policies, 
and focusing on the challenge of preserving and expanding the 
Nation's surface transportation system to meet the 
transportation demands of the 21st century, Congress 
established this Study Commission to help us work through these 
issues in the future.
    The purpose of the Commission was to conduct a 
comprehensive study of the current and future needs of the 
Nation's surface transportation system, and to provide 
recommendations to inform policymakers regarding the future 
role of the system in supporting a robust economy, 
accommodating a nation's growing population, and maintaining 
mobility and our existing quality of life.
    Congress also asked the Commission to investigate 
mechanisms to finance the investments necessary to support this 
system in the future. Since its establishment in May 2006, the 
Commission has met multiple times to hear about the challenges 
facing America's surface transportation network.
    Today, 5 of the 12 Commissioners will testify about the 
specific comments relating to freight mobility, highway, auto 
and truck safety, passenger and freight rail capacity and 
surface development, inter-modal transportation, and the 
integration of our surface, maritime, and aviation networks.
    Again, I want to thank the Commission for your work, I know 
that you have done what the Congress asked you to do, and 
really help us look at these issues, and we will try to come to 
terms and listen to your recommendations, and today will be the 
starting point for that.
    I do agree with the Commission's conclusion that the Nation 
has outgrown the current surface transportation system, that 
new financing options need to be employed to upgrade and expand 
our current system, and that new policy directives and 
legislative solutions are necessary for us, as a nation, to 
maintain and improve our system in the future.
    I also share the Commission's prediction of dire 
consequences if policymakers fail to take significant action. 
We have already seen the consequences of a persistent, 
insufficient investment in surface transportation, 
deterioration of surface transportation assets, increased 
highway casualties, and growing congestion, that affects all 
modes of surface transportation and stifles economic 
development.
    As Chairman of the Subcommittee on Consumer Affairs, I'm 
aware that we need to make sure that the changes we make will 
ensure the safety of the traveling public. As we develop 
surface transportation policy for the future, I do not want us 
to lose focus on the importance of reducing approximately 
43,300 traffic deaths--including over 5,000 truck-related 
fatalities--which occur in the United States each year. 
Promoting safe and educated driving, improving road conditions, 
and increasing research and development for safety technologies 
and techniques are all part of the formula for improving our 
surface transportation system.
    It's my hope that Congress will work in a bipartisan way, 
not just today, but certainly in the future, as we try to look 
at our system, and hopefully break free of any political--
partisan polarization that we might face here in the Congress 
and between the branches of government. I find the timing of 
this hearing will be critical, as we begin to draft the next 
reauthorization of the Highway Bill in the coming months, and 
the Committee continues its current effort to reauthorize the 
rail safety programs and Amtrak.
    I very much look forward to hearing testimony from the 
witnesses, and I'll have several questions, and I know that my 
colleagues will, as well. With that, Senator Hutchison.
    Senator Hutchison. I will defer to my Vice Chairman, if 
he's ready.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Well, I just would put my statement in 
full in the record, if that's all right.
    Senator Pryor. Sure.
    Senator Stevens. Thank you.
    [The prepared statement of Senator Stevens follows:]

    Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska
    Thank you, Senator Pryor, for holding this hearing, and thank you, 
Commissioners, for joining us today.
    The Commission was established in Section 1909 of SAFETEA-LU and 
was charged by Congress with thoroughly reviewing the Nation's 
programs, and with preparing a conceptual plan that outlines a long-
term transportation vision over the next 50 years.
    The Commission held 22 hearings over 20 months of study and took 
testimony from over 300 witnesses.
    Issues regarding an increase of the gas tax and the role of public-
private partnerships, however, prevented the Commissioners from 
reaching unanimous recommendations.
    However, there are areas of agreement among all the Commissioners. 
These recommendations have the greatest promise of influencing 
transportation policy in the future.
    The Commissioners all recognize the importance of a strong, inter-
connected transportation system to support our Nation's economic 
prosperity and growth.
    To improve our transportation system, it will be necessary to 
simplify and streamline Federal transportation programs and funding 
categories. This will provide the states with more flexibility in how 
they spend their transportation dollars. Currently, it takes between 7 
and 10 years to complete a highway project. This is entirely too long 
and makes completing projects more expensive.
    I am looking forward to hearing from our witnesses today and 
learning how we can improve our transportation system now.
    Thank you, again, Senator Pryor, for holding this hearing.

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Well, thank you very much for convening 
this panel, I'm very pleased to hear what the members of the 
Commission want to say. I have been sort of briefed by my 
constituent, Mr. Rose, who I think gave me a good overview of 
what you were looking at, and I think that it was important to 
have this kind of Commission Report.
    I come from the state that has the largest land mass in the 
continental United States, and the state with the most road 
miles, and that means we have vast agricultural regions, but we 
also have some of the fastest-growing cities in our country, 
and our productivity is being stifled when we don't have good 
transportation networks.
    The Commission did a good job in laying out the predicament 
in which we find ourselves, and the challenges that we will 
face over the next 50 years. It is a sobering report.
    I'm sure that we will begin to address some of these issues 
in the SAFETEA-LU legislation that will come forward next 
year--or the reauthorization of SAFETEA-LU. And while I find 
some of the solutions offered in the report to be interesting, 
I do have some significant concerns, which are non-starters 
here in Congress.
    While there may be merit to indexing the Federal Gas Tax, a 
25 cent or more per gallon increase in the tax is unacceptable. 
It is even more unacceptable in Texas where, as a donor State, 
we forego needed infrastructure improvements every year, by 
sending millions of gas dollars to other states. I cannot 
imagine a scenario where a tax increase of this magnitude would 
pass Congress, particularly with myself and other donor State 
colleagues supporting something that would make our situation 
of going into a hole, even deeper.
    Now that the interstate highway system is complete, I think 
it's time for this practice of donating to other States to end. 
I wish you had taken up the issue of whether we still need the 
gas tax to come to the Federal Government and be redisbursed, 
inequitably, to some States, and a growth State like mine that 
is the biggest donor State in America, also one of the highest 
growth States in America, is doubly abusive.
    So, I hope that that is dead on arrival here, and I will do 
everything I can to make sure that it is.
    Additionally, I am concerned about the views on tolling, 
that were put forward. I do support the right of local 
communities to build new infrastructure through tolling. I 
support tolling if it is going to create an additional lane, 
where you keep the freeways that are already built, with the 
same number of free lanes. I just can't support the proposals 
to toll existing lanes. The Federal Government and the States 
built these roads using Federal funding with the commitment 
that they would remain ``free'' ways.
    These existing roads are a public good built with public 
funding, and should not be converted to generate money for 
local entities to take away from the Federal taxpayers. So, I 
hope that that is not going to be something that also gets 
traction.
    I do appreciate the Commission's recognition that transit 
and inter-city passenger rail must be part of a solution. I am 
disappointed that the Commission chose to focus much of its 
analysis of transit on maintaining the status quo and not as 
much on the investments necessary to truly improve and expand 
America's transit systems. No urban congestion program will 
work without improving the ratio of transit to vehicle trips in 
a given region.
    I was pleased with the focus on passenger rail, and a 
thorough analysis of what it will take to build an extensive 
national passenger rail system, with the increased ridership 
necessary to sustain it. However, Amtrak is not mentioned, even 
once, in the Report. It is the lone national transportation 
provider supported by the Federal Government, and should be 
instrumental in the expansion of our passenger rail system.
    So, I do think it is terrific that we had the Commission, 
with some very interesting proposals, and I think the issues 
are laid out very well. I hope that we can be a little more 
creative about addressing some of these issues, and of course, 
that's what Congress' responsibility is.
    So, thank you very much.
    Senator Pryor. Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Mr. Chairman, for the record, Oregon isn't 
as big as Alaska or Texas, but we still have a lot of dirt 
between light bulbs up in the eastern parts, where I'm from.
    But, I thank the Chair for holding this important hearing. 
I also want to thank our witnesses, all members of the National 
Surface Transportation Policy and Revenue Study Commission who 
agreed to be here today, and to testify.
    The Commission was charged with an unenviable task of 
reviewing our Nation's transportation policy, and developing a 
plan to ensure that our surface transportation system is able 
to serve the interests of the United States well into the 
future.
    It's clear, however, that our system is barely keeping up 
with today's demands. It is virtually impossible to travel the 
country and not encounter congestion and delays. I've seen some 
estimates that put the annual cost of these delays to the U.S. 
economy as high as $78 billion.
    In the Pacific Northwest, the bridge that connects Oregon 
and Washington is the most congested stretch of Interstate 5 
outside of California. The I-5 river crossing experiences crash 
rates nearly two and a half times the statewide average for 
comparable facilities. Delays lasting two to 5 hours are not 
uncommon during peak hours of the commute over the 5-mile 
segment of the interstate that includes this crossing. And by 
2030, congestion is expected to grow to 14 to 16 hours per day 
on this corridor, as vehicle traffic over the bridge is 
expected to increase by more than 40 percent.
    The Columbia River Bridge needs to be replaced. This will 
be a massive project, costing millions of dollars, and taking 
years to complete--but it needs to go forward. This project is 
just one of many around the country, aimed at easing the 
congestion that threatens to otherwise strangle our economy, 
and force us to spend more time stuck in traffic, and less time 
with families.
    The challenge we have is to figure out how to pay for these 
improvements. The Highway Trust Fund is depleted, and yet the 
Commission's Report states that we need to more than double our 
annual transportation expenditures in order to return our 
system to a state of good repair, and to create the advanced 
surface transportation infrastructure needed to keep our 
economy strong.
    The Commission has put forward a number of proposals to 
fund the construction of our roads, highways and bridges. I 
look forward to hearing more about their ideas to fill the 
funding gap.
    Finally, I want to commend the Commission for its focus on 
safety in the report. We lose 40,000 Americans a year to 
accidents on our Nation's highways. We have to, and we can, do 
better. I applaud the Commission for setting a goal of halving 
traffic fatalities by 2025. This is an ambitious goal, but I'm 
confident we can get there.
    Mr. Chairman, thank you again for holding this hearing, and 
I look forward to hearing from our witnesses.
    Senator Pryor. Thank you. And in the interest of time, I'm 
going to greatly abbreviate your introductions.
    First, let me say that Senator Stevens had to slip out, 
there's a portrait unveiling for Senator Daschle that starts--
sometime in the next 30 minutes or so--and he had to run over 
there to be part of the pre-program for that. But he said he 
would submit his questions for the record as well as his 
statement, so there may be other Senators that do the same, 
without objection.
    Let me go ahead and just introduce our first witness today. 
Mr. Jack Schenendorf, he's the Commission's Vice Chair, and 
he's Of Counsel at Covington & Burling.
    Go ahead.

  STATEMENT OF JACK SCHENENDORF, VICE CHAIR, NATIONAL SURFACE 
   TRANSPORTATION POLICY AND REVENUE STUDY COMMISSION AND OF 
                COUNSEL, COVINGTON & BURLING LLP

    Mr. Schenendorf. Thank you, Senator Pryor.
    Let me start by saying it's a real honor to be here and 
testifying before you, because I started my Congressional 
career on the House Transportation Committee, working for 
Congressman John Paul Hammerschmidt, and one of the first 
projects I worked on was Highway 71 in northwestern Arkansas, 
and I learned--not only the importance of transportation to an 
area, but how important that was in the national system, with 
Wal-Mart, and J.B. Hunt and the like--and so it was a real 
educational process.
    I'm honored to be testifying today as the--in my capacity 
as the Vice Chair of the Commission. In summarizing the 
Commission's reports, I'd like to make three main points.
    First, we have a national transportation crisis. Simply 
put, we have outgrown our aging surface transportation system. 
The future of our Nation's well-being, vitality and global 
economic leadership is at stake. We must, as a Nation, take 
significant, decisive action to create and sustain the 
preeminent surface transportation system in the world. This is 
a national problem that will require strong Federal leadership, 
and we must recognize the sobering financial reality of such an 
undertaking. We are recommending that all levels of government, 
and the private sector, invest at least $225 billion annually 
for the next 50 years, to upgrade our existing transportation 
network to a state of good repair, and to build the more 
advanced facilities we will require to remain competitive.
    We are spending less than 40 percent of that amount today. 
We cannot sit back and wait for the next generation to address 
these ever-increasing needs--it will be too late. The crisis is 
now, and we have a responsibility and obligation to create a 
safer, more secure, and an ever-more productive system.
    Second, we need fundamental reform. In addition to putting 
more money into the system, the Federal transportation program 
must be reformed. We do not believe that the Federal program 
should be reauthorized in its current form. Instead, we are 
calling for a new beginning.
    We believe that a mission or sense of purpose must be 
restored to the Federal program. Since completion of the 
interstate system, the program has had no clear mission. It is 
now, essentially, a block grant model, with little or no 
accountability for specific outcomes. That's why we are 
recommending that the 108 existing surface transportation 
programs, and SAFETEA-LU and existing laws be replaced with 10 
new Federal programs that are performance-driven, outcome-
based, generally mode-neutral, and refocused to pursue 
objectives of genuine national interest. These programs include 
a State of Good Repair Program, a National Freight Program, 
Safety Program, Metropolitan Congestion Program, and other 
programs that will be discussed in more detail by my 
colleagues.
    The way that these programs, I might note, are structured, 
will go a long way toward resolving the donor/donee issue, 
because we propose that the funding mechanisms and the 
distribution mechanisms be different than they are today, and I 
believe will go a long way toward addressing that problem.
    The third point is that if we want a 21st century 
transportation system, we must be willing to pay for it. There 
is no free lunch when it comes to infrastructure investment. 
Policy changes, though necessary, will not be enough, on their 
own, to produce the transportation system the Nation needs in 
the 21st century. We will need a significant increase in public 
funding to keep America competitive, we will need additional 
private investment, we will need more tolling, and we will need 
the price for use of the system. Simply put, we must make use 
of all of the financial tools available to us.
    In closing, let me just say that one of the things that 
struck us was our parents and grandparents--about 50 years 
ago--gave us a brand-new system in the interstate system that 
had excess capacity in it. They also de-regulated our freight 
rail system, which allowed our freight rail system and the 
excess capacity in it, along with the interstate system to 
serve our Nation well, and it's something that we have become 
used to, and is part of our fabric, and has been part of the 
reason that our economy has been as strong as it has been.
    But as I mentioned before--that system is aging, and we 
have outgrown it, both rail and highway systems are congested, 
we have tremendous growth coming in the future, and it's--this 
generation is going to have to step up to the plate and do for 
future generations, what our grandparents and parents did for 
us.
    Thank you.
    [The prepared statement of Mr. Schenendorf follows:]

 Prepared Statement of Jack Schenendorf, Vice Chair, National Surface 
  Transportation Policy and Revenue Study Commission and Of Counsel, 
                        Covington & Burling LLP
    I am Jack Schenendorf. I am Of Counsel with Covington & Burling LLP 
in Washington, D.C. Prior to joining Covington, I served on the 
Republican staff of the House Transportation and Infrastructure 
Committee for 25 years. I also served on the Bush/Cheney Transition 
where I was Chief of the Transition Policy Team for the U.S. Department 
of Transportation and was responsible for reviewing all transportation 
policies and issues for the incoming Administration.
    In 2006, Speaker Hastert appointed me to the National Surface 
Transportation Policy and Revenue Commission. I was subsequently 
elected Vice Chair by my fellow Commissioners. It is in that capacity 
that I am testifying before you today.
    In the Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy For Users (SAFETEA-LU), Congress established the National 
Surface Transportation Policy and Revenue Study Commission to undertake 
a thorough review of the Nation's transportation assets, policies, 
programs, and revenue mechanisms, and to prepare a conceptual plan that 
would harmonize these elements and outline a coherent, long-term 
transportation vision that would serve the needs of the Nation and its 
citizens.
    This Commission has worked diligently to fulfill this charge, 
meeting and holding public hearings across the country during the 
intensive 20-month study period. On behalf of all of the Commissioners, 
I would like to thank our Chair, Secretary Mary Peters, who did an 
outstanding job in guiding us through this effort. She presided over 
the Commission with graciousness, wisdom, and a great deal of patience. 
And I would be remiss if I did not also thank all of the Department of 
Transportation staff assigned to the Commission--especially Chris 
Bonanti, Lydia Conrad, Ross Crichton, Eric Gabler, James March, David 
Marks, Mary Moehring, and Darren Timothy. Their professionalism, 
expertise and dedication were instrumental in our success. And a 
special thanks goes to our Executive Director, Susan Binder, for her 
hard work and for the sound guidance and advice she provided during our 
effort. We would not be here today were it not for her and her team.
    Our findings and recommendations--calling for bold changes in 
policies, programs and institutions--are contained in our report, 
Transportation for Tomorrow. Our recommendations are the product of a 
bipartisan consensus of a diverse group of Commissioners--5 appointed 
by Republican officeholders and 4 appointed by Democratic 
officeholders; from both ends of the political spectrum and everywhere 
in between; from all regions of the country; a CEO of a company that 
relies on transportation services; a CEO of a trucking company; a CEO 
of a rail company; a state transportation official; and a local 
transportation official. But despite our different perspectives, we 
were able to coalesce around the findings and recommendations in the 
Commission's report.
    My testimony today will focus on our vision and our four key 
recommendations.
Background
    But first a few key findings:

   Conditions on America's surface transportation systems--our 
        roads, bridges and highways, our passenger and freight rail 
        facilities, our public transit networks--are deteriorating. The 
        physical infrastructure itself is showing the signs of age. In 
        almost all cases, the operational efficiency of our key 
        transportation assets is slipping.

   In figures compiled by the Texas Transportation Institute, 
        congestion cost the American economy an estimated $78 billion 
        in 2005, measured in terms of wasted fuel and workers' lost 
        hours. Congestion causes the average peak-period traveler to 
        spend an extra 38 hours of travel time and consume an 
        additional 26 gallons of fuel.

   Over the next 50 years, the population of the United States 
        will grow by some 120 million people, greatly intensifying the 
        demand for transportation services by private individuals and 
        by businesses. Most of that growth will occur in metropolitan 
        areas. Congestion will increase and spread beyond the 
        traditional morning and evening rush hours to affect ever-
        lengthening periods of each day.

