[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
           FINANCING INVESTMENTS IN HIGHWAYS AND MASS TRANSIT

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 17, 2009

                               __________

                            Serial No. 111-8

                               __________

           Printed for the use of the Committee on the Budget


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

                  U.S. GOVERNMENT PRINTING OFFICE
47-994                    WASHINGTON : 2010
-----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001

                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            CYNTHIA M. LUMMIS, Wyoming
CHARLIE MELANCON, Louisiana          STEVE AUSTRIA, Ohio
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        DEVIN NUNES, California
ROSA L. DeLAURO, Connecticut,        GREGG HARPER, Mississippi
CHET EDWARDS, Texas                  [Vacant]
ROBERT C. ``BOBBY'' SCOTT, Virginia
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, March 17, 2009...................     1

Statement of:
    Hon. Allyson Y. Schwartz, Vice Chair, Committee on the Budget     1
    Hon. Earl Blumenauer, a Representative in Congress from the 
      State of Oregon............................................     1
    Hon. Paul Ryan, ranking minority member, House Committee on 
      the Budget.................................................     3
    Debra L. Miller, secretary, Kansas Department of 
      Transportation.............................................     4
        Prepared statement of....................................     6
    Robert D. Atkinson, Chair, National Surface Transportation 
      Infrastructure Financing Commission........................    11
        Prepared statement of....................................    15
        Responses to questions for the record....................    65
    Tyler D. Duvall, consultant, former Assistant Secretary for 
      Transportation Policy, U.S. Department of Transportation...    21
        Prepared statement of....................................    25
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................    29
        Prepared statement of....................................    29
    Hon. Robert B. Aderholt, a Representative in Congress from 
      the State of Alabama, questions for the record.............    65