   If, as expected, the world economy grows and becomes more 
        globally integrated during the next half-century, the U.S. will 
        experience higher trade volumes and greater pressures on its 
        international gateways and domestic freight distribution 
        network. Economic forecasts indicate that freight volumes will 
        be 70 percent higher in 2020 than they were in 1998. Without 
        improvements to key goods-movement networks, freight 
        transportation will become increasingly inefficient and 
        unreliable, hampering the ability of American businesses to 
        compete in the global marketplace.

   Travel on the Nation's surface transportation system is far 
        too dangerous. In 2006, over 42,000 people lost their lives on 
        American highways, and almost 2.6 million were injured.

   Overly onerous and procedure-bound environmental review 
        processes can often serve to delay the speedy and cost-
        conscious delivery of important transportation improvements. 
        Major highway projects take about 13 years from project 
        initiation to completion, according to the Federal Highway 
        Administration, and Federal Transit Administration figures 
        indicate that the average project-development period for New 
        Starts projects is in excess of 10 years.
Our Vision
    Just as it helps to know your destination before starting off on a 
trip, our Commission believed at the outset that it is important to 
have in mind a vision of what the national surface transportation 
system might look like--or at least how we'd like it to function--in 
the middle of the 21st century.
    We decided to aim high. We agreed among ourselves that our 
fundamental motivation should be to help the United States to ``create 
and sustain the pre-eminent surface transportation in the world.'' That 
pledge has in the end allowed us to reach agreement on a surprisingly 
wide range of sweeping policy proposals.
Four Key Recommendations
    The Commission respectfully makes the following key 
recommendations:
    First, to keep America competitive, we are recommending a 
significant increase in investment in our national surface 
transportation system.
    Any effort to address the future transportation needs of the United 
States must come to grips with the sobering financial reality of such 
an undertaking. We estimate that the U.S. needs to invest at least $225 
billion annually for the next 50 years to upgrade our existing 
transportation network to a good state of repair and to build the more 
advanced facilities we will require to remain competitive. We are 
spending less than 40 percent of this amount today.
    The existence of an enormous investment gap is indisputable. It has 
been documented by study after study, including most recently the Urban 
Land Institute's Infrastructure 2007 Report, DOT's own Conditions and 
Needs Report, and various state studies. It has been documented by our 
Commission's analyses. It has been documented by the many witnesses we 
heard from in our hearings. And it is being documented every day by the 
American people as they sit in congestion on crumbling roads or ride on 
crowded and aging buses and trains.
    The implications of this underinvestment, which has been going on 
for decades, are ominous. We saw with Katrina what happens when there 
is a pattern of underinvestment in infrastructure. Unless we close this 
investment gap soon, our surface transportation systems will face the 
same fate as New Orleans' levees. We must not let this happen.
    To close this investment gap, we will need increased public 
funding. We will also need increased private investment. More tolling 
will need to be implemented and new and innovative ways of funding our 
future system will need to be employed. And we will need to price for 
the use of our system, which will help reduce investment needs.
    Second, we are recommending that the Federal Government be a full 
partner--with states, local governments and the private sector--in 
addressing this looming transportation crisis.
    The problem is simply too big for the states and local governments 
to handle by themselves, even with the help of the private sector. We 
believe that the Federal Government must continue to be part of the 
solution, both in terms of providing leadership and in terms of 
providing a fair share of the resources.
    And it's not just that the problem is big. The Federal Government 
has a strong interest in our national transportation system. The system 
is of vital importance to our economy, our national defense and our 
emergency preparedness. Our transportation network is critical to the 
interstate and regional movement of people and goods, economic growth, 
global competitiveness, environmental sustainability, safety and our 
overall quality of life.
    Third, we are recommending fundamental and wide-ranging reform of 
the Federal transportation program. We are recommending that the 
program be transformed into one that is performance-driven, outcome-
based, generally mode-neutral, and refocused to pursue objectives of 
genuine national interest.
    In addition to putting more money into the system, the Federal 
transportation program must be reformed. We do not believe that the 
Federal program should be reauthorized in its current form. Instead, we 
are calling for A New Beginning.
    No more restrictive categories. No more planning silos. Generally 
no more modal silos. And no more earmarks.
    There are three key elements to this recommendation.
    Element One: We believe that a mission or sense of purpose must be 
restored to the Federal program. Since completion of the Interstate 
System, the program has had no clear mission. It is now essentially a 
block grant model, with little or no accountability for specific 
outcomes. We believe that this must change.
    We are recommending that the program be transformed into one that 
is performance-driven, outcome-based, free of earmarking, generally 
mode-neutral, and refocused to pursue objectives of genuine national 
interest. More specifically, we are recommending that the 108 existing 
surface transportation programs in SAFETEA-LU and related laws should 
be replaced with the following new Federal programs:

   A program designed to bring our existing highways, bridges 
        and transit systems into a state-of-good-repair;

   A freight program designed to enhance U.S. global 
        competitiveness;

   A program designed to reduce congestion in our largest 
        metropolitan areas (population greater than one million) (e.g., 
        reduction of 20 percent by 2025);

   A program designed to improve access and mobility in smaller 
        cities and rural areas;

   A program designed to improve safety by cutting fatalities 
        (e.g., by 50 percent by 2025);

   A program designed to provide high speed passenger rail 
        service in the Nation's high-growth corridors (300-500 miles);

   A program designed for environmental stewardship;

   An energy security program designed to hasten the 
        development of replacement fuels;

   A Federal lands program; and

   A coherent national research and development program.

    These programs would give rise to a national surface transportation 
strategic plan that would guide Federal investment.
    U.S. DOT, state and regional officials, and other stakeholders 
would establish performance standards in the Federal program areas 
outlined above and develop detailed plans to achieve those standards. 
Detailed cost estimates would also be developed. These plans would then 
be assembled into a national surface transportation strategic plan.
    Federal investment would be directed by the national surface 
transportation strategic plan. Only projects called for in the plans 
would be eligible for Federal funding. And all levels of government 
would be accountable to the public for achieving the results promised.
    The Commission acknowledges that this element of the recommendation 
represents a major departure from current law. Developing performance 
standards and integrating them into a performance-driven regimen will 
be challenging but we believe the rewards will be worth the effort. In 
addition to making better use of public monies to accomplish critical 
national objectives, the Commission's recommended approach of 
performance standards and economic justification would do much to 
restore public confidence in the transportation decision-making 
process. In such an environment, we believe Congress and the public 
would be more amenable to funding the Nation's transportation 
investment needs.
    Element Two: The project delivery process must be reformed by 
retaining all current environmental safeguards, but significantly 
shortening the time it takes to complete reviews and obtain permits. 
Projects must be designed, approved and built as quickly as possible if 
we are to meet the transportation challenges of the 21st Century. This 
will save both time and money.
    Element Three: We are recommending that Congress establish an 
independent National Surface Transportation Commission (NASTRAC), 
modeled after aspects of the Postal Regulatory Commission, the Base 
Closure and Realignment Commission, and state public utility 
commissions. The new Federal commission would perform two principal 
planning and financial functions:

   The NASTRAC would oversee various aspects of the development 
        of the performance-based performance standards in the Federal 
        program areas outlined above and the detailed plans to achieve 
        those standards, and it would approve the national 
        transportation strategic plan.

   Once the national strategic plan has been approved, the 
        NASTRAC would establish a Federal share to finance the plan and 
        recommend an increase in the Federal fuel tax to fund that 
        share, subject to congressional veto.

    And fourth, to close the investment gap, we are recommending a wide 
range of revenue enhancements.
    Unfortunately, there is no free lunch when it comes to 
infrastructure investment. Policy changes, though necessary, will not 
be enough on their own to produce the transportation system the Nation 
needs in the 21st century. Significant new funding also will be needed.
    We are recommending significant changes in the way the program is 
financed. In the long-term, we envision transitioning from motor fuel 
taxes to a VMT tax; we include in our recommendations a number of 
provisions to hasten that transition. And in the interim, we would no 
longer rely almost exclusively on motor fuel taxes; instead, we would 
rely on a broad range of user-related fees and charges.
    Here are our major revenue recommendations:
    General Revenue Recommendations: We are making the following 
general revenue recommendations:

   It is imperative that all levels of government and the 
        private sector contribute their appropriate shares if the 
        United States is to have the pre-eminent surface transportation 
        system in the world.

   We strongly support the principle of user financing that has 
        been at the core of the Nation's transportation funding system 
        for half a century.

   We are recommending continuation of the budgetary 
        protections for the Highway Trust Fund, so that user fees 
        benefit the people and industries that pay them.

    Immediate Revenue Recommendations: We recommend that legislation be 
passed in 2008 to keep the Highway Account of the Highway Trust Fund 
solvent and prevent highway investment from falling below the levels 
guaranteed in SAFETEA-LU.
    Mid-Term Revenue Recommendations: We are making the following 
specific recommendations with respect to transportation funding in the 
period between 2010 and 2025:

   The annual investment requirement to improve the condition 
        and performance of all modes of surface transportation--
        highway, bridge, public transit, freight rail and intercity 
        passenger rail--ranges between $225-340 billion. The range 
        depends upon the extent of peak-hour pricing implemented on 
        congested urban highways in lieu of physical capacity 
        expansion. To address this investment target by providing the 
        traditional Federal share of 40 percent of total transportation 
        capital funding, the Federal fuel tax needs to be raised by 25-
        40 cents per gallon. This increase should be phased in over a 
        period of 5 years (5 to 8 cents per gallon per year). This rate 
        increase should be indexed to the construction cost index.

   We are also recommending other Federal user-based fees to 
        help address the funding shortfall, such as a freight fee for 
        goods movement projects, dedication of a portion of existing 
        customs duties, and ticket taxes for passenger rail 
        improvements. Tax and regulatory policy also can play an 
        incentivizing role in expanding freight and intermodal 
        networks.

   In addition, we are recommending that Congress remove 
        certain barriers to tolling and congestion pricing, under 
        conditions that protect the public interest. This will give 
        states and local governments that wish to make greater use of 
        tolling and pricing the flexibility to do so. More 
        specifically, we are recommending that Congress modify the 
        current Federal prohibition against tolling on the Interstate 
        System to allow:

     tolling to fund new capacity on the Interstate System, 
            as well as the flexibility to price the new capacity to 
            manage its performance; and

     congestion pricing on the Interstate System (both new 
            and existing capacity) in metropolitan areas with 
            populations greater than 1 million.

   We are recommending that Congress encourage the use of 
        public-private partnerships, including concessions, for 
        highways and other surface transportation modes. Public-private 
        partnerships can serve as a means of attracting additional 
        private investment to the surface transportation system, 
        provided that conditions are included to protect the public 
        interest and the movement of interstate commerce.

   State and local governments have many different types of 
        revenues to draw upon for their share of new investment. The 
        Commission expects that state and local governments will have 
        to raise motor fuel, motor vehicle, and other related user 
        fees. In addition, many may take advantage of the expanded 
        opportunities in tolling, congestion pricing and public-private 
        partnerships that our recommendations propose.

    Long-Term Revenue Recommendations: We are making the following 
specific recommendations for transportation funding in the post-2025 
era:

   The motor fuel tax continues to be a viable revenue source 
        for surface transportation at least through 2025. Thereafter, 
        the most promising alternative revenue measure appears to be a 
        vehicle miles traveled (VMT) fee, provided that substantial 
        privacy and collection cost issues can be addressed. The next 
        surface transportation authorization act should require a major 
        national study to develop the specific mechanisms and 
        strategies for transitioning to the VMT fee or another 
        alternative to the motor fuel tax to fund surface 
        transportation programs.
A Failure To Act Would Be Devastating
    The surface transportation system of the United States is at a 
crossroads. The future of our Nation's well being, vitality and global 
economic leadership is at stake. We must take significant, decisive 
action now to create and sustain the pre-eminent surface transportation 
system in the world.
    But some will question whether it is realistic to think that 
Congress will raise the gas tax by 25 to 40 cents per gallon over 5 
years, given the current anti-tax increase sentiment in some quarters. 
The Commission's recommendation is based on our best judgment on what 
needs to be done to address our investment shortfall, without factoring 
in the political feasibility.
    But it doesn't seem unreasonable to think that the public would be 
willing to support an increase of this magnitude to finance a reformed 
program that has a clear mission and is focused on projects in the 
national interest. In year five, the cost to the average motorist would 
be 41 cents to 66 cents per day--less than the price of a candy bar or 
about \1/5\ the cost of a cafe latte. This seems like a bargain when 
you consider that he or she will get for it: substantially reduced 
fatalities, highway and transit systems in a state of good repair, 
reduced congestion, a transportation system that can support a strong 
economy and job growth, and access for all Americans to all parts of 
our Nation. Moreover, forty-one or sixty-six cents a day also seems 
quite reasonable when you compare it to the projected $5 to $6 average 
per trip cost of using a 14-mile stretch of the Capital Beltway during 
rush hour--a project which some have called a ``national model.''
    But even more compelling is that a failure to act--that is, a 
failure to raise sufficient revenue to close the investment gap--would 
be devastating.
    The United States would be unable to compete effectively in the 
global marketplace. Our status as an economic superpower would be 
jeopardized. Jobs would be lost. And as U.S. businesses are squeezed by 
foreign competitors, those jobs that remain would likely be lower 
paying.
    Moreover, our quality of life would suffer substantially. We would 
have fewer travel options. We would spend more time in congestion. We 
would have to leave our families earlier in the morning and arrive home 
later at night. Going to and from the doctor would be more difficult as 
congestion extends to more and more roads and for longer and longer 
periods of time. Other errands and trips to school would be similarly 
affected. And as gridlock became common even in rural areas, vacations 
would become a nightmare. And the cost of maintaining our vehicles 
would increase as they are damaged by our crumbling infrastructure.
    Eventually we would reach the point of catastrophic failures. Road 
closures. Bridge collapses. Long detours. Tragedies like the I-35 
Bridge collapse in Minnesota would become all too common.
    Fatalities and injuries would continue increasing and could reach 
alarming rates.
    We cannot let this happen. We must find the political leadership 
and the political will to make the necessary reforms and the necessary 
investment. Raising revenues will not be easy. But we must do it, and 
we must do it soon.
A Call To Action
    President Dwight D. Eisenhower had the foresight to understand how 
a system of interstate highways would transform the Nation. If there 
was ever a time to take a similarly daring look at a broadened surface 
transportation network, it is now. The nation faces challenges similar 
to those of the Eisenhower era. However, the imperative for change due 
to the global economy is even stronger.
    The good news is that we can do it. We believe that our 
recommendations, if enacted as a package, will give the American people 
the transportation system they need and deserve. We cannot just reform 
our way out of the transportation crisis; nor can we get the job done 
by sending lots more money coursing through a broken project delivery 
system. We need both reform and increased investment.
    We cannot sit back and wait for the next generation to address 
these ever-increasing needs. It will be too late. The crisis is now and 
we have a responsibility and obligation to create a safer, more secure, 
and ever more productive system. We need to create and sustain the pre-
eminent surface transportation system in the world. Now.

    Senator Pryor. Thank you.
    Next we'll have the Honorable Frank Busalacchi, he's a 
Commission member, but he's also Secretary of the Wisconsin 
Department of Transportation.

      STATEMENT OF HON. FRANK J. BUSALACCHI, COMMISSIONER,

           NATIONAL SURFACE TRANSPORTATION POLICY AND

         REVIEW STUDY COMMISSION; SECRETARY, DEPARTMENT

      OF TRANSPORTATION, STATE OF WISCONSIN AND CHAIRMAN,

              STATES FOR PASSENGER RAIL COALITION

    Mr. Busalacchi. Good afternoon, Chairman Pryor, Members of 
the Committee, my name is Frank Busalacchi, I am Secretary of 
the Wisconsin Department of Transportation, and also the Chair 
of the States for Passenger Rail Coalition.
    As a State DOT Secretary, I see firsthand how 
transportation affects our citizens lives. Serving on the 
Commission allowed me to consider how Federal policy could be 
crafted to best serve citizens nationwide, and to assure that 
States worked together to achieve national goals.
    Commissioners came to the table with perspectives from 
every conceivable viewpoint. We held 10 public hearings across 
the Nation. We spent 3 days together at a retreat in 2007. We 
had many long and difficult conversations, but we came together 
to support the report before you, because we recognize our 
charge is critically important to the Nation.
    We started with needs. The Commission analyzed information 
to project the Nation's transportation needs over the next 50 
years. For highways and transit systems, this exercise was 
easier than for rail. U.S. DOT has been collecting highway and 
transit data for many years. For freight and passenger rail, 
the Commission relied on Commissioner Rose and me to compile 
needs information. I engaged a working group to provide an 
inter-city passenger rail analysis.
    The group mapped the vision of the national rail system in 
2050, and determined cost estimates to achieve that vision. Its 
focus is city-to-city connections in corridors of 500 miles or 
less.
    The 2050 map is illustrative only, as individual states 
will be responsible for their own rail plans. Many States are 
already working on estimates and plans for new passenger rail 
service. With Federal support, these States will be empowered 
to implement their rail plans.
    For the past 50 years, we have not adequately supported our 
passenger rail system. In response to testimony from State and 
local officials asking for additional public investment in 
rail, the Commission adopted inter-city passenger rail, as part 
of its multi-modal vision for the future.
    Of the 10 new programs recommended, inter-city passenger 
rail is the only modally focused program. The Federal 
Government would fund 80 percent of the program, similar to the 
funding partnership for highways, transit, and aviation.
    We must create a healthy, vibrant passenger and freight 
rail system that moves people and freight. Rail has the added 
benefit of reducing carbon dioxide, and other emissions per 
passenger mile, compared with highway and air travel.
    Gas prices are reaching $4 a gallon, and people are moving 
to trains. Amtrak is consistently reporting more riders on its 
trains, most recently reporting ridership increases of 11 
percent on State corridor trains.
    The Senate understands the importance of inter-city rail, 
having twice approved the provisions of S. 294, authorizing a 
grant program for States to implement passenger rail service.
    We need action now. Without a Federal funding partner, 
states will not be able to build passenger rail systems to 
accommodate the increasing demand from our citizens. When 
Commissioners came together, they quickly recognized the 
problems of a limited passenger rail system. Lack of 
transportation options in some cities, inadequate freight 
capacity, and traffic congestion in our urban areas.
    There were strong voices, as well, for transportation 
challenges of rural America. Our transportation system is a 
network that passes through urban, suburban, and rural areas. 
Rural states generally have higher lane miles, and fewer people 
to support the upkeep of their roads. They have limited transit 
services, and inadequate vehicle miles traveled to support a 
privately managed toll system.
    Connecting America--a national program for smaller cities 
and rural areas--assures that states with rural populations 
will continue to receive Federal transportation funds. All 
states, regardless of their population density, geographical 
size or economic status, depend on their transportation systems 
for their economic vitality, and quality of life. Without a 
Federal commitment to a program like Connecting America, 
between 20 and 25 States will miss out on the benefits of 
improved transportation.
    Once the Commission identified the needs, we considered 
options for funding our multi-modal vision. For 50 years, the 
Highway Trust Fund has been the primary mechanism for funding 
our transportation system. But its revenues have not been 
raised in over 15 years, nor has the fund been indexed, to 
protect it from inflation.
    Commissioners are concerned that the cash balance in the 
Highway Account of the Highway Trust Fund may fall to a 
negative $1.4 billion by the year 2009.
    I'm troubled by the President's 2009 budget proposal, and 
the lack of a long-term solution to assure the growth and 
predictability of future revenues. If Congress does not address 
this revenue shortfall in the Highway Trust Fund, my state's 
funding--assuming no corrective action, will drop by nearly 
$100 million in the year 2009. All States will be similarly 
affected.
    We spoke plenty in our Commission Report--there is no free 
lunch when it comes to financing. We recommend a variety of 
revenue sources, and we came down squarely on the side of ``pay 
as you go'' financing.
    The Commission looked at long-term leases by private 
investment companies used to build interstate tolling projects. 
Our roads and transit systems are public assets, and should be 
protected. We should not allow private companies to take their 
profits from infrastructure built with public funds.
    The current issues plaguing Wall Street and our economy, 
speak to this issue. The government must assure that the public 
is not assuming the risk of private sector investment 
decisions. It was a bold vision, and strong commitment to fund 
the Interstate that made it possible 50 years ago. Now, our 
highway and aviation systems are congested, and it's time to 
create a truly multi-modal system.
    It will take a strong Federal partner to help finance the 
Commission's vision for the preeminent transportation system in 
the world.
    Thank you.
    [The prepared statement of Mr. Busalacchi follows:]