                        FINANCING INVESTMENTS IN
                       HIGHWAYS AND MASS TRANSIT

                              ----------                              


                        TUESDAY, MARCH 17, 2009

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:08 a.m. in room 
210, Cannon House Office Building, Hon. John Spratt [chairman 
of the committee] presiding.
    Present: Representatives Spratt, Schwartz, Kaptur, Doggett, 
Blumenauer, Berry, Etheridge, McCollum, DeLauro, Bishop, 
Connolly, Schrader, Ryan, Garrett, Jordan, Lummis, and Austria.
    Ms. Schwartz [presiding]. Good morning. Chairman Spratt has 
been delayed. He has asked me to open the committee hearing.
    The House Budget Committee hearing on transportation is 
intended to inform the committee on our investment needs and 
financing options not only for the next highway and transit 
bill, but for more information on transportation.
    Today's hearing came, in large part, to the initiative of 
Mr. Blumenauer of Oregon, and so I will shortly yield our time 
for an opening statement to him, and then we will recognize Mr. 
Ryan for his opening statement,
    But first I want to welcome our witnesses.
    Ms. Debra Miller, who is the Secretary of Transportation 
for the State of Kansas and a member of the American 
Association of State Highway and Transportation Officials. 
Welcome; and Dr. Robert Atkinson, who is chairman of the 
National Surface Transportation Infrastructure Financing 
Commission. And Mr. Tyler Duvall, who is a consultant and 
former Assistant Secretary of Transportation at the U.S. 
Department of Transportation.
    Welcome to each of you, and I look forward to your 
testimony.
    Now I would like to yield to Mr. Blumenauer for an opening 
statement on our side.
    Mr. Blumenauer. Thank you very much, Madam Chair.
    I join you in welcoming our guests this morning and deeply 
appreciate the committee carving out some time for us to focus 
on the needs of transportation and the Highway Trust Fund that, 
for 2 years in a row, has moved into deficit for the first time 
in history.
    As we are looking at ways to jumpstart the economy, as we 
are looking at strengthening our partnership with State and 
local governments, as we are dealing with needs beyond the 
economy to deal with saving the planet, greenhouse gases, 
transportation is integral to each and every one of these major 
items. It is my hope we can hear today from people who are on 
the ground working represented by Ms. Miller, people who are 
meeting challenges of a declining highway trust fund and 
escalating costs of transportation, that we can hear from Mr. 
Atkinson with the second of two commissions that we established 
in the reauthorization of the Surface Transportation Act in the 
last iteration.
    To take a hard look. This is not unforeseen that we are 
going to run into choppy economic waters.
    For the last 2 years, I have been working with 250 
stakeholders to look at opportunities for us to come together. 
Lots of things divide us on Capitol Hill, there are lots of 
areas of philosophical and partisan division. But one of the 
things that has struck me is how at the grassroots level across 
the country, people are coming together with a vision of what 
transportation needs to do, how it is a key to strengthening 
the fabric of the community and how disparate groups--it has 
been my privilege to work in transportation-related activities 
since I was a child legislator before Mr. Ryan was born.
    I have watched as people who you wouldn't expect to be on 
the same page are understanding the challenge that we face, 
whether it is the Chamber of Commerce, the truckers, railroads, 
bicyclists, engineers, there is a vast array of people who 
understand that we need a new vision for transportation and we 
need a sustainable funding mechanism.
    Our colleagues on the T&I Committee are hard at work 
dealing with what the reauthorization--or in some cases some 
people actually want to rewrite it to make it commensurate with 
the needs and challenges of today's economy and environment. 
But it is going to be a much different bill if it is a $260 
billion reauthorization or it is at $500 or $600 billion. We 
can help work with people around the country who are coming 
together to be able to at least establish some budget headroom 
so that there are possibilities for Ways and Means and 
Transportation to be able to meet these challenges.
    I deeply appreciate the opportunity for the Budget 
Committee to have now its second hearing. Chairman Spratt was 
kind enough to give us one last year as well, because this is 
one of the areas where the challenge is clear, where there is a 
broad and emerging consensus with the business, labor, 
environment, local and State government, and the Budget 
Committee is going to play a critical role in determining what, 
if anything, Congress does in this session.
    I appreciate your courtesy, and I yield back.
    Ms. Schwartz. Thank you very much, Mr. Blumenauer, for your 
really important work on just making sure that we understand 
how important Transportation, and I would say it in the 
broadest sense of the word, it actually really relates to 
sustainable communities. And given the economy we are in right 
now and the pressures on American families, we have seen 
American families and communities really respond dramatically 
to not only wanting to see repair for roads, bridges and 
highways, but to see a different kind of investment in 
transportation, including rail. It has really been very, very 
important.
    And I see you are wearing a green bicycle today. So how 
very appropriate given today is St. Patrick's Day. So good 
acknowledgment of both of your interests in all forms of 
transportation and your respect for St. Patrick's Day. So good 
work on that one.
    Let me turn to Mr. Ryan for an opening statement, if he 
should wish.
    Mr. Ryan. Thank you, Madam Vice Chair.
    I want to congratulate the gentleman on the green lapel pin 
as well, being an Irishman.
    Let me first say to you, Mr. Blumenauer, you and I have 
agreed with each other at times and we have disagreed with each 
other at times. But I have got to say, I have a tremendous 
amount of respect and admiration for your passion for issues. 
You are a very sincere advocate for your point of view. And you 
are one of the leaders on this issue in Congress, and you are 
to be commended for that. I think it is because of your 
advocacy that we are having this hearing. I want to thank you 
for your passion. I think that is important.
    Across our country, the Federal highway and transit 
spending have played a vitally important role in the growth and 
productivity of our economy and our way of life. This year, 
Congress is going to likely consider the multi-year legislation 
to reauthorize Federal surface transportation programs. 
However, the current program and the financing structure faces 
numerous challenges that will make this year's authorization a 
difficult one.
    These include first, and probably most obvious, a difficult 
economic environment. We are in a recession, which most 
economists predict is going to last until some time next year 
with a slow recovery to follow.
    Second, we have record deficits. About 2 months ago, CBO 
projected the current year's deficit to reach more than $1 
trillion, which is a staggering figure. On Friday, we will get 
CBO's new numbers and they will be much, much higher deficits.
    Third, the current highway and transit program, the 
structure is badly flawed directing too much of its resources 
toward low-value programs and projects. It is worth noting that 
these programs are among the most highly earmarked in the 
Federal budget. The SAFETEA-LU bill, for example, included some 
$24 billion in earmarks, including the Bridge to Nowhere, one 
of the most recognizable and embarrassing examples.
    Finally, the current financing structure, based on excise 
fuel and tire taxes can't even support the current levels of 
funding, much less those sought by Members of Congress and 
stakeholders. Last year Congress transferred $8 billion from 
the general fund to the highway account of the Highway Trust 
Fund, to cover the shortfall--a departure from the user 
financing for the program. I think I share the gentleman's 
concern that we have got to find a financing mechanism that 
works. I believe we need a robust Federal role in 
transportation, but I think we have got to fundamentally 
rethink what that role is. Is it using scarce Federal dollars 
to build local toll pass, parking lots, and bridges that don't 
go anywhere? Or is it time we refocus transportation spending, 
take it back to its roots, to help build a well-targeted, high-
return projects that benefit the economy and the country at 
large and in a way that is both transparent and cost effective.
    I believe this is a critical discussion for every member of 
this committee, Republican or Democrat, and I certainly look 
forward to hearing from the witnesses on this matter today.
    Thank you.
    Ms. Schwartz. And I did want to yield for just one moment 
to Mr. Connolly. He wanted to welcome some guests that he has.
    Mr. Connolly. We have some students here from Lake Braddock 
High School in the 11th Congressional District watching their 
Congress at work, and I want to welcome them all here today.