Prepared Statement of Hon. Frank J. Busalacchi, Commissioner, National 
Surface Transportation Policy and Revenue Study Commission; Secretary, 
 Department of Transportation, State of Wisconsin and Chairman, States 
                      for Passenger Rail Coalition
    Good afternoon, Chairman Inouye, Vice Chairman Stevens, Members of 
the Committee. My name is Frank Busalacchi. I am Secretary of the 
Wisconsin Department of Transportation and Chairman of the 31-member 
States for Passenger Rail Coalition. It is a distinct pleasure to 
appear before your Committee today with colleagues from the National 
Surface Transportation Policy and Revenue Study Commission (the 
Commission).
    As a state DOT Secretary, I see firsthand how transportation 
affects our citizens' lives. Serving on the Commission offered me the 
opportunity to consider how Federal policy could be crafted to best 
serve citizens nationwide--and to assure that states work in concert to 
achieve national goals. I am honored that Speaker Nancy Pelosi 
appointed me to serve as a member of this Commission, and I am proud of 
our accomplishments.
The Commission's Vision--Needs and the Federal Role
    The Commission delivered its report to Congress in December 2007. 
That report is supported by a bipartisan group of Commissioners who 
came together to chart a course for the Nation's transportation system 
over the next 50 years. To do this, we began with the end in mind. 
Early in our work, we created a vision that we believed should drive 
our Nation's transportation policy--to create and sustain the 
preeminent transportation system in the world.
    Commissioners came to the table with perspectives from every 
conceivable viewpoint. We held ten public hearings across the Nation. 
We spent 3 days together at a retreat in August 2007. We had many long 
and difficult conversations. In the end, we came together to support 
the report before you because we recognized our charge was critically 
important to the Nation. We also recognized that if we did not come 
together as Democratic, Republican, public sector and private sector 
members, we could not look Members of Congress in the eye and ask them 
to come together over the critical issue of transportation policy.
    We started with needs. The Commission gathered and analyzed 
information to project the Nation's transportation needs over the next 
50 years. For highways and transit systems, this exercise was somewhat 
easier than for rail. We had the benefit of highway and transit data 
collected by U.S. DOT over many years. For both freight and passenger 
rail, the Commission relied on Commissioner Matt Rose and me to oversee 
the collection of needs data. For all surface transportation, the needs 
are staggering--a minimum of $225 billion each year, potentially as 
much as $338 billion. Counting all levels of government, our Nation 
currently spends less than $90 billion each year.
    While sobering, these dollar figures gave us a firm foundation for 
the remainder of the Commission's work and, specifically, our next 
task--determining the Federal role. Again, my role as Wisconsin DOT 
Secretary informed my view of this issue. From a parochial perspective, 
Wisconsin DOT works to provide the best transportation value to the 
citizens of Wisconsin. At the same time, investments made in the 
Chicago metropolitan area and in other areas around the country 
directly impact upon Wisconsin's transportation system. The important 
point here is that without a strong Federal vision supported by Federal 
policy and funding, the states will always act in their self-interest.
    The Commission spent a morning with representatives of the ``Big 
Seven'' organizations \1\ last May, and the testimony of these 
organizations drove that point home to me. They told the Commission 
that only the Federal Government has the ability to move policy in big, 
national ways. Each state or city can work to be innovative, but 
national coordination, supported by funding, must come from the Federal 
level.
---------------------------------------------------------------------------
    \1\ Council of State Governments, National Governors Association, 
National Conference of State Legislatures, National League of Cities, 
U.S. Conference of Mayors, National Association of Counties, 
International City/County Management Associations.
---------------------------------------------------------------------------
    The Federal Government must assure a national transportation 
system. Without this, we have merely a conglomeration of state, 
regional and local transportation systems. Only national policy and 
funding can assure that all Americans have mobility options and can 
afford to use the system. Only national policy and funding can assure 
that our freight system consists of rails and roads in good condition. 
Only national policy and funding can assure that we rebuild our 
intercity passenger rail network and revitalize our transit systems to 
address the current challenges presented by a growing population, 
global warming, and the need for energy conservation and smart land 
use.
    Finally, I believe that we must define the system first--and then 
determine what method, or methods, we'll use to pay for transportation. 
Different visions of the transportation system call for different 
funding sources and approaches. However, since release of the 
Commission's report, the discussion has focused on how we pay--should 
we toll, raise the gas tax, sell the system off to the private sector, 
or focus on an entirely new revenue approach? Not one of these options 
is compelling without a clear understanding of what our citizens need 
and what the system should look like. Only with that knowledge can we 
identify the associated costs, benefits, and stakeholders and better 
understand the pros and cons of each financing approach. No one 
benefits from a conversation about financing without understanding what 
it is we need to build.
    These considerations highlighted for me the importance of the 
Federal role--because interstate roads, intercity rail, a sound freight 
system and world-class transit systems cannot, by and large, be built 
by towns, or villages, or even cities or states. All levels of 
government need to come together to deliver what is among the most 
important of government services to citizens--the promise of mobility--
to earn a living, see a family member, seek health care, or go to 
school.
The Commission's Vision--Program Elements
    After determining that national needs were large and that the 
Federal Government had a key role to play in creating national policy 
and providing Federal funding, the Commission focused its efforts on 
the Federal transportation program. We worked with U.S. DOT staff to 
learn what is working and not working with the current program. We 
tried to envision a program structure that would address identified 
needs, support the Federal role, maintain Federal, state and local 
government partnerships, and include the private sector when 
appropriate to meet national policy goals.
    The Commissioners agreed that the current program structure is 
complex beyond reason. Over the past 50 years, more than 100 separate 
programs have evolved. This translates into an accounting nightmare for 
state DOTs and others responsible for programming Federal dollars. Each 
month, my state DOT receives reports from the Federal Management 
Information System (FMIS), an FHWA database that tracks the various 
categories of Federal funding that can be applied to highway projects 
and assists states in programming their oldest funds first to avoid 
unnecessary funding lapses. Wisconsin's current report is over 150 
pages long, with funding accounts that date back to the 1980s. This 
report is for highways alone; it doesn't speak to the accounting 
challenges of our current transit and rail programs.
    The Commission created a program structure that simplifies the 
existing complex array of Federal programs. We recommend that today's 
100 programs be consolidated to ten programs that are in the Federal 
interest.\2\ The proposed programs are designed to address key Federal 
priorities while offering state and local governments flexibility in 
applying Federal funds to their needs.
---------------------------------------------------------------------------
    \2\ Rebuilding America: A National Asset Management Program; 
Freight Transportation: A Program to Enhance U.S. Global 
Competitiveness; Congestion Relief: A Program for Improved Metropolitan 
Mobility; Saving Lives: A National Safe Mobility Program; Connecting 
America: A National Access Program for Smaller Cities and Rural Areas; 
Intercity Passenger Rail: A Program to Serve High-Growth Corridors by 
Rail; Environmental Stewardship: A Transportation Investment Program to 
Support a Healthy Environment; Energy Security: A Program to Accelerate 
the Development of Environmentally-Friendly Replacement Fuels; Federal 
Lands: A Program for Providing Public Access; Research, Development, & 
Technology: A Coherent Transportation Research Program for the Nation.
---------------------------------------------------------------------------
    The Commissioners reached consensus support for Federal funding for 
transportation on Federal lands and research that benefits the Federal 
program. The remaining eight programs are the result of long 
deliberations that began with discussions of the Federal role.
    In my testimony, I will address two of the eight programs 
recommended by the Commission: Intercity Passenger Rail: A Program to 
Serve High-Growth Corridors by Rail; and Connecting America: A National 
Access Program for Smaller Cities.
Intercity Passenger Rail Program
    The Commissioners looked carefully at the Nation's population 
growth estimates. Experts predict that our population will grow from 
about 300 million people in 2007 to 450 million people by 2050. We 
looked at congestion on our highways and airways and quickly recognized 
that our Federal program must become more multi-modal to address 
population growth and other critical national priorities such as energy 
conservation and global warming.
    Our Commission recognized that Federal policy and funding 
approaches have, unfortunately, led to a disinvestment in passenger 
rail over the past 50 years. Years ago, intercity passenger rail routes 
comprised the backbone of the country's transportation network. Freight 
rail is investing in its system, but based on a freight rail 
analysis,\3\ freight rail cannot economically justify sufficient 
investment in its infrastructure to address the demand for added 
freight rail capacity, much less added passenger rail capacity. We must 
create a healthy, vibrant passenger and freight rail system that can 
provide a key mobility option for people and freight. Rail has the 
added benefit of reducing carbon dioxide and other emissions per 
passenger mile compared to highway and air travel.
---------------------------------------------------------------------------
    \3\ National Rail Freight Infrastructure Capacity and Investment 
Study, September 2007.
---------------------------------------------------------------------------
    The Commission heard testimony from state and local officials and 
others asking for additional public investment in intercity passenger 
rail. The intercity program includes a Federal/state funding 
partnership for intercity passenger rail similar to the partnerships 
that exist for highways, transit and aviation. We do not envision rail 
replacing other transportation modes. We see rail providing greater 
mobility to help meet the needs of our growing and aging population.
    To assist the Commission in advising Congress, I engaged a 
Passenger Rail Working Group to develop a passenger rail analysis.\4\ 
This group mapped a vision of the national rail system in 2050 and 
determined cost estimates to achieve this vision. Its focus is city-to-
city connections in corridors of 500 miles or less. The 2050 map, 
contained in the Commission report, provides one perspective on the 
future of passenger rail and is entirely illustrative. Individual 
states will be responsible for their own rail plans. Many states are 
already working on estimates and plans for new passenger rail service; 
they are undertaking this work because they understand their citizens 
want a mobility option--especially in light of high gas prices and 
increasing highway and airway congestion. With Federal support, these 
states will be empowered to implement their passenger rail service 
plans.
---------------------------------------------------------------------------
    \4\ Vision for the Future--U.S. Intercity Passenger Rail Network 
through 2050, December 2007.
---------------------------------------------------------------------------
    Of the ten new transportation programs recommended by the 
Commission, Intercity Passenger Rail is the only program focused on one 
specific mode of transportation. The Federal Government would fund 80 
percent of the program, similar to what it now provides for other 
modes.
Connecting America: A National Access Program for Smaller Cities and 
        Rural Areas
    Commissioners quickly recognized the problems of congestion, 
inadequate freight capacity, a limited passenger rail system and lack 
of transit options in some cities. These are the issues that get most 
coverage in the news. However, there were strong voices as well for the 
transportation challenges of rural America.
    Commissioners found particular resonance in the following quote by 
President Dwight Eisenhower: ``Our unity as a nation is sustained by 
free communication of thought and by easy transportation of people and 
goods. . . . Together the unifying forces of our communication and 
transportation systems are dynamic elements in the very name we bear--
United States. Without them, we would be a mere alliance of many 
separate parts.'' \5\ All states--regardless of their population 
density, geographical size or economic status--depend on their 
transportation systems for their economic vitality and quality of life.
---------------------------------------------------------------------------
    \5\ A 10-Year National Highway Program--A Report To The President, 
The President's Advisory Committee On A National Highway Program, Clay 
Committee, 1955.
---------------------------------------------------------------------------
    The Commission's report does not specifically define ``rural 
states.'' These states generally have higher lane miles and fewer 
people to support the upkeep of their roads. In many states, the 
ability to raise adequate revenues through property and income taxes is 
limited. They likely have inadequate Vehicle Miles Traveled (VMT) to 
support a privately managed toll system. In addition, they may have 
limited transit services and certainly not the typical transit system 
found in an urbanized area. These states have elderly residents and 
residents with disabilities who cannot drive and have severely limited 
mobility options. They may have one or two larger cities, but beyond 
the urban area, the state's population is rural in nature. There are 
likely between 20 and 25 states that fall into the ``rural state'' 
category.
    Urban congestion may impact the daily lives of most of us, but we 
cannot ignore the extreme needs of our rural areas. Many trips begin, 
end or travel through rural areas. Rural roads and rail lines are both 
critically important in moving our goods to market. Rural transit 
services must be implemented to serve residents with limited mobility 
options. The Commission recommends the ``Connecting America'' program 
to address the needs of all states with rural areas and to assure the 
national character of our transportation system.
The Future of the Highway Trust Fund and Paying the Bill
    Our final task was to address financing. Commissioners agreed that 
our Nation showed uncommon wisdom in establishing the Highway Trust 
Fund (HTF). The Clay Committee actually recommended debt financing, 
specifically bonding, as an approach to funding its ten-year highway 
plan. The Congress looked at this proposal and rejected it, believing 
instead that a pay-as-you-go system was in the best interest of the 
Nation. In light of the current issues with debt across our economy, we 
should all be grateful for your predecessors' wisdom on this issue.
    The Commission came down strongly on the side of a multi-modal 
system where all modes are treated similarly in terms of their access 
to the trust fund. We recommend renaming the Highway Trust Fund the 
Surface Transportation Trust Fund (STTF). States would then be able to 
choose the right transportation solution--instead of selecting a less-
preferable option that assures access to Federal funding.
    We spoke plainly in our Commission report: there is no free lunch 
when it comes to financing. Our Commission came down strongly on the 
side of a pay-as-you-go system. We do not believe that this is the time 
to make Federal transportation investments based on more debt. We also 
faced up to the issue that the Nation's transportation needs are 
enormous. Our report outlines a variety of revenue sources that could 
be, and likely should be, tapped to fund the investments we see as 
important.
    We recognized that in order to bring freight and passenger rail 
investments into the trust fund, the trust fund's resources must be 
increased significantly. The recommendation of a gas tax increase of 25 
to 40 cents over 5 years, with subsequent indexing to the Consumer 
Price Index, has been widely reported. Other recommended revenue 
increases to support the new STTF include an increase in container 
fees, custom duties, ticket taxes, and tax incentives for freight 
transportation businesses investing in transportation infrastructure. A 
carbon tax could be instituted or a cap-and-trade system adopted to 
reduce greenhouse gas (GHG) emissions. The Commission believes it is 
appropriate for transportation activities that contribute to reductions 
in GHG emissions to receive a proportionate share of these revenues.
    The Commission looked carefully at private sector investment in 
large Interstate projects through the use of long-term leases. The 
Interstate and National Highway Systems were built with user fees paid 
for by the citizens of this Nation. Fundamentally, the Commission 
agreed that the roads and transit systems are not only a public asset; 
they are, more importantly, a public good. Public ownership assures 
that policymakers are responsible to citizens for the maintenance and 
improvement of our transportation assets. It also assures that the 
value of these assets--and the sizable public investment made in them--
accrues to citizens. As these assets are tolled to limit transportation 
demand, the mobility of our citizens and businesses is also limited. In 
my view, that is not a sound transportation vision for our Nation.
    For that reason, the Commission developed protections to assure 
that public assets and the public good are protected. The current 
issues plaguing Wall Street and our economy with regard to leveraging 
by large investment banks should be considered in relation to 
transportation financing. Leveraging is used in many of the deals 
negotiated by states and local governments with the private sector. 
Bear Stearns was involved in transportation financing, both as a bidder 
on projects and as a consultant to governments reviewing private sector 
bids. For the past decade, Bear Stearns hosted transportation 
conferences focused on increasing private investment in what has been 
primarily a public sector-financed transportation system.
    Congress will ultimately have to address how to treat the ``shadow 
banking system'' with its leveraged deals supported by complex 
financial instruments that bypass financial regulation.\6\ Many of the 
deals negotiated by states include private equity firms. We should not 
allow private companies to take their profits from our transportation 
system, while the public takes the risk. My view may be considered old-
fashioned; perhaps that is why so many U.S. DOT programs that advocate 
debt call it ``innovative financing.'' In my world, debt is debt. It 
has its place, but it should be considered carefully.
---------------------------------------------------------------------------
    \6\ Krugman, Paul, ``Partying Like It's 1929,'' The New York Times, 
March 21, 2008.
---------------------------------------------------------------------------
The Highway Trust Fund Challenge for Federal Fiscal Year 2009
    Before closing, let me comment on the current challenge facing the 
Highway Trust Fund. As this Committee is aware, the Congressional 
Budget Office (CBO) estimates that by the end of Federal Fiscal Year 
(FFY) 2009, the Highway Account of the HTF will have a negative cash 
balance of $1.4 billion. The Treasury's estimate for the HTF-Highway 
Account deficit is a negative $3.4 billion. I asked my staff to 
evaluate the impact of the estimated HTF-Highway Account deficit on 
Wisconsin in FFY 2009 if no corrective action is taken. The following 
chart identifies how Wisconsin's highway funding would be affected 
under the various proposals, using CBO estimates. Recall, if this graph 
illustrated Treasury estimates, the FFY 2009 impact would be much 
greater. All states will be similarly impacted by the HTF-Highway 
Account deficit.


    The next graph shows the long-term impact of the HTF-Highway 
Account cash balance if the Administration and Congress take no action. 
Again, the chart is based on CBO estimates of the HTF-Highway Account 
deficit; the Treasury estimates would show a more significant reduction 
in highway funding to Wisconsin in the earlier years. Like the chart 
above, the estimates for future years can be compared with Wisconsin's 
highway funding for FFY 2008.


    With no revenue solution, the Mass Transit Account of the HTF will 
go negative in FFY 2012. With no revenue solution, neither account will 
regain its FFY 2008 level until the mid-2020s. With no revenue 
solution, the Federal funding partnership in transportation, for all 
intents and purposes, will end.
    I am disappointed that the approach taken by the President's budget 
is to transfer funding from the HTF-Mass Transit Account to the HTF-
Highway Account, moving the Transit Account deficit 1 year closer. I am 
troubled by the Administration's unwillingness to address the negative 
cash balance in the HTF-Highway Account. Like every challenge, if this 
issue were confronted earlier, the fix would have been easier. Instead, 
the burden of meeting this challenge is left for Congress, making the 
reauthorization discussion next year all the more difficult.
    I want to thank the Committee for the opportunity to provide my 
views on our Commission's work and the short-term issues associated 
with the potential negative HTF-Highway Account cash balance. Despite 
this short-term challenge, I hope that in the Commission report you 
will find a sound blueprint for the next golden age of transportation 
in the United States.

    Senator Pryor. Thank you.
    Our next witness will be Mr. Steve Heminger, he's a 
Commission member, of course, and Executive Director of the 
Metropolitan Transportation Commission for the San Francisco 
Bay Area.

           STATEMENT OF STEVE HEMINGER, COMMISSIONER,

           NATIONAL SURFACE TRANSPORTATION POLICY AND

       REVENUE STUDY COMMISSION; AND EXECUTIVE DIRECTOR,

             METROPOLITAN TRANSPORTATION COMMISSION

    Mr. Heminger. Mr. Chairman, and Senators, thank you for the 
opportunity to testify today, I do apologize about having to 
depart early, because of a change in my airline schedule plans.
    If you have a hearing on airline travel, please invite me 
back.
    [Laughter.]
    Mr. Heminger. I can fill you up with a lot of information, 
I'm sure most Americans can these days.
    In my brief testimony, I'd like to describe 2 of the 10 new 
Federal surface transportation investment areas which we 
propose to replace the 108 different spending categories in 
current law that Jack had described.
    The first is in the area of congestion relief, and has the 
working title of Metropolitan Mobility. In simple terms, this 
new program is designed to decongest our major urban areas.
    The Census Bureau tells us to expect 120 million more 
fellow citizens by the year 2050, and from a transportation 
point of view, that kind of growth wouldn't be too tough to 
handle, if it were spread across our vast country--but it won't 
be.
    Most of these new Americans will live where most of today's 
Americans live--in metropolitan areas. These urban centers are 
the economic engines of the Nation, and they are bound to 
become even more vital, as America's population continues to 
urbanize and cluster near large cities.
    In our report, we have focused on major metropolitan areas 
with more than 1 million residents. These 50 or so areas 
account for about 60 percent of the Nation's population in GDP, 
but these same areas capture an astonishing 90 percent of 
national market share for 3 key transportation indicators--
traffic congestion, transit ridership, and population exposure 
to auto-related air pollution. In a nutshell, these major 
metros are where the transportation action is.
    In 1982, only Los Angeles experienced congestion levels 
that exceeded 40 hours per year for the average commuter. 
Today, that level of traffic delay has spread to nearly 30 
urban areas around the country. We think the Nation needs to 
set ambitious targets to reduce traffic congestion in these 
areas--not just slow the rate of increase.
    In order to do so, metropolitan officials will surely need 
more resources, but they will need more authority, as well, to 
implement market-based strategies like congestion pricing, to 
help unclog some of our key commute and freight corridors. And 
with added resources and authority, we believe strongly, should 
come accountability, to meet the mobility targets they set. 
That's what our Commission report means, when we say 
performance-based, and outcome-driven. We believe it's time to 
stop complaining about traffic congestion, and start doing 
something about it.
    The second area is in saving lives, and I was gratified 
that so many of you mentioned that in your opening remarks, and 
I'm afraid to say that, put bluntly, our track record on 
highway safety in America is a national tragedy. Every year, 
40,000 of our fellow citizens die on the Nation's highways, 
which is equivalent to a 9/11 every month, month after month, 
year after year.
    In addition to the horrible human costs, the economic 
consequences are enormous. According to a study released just 
last month by AAA, the annual cost of traffic crashes in lost 
earnings, medical bills, and other economic impacts is nearly 
2.5 times the annual cost of traffic congestion, in the 
Nation's urban areas.
    We constantly hear Federal officials claim that safety is 
job one, and the current Transportation Act is even named 
``SAFETEA,'' yet the carnage continues. With the exception of 
many rural roads that do need to be upgraded, our highways 
themselves are pretty safe--it's the drivers who are dangerous. 
Driver behavior is where we need to devote much more attention 
than we have in the past. Just as countries very similar to 
ours--like Great Britain and Australia--have done so, and 
achieved much lower fatality rates than our own.
    Our Commission report proposes an aggressive--but 
achievable--goal of cutting traffic fatalities in half by 2025. 
We can reach that goal, but only if the combined might and 
muscle of our Federal, State and local governments are brought 
to bear. If we do reach that goal, it would mean 20,000 more 
Americans every year would be able to tell their loved ones 
about their drive home from work each day.
    In conclusion, Mr. Chairman, I do appreciate this 
opportunity to testify. I hope we are conveying to you today 
how strongly we feel, and what a great sense of urgency we feel 
in conveying this message about the worsening conditions of our 
Nation's transportation infrastructure. The inefficiencies and 
under-investment that plague the Nation's transportation 
network aren't just about concrete, asphalt and steel--they 
jeopardize our national security, they damage our ability to 
compete in a global economy, and they harm our enviable quality 
of life.
    These conditions--to use a phrase that Senator Hutchison 
used--are unacceptable. Our Commission spent 2 years looking 
for a near-term alternative to the gas tax, but we couldn't 
find one. Our simple message to the Congress--and perhaps it's 
an unpleasant one--is that if we want a better transportation 
system, we are going to have to pay for it.
    Thank you.
    [The prepared statement of Mr. Heminger follows:]

 Prepared Statement of Steve Heminger, Commissioner, National Surface 
   Transportation Policy and Revenue Study Commission; and Executive 
            Director, Metropolitan Transportation Commission
    Chairman Inouye, Vice Chairman Stevens and Members of the 
Committee. My name is Steve Heminger, and I am Executive Director of 
the Metropolitan Transportation Commission (MTC). MTC is the 
metropolitan planning organization for the nine-county San Francisco 
Bay Area. It allocates more than $1 billion per year in funding for the 
operation, maintenance, and expansion of the region's surface 
transportation network. MTC also serves as the Bay Area Toll Authority 
(BATA) responsible for administering all toll revenue from the seven 
state-owned bridges that span the Bay. BATA has a ``AA'' credit ratings 
and has issued over $5 billion in toll revenue bonds to finance bridge, 
highway, and transit construction projects.
    I was appointed to the National Surface Transportation Policy and 
Revenue Study Commission by House Speaker Nancy Pelosi. It was a rare 
privilege to serve on that Commission, just as it is a distinct honor 
to appear before this Committee today to discuss our commission's 
findings and recommendations. In my brief testimony, I would like to 
describe two of the ten new Federal surface transportation programs 
which we propose to replace the 108 different spending categories in 
current law. These two new programs meet the rigorous test we developed 
for a new beginning in U.S. surface transportation policy: that the 
Federal investment strategy should be performance-driven, outcome-
based, generally mode-neutral, and refocused to pursue objectives of 
genuine national interest.
1. Congestion Relief
    The first of these new Federal investment programs has the working 
title of Metropolitan Mobility. In simple terms, it is designed to 
decongest our major urban areas. The Census Bureau tells us to expect 
120 million more fellow citizens by the year 2050. From a 
transportation point of view, that kind of growth wouldn't be too tough 
to handle if it were spread across our vast country. But it won't be. 
Most of these new Americans will live where most of today's Americans 
already live: in metropolitan areas. These urban centers are the 
economic engines of the nation, and they are bound to become even more 
vital as America's population continues to urbanize and cluster near 
large cities.
    In our commission report, Transportation for Tomorrow, we have 
focused on major metropolitan areas with more than 1 million residents 
(see Exhibit 1). These 50 or so areas account for about 60 percent of 
the Nation's population and GDP--that's impressive enough. But these 
same areas capture an astonishing 90 percent of national market share 
for three key transportation indicators: traffic congestion, transit 
ridership, and population exposure to auto-related air pollution (see 
Exhibit 2). In a nutshell, these major metros are where the action is.



    In 1982, only Los Angeles experienced congestion levels that 
exceeded 40 hours per year for the average commuter. Today, that level 
of traffic delay has spread to nearly 30 urban areas across the country 
(see Exhibit 3). We think the Nation should set ambitious targets to 
reduce traffic congestion in these areas--not just slow the rate of 
increase. In order to do so, metropolitan officials will need more 
resources. But they will need more authority as well--to implement 
market-based strategies like congestion pricing to help unclog some of 
our key commute and freight corridors. And with the added resources and 
authority should come accountability--to meet the mobility targets they 
set. That's what our commission report means when we say ``performance-
based'' and ``outcome-driven''. We believe it's time to stop 
complaining about traffic congestion, and start doing something about 
it. As former Transportation Secretary and former Congressman Norm 
Mineta has said: ``Congestion is not a fact of life.''


    A principal cause of traffic congestion in our metropolitan areas 
is that trucks carrying goods and autos carrying commuters are 
competing for the same scarce road space. In addition, several major 
urban areas--including my own--are home to the Nation's largest 
seaports where containerized cargo enters and exits the United States 
(see Exhibit 4). That is why our report advocates strategies to grow 
the market share of both freight and passenger travel that occurs on 
the Nation's rail network. It is also why the linkage between the 
Metropolitan Mobility Program and the new Freight Transportation 
program we recommend will be so critical to the success of reducing 
urban traffic congestion.


2. Saving Lives
    Put bluntly, our track record on highway safety in America is a 
national tragedy. Every year 40,000 of our fellow citizens die on the 
Nation's highways--that's equivalent to a 9/11 every month, month after 
month, year after year (see Exhibit 5). In addition to the horrible 
human cost, the economic consequences are enormous. According to a 
study released just last month by the American Automobile Association, 
the annual cost of traffic crashes in lost earnings, medical bills, and 
other economic impacts is nearly two and a half times the annual cost 
of traffic congestion in the Nation's urban areas--$164 billion for 
traffic crashes vs. $68 billion for congestion.


    We constantly hear Federal officials claim that safety is Job #1, 
and the current transportation act is even named SAFETEA, yet the 
carnage continues. With the exception of many rural roads that need to 
be upgraded, our highways themselves are pretty safe--it's the drivers 
who are dangerous. Driver behavior is where we need to devote much more 
attention than we have in the past, just as countries very similar to 
ours--like Great Britain and Australia--have done so and achieved much 
lower fatality rates than our own (see Exhibit 6).


    Every state should have a primary seat belt law, but only half do. 
Every state should have a motorcycle helmet law, but only 20 do. Every 
state should have an ignition interlock law that prevents repeat drunk 
drivers from starting their car if they're not sober, but less than a 
handful do. And once those laws are passed, they need to be vigorously 
enforced to ensure compliance.
    Our commission report proposes an aggressive but achievable goal of 
cutting traffic fatalities in half by 2025. We can reach that goal, but 
only if the combined might and muscle of our Federal, state, and local 
governments are brought to bear. If we do reach that goal, it would 
mean 20,000 more Americans every year would be able to tell their loved 
ones about their drive home from work each day.
    Again, I appreciate the opportunity to testify before the 
Committee. My Commission colleagues and I feel a great sense of urgency 
in the message we convey to you today about the worsening condition of 
the Nation's transportation infrastructure. The inefficiencies and 
underinvestment that plague the Nation's transportation network aren't 
just about concrete, asphalt, and steel. They jeopardize our national 
security, damage our ability to compete in a global economy, and harm 
our enviable quality of life. We simply cannot afford to pass this 
problem onto the next generation. The time to act is now.

    Senator Pryor. Thank you.
    Our next witness will be Mr. Matt Rose. He's Chairman, 
President, and Chief Executive Officer of BNSF Railway.

 STATEMENT OF MATTHEW K. ROSE, PRESIDENT AND CEO, BNSF RAILWAY 
  COMPANY, AND COMMISSIONER, NATIONAL SURFACE TRANSPORTATION 
              POLICY AND REVENUE STUDY COMMISSION

    Mr. Rose. Thank you, Mr. Chairman.
    It's a pleasure to be here with you today, I'm sitting next 
to my colleague, Pat Quinn, who represented the ATA as CEO of 
U.S. Xpress, one of our largest shippers in the trucking 
industry. Pat and I spent a lot of time on this over the last 
couple of years, thinking about the freight side of what--what 
you all asked us to study. I brought a couple of slides, if the 
technology will come on here, in a minute. But what I want to 
do is just take you through a couple of facts of what we 
accumulated during this 2-year process.
    The first one, really, begs the question of what's 
different right now for the next 25 years, versus the past 25 
years? And simply said, the big difference is that we've really 
used up all of the excess capacity that we've had in both the 
highway system and the rail system.
    Let me give you just a couple of examples. In the railroad 
system, over the last 25 years, we've actually reduced rail 
miles by almost 40 percent in this country. So, we've reduced 
rail miles by 40 percent, yet we've increased gross ton miles, 
or units of measure, by almost 65 percent.
    In the highway system, we've actually increased highway 
miles by about 7 percent in terms of adding to our highway 
system, but look at what we've done in terms of VMTs, vehicle 
miles traveled, increasing almost 96 percent.
    And so, where we found ourselves is really at the tipping 
point, in terms of all of the excess capacity. All of these 
various networks is now gone, and as we think about the next 25 
years, it really is a significantly different business 
proposition, versus the past 25 years.
    The next issue, really, that will drive what we firmly 
believe will be a transportation crisis, is really just the 
issue of compounding numbers of population growth, of trade 
growth, of GDP growth--whatever you want to look at. If you 
think about just what a 2 percent growth of GDP--which is 
something that we would all expect to rely on for this 
economy--you can see the type of numbers that that's going to 
relate to.
    We're going to end up seeing our population grow to about 
338 million people by the year 2020, again, that's going to 
only be a CAGR of about 1 percent, but look at what happens to 
the gross ton miles of the freight network--it's going to have 
to grow by about 2 percent, just to keep up with this normal 
growth in the economy.
    Senator Smith mentioned the issue of congestion costs in 
our economy, Texas A&M actually studies congestive costs, which 
is a interesting proposition. Texas A&M will report right 
around that number the Senator mentioned, about $70 billion a 
year.
    And while that may not sound like a lot on a $13 trillion 
economy, again, the congestive costs start to multiply, and by 
the year 2020, they're expecting for the economy to see about 
$200 billion worth of congestive costs.
    One of the other ways that our shippers, your manufacturing 
companies, the retailers of the country--they see these 
congestive costs when we measure supply chain costs as a 
percent of GDP. This number in our country has fallen every 
year for the past several decades, to where the United States 
has the most efficient supply chain costs of anywhere in the 
world.
    And you say, ``Well, how does that relate?'' Well, quite 
frankly, it allows us to be global traders, and it allows us to 
get our goods to places all around the world. We have done this 
through Just-In-Time, we've done this through excellent highway 
systems, railroad systems, all of these things.
    You'll notice, though, the last couple of years, that line 
started to tick up. And that's, really, what the customers and 
what our consumers are starting to see--the transportation is 
actually becoming inverted, and actually starting to cost our 
economy, going forward.
    Well, the Commission recommended a number of things for 
freight rails, specifically, to include tax incentives to 
stimulate more growth, rational regulation to make sure that 
the regulatory model that we're under would incentivize 
railroads like myself to be able to invest more in our rail 
property, and not less. Finally, the Commission took a mode-
neutral approach against all of the programmatic reforms that 
I've outlined.
    One of the great opportunities that, quite frankly, our 
society has is to rely more on freight rail, and this is a 
chart that shows the cumulative investment of the railroad 
industry over the last 10 years, and you can see the line in 
the year 2006 and the all-time record high of almost $10 
billion, if you add all of the various capital that we see 
flowing through the system.
    And again, the line graph there represents return on 
invested capital. This business model, while it isn't perfect, 
it's working very, very well, as return on invested capital is 
increased for the railroad industry, you're seeing the 
railroads spend record levels of capital investment.
    The other thing that, through the Commission, we did, for 
the first time ever, we put together the large Class Is, in a 
virtual sense, and looked at going out to the year 2035 and 
asked the basic question, ``Will the railroads have enough 
capacity to handle that 2 percent CAGR growth for the next 25 
and 30 years?'' And what we found, that right now, if you think 
about that growth again--both population as well as GDP--the 
railroads will need to spend about $135 billion through this 
period, through the year 2035, in our physical plant, to be 
able to handle this level of growth. Right now, at spending at 
record capital amounts, the railroads will spend about $70 
billion.
    We would also expect through better productivity, to get an 
additional $26 billion, because productivity is our friend in 
terms of capacity creation. We're totaling about $96 billion, 
or $100 billion, so that leaves us with a gap of about $40 
billion that the railroads need to find a way to solve for, to 
be able to handle the future rail capacity of our country.
    So, the question obviously is, how do we close that gap? 
Senator Smith and others have been instrumental in helping us 
think through what will make railroads invest more money? And 
we've been proud to support the Senator's Capacity Expansion 
Act--which is really an investment tax credit that will 
incentivize railroads to go out and do things that they 
otherwise wouldn't have done.
    You all just passed a stimulus bill here, recently, that 
had in it some accelerated depreciation, and railroad CEOs like 
myself did exactly what the smart economists told you we would 
do--we went out and we upped our capital program for this year 
by buying more locomotives and other things, that that would 
allow us to take advantage of those various tax instruments.
    The other thing you'll hear from this Commission time and 
time again is the need to really develop--to develop a national 
freight program. Everywhere we went in the country, the thing 
that was most compelling, I think, to the Commissioners was how 
significant this issue was raised around a freight mobility 
crisis--not only on the highways--but also in the overall 
railroads. And examples of this are listed here. Things like 
rail corridor developments, inter-modal connectors, looking at 
implementation of train control technology--all of these 
things, again, define ways to increase the overall freight 
rail, and freight capacity of our overall network.
    We studied a lot around public-private partnerships. We 
studied what would be the ideal-type public-private 
partnerships and what should be the principles around these 
public-private partnerships? And here are a couple of things 
the Commission recommended--everything from standardization of 
these public-private partnerships to making sure that there are 
no misallocation of public funds to these projects. Making sure 
that all of the grants and loans and public financing for rail-
related projects doesn't supplant or diminish actual private 
investment that we see going on right now.
    We also looked about the real, underlying realization of 
our global society now, and quite frankly, global trade is one 
thing that has really changed our transportation 
infrastructure, and we spend a lot of time discussing a freight 
fee, whether or not we could support something like that.
    And we looked at a lot of different models, my favorite is 
to direct a portion of the Customs fee out of the current 
process, a 5 percent direction of a Customs fee into a national 
freight fee, would provide almost $2 billion a year to apply to 
those bottlenecks that we have in these freight areas all over 
the country.
    There's a lot of issues, though, when we think about a 
Customs fee--or any type of freight fee--that must come into 
play. First, it really must link and dedicate--as directly as 
possible--to the use of what you're trying to remediate. It's 
got to be predictable, it's got to be dedicated and sustained 
on a pay-as-you-go basis. And, it can't discriminate. It has to 
be--the ultimate consumer will bear the cost, and, most 
importantly, we believe it needs to be nationally coordinated.
    As Frank mentioned, we spent a lot of time on passenger 
rail, and we did spend a lot of time looking at the regional 
passenger rail, because we believe this is the most efficient 
way to be able to take vehicles off the highway system, given 
also what we know is ahead of us in terms of greenhouse gases 
and our crisis on foreign oil imports.
    With all of these things, there's a lot of warnings ahead 
in terms of when we start changing the actual funding of all of 
these various systems. There are some cautions. First, the 
public will not accept higher fuel taxes and other fees, if the 
system isn't overhauled. In other words, every dollar of 
transportation that we spend in this country, has to go to 
remediating transportation issues.
    Second, shippers will not accept any type of user fee, 
unless principles around those investments are fair and 
transparent. For example, inter-modal shippers should not pay 
for coal capacity expansion, and vice versa.
    Third, railroads will not accept public funds with 
obligations not central to the investment, if strings are 
attached.
    And fourth, we all agree that the lack of action will 
result in further degradation of our transportation efficiency, 
and ultimately affect our global competitiveness.
    [The prepared statement of Mr. Rose follows:]

Prepared Statement of Matthew K. Rose, President and CEO, BNSF Railway 
 Company and Commissioner, National Surface Transportation Policy and 
                        Revenue Study Commission
    Good morning Chairman Inouye, Vice Chairman Stevens and Members of 
the Committee. I want to thank you for the opportunity to appear before 
you today to discuss the National Surface Transportation Policy and 
Revenue Study Commission's report and findings.
    At the outset, I would like to say that it has been an honor to 
serve on this Commission, and I was privileged to work with my fellow 
Commissioners, each of whom brought a unique perspective to our work 
and from which I learned a great deal. I would also like to thank 
Department of Transportation Secretary, Mary Peters; former 
Transportation Secretary, Norm Mineta; and acting Transportation 
Secretary, Maria Cino, for their collective leadership in chairing the 
Commission. I can tell you that considering the expertise and strongly 
held views of the Commissioners, leading this group was no small task.
    My own perspective, of course, is shaped by my long career in the 
freight logistics business, and I should make it clear that I speak 
only for myself, as a Commissioner, and not for the railroad industry 
as a whole. The Commission's deliberations addressed a number of issues 
about which a railroad CEO naturally has some skepticism--such as 
expanding the highway system, a larger passenger rail program and a 
Federal freight program partially funded by a user fee. Thus, it was 
important to me that the Commission's recommendations, especially those 
for achieving freight and passenger mobility goals, were effective and 
not made at the expense of stakeholders in America's freight system. I 
believe the Commission generally has succeeded in this regard and that 
the Commission's proposals on these subjects should be carefully 
considered by Congress as it develops a comprehensive transportation 
program aimed at sustainably preserving mobility and economic growth.
    Regardless of whether some or all of the Commission's 
recommendations are enacted by Congress, I believe this report is an 
unqualified success in demonstrating to Congress--and the drivers and 
consumers who elect them--that freight mobility is essential to jobs, 
global competitiveness and quality of life.
    When the Commission began its deliberations and receiving the views 
of the public almost 2 years ago, it was clear to me that key 
transportation, economic development and academic experts understand 
how critical freight transportation is to the U.S. economy. Witness 
after witness from every part of the country underscored the importance 
of decongesting and expanding freight networks. Frankly, I was a little 
surprised and pleased at how the importance of freight mobility is 
increasingly appreciated outside of the logistics community.
    Thus, goods movement became a fundamental element of the 
Commission's work. The Commission made policy and programmatic 
recommendations to promote efficient freight networks, in contrast to 
the nearly exclusive focus on passenger mobility in all of the 
preceding comprehensive surface transportation laws. In fairness, 
things are different today than they were even at the time of enactment 
of the last surface transportation bill. The Commission found that we 
are at a freight capacity tipping point. For all modes, freight 
capacity is tight, reflected in both higher costs to the supply chain 
and consumers and in the environmental impacts associated with 
congestion and increased volumes.
    One of the most important byproducts of this report is the 
Cambridge Systematics/AAR Study, which benchmarks current U.S. freight 
rail capacity in key corridors and projects needed to expand capacity 
into the future, based on freight volume growth levels presumed by the 
Commission. Such a study has never been done before; it was not 
necessary. Now, however, the economy is a reflection of the freight 
rail network, and policymakers should have a better understanding of 
what that means, the consequences of inaction and be given 
recommendations for a path forward.
    As many of you on the dais know, I invariably ask elected officials 
to weigh policy proposals against whether implementation will result in 
more freight capacity, or less. The Cambridge Study tells us how much 
more freight rail capacity the country needs if we want to continue to 
realize the economic and environmental benefits of an efficient 
national freight rail network. Understanding future freight rail 
capacity needs will also help policymakers evaluate whether public 
policy proposals--on passenger rail, public-private partnerships, 
economic and other regulation--help achieve needed freight rail 
capacity expansion, the vast majority of which has been, and will 
continue to be, privately funded and maintained by the railroads.
    The Commission concluded that freight rail capacity needs to be 
expanded systematically over the next 15, 30 and 50 years, and also 
determined that freight rail market share should be increased. 
Significantly, the Commission recognized that private investment is the 
key driver of freight rail network expansion. I know first-hand that if 
government regulation--economic, safety, security, environmental, 
labor--is not based in cost-benefit analysis and an understanding of 
the impact of implementation on re-investment, it will choke off 
private spending on expansion capital. Obviously, railroads are not the 
only private sector provider of transportation to whom this principle 
applies. Thus, the Commission found that rational regulatory policy is 
important to successfully promoting investment and productivity for all 
of the Nation's private sector providers of transportation. This is one 
of the most important conceptual underpinnings of the report.
    The Commission also recognized the value of tax incentives in 
spurring needed investment in capacity expansion. It recommended a 
Federal investment tax credit as a way to expand rail network capacity. 
This has been proposed by the freight rail industry as a way to invest 
faster to meet market demand. The expansion tax credit, together with 
immediate expensing of the remaining 75 percent of capital investment, 
would reduce expansion project costs by approximately 30 percent. The 
net effect is that project return would increase by 3 percent to 4 
percent, making the investment in expansion more likely and on an 
earlier timeline. It is enough of an incentive so that a good 
investment will be made earlier, but not excessive so as to spur a bad 
investment. The Commission's recommendation extends also to the 
maintenance tax credit needed by the short line industry.
    Beyond tax policy, this Committee should also seriously consider 
the Commission's new freight mobility programmatic recommendations to 
the surface transportation programs. Specifically, the Commission 
recommended a freight program which is intended to afford broad 
flexibility to implement freight-related projects that are currently 
beyond the traditional modal authorizations. With regard to freight 
rail, the Commission recognized that there are projects that produce 
substantial public benefits but from which railroads would not benefit 
enough operationally to make the investment on their own. These 
projects might reduce vehicular congestion, transportation 
environmental impacts or even improve freight efficiency; however, 
there is a higher need for the railroad's finite investment dollar 
elsewhere. This proposed freight mobility program helps bridge the gap 
between the projects in which the railroads must invest to keep 
networks strong and expanding to meet market demand and projects that 
serve national, state and local freight mobility goals. Projects 
eligible for the freight mobility program would serve the public 
interest in improving mobility and eliminating chokepoints and their 
related environmental impacts.
    The Commission envisioned eligible public-private partnership 
projects to include intermodal connectors, strategic national rail 
bridges where the cost of construction exceeds return on private 
invested capital, train control technology and assistance in corridor 
development. In addition, eligibility would include development of 
``green'' intermodal facilities and operations, and on/near dock 
facilities, which can reduce vehicular congestion, emissions and noise 
and can improve safety.
    Proposed projects would be the product of cooperation between 
freight railroads and the public sector--as they are now--but with the 
formality imposed by a National Freight Transportation Plan, which 
calls upon Federal, state, local and private stakeholders to evaluate 
projects using cost-benefit analysis. This process also will formally 
implement the principles recognized by the Commission that public 
entities and private entities should pay for their respective benefits, 
that publicly-funded projects should not require non-economic private 
investment or service, and that public investment should not supplant, 
diminish or strand private investment.
    The Commission made a recommendation that more funding from a 
variety of sources should help pay for the projects undertaken through 
this program. These include gas tax revenues, a portion of the existing 
Customs revenues, and potentially a freight fee and any carbon-related 
revenues that may result if Congress regulates green house gases. In 
addition, the Commission acknowledged that freight projects should 
receive funding from other programs--environmental, passenger rail, 
transit, metropolitan mobility--if they meet the goals of those 
programs.
    I believe that, since trade is the key driver for these increasing 
volumes, Customs duties are an appropriate stream of revenue for 
funding a freight program. Customs duties, with established collection 
and administration, have the added benefit of not displacing freight 
between ports of entry. Dedicating 5 percent of current Customs duties 
for investment in freight projects would generate about $1.8 billion 
annually and $20 billion cumulatively through 2017. Dedicating 10 
percent of current Customs revenues would yield $3.6 billion annually 
and $49 billion cumulatively through 2017.
    The Commission was not specific about the form of any freight fee 
which Congress might authorize--such as a container fee, or waybill 
surcharge. However, it did correctly qualify that any fee considered by 
Congress should be designed to ensure that commerce is not burdened. At 
the same time, Congress should ensure that local and state 
proliferation of such fees are, in general, preempted. In addition, no 
mode of transportation or port of entry should be unduly advantaged or 
disadvantaged. A national freight fee is preferred to individual state 
fee initiatives that are now emerging in several states, which may 
inadvertently distort global trade flows and result in diverting 
congestion from one port region to another. A national fee is the best 
way of keeping a level playing field across national freight networks.
    The Commission also found that a fee must be designed to ensure 
that the ultimate consumer bears the cost. This means that any freight 
fee is paid by the beneficial cargo owner, not transportation 
intermediaries such as steamship, trucking, or rail companies. An issue 
with fees assessed against carriers is their inability to pass these 
fees on in a competitive marketplace, which will result in reducing 
their ability to re-invest. Furthermore, the administrative burden to 
bill and collect a Federal freight fee should not be put on the private 
sector.
    The Commission recognized that the payers of such a fee must 
realize the benefit of improved freight flows resulting from projects 
funded by the freight program. This is a fundamental user fee 
principle. It is essential to recognize that any freight fee is the 
shipper's money--private funding--which should be invested in ways that 
result in increased freight velocity, capacity and additional 
reliability. It will take additional revenues from all sources--
including gas taxes, Customs duties and potentially revenues from any 
greenhouse gas regulatory program--to better meet the public's mobility 
and environmental goals.
    I expect that freight stakeholders and Congress will have a strong 
debate about specifics of a freight fee and whether a ``freight trust 
fund'' should be created to administer it. The rail industry has long 
been opposed to that concept because there is little ``trust'' that the 
funds would flow to projects that meet the goals of an integrated 
goods-movement strategy--versus the political earmarking process. The 
Commission called upon Congress to create an accountable and 
transparent programmatic linkage between an assessed freight fee and 
the selection and funding of projects that facilitate growing trade-
driven freight volumes.
    In my opinion, conditions placed by Congress around the use of the 
freight fee will be critical to whether freight stakeholders are able 
to come to agreement on such a proposal. To ensure the wisest use of 
resources, the Commission recommended the development of a National 
Freight Plan and a NASTRAC to ensure that only effective, high priority 
projects would receive funding. In the absence of some kind of strong 
program governance for funding freight projects, I could not support 
any freight fee and related freight trust fund.
    Next, I would like to address the passenger rail recommendations of 
the Commission's findings and recommendations. I believe that it is 
self-evident that passenger rail has a place in America's 
transportation future, given the energy and environmental challenges 
this country faces.
    First and foremost, this country should raise its sights and view 
separated right of way, high-speed passenger rail as a starting point, 
rather than an end point, of its passenger rail vision. 
Incrementalism--where more passenger rail is added to existing freight 
networks until capacity is full--will be frustrating and potentially 
counterproductive in light of growing freight volumes. This Committee 
should commit itself to a bold vision of high-speed passenger rail in 
the next transportation bill.
    However, the current reality is a system of joint use by freight 
and passenger rail. While the Commission envisions high speed rail, it 
also addressed the joint use model and, in so doing, was clear about 
the need to protect and expand the underlying freight network. 
Throughout the Commission's passenger rail discussions, it recognized 
that it is nonsensical to impede operations and expansion of freight 
rail, the most fuel- and cost-efficient and environmentally friendly 
means of moving growing volumes, thus driving freight to the Nation's 
highways. That is an important externality in any cost-benefit 
analysis.
    Specifically, the Commission upheld the principle that access by 
passenger providers to freight rail networks, where reasonable, must be 
negotiated at an arm's length with freight railroads, and the impact on 
present and future corridor capacity must be mitigated to ensure that 
rail freight capacity is not reduced, but enhanced. This recognizes 
that speed differences between passenger and freight trains and certain 
well-defined passenger service requirements must be taken into account 
and that there must be a fair assignment of costs based on the ongoing 
cost of passenger services. These costs include the cost of upgrading 
and maintaining track, signals and structures to support joint freight 
and passenger operations, and the costs associated with sealed or grade 
separated joint use corridors. Finally, it goes without saying that all 
host railroads must be adequately and comprehensively protected through 
indemnification and insurance for all risks associated with passenger 
rail service. In short, the Commission's vision recognizes that in 
order to be a true transportation alternative for Americans, passenger 
rail cannot be achieved on the cheap, as it has been to date.
    I would like to point out the other findings and recommendations in 
the report that have positive implications for freight mobility. The 
Commission made extensive recommendations for streamlining the project 
permitting process and specifically recognized that privately funded 
freight rail projects often face the same costly challenges and delays. 
In our discussions, the importance of preserving Federal pre-emption in 
this regard was recognized. In addition, the Commission recommended an 
environmental stewardship program, which recognizes ways to improve the 
environmental impacts of freight operations. The recommendations 
envision tax incentives for deployment of cleaner locomotives, and 
funding for retrofitting locomotives with clean-burning technology.
    I believe the Commission succeeded in this report in bringing the 
rail sector to the policy table in a way that has never been done 
before. The Commission recommends a more mode-neutral approach that 
allows policymakers to recognize freight rail's inherent cost 
effectiveness, fuel efficiency and environmental sustainability in 
program and project funding decisions. That's new, and it should help 
level the playing field between modes and result in greater benefits to 
drivers, communities and the environment.
    In conclusion, it is a privilege to transmit the Commission's 
findings to you and formally conclude the work that Congress asked us 
to do. I am confident that the call to action which the Commission 
makes will be carefully evaluated by this committee, and that it will 
give careful attention to the freight mobility and passenger rail 
findings and recommendations of the Commission. I look forward to your 
deliberation of these findings, and those of others yet to come before 
you, as you prepare for what may be one of the most important 
reauthorization bills yet.

    Senator Smith. Mr. Chairman?
    Senator Pryor. Yes, sir?
    Senator Smith. May I ask Mr. Rose a question to clarify a 
number?
    Senator Pryor. Sure.
    Senator Smith. Matt, you indicated that we had added 6 
percent to our surface transportation, highways, and like 90 
percent increase in demand. What was the rail figure, again?
    Mr. Rose. It's down 39 percent in terms of rail miles, and 
up 65 percent in terms of gross ton miles.
    Senator Smith. And is it down in rail miles because we've 
taken a lot of shortline railroads? Why is it down 33 percent?
    Mr. Rose. You know, really, Senator, it's just--if you go 
back in the 1970s and the early 1980s, the system was in chaos. 
And you had a number of rail lines in bankruptcies, and a lot 
of those rail lines, quite frankly, became bike paths, and a 
lot of those are dormant right-of-ways, all across the country.
    Senator Smith. As you look at the increase in the capital 
investment that the railroads are making, will that number 
shrink?
    Mr. Rose. It will, but it will be like the highway miles, I 
mean, right now we're expanding--we're putting record capital 
in expansion of the number of miles we're adding. But, like at 
BNSF, we're talking about hundreds of rail miles, on a base of 
33,000. So, it's just like the highways--you're going to see 
increase in rail miles, I believe, but it will be quite de 
minimus, in terms of the overall number.
    And I think it's also important to point out, you know, 
while it sounds--it sounds dramatic, and it is, rail miles down 
39 percent--a lot of those rail miles are not, of course, in 
the heavy metropolitan areas and these heavy trade lanes. And 
if you really, again, focus on what has really changed in our 
society, we used to be a production and a consumption society--
now we're much more of a consumption society, so we've got 
these rail miles that used to serve these smaller areas, quite 
frankly, isn't where the big global trade is. And it's not 
where our agricultural exports are going, things like that.
    Senator Smith. Thank you.
    Senator Pryor. Thank you.
    Next we have Mr. Patrick Quinn, he's Co-Chairman and 
President, U.S. Xpress Enterprises.

         STATEMENT OF PATRICK E. QUINN, CO-CHAIRMAN AND

          PRESIDENT, U.S. XPRESS ENTERPRISES, INC. AND

         COMMISSIONER, NATIONAL SURFACE TRANSPORTATION

              POLICY AND REVENUE STUDY COMMISSION

    Mr. Quinn. Good afternoon.
    My name is Pat Quinn and I am the Co-Chairman of U.S. 
Xpress Enterprises. U.S. Xpress Enterprises is headquartered in 
Chattanooga, Tennessee, and I also had the privilege of serving 
as the immediate past Chairman of the American Trucking 
Associations, the national trade association of the trucking 
industry. I was appointed to this Commission by Senator Bill 
Frist.
    U.S. Xpress Enterprises is the Nation's third-largest, 
privately owned truckload carrier, with a fleet in excess of 
7,500 tractors and 22,000 trailers. The company is one of the 
largest providers of expedited and time-definite services in 
the truckload industry and a leader in providing expedited 
inter-modal rail services with partners such as Mr. Rose's 
company, sitting here next to me.
    Mr. Chairman, I came to this infrastructure commission with 
the goal of convincing my fellow Commissioners of the need for 
a new national transportation vision that put a priority on a 
freight system that would serve the needs of our Nation's 
economy. That vision would include a strong Federal role today, 
and continuing over the next 25 to 50 years.
    I'm pleased to discover they didn't need any convincing. 
Even more importantly, we scheduled hearings around the country 
and heard testimony from a wide range of interested parties, we 
found out that the public really does not need any convincing. 
This may well be a case where the public is far ahead of the 
policymakers in understanding that our ability to move goods 
efficiently, safely, and in a timely manner needs to be a 
national priority.
    In addition to the Commission's recommendations regarding 
freight movement as a national priority, I also would like to 
briefly comment on several other recommendations.
    Regarding financing, the Commission report reasserts the 
long-standing Federal policy of user financing. Specifically, 
the report states that, ``personal and commercial travelers 
should pay for the transportation systems and services they use 
in proportion to the costs associated with their use.''
    Furthermore, the Commission report acknowledges that the 
primary funding source for highway infrastructure needs should 
remain the Federal fuel tax, both on gasoline and diesel fuel. 
And while the Commission report recognizes that alternatives to 
the tax may be necessary in 15 to 20 years, it also points out 
that the fuel tax has the following key attributes: low 
administrative and compliance costs; ability to generate 
substantial amounts of revenues; relative stability and 
predictability; and ease of implementation. I believe those 
principles should be the benchmark against which Congress 
evaluates future alternatives to the fuel tax.
    Equally important, the Commission report recommends that 
Congress needs to enact strict criteria and conditions for the 
approval of any new tolling or privatization initiatives, in 
order to ensure that the public interest is protected. From the 
trucking industry's perspective, the allure of privatization of 
our Nation's highway infrastructure runs counter to the very 
needs of interstate commerce and a national highway network.
    Obviously, reform of the program is important, and one of 
the most important recommendations of the Commission centers on 
the relationship between the need for additional revenues and 
the reform of the program. The Commission report also states 
that, ``simply raising the Federal fuel tax and putting more 
money into the same programs will not be acceptable.'' The 
Commission report clearly states that before any Federal 
financial support is increased, ``the nation's surface 
transportation programs must be fundamentally reformed.''
    Those reforms include: Limiting the scope of programs 
eligible for Federal assistance to those having a true national 
interest; making State and local agencies receiving Federal 
funds accountable for meeting performance objectives; reducing 
unnecessary and wasteful project delivery requirements; and, 
requiring that major projects be subject to benefit-cost 
analysis.
    Regarding safety, which is extremely important, certainly 
to my company and to the industry that participates as a major 
user of our Nation's highway system, the Commission spent 
considerable time developing the recommendations regarding 
safety--and again, that's a subject that's important to me and 
to the members of this Committee--and specifically, we 
recommend that the U.S. Department of Transportation establish 
national safety standards, beginning with an ambitious but 
reachable goal--as Commissioner Heminger said--of cutting our 
fatalities in half from current levels by 2025.
    And again, the Commission recommends performance standards 
for States to meet in order to ensure that this recommendation 
is not merely a headline but rather an achievable goal.
    Thank you for the opportunity to testify today.
    [The prepared statement of Mr. Quinn follows:]

  Prepared Statement of Patrick E. Quinn, Co-Chairman and President, 
   U.S. Xpress Enterprises, Inc. and Commissioner, National Surface 
           Transportation Policy and Revenue Study Commission
    Good afternoon. My name is Pat Quinn and I am the Co-Chairman of 
U.S. Xpress Enterprises, headquartered in Chattanooga, Tennessee. I 
also am a past Chairman of the American Trucking Associations, the 
national trade association of the trucking industry. I was appointed to 
the National Surface Transportation Policy and Revenue Study Commission 
by former Tennessee Senator Bill Frist.
    U.S. Xpress Enterprises is the Nation's third-largest, privately 
owned truckload carrier, with a fleet of 7,500 tractors and 22,000 
trailers. U.S. Xpress provides dedicated, regional, and expedited team 
truckload services throughout North America, with regional capabilities 
in the West, Midwest, and Southeastern United States. The Company is 
one of the largest providers of expedited and time-definite services in 
the truckload industry and is a leader in providing expedited 
intermodal rail services.
    Mr. Chairman, I came to the Infrastructure Commission with the goal 
of convincing my fellow Commissioners of the need for a new national 
transportation vision that put a priority on a freight system that 
would serve the needs of the Nation's economy. That vision would 
include a strong Federal role today and continuing over the next 25 to 
50 years. I was pleased to discover they didn't need any convincing. 
Even more importantly as we scheduled hearings around the country and 
heard testimony from a wide range of interested parties, we found out 
the public didn't need any convincing. This may well be a case where 
the public is far ahead of the policy-makers in understanding that our 
ability to move goods efficiently, safely and in a timely manner needs 
to be a national priority.
    In addition to the Commission's recommendations regarding freight 
movement as a national priority, I also would like to briefly comment 
on several other recommendations.
Financing
    The Commission report reasserts the long-standing Federal policy of 
user financing. Specifically, the report states that, ``personal and 
commercial travelers should pay for the transportation systems and 
services they use in proportion to the costs associated with their 
use.'' Furthermore, the Commission report acknowledges that the primary 
funding source for highway infrastructure needs should remain the 
Federal fuel tax, both on gasoline and diesel fuel. And while the 
Commission report recognizes that alternatives to the tax may be 
necessary in 15 to 20 years, it also points out that the fuel tax has 
the following key attributes: low administrative and compliance costs; 
ability to generate substantial amounts of revenue; relative stability 
and predictability; and ease of implementation. I believe those 
principles should be the benchmark against which Congress evaluates 
future alternatives to the fuel tax.
    Equally important, the Commission report recommends that Congress 
needs to enact strict criteria and conditions for the approval of any 
new tolling or privatization initiatives in order to ensure that the 
public interest is protected. From the trucking industry's perspective, 
the allure of privatization of our Nation's highway infrastructure runs 
counter to the very needs of interstate commerce and a national highway 
network.
Reform of the Program
    One of the most important recommendations of the Commission centers 
on the relationship between the need for additional revenues and reform 
of the program. The Commission report states that, ``simply raising the 
Federal fuel tax and putting more money into the same programs will not 
be acceptable.'' The Commission report clearly states that before any 
Federal financial support is increased, ``the Nation's surface 
transportation programs must be fundamentally reformed.''
    Those reforms include:

   Limiting the scope of programs eligible for Federal 
        assistance to those having a true national interest.

   Making State and local agencies receiving Federal funds 
        accountable for meeting performance objectives.

   Reducing unnecessary and wasteful project delivery 
        requirements.

   Requiring that major projects be subject to benefit-cost 
        analysis.
Safety
    The Commission spent considerable time developing its 
recommendations regarding safety, a subject that is very important to 
the membership of this Committee. Specifically, the Commission 
recommends that the USDOT establish national safety standards, 
beginning with an ambitious but reachable goal to cut surface 
transportation fatalities in half from current levels by 2025. And 
again, the Commission recommends performance standards for states to 
meet in order to ensure that this recommendation is not merely a 
headline but rather an achievable goal.
    Thank you for this opportunity to testify today. I look forward to 
answering any questions you may have.

    Senator Pryor. Thank you.
    Now, for those of you who missed my announcement earlier, 
Steve Heminger has to catch a flight, and he has to leave here 
in about 10 minutes. So, if you all have any questions specific 
to him, let's go ahead and ask.
    I'll ask one, and I'm going to ask the same question to 
others after you leave. My question for you, Mr. Heminger, to 
start out, is a question that was in the news last week. 
There's been a proposal that's floated out there on having a 
holiday on the gas tax. And my question for you is, what impact 
would that have on you, if we did a gas tax holiday?
    Mr. Heminger. Mr. Chairman, obviously, a lot of us work in 
the transportation field, and so one impact that comes 
immediately to mind is it would result in a substantial 
reduction available to take care of our infrastructure. This is 
at a time when the Highway Trust Fund is already about to enter 
a negative balance condition, so I can't imagine a worse time 
to suggest removing additional resources from that fund.
    I also would speculate, perhaps, that if the intended 
effect is to provide some price relief to consumers, that will 
be up to the people who set the prices. And I think it's 
entirely plausible that the consumers would not really see any 
relief.
    The one way I look at this, Mr. Chairman, and I'm not an 
economist, but when the Federal gas tax was last increased, it 
was 1993. In 1993, the average retail price of gas in the 
United States was a dollar, and now it's pushing $3.50. In my 
town of San Francisco, it's pushing $4.00. The tax hasn't 
caused the price to go up. There are a lot of other factors 
that have caused the price to go up.
    And over that time, that $2.00 increase in price has not 
resulted in a single improvement to our infrastructure system. 
And I think that's a crying shame. The place where we have 
relied up to now to finance our infrastructure system--the 
place where we built the interstate system--for the last 15 
years, has essentially been inactive, and all of the revenues 
that have been generated through that price rise have gone 
other places. They've gone abroad--they've gone into plenty of 
things, everything, in fact, except improving the 
infrastructure for the people paying those fees.
    So, while we understand that our recommendations in the 
area of the fuel tax and taxation are some strong medicine, one 
thing about the fuel tax is that if it does lead to a higher 
price, the people paying that higher price get a benefit for 
it--they receive something in return. And I think one reason 
that there is obviously a lot of concern in the country and the 
Congress about high fuel prices, is we're not getting anything 
for the high rate.
    Senator Pryor. OK.
    Yes, sir?
    Senator Smith. Yes, Mr. Heminger, you mentioned that 
Australia and Great Britain, I believe----
    Mr. Heminger. Yes, sir.
    Senator Smith.--have reduced their fatalities. How did they 
do it? What can we do to emulate that?
    Mr. Heminger. A lot of it, Senator, has to do with driver 
behavior, and I acknowledge that this is some of the more 
sensitive areas for legislation and regulation, but the fact 
is, if you look around the United States, half of the States 
don't have a primary seat belt law, half of them don't have 
motorcycle helmet laws. Only a few of them have ignition 
interlock laws, which prevent a drunk driver from driving 
drunk.
    That's really where Great Britain, Australia, a number of 
the European nations have pushed aggressively. They've passed 
tough laws, and they have enforced them, rigorously, and they 
have driven down fatality rates, significantly.
    In the field they talk about the three E's--you know, 
Education, Enforcement and Engineering--and we've done pretty 
good on the first and the third, it's the enforcement part that 
we've had trouble with, because it does mean, sort of getting 
in the face of motorists out there who aren't obeying the laws, 
or who are driving recklessly.
    Senator Smith. So, it isn't an infrastructure thing, it's 
education, enforcement----
    Mr. Heminger. Look, part of it has to do with the fact that 
we've got a big network. And we do have a lot of fatalities 
occur off of the interstate, on rural roads where there's a lot 
of engineering solutions that could be enacted. But a 
significant fraction of the 40,000 people dying every year are 
as a result of still, not wearing seatbelts, drunk driving, and 
the like. And that's where I think there is a lot of ground to 
be gained, here in the United States.
    Senator Smith. Thank you.
    Senator Pryor. Senator Thune?

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Mr. Chairman, I have to get somewhere else 
here in just a minute, too, but if I could, I'll pose this 
question to Mr. Heminger, and then if the others would answer 
it for the record, that would be great, too.
    But, I'm just interested in kind of getting an overall 
sense of, you know, you obviously have studied these issues 
very closely over a long period of time, and there are some out 
there who have suggested that the Federal Government ought to 
reduce its role when it comes to our Nation's transportation 
system, and the way that we invest in it, and what-not. And I 
guess I'm just wondering what you think would happen if the 
Federal Government did just that? I mean, if there's a lot of 
talk about going to more toll roads, and that sort of thing, 
just kind of your overall impressions and response to that 
question?
    Mr. Heminger. Senator, I think the short answer for most, 
if not all, of us here on the panel today--but certainly the 9 
members of the Commission that signed the report--is that there 
is no substitute for Federal leadership. Federal leadership is 
what built the interstate system--we would not have an 
interstate system without Federal leadership. We would not have 
as robust a public transit network--which is not robust 
enough--but we would not have what we've got without Federal 
leadership and support.
    We really see no substitute--the Federal program, 
historically has provided about 40 percent of the capital 
funding. And while we endorse the notion of greater private 
sector involvement under reasonable conditions that protect the 
public interest, we don't think the private sector is going to 
replace 40 percent of the capital funding, which is what the 
Federal Government provides today.
    We don't think it makes sense that we should take the 
Federal program and shove it down to the States and pretend 
that that somehow creates more money--it doesn't. In fact, in 
many places, it may create less funding, because a number of 
States restrict the ability to use gas tax funds on public 
transit, as an example. So there would be many places where 
public transit would see a reduction in funding, if there were 
some kind of turn-back or devolution of the tax rate.
    So, we believe, essentially, that the current system under 
which private, local, State and Federal Governments all play a 
role, needs to continue, and that the Federal Government needs 
to lead the way.
    Senator Thune. Mr. Chairman, that's really the only 
question I have, but I just wanted to thank the Commission for 
your good work, and for your recommendations. And we obviously 
are looking very intently at some of those. We have a big 
problem in this country, we've got a big challenge ahead of us, 
we have a huge backlog of transportation needs, and those are 
going to have to be addressed. Whatever your mode of 
transportation is right now, we've got lots of capacity issues, 
I think, facing us in the future that are going to require a 
significant investment. And the question is how can we best 
accomplish that.
    And there are some of us who have introduced some different 
ideas, I think some of us are going to have to think outside 
the box, Senator Wyden and I have a Build America Bonds Program 
that we would like to have considered, as well, I think that 
was a little bit outside the purview of what you were doing, 
but that's something that we think makes some sense in terms of 
getting some additional dollars into our infrastructure across 
this country, but in order for us to be competitive globally, 
we've got to figure out how to solve this problem, and address 
it.
    Because it is key to our competitiveness, and I think 
people in this country have an expectation that this is 
something the government has a role with. And when it comes to 
infrastructure we've got to step up and do what needs to be 
done.
    So, thank you again for your good work.
    And thank you, Mr. Chairman for holding this hearing.
    Senator Pryor. You bet.
    Listen, thank you Mr. Heminger, I know you need to slip 
out, and safe travels.
    Let me go ahead and ask you, Mr. Schenendorf, what I asked 
in my first question, and that is, again, last week there was 
some discussion about a gas tax holiday. What impact would that 
have on you?
    Mr. Schenendorf. Well, I would say that I agree with 
Commissioner Heminger's assessment. I think that there is, 
first, no guarantee that any of that money is going to actually 
flow to the user.
    But even more importantly, I mean, I think it sends the 
wrong signal to the public. We need, if anything, to spend more 
on our infrastructure, and American's will benefit much--to a 
much greater degree if we're able to repair our roads, provide 
the capacity we need so that we can, basically, reduce 
congestion and make sure that we're economically competitive 
throughout the world, that we need to invest more--and 
suspending taxes just sends the wrong signal, in my judgment.
    Senator Pryor. Mr. Busalacchi?
    Mr. Busalacchi. Well, Senator, my opinion on this is 
probably a little bit stronger than Jack's in that there is no 
easy fix to the problem that we have in this country. The 
problem that we have with transportation in this country is 
very complex. Having a short-term reduction of the gas tax is 
certainly not the solution to the problem.
    We have a major issue with funding. We're asking for a huge 
increase to the Highway Trust Fund on an annual basis because 
of a number of complex issues. I don't believe that any kind of 
short-term fix that reduces the amount of dollars going into 
the Highway Trust Fund is going to solve the larger issues.
    The decisions that are going to need to be made by Congress 
will be difficult. At the same time, as Commissioner Rose said 
earlier, we're going to have 120 million more people by the 
year 2050.
    So we just don't have the issue of failing infrastructure; 
we're also going to need to accommodate more people. How are we 
going to compete in the world? It is a ruse to suggest that for 
3 months or 4 months reduce the gas tax, and that will fix the 
problem.
    The American people have to understand that what's going on 
here is very serious. We have to look at it that way. I'm not 
trying to get on a stump here. This is a serious issue for the 
country and I think it's short-sighted to think that reducing 
that tax for 3 months is going to solve the problem.
    Senator Pryor. Thank you.
    Mr. Rose, did you have any comments on the gas tax holiday?
    Mr. Rose. No, I'd just add--I think that one thing we need 
to, at least what I read in--when I read the papers, was that 
the proposal was to take money out of the General Fund to put 
into the Highway Trust Fund, it wasn't to deplete the Highway 
Trust Fund. So, I'd just like to add that as a little bit of an 
add-on to--to this issue.
    And I, again, I think it's hard to know whether or not the 
price of oil would come down by the 18.5 cents a gallon. I 
really viewed the whole concept more of a stimulus to get more 
money in people's pockets, but I think the--it was clear that 
money would not be taken out of the Trust Fund, it would be 
brought in from the General Fund.
    Senator Pryor. Mr. Quinn?
    Mr. Quinn. Well obviously, you know, fuel for the trucking 
industry has almost become the highest cost, and for some 
companies it is higher than labor, it's always been 
traditionally the second highest cost.
    And I just read a report late last week that said in the 
first quarter more than 900 trucking companies went out of 
business, most of them small firms. Obviously, you know, 
created probably--primarily by the cost of fuel. But I, you 
know, certainly companies are hurting and it could be helpful 
to some companies, but I--without more information as to how 
this might actually play out and reduce, you know, the cost at 
the pump for the users, I'm not sure. And again, it's a, you 
know, a 3-month situation. We really need more long-term 
solutions as to how to deal with this, I think, than a 3-month 
situation.
    Senator Pryor. All right. Let me follow up on that, if I 
may, with the entire panel, then I'll let Senator Smith ask 
some questions. I'd like to address the VMT, the Vehicle Miles 
Traveled.
    Based on some of the data that you've showed us and have 
discussed, we see what's happened. What has the Commission 
decided or what did you discuss and what would you recommend, 
given the changing marketplace for vehicles today? Hybrids, 
plug-in electrics, and other type of vehicles, including ones 
that use ethanol, are coming on board that don't use any, or 
not much--traditional gasoline and diesel. What did you all 
talk about that?
    Mr. Schenendorf. We recognize that that is an issue, and in 
the long term, we recommended taking all of the prudent steps 
today to try to move toward a VMT-related fee or tax as quickly 
as we can get there. There are still some substantial hurdles 
to being able to implement that kind of technology, privacy 
issues, evasion issues, administration issues, and, but 
nevertheless though, we recommended research, pilot projects in 
an effort to move as quickly in that direction as possible.
    We do think that that's going to take a number of years, 
and we agree with the TRB study that this is probably 10, 15, 
20 years away. And in that interim period that we're going to 
need to--and we're going to be able to--rely on the gas tax, 
but we did recommend trying to move toward a VMT-related fee as 
quickly as we can, with some TRB further studies and pilot 
projects in order to try and hasten that transition.
    Senator Pryor. Anyone else?
    Mr. Busalacchi. Yes, Senator, I was able to go to Oregon 
and the University actually took me through their pilot 
program. It's a very interesting program, and I think they did 
a great job. The Commission recommended a short-term and long-
term solution to our revenue issue. I believe that the VMT 
solution is more long-term, several years down the road.
    As Jack had said, we have issues with privacy associated 
with the VMT concept. I do believe that, in the long-term, it's 
something that we need to seriously consider. This is a program 
that we can use, that could be successful, and respects the 
user pay principle--the people who use the system will pay for 
the system. I think that's everybody's goal.
    I was very impressed by what Oregon is doing; it shows 
there is an approach out there that works.
    Senator Pryor. Senator Smith?
    Senator Smith. That's a good lead-in.
    You know, it was very interesting that this--this test, 
this mileage fee concept and the road-user fee pilot program 
that Oregon authorized. I was very interested to learn that 
they believe the technology exists to make it work, and that 91 
percent of those involved in it said they would prefer it to 
the gas tax. I'm neither endorsing it or denouncing it, I'm 
just curious if you think that that may be a more equitable way 
to bear this future capital investment that we have ahead of us 
as a country.
    Mr. Schenendorf. It certainly, if all of the problems can 
be overcome, it certainly has the potential to be that way, 
because you can then engage in different kinds of pricing, 
depending on the time--time of day, which particular road 
system you're on. So I think it does have a lot of potential, 
and I think, you know, we think our report moves as quickly as 
possible in that direction, recognizing it's still going to 
take some time to perfect it. And to turn over the fleets, 
because you have to have an entire fleet outfitted with the 
equipment that would be needed to----
    Senator Smith. We'd need a transition period.
    Mr. Schenendorf. --right.
    Senator Smith. Mr. Schenendorf, you mentioned that if we 
did the gas tax holiday this summer that it wouldn't get to the 
consumer. Is that--I assume you're concluding that--at least I 
believe that's what you said--that the companies would just 
pocket that. Is that your--is that your conclusion?
    Mr. Schenendorf. I think there's a good possibility that 
that would be the case. And I think we don't know for sure what 
would happen if the--because you don't actually pay at the gas 
pump. Those fees are paid much higher up the chain, and whether 
or not the prices would actually reflect the suspension of the 
18.4 cents, I think is a question. So, it's--that I'm not sure 
that the consumer would actually see the full amount.
    Senator Smith. There'd certainly be a lot of political 
pressure to make sure that the consumer did see it, I imagine.
    Mr. Schenendorf. Right, but there's so much fluctuation in 
the price of gasoline, I think it would be very hard to be able 
to absolutely ascertain, yes, it was passed through or no it 
wasn't.
    Senator Smith. Fair enough, thank you.
    Mr. Busalacchi. Senator Smith, I think the other thing to 
remember is that from the point of view of a DOT person, a 
system like this can really provide us a lot of data on a 
regular basis, because we would know what roads people are 
using and how much they're using them. This information would 
be very helpful to each individual State if you're able to 
track, not just the miles traveled, but the roads being used. A 
system like this, really has a lot of potential.
    Senator Smith. If you examined the program at the 
University of Oregon, did they make a distinction between urban 
miles traveled versus rural miles traveled and account 
differently for that in term of cost?
    Mr. Busalacchi. In the Oregon pilot there were only two or 
three gasoline stations that the drivers used. I think that all 
of this type of information could be included in a VMT.
    Senator Smith. Well, that is really the question I would 
have, if somebody from Pendleton, Oregon where there's a lot 
of, as I said, a lot of dirt between light bulbs--it just seems 
to me that in rural economies, where the economies frankly are 
much poorer than in urban places, and the miles they have to 
travel with farm goods and things like that are much greater, 
they would be disproportionately disadvantaged, and there would 
have to be some kind of an adjustment between urban and rural 
in order to just simply make it fair, and to raise the revenues 
necessary.
    Mr. Schenendorf. I think the system, you know, when people 
talk about the VMT fee and the future and what it might look 
like, I think it's meant to be designed in a way that would 
allow that exact type of thing to be done, where you really 
could tailor the charges to the kind of road, the kinds 
activities, and we have rural areas that have very light flow 
on it that would be at a much, potentially, lower rate than in 
urban areas where you've got a lot of congestion and it's a 
much higher price for use of those facilities.
    Senator Smith. The reason that that's important, and a lot 
of times folks in urban areas don't understand this, they feel 
like the rural areas are getting some big deal because we 
invest disproportionately a lot more concrete and asphalt in 
rural places. But for every 40 wheat farmers in Pendleton, 
there are thousands of jobs directly related in Portland, 
Oregon, an urban place, to haul in their wheat, and the getting 
it out to the world markets. So, there really is a need to 
enhance understanding of the interconnectedness and the mutual 
need between urban and rural people.
    Thank you.
    Senator Pryor. Let me ask another question, if I may. Thank 
you, Senator Smith, appreciate you attending. I know this is 
one of the matters you discussed multiple times at the 
Commission level, and I understand there's a minority view on 
this topic as well, and that is the question of tolling. Who 
wants to explain to the Committee the nature of your 
discussions on tolling and where the sides were on that, and 
then what the Commission actually decided? Who wants to do 
that?
    Mr. Schenendorf. I can take a first stab at it----
    Senator Smith. Sure.
    Mr. Schenendorf.--if you'd like. On the question of tolling 
and pricing and public-private partnerships, which really means 
private tolling and private pricing, the difference of opinion, 
I think, was really one of degree. I think all of the 
Commissioners felt that those are financing tools that we're 
going to need to take advantage of as we try to build the 
transportation system for the 21st century.
    The difference was, I think, that the dissenters viewed 
that really as almost the total solution, they were, you know, 
their basic position was that there ought to be devolution, the 
Federal Government should basically reduce its commitment, 
therefore they didn't, the use of a gas tax or a freight fee or 
everything was not an issue because the Federal Government 
wouldn't be part of the solution, and therefore, the way that 
the system would then be financed would be through tolling and 
private sector.
    I think the majority of the Commissioners' view was that we 
needed to have a continuation of public funding being a big 
piece of the solution and the Federal Government provide the 
leadership, being a full partner, but that tolling and public-
private partnerships and pricing were still going to be 
necessary to make the system work and were going to play an 
important part, just not the whole solution.
    Mr. Busalacchi. Senator, I think in the Commission report, 
we left it up to the individual States, whether or not they 
wanted to embark on public-private partnerships and tolling and 
things like that. It's a State decision, quite frankly. If you 
use my State as an example, we've made a policy decision that 
we don't want toll roads, period. We don't think they're 
helpful. We think they punish people who have already paid for 
these roads. A large part of the commerce that flows in and out 
of our State is by truck; we're cognizant of the fact that the 
truckers would be affected as well.
    We feel that in our State in particular tolling is 
problematical.
    But having said that, tolling could be a solution for some 
states. It's not the total solution, in fact, it's a very, very 
small part of the tools that need to be in the revenue options 
toolbox.
    Senator Pryor. And Mr. Quinn, you look like you wanted to 
add something to the tolling discussion.
    Mr. Quinn. Well, obviously to the trucking industry, 
tolling is a very serious issue, but I think the Commission 
rightfully decided that the tolling of existing interstates, 
that have been built and paid for with the current taxing 
structure, did not make sense. On new construction or new roads 
where you're given an option and it's not mandated, that may 
make sense and can be--again, as the other Commissioner said, 
it's part of a solution, it's part of a tool, it's not--there 
is no ``the answer'' for the problems and the financing that's 
necessary. But tolling of new construction may be helpful, HOV 
lanes, you know, hot lanes, things like that that can be, that 
perhaps can be helpful on new construction. We would be 
supportive of that.
    Senator Pryor. OK.
    Let me ask, if I may, Mr. Rose, about freight fees. In your 
testimony or in something I read, you talked about freight fees 
and a national fee may be the best way to go about assessing 
the freight fees. I think the Committee would have several 
questions about how that would work, such as, who pays the fee, 
who collects the fee, et cetera. Could you elaborate on your 
thoughts on freight fees and then what the Commission concluded 
on the issue?
    Mr. Rose. Sure, Senator. Right now, at the major trade 
ports, there's a lot of individual municipalities, cities, 
States, all considering freight fees. Just in the San Pedro 
Port of Los Angeles/Long Beach, you've got an hours of the day 
fee, they're going to a new truck fee, they're going to a, 
potentially, a labor fee, they're going to a--building a new 
terminal, they're going to do a fee with that. I mean, we've 
got the Alameda Corridor fee.
    And so, you know, one of the things about our commerce 
system, why there is a national need, is that if we allow 
people to tax commerce and tax transportation, we will end up, 
quite frankly, with a very disjointed economic reality. So what 
will happen is that freight will move around, thus causing more 
infrastructure requirements in areas that may or may not be the 
most efficient route.
    The purpose of having, again, federally preempted, is for 
that reason. As far as having a common collection point, you 
can imagine if--if one of our customers was having to pay five 
or six different fees on a single load of freight, as well as--
the last thing I think that we want to do is incentivize 
freight movements to go through other parts of the North 
American continent, i.e., Mexico or Canada, only then to come 
into a different port of entry that would not have the same 
level playing field, if you will, on a fee coming through a--or 
a load coming through a port.
    So, what's really important to customers, shippers, 
retailers, those people who are paying the freight bill, is 
that, again, there's transparency and that these fees go to the 
actual transportation.
    The best example of this is the Alameda corridor out in the 
Los Angeles area, where we built a 20 mile trench, if you will, 
$2.5 billion, and we have an assessment of around $18, it's 
inflated a little bit, $18 per 20-foot equivalent, for every 
box that comes through those, an $18 fee gets applied to it. 
And we didn't hear, quite frankly, any complaints against 
shippers--from shippers because everybody was able to see the 
$2.5 billion.
    What we see with some fees though, and the same thing that 
I think Pat was referring to, in terms of tolling, when those 
fees or those tolls go off the actual physical facility and go 
off to solve other problems, then, quite frankly and rightfully 
so, I believe, shippers feel like that they're--that they're 
being mistreated and that they don't believe that those fees 
are going to remediate transportation-type issues.
    Senator Pryor. OK.
    Let me ask another question, and I'm not sure who this 
should go to, but let me try with Mr. Busalacchi and see if 
this is something he would like to comment on, or if one of the 
other Commissioners should respond.
    I know in the discussions we've already had, the concept of 
performance standards has come up. I am interested to know how 
the Commission envisions performance standards working and what 
that really means. Are we looking at doing formulas, based on 
population or road usage? So, who's the best one to answer 
that?
    Mr. Schenendorf. What we envisioned, all ten of the 
programs we envision as performance-based programs, and if they 
were enacted the way we envision them, by the Congress, the 
first step would be for the Federal Government and the States 
and the stakeholders to work out the metrics for each of these 
standards, so that you would have a measurable national metric 
for what it means to be in a state of good repair, or how we're 
going to measure congestion, or freight movement, depending on 
the particular program.
    Once you had those standards then agreed to, each State 
would go out and would measure what they had to do and develop 
a plan for bringing their infrastructure into a state of good 
repair or what it's going to take in order--in that 
metropolitan area to reduce congestion by 20 percent, and what 
kinds of investment they would have to make, and they would 
cost that out.
    They would provide a cost estimate, just the way the 
interstate system had a cost estimate for what it was going to 
cost to meet that performance standard. And then, nationally, 
you could use those costs to make--to distribute the funding so 
that each State would get its relative share of what it needed 
to meet the performance standard. You would also know 
nationally how much money you had to put into the program to 
achieve the performance standard over a certain number of 
years.
    And so that as you funded that over time, you would 
basically have all the States progressing toward meeting the 
performance standard over some period of time. That's precisely 
the model that was used for the interstate system, with cost 
estimates, and the interstate system was ultimately completed 
using that approach.
    So, the model is the interstate system program, the actual 
metrics for the standards would be developed in a collaborative 
process, at the outset, by the Federal Government, States, and 
stakeholders.
    Senator Pryor. My sense on that is that's certainly an idea 
that we ought to talk about and discuss and see if we can find 
the right pathway to performance standards. But, the House and 
Senate will have some concerns about that program being set up 
appropriately and taking all the miscellaneous circumstances 
into account. I already know how colleagues can justify how 
money is currently being spent. But I do think it's a worthy 
idea to consider and if it works out and that's the direction 
we want to go, great. I want to thank the Commission for 
putting that on the table for discussion.
    I don't remember which one of you in your opening 
statements mentioned the idea of Department of Transportation 
consolidation. I think there are 108 different Federal agencies 
and the Commission recommends that somehow they be condensed. 
I'm not sure if the recommendation is to condense that into ten 
programs or just sort of ten umbrellas, under which 108 
agencies fit. I'm not quite sure what the best route is for 
consolidating. Why does the Commission think those need to be 
consolidated? I can understand why without hearing it, but I'd 
like to hear your thoughts and what the rationale was there. 
And then, when you end up with these ten, do you have the 
structure and the specifics in mind already? Do you have that 
blueprint done, or are we just talking concepts here?
    Mr. Schenendorf. I--it was my statement. We basically are 
suggesting is that--we're proposing these 10 performance-based 
programs as a replacement for the existing programs. And the 
reason that we've done that is, when you have 108 funding 
streams and 108 priorities, you really don't have any 
priorities.
    And so what we have tried to do is to say the Federal 
Government needs to refocus its program, it needs to have a 
sense of mission, and we defined that mission as these 10 
programs, a program for state of good repair, a program to 
reduce congestion in major metropolitan areas, Commissioner 
Rose talked about the National Freight Program. So those are 
the 10 programs--a safety program--and those programs would 
reflect the Federal priorities, and then they would operate the 
way we just talked about, in developing the performance 
standards.
    Senator Pryor. So, if I can pick on two specific programs 
today, FMCSA and NHTSA, might those both go in the safety 
program?
    Mr. Schenendorf. Those would be--those missions would be 
encompassed in the safety program.
    Senator Pryor. OK. What about if programs really have split 
missions, would you break up that some how and reconfigure that 
in some way?
    Mr. Schenendorf. Yes, it would depend obviously on the--on 
the particular program, but we think that the 10 performance-
based programs that we're recommending really cover all of the 
current missions in the 108, but just in a much more focused 
way, and in a way that ultimately the public will be better 
able to understand what the mission and States and local 
governments are going to have to come up with plans and 
programs that actually accomplish the transportation objectives 
laid out in those 10 performance-based programs.
    Senator Pryor. OK. I also noticed in the commission's 
report and findings, the idea of a National Surface 
Transportation Commission, which might be modeled after 
something they do at the Postal Service, and maybe even the 
BRAC. The idea would be to try to depoliticize the allocation 
of resources, is that fair?
    Mr. Schenendorf. I think it was meant to try to 
depoliticize some of the more controversial things, really in 
raising the revenues that would be necessary in setting the 
funding levels, and like the Postal Rate Commission, the 
purpose of this Commission would not be to duplicate what DOT 
does in any fashion, but instead, would be there to oversee it 
and the basically say, ``OK, this is the program Congress set 
out, here's how much it's going to cost, here's the level of 
taxes that you'll need,'' and then have Congress vote up or 
down on the level of revenue that would be necessary for the 
program that Congress put in place, and obviously Congress can 
change those requirements.
    But it was supposed to be a helpful thing to kind of 
depoliticize what has been a very difficult political decision 
in raising the funding.
    Senator Pryor. So, just to walk me through that a little 
bit, the Commission's thought is that the Congress, and the 
President of course, would authorize a Commission that I think 
we call NASTRAC, to find and structure revenue sources and also 
have the ability to raise that revenue, in other words, to 
increase the gas tax or whatever the case may be. Is that 
correct?
    Mr. Schenendorf. Not exactly, I mean, I think what they 
would do is kind of oversee the DOT process. And we talked 
before about these cost estimates that would come up. Each of 
these programs would basically have a cost associated with 
them, what it's going to take, and then what they would do is 
they would compile all those and say, ``You know, in order to 
do what Congress has laid out in the statute over the next 15 
years, it's going to take X billion dollars per year of 
investment in all of these programs, and that would mean that 
the Federal gas tax, if that's what Congress has said is going 
to be the funding source, would have to be raised, let's say, 
by, you know, four cents a gallon.''
    And then that four cents a gallon--they wouldn't actually 
raise it by four cents a gallon, but they would send it to 
Congress as the recommendation that it be raised by four cents 
a gallon, and then Congress would have to vote on that, just 
the way they vote on postal rate increases. It would be an up 
or down vote. Congress would make the final decisions, but this 
would be put in front of them as saying here's what it's going 
to cost to do what Congress laid out in the statute.
    Senator Pryor. Well, I notice all your colleagues here love 
to allow you to talk. You guys can chime in on this if you want 
to.
    But, let me ask another question that is again part of your 
recommendations and part of the discussions that you had, and 
that is congestion relief and metropolitan mobility--those are 
very important things, obviously. But I think the way you have 
it structured, you focused on communities of a million or more 
in population.
    For example, you mentioned the Northwest Arkansas corridor, 
in which the old Highway 71 traverses. By the way, when I was 
in college and law school, Highway 71 was so dangerous and so 
bad, so hard to drive, I actually used to take a road home 
called ``the Pig Trail.'' So, you can imagine how bad that one 
was. Compared to 71, though, I thought it was preferable.
    Nonetheless, the northwest part of our state is growing 
really exponentially--in the last 10 or 20 years it has really 
taken off, it's one of the fastest growing areas in the 
country--but they have a lot of congestion issues. They're far 
outgrowing and outpacing the infrastructure that we currently 
have there. Every time I go up there, I'll be stopped at a 
traffic light, and somebody will make me roll down the window, 
and say, ``Hey, when are we going to get some more roads up 
here?''
    But that area doesn't have a million people. So, what about 
an area that isn't at the million threshold, but is growing 
rapidly, and for whatever reason, needs some help on its 
infrastructure--how do you contemplate fixing it?
    Mr. Schenendorf. We really have, of the 10 programs, two 
are really complementary to each other. One is the Metropolitan 
Mobility of a Million or More, the other is the Rural and 
Smaller Cities. So, for all the areas not covered by the 
Million or More--because we thought those were a special set of 
problems, that those areas of a million or more, it really 
needed a targeted, and somewhat different program, the rest of 
the State and smaller communities would be eligible under the 
other program, and that program itself would have congestion 
standards with respect to both access and mobility in those 
areas. And so they would get funding, as well, through the 
second program.
    Senator Pryor. I promise you every question I ask isn't 
going to be about Arkansas, but just as an example--and I know 
if other Senators were here they would have examples in their 
States, too--I'm not trying to make this Arkansas-centric, one 
of the 10 programs that you have, is called the Connecting 
America Through a National Access Program.
    And, for example, in our State--and again, I know other 
States, if other Senators were here they could tell specifics 
from their State--but in my State, we have a planned, but far 
from completed project. In many areas, in most areas there's 
been almost no work done on it, at all, except for just a 
general planning. For example, Interstate 49, which would go 
down the western state border of Arkansas due north and south, 
very close to Oklahoma. And I-69, which would come through 
mostly in Mississippi, and then clip the southern quadrant of 
our State, and go through a little corner of our State and then 
go on down into Louisiana.
    Those are two interstates that have not yet been built, 
they've been on the map and on the blackboard for a long time, 
but, we as a Nation, have never built them. Is that the way you 
envision--this Connecting America Program?
    Mr. Schenendorf. Those kind of corridors--and there are 
many of them, throughout the country that need to be upgraded 
to four-lane, divided, interstate-type roads--would really, 
potentially, be funded under two of the 10 programs--one is the 
one that you mentioned, the Rural Access, providing access to 
all parts of America, and tying all parts of America together, 
so that's one place.
    But also on the freight--National Freight Program--some of 
those routes are going to be part of the corridors that need to 
be upgraded for freight movement throughout the country, so 
some of those corridors could be upgraded through that program, 
as well. So, you've got those two major programs that would be 
able to provide funding for those kinds of corridors.
    Senator Pryor. OK.
    Let me go back, if I may, to one of your previous answers 
when I asked earlier about minority views. Not all of the 
Commissioners signed the report--I forgot, how many 
Commissioners were there, total? Twelve?
    Mr. Schenendorf. Twelve.
    Senator Pryor. And what, all but 2 or 3 signed?
    Mr. Schenendorf. Nine Commissioners approved the report, 3 
dissented, of the 9 that approved it, 5 were appointed by 
Republicans, 4 by Democrats, includes a very diverse group from 
a very diverse political spectrum, all signed the report, 
supporting it.
    Senator Pryor. I don't want to say one person is more 
valuable than the next--but maybe the most significant name or 
position in the dissenting group is the current Secretary of 
Transportation, Mary Peters.
    As I understand, her viewpoint, and the reason she didn't 
sign the report--and you all tell me if I'm wrong, but--as I 
understand it, is because she felt like the funding mechanism 
was too Federal tax-centric, is that fair to say?
    Mr. Schenendorf. Well, I think the main difference was the 
role of the Federal Government, that basically, Secretary 
Peters and the other dissenters were arguing for a much 
diminished Federal role, that there wouldn't be any increase in 
funding at the Federal level, that the Federal mission would be 
more confined to, really, maybe just the interstate program, 
that they're not--wasn't the need for Federal assistance to 
transit or intercity passenger rail, and that all of those 
improvements were really the responsibility of State and local 
governments and the private sector.
    So, it was really that role of the Federal Government that 
was the real distinction between the majority and the minority.
    Senator Pryor. Anybody have anything to add on that? On the 
dissenting view?
    Mr. Rose. I just, from my perspective, we were in agreement 
on a lot more things than we were in disagreement on. And it 
really came down to how best to collect, and where the primary 
responsibility--but an awful lot of the programs, from 
performance standards, to a lot of the various program 
reductions, we were all in agreement upon.
    Senator Pryor. And, Mr. Rose, was this a healthy process 
for you to go through? Did you think this process was good for 
the system?
    Mr. Rose. I think it is. What I believe one of our roles 
was, to give you a, at least a blueprint of some ideas, as you 
all debate and discuss the next funding. We hope that you will 
constantly be thumbing through the book and the suggestions, 
and at least know that for 2 years, 12 people spent a lot of 
time, going around the country, listening to a lot of various 
organizations' constituents.
    And while, at the end of the day, we really do believe that 
we've got a world-class transportation system, we know that, if 
you subscribe to, our economy is going to continue to grow, and 
that our population is going to continue to grow, we think 
we've got a really big issue coming toward us.
    And we hope that--if nothing else--that you'll take a lot 
of the work that's been done, and reference it, as you all go 
through your various processes to design the future 
transportation network for our country.
    Senator Pryor. Let me ask, if I may, while I have you, Mr. 
Rose, on this railroad tax credit? You all talk about that, and 
I know that Senator Lott, when he was here, had a tax credit 
idea and a bill--could you elaborate what the Commission talked 
about, when it came to the tax credit?
    Mr. Rose. Sure. The--I think the real debate was around 
that we need more freight rail capacity. And as we looked at 
our study the first time, again, that these--the entire Class I 
network has never been modeled, if you will, as one U.S. 
railroad network, because these are privately held companies 
that all interconnect with each other.
    But the study revealed that we're going to have to spend 
about $140 billion through the year 2035. And even though the 
railroads are spending at record capital right now, we think 
that there's still going to be a gap there. And I believe that 
the most efficient, and the most rational way to do this, is 
through tax stimulus.
    And the reason we believe that--and the reason I believe 
it--is that what we try to design in this program is a program 
that would simply stimulate investment to come sooner rather 
than later, but not so much of a stimulus that it would ever 
stimulate non-economic investment to be made.
    And the other thing we made--that we were clear about--this 
isn't just for railroads. We have a lot of customers that, 
quite frankly, want to build rail storage capacity, rail 
expansion capacity--in some cases----
    Senator Pryor. And some of this deals with coal?
    Mr. Rose. Right.--it could be rail--it could be coal-
storage yards. You know, we believe that there are customers 
that want to build out to another railroad, that would be used 
for this expansion capacity.
    So let's say, it's the 25 percent off of expansion capacity 
only--so it's not for the maintenance and renewals of the ties 
and the ballast resurfacing that we do--and we believe that it 
would have a net-net very positive impact to get more rail 
capacity for our country.
    Senator Pryor. Good.
    Before I let you all go, because many of our colleagues 
went to that Tom Daschle portrait unveiling, they left me with 
a lot of questions here, and that's why I'm asking all of the 
questions.
    But, I do have one question, as we leave, and I don't know 
who's best to try to handle this, but you all talk about taking 
these 108 programs and consolidating them down into 10--does 
that also mean, and I'm not sure the report speaks to this 
directly--does that also mean that the entire Department of 
Transportation should be reconfigured, and reorganized, and re-
done to meet the challenges that they have today?
    Mr. Schenendorf. Well, I think that it wouldn't be 
essential to do that, but I don't think that we think that that 
would be the next logical step. And I think we did recommend 
that at some point, once you consolidate these programs into 
performance-based, modally neutral programs, than it would make 
sense that the Department of Transportation restructure the 
Department in a way that was more compatible with the 
performance-based programs. But certainly, it wouldn't be 
essential to do that, you could take the first step of doing 
the performance-based.
    Senator Pryor. Great.
    Did you all have anything else before I adjourn the 
hearing? Any other comments?
    Mr. Busalacchi. I would just like to reaffirm a couple of 
things that I had said in my testimony about inter-city 
passenger rail. This is a very important piece of the 
Commission report. It's something that I believe very strongly 
that the country wants and needs. States have to have a Federal 
partner. States cannot expand inter-city rail without a Federal 
partner.
    I believe that if we do it, and we expand our rail network, 
and we do it as the Commission report recommends, focusing on 
congested city-to-city pairs of 500 miles or less, we can help 
ourselves with energy independence, and global warming. It's 
something that we can do, but we're running low on time.
    I know the Senator, before she left, had mentioned that we 
didn't say anything about Amtrak. Commissioners recognized that 
Amtrak--at the end of the day, may not be the only provider. I 
feel very strongly that we have to reauthorize Amtrak, and give 
them the money they need. We really need a Federal commitment, 
here, like the commitment we've made to highways and airports.
    Thank you.
    Senator Pryor. You bet.
    Anybody else before we adjourn?
    Mr. Quinn. Mr. Chairman, just a couple of things. You know, 
transportation is so important to our Nation's economy--between 
the rail industry and the trucking industry--you know, we move 
the Nation's economy.
    And the freight bottlenecks, the congestion that we're 
seeing on the highways today are costing billions of dollars a 
year. If we could transform, correct those situations, that 
actually frees money up, you know, for other development 
construction.
    And they're becoming more critical every day as more and 
more vehicles are on our roads, and if the economy is going to 
grow, we simply have to solve these problems, immediately. It's 
a crisis out there today, and it's a crisis that grows bigger 
every day. And if you take Matt's--his 2 percent a year, and 
look what that does, compounded, this has to be addressed now, 
because it's costing us. The failure to act is what's going to 
cost us billions more dollars. It costs billions now, but the 
failure to do anything is going to be much more expensive than 
what we have to do.
    Senator Pryor. Right.
    Mr. Quinn. Thank you.
    Senator Pryor. Well, thank you.
    And let me just say this and--I'm sorry, did you?
    Mr. Schenendorf. Well, I just wanted to add at the end 
here, on behalf of all of the Commissioners, thank you for 
having us up here and giving us this opportunity, and we stand 
ready to help in any way we can as you proceed forward.
    Senator Pryor. Well, thank you.
    That's really what I was going to say, is that I want you 
to know that your work is not in vain, and we are going to 
start the process here at some point in the next several weeks. 
It will be up to Senator Inouye and Senator Stevens on how we 
proceed in the Committee.
    But we're going to start that process of looking at our 
future highway needs, and getting prepared for the next highway 
bill, when that comes up, and your work, and all of your time 
and effort and energy will really be a starting point for 
discussion in a lot of areas.
    I think your work has been valuable, and it's very much 
appreciated. We will leave the Committee record open for 2 
weeks, we'll allow Senators who could not be here--or like 
Senator Stevens, had to leave early--to submit their questions 
for the record, so don't be surprised if the staff contacts you 
all, and asks you to get those responses back to us, but this 
is very important.
    And it's like you said, our transportation system moves the 
economy, and it literally does. If we want to have that 
economic growth, like you all talked about, we have to have the 
right kind of transportation infrastructure there to make it 
happen, and to allow it to happen.
    So, again, I want to thank you on behalf of the entire 
Committee, certainly Senator Inouye, Senator Lautenberg, 
Senator Stevens, Senator Hutchison, want to thank you all very, 
very much for being here, and all your time, and if there's 
anything else you'd like to submit for the record like more 
charts, please don't hesitate to do that, we look forward to 
working with you over the next several months.
    The hearing is adjourned.
    [Whereupon, at 4:22 p.m., the hearing was adjourned.]
                            A P P E N D I X

  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Jack Schenendorf
    Question 1. The Commission recommends a consolidation of the 
Federal surface transportation programs into 10 new program areas. One 
of those programs area is a safety program. How should this safety 
program be financed--by the users of the system?
    Answer. The Commission applauds the Federal Government's work over 
the past four decades to improve transportation safety. There is no 
doubt that our Nation's surface transportation systems are much safer 
than they were in the early 1970s, thanks to cooperative efforts 
between the Federal Government, State and local partners, research 
institutions, and the private sector.
    Much work, however, needs to be done, which is why the Commission's 
final report recommends more ambitious national safety standards and a 
goal to cut surface transportation fatalities in half from current 
levels by 2025. To accomplish this, the Commission recommends a 
National Safe Mobility Program. Like the other programs envisioned 
under a restructured surface transportation strategy, the Commission's 
final report recommends funding the National Safe Mobility Program 
through user fees. These user fees would come from the Highway Trust 
Fund--or its successor, a Surface Transportation Trust Fund--that 
includes revenue from a variety of sources, including fuel taxes.
    The fatalities and injuries created by unsafe transportation impact 
many aspects of society at large, including public health, family 
welfare, and the economy. There is justification in having 
transportation users pay the cost for safety programs.

    Question 2. The Commission also recommends creating a National 
Freight Program. Does the Commission recommend levying a waybill tax? 
Who does the Commission believe would be best to administer a waybill 
tax? Should these funds available for port-related infrastructure that 
feeds into the surface system, as currently there is no Federal program 
to financing port improvements?
    Answer. Given the strong Federal interest in freight movement, the 
Commission recommended that Congress should make available a variety of 
funding sources to meet the needs of a freight transportation program 
which addresses chokepoints at major gateways and trade corridors. The 
freight program envisions port-side improvements, if they are part of 
comprehensive freight planning and yield the intended benefit of 
improving freight flow across the Nation's freight transportation 
networks.
    At the Federal level, the Commission envisioned a variety of 
funding mechanisms, including increased gas tax revenues, tax credits, 
a portion of Customs duties revenues and a Federal freight fee. With 
regard to a Federal freight fee, the Commission reviewed a variety of 
fee options, including a freight waybill charge. It did not render a 
judgment on what type of specific fee would be the best to implement to 
help fund freight projects.
    Throughout the deliberations of a fee, there was discussion of the 
fact that international trade is a ``game changer'' for freight flows, 
which informed the Commission's judgment that generating revenues from 
trade-related means is appropriate. Thus, the Commission focused on 
diverting a portion of Customs fees to freight projects. This approach 
has the advantage of an existing mechanism for collection and is a 
reasonable proxy for trade volumes flowing through freight networks and 
chokepoints. The Commission noted that if 5 percent of Customs duties 
were dedicated to freight transportation improvements, revenues would 
be approximately $1.8 billion per year.
    With regard to a container fee, the Commission noted that a 
container fee paradigm has in the past served to fund the public's 
share of public-private partnerships to develop needed freight 
infrastructure. The Alameda Corridor is the best example of this model. 
However, the Commission was careful to caution Congress that any such 
fee should be undertaken only with the creation of an accountable and 
transparent programmatic linkage between any assessed fee and the 
selection of projects that facilitate increasing volumes of primarily 
trade-driven freight. The payers of such a fee must realize the benefit 
of improved freight flows resulting from projects funded by the freight 
program. Such a fee should be designed to ensure that commerce is not 
burdened by local and State proliferation of such fees; no mode of 
transportation or port of entry is disadvantaged and that the ultimate 
consumer bears the cost (i.e., carriers do not assess, the government 
does, so that the cost cannot be borne by a carrier).
    The Commission noted that private freight rail investment is the 
most significant source of investment in the freight network and that 
such investment would fall short of demand, despite current and 
projected record levels of infrastructure spending. Thus, the 
Commission recommended an investment tax credit to pull forward 
additional private investment and counseled against proposals that 
would reduce private freight railroad investment. A variety of 
witnesses before the Commission presented convincing arguments that 
this would include not only regulatory changes, but also increased 
taxes and fees on carriers.

    Question 3. The Federal Highway Administration has estimated that 
large trucks do not pay their full cost in fuel taxes related to their 
use of and impact on Federal highways. Does the Commission recommend 
ensuring that all users fully pay their associated costs?
    Answer. The Commission recognized that increasing the fuel tax 
without commensurate changes in truck taxes could exacerbate the 
current situation where heavy trucks pay less than their share of 
highway costs. Therefore, the Commission recommended that when 
adjusting Federal fuel tax rates, tax rates on existing Federal truck 
taxes should be adjusted proportionally to maintain the current 
allocation of highway cost responsibility.

                                  
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