  STATEMENTS OF DEBRA MILLER, SECRETARY, KANSAS DEPARTMENT OF 
TRANSPORTATION; DR. ROBERT ATKINSON, CHAIRMAN, NATIONAL SURFACE 
 TRANSPORTATION INFRASTRUCTURE FINANCING COMMISSION; AND TYLER 
      DUVALL, CONSULTANT, FORMER ASSISTANT SECRETARY FOR 
    TRANSPORTATION POLICY, U.S. DEPARTMENT OF TRANSPORTATION

    Ms. Schwartz. And now Ms. Miller, if you would begin, and 
we look forward to your testimony. Of course, as you know, your 
full written testimony can be entered into the record. And so 
if you would summarize and highlight it for us, that would be 
helpful.

                   STATEMENT OF DEBRA MILLER

    Ms. Miller. Thank you. Happy to do it, Madam Chairman.
    Good morning. I am Deb Miller, Secretary of the Kansas 
Department of Transportation, and I am chair of AASHTO's 
standing committee on planning. I appreciate this opportunity 
to testify because the budget assumptions this committee makes 
this year when you do your budget resolution will be the 
starting point as the House considers the new surface 
transportation authorization bill as has already been 
referenced.
    We certainly believe this bill has the potential to be 
historic in terms of the history in how we support 
transportation in our country. Even before we get to the issue 
of reauthorization, though, there are several key obstacles 
that stand in our way. First, as revenue to the Highway Trust 
Fund continues to lag expenditures, the $8 billion Congress 
transferred last September may not sustain the highway program 
through September of this year.
    Next, absent additional revenues to the Highway Trust Fund, 
spending will drop dramatically in fiscal year 2010. This may 
not be an issue if a new program is authorized by October 1st, 
but we also need to ask what happens to fiscal year 2010 
spending if more time is needed to complete authorization. If 
this is the case, then interim funding will be needed to be 
provided in the third fiscal quarter of this year to ensure 
there is no interruption in the highway program in either 
fiscal year 2009 or fiscal year 2010.
    Second, on September 30th, unless Congress acts, $8.7 
billion of contract authority, as required by SAFETEA-LU, will 
be rescinded from the highway program. Cancellation of this 
recession needs to take place. The importance of eliminating 
the rescission has grown as rescissions since 2002 have totaled 
almost $20 billion. Further loss could very well result in the 
cancellation of projects all across the country.
    Third, there was a proposal in the President's fiscal year 
2010 budget to eliminate contract authority for transportation 
programs. This is an idea we urge Congress to reject. Contract 
authority provides the predictability that States need to make 
the long-term commitments vital to highway, transit and 
aviation programs, and it must be preserved.
    Fourth, solutions chosen to achieve climate change 
objectives, such as cap-and-trade or a carbon tax, should not 
preempt the need to increase revenues from fuel taxes to 
sustain the highway and transit programs. Transportation and 
climate change legislation needs to be coordinated.
    Finally, there are two challenges which will have to be 
addressed in the next Surface Transportation Authorization 
Bill. Revenues are flowing into the Highway Trust Fund at a 
rate of billions of dollars below the current rate of 
obligations for future spending. Come October 1st, unless 
Congress closes this gap, the highway program will face a 
cutback of $20 billion or more for fiscal year 2010. The 
transit program will face a $5 billion reduction 1 year later.
    The first priority must be at a minimum to sustain the 
current highway and transit programs at no less than their 
current levels of funding. But even maintaining the current 
funding levels doesn't ensure current construction work loads. 
From 2004 to 2008 highway construction prices soared due to 
increased cost for steel, cement and asphalt.
    It is estimated that between 1993, when Federal fuel taxes 
were last adjusted, and 2015, highway construction costs will 
have raised more than 80 percent. To restore purchasing power, 
the highway Federal funding will have to be increased to $75 
billion per year by 2015 and Federal Transit Funding to $18.5 
billion per year.
    In order to maintain our Nation's transportation needs, we 
must do more than just address the highway and transit 
programs. AASHTO also believes that freight and intercity 
passenger and rail city programs need to be funded. To address 
our transportation goals, AASHTO believes that $545 billion 
over the next 6 years will be needed. This is how that breaks 
out: $375 billion for highways; $93 billion for transit, $42 
billion for freight--funding to come from outside the Highway 
Trust Fund--and $35 billion for intercity passenger rail also 
to come from outside the Highway Trust Fund.
    So how can all of this be paid for? Clearly, that is the 
toughest question facing us.
    By our accounts, current highway and transit program 
revenues will generate $260 billion over the next 6 years 
leaving a funding gap of $210 billion. To close this gap, we 
believe Congress will have to consider a menu of options, and 
this menu is more fully described in the written testimony that 
has been submitted.
    But it includes such things as bond financing, dedicating a 
portion of custom fees to transportation and a series of fees 
on freight. The menu also includes increasing gas and diesel 
taxes as the National Surface Transportation Infrastructure 
Financing Commission has recommended in their recently released 
report, and consideration of a VMT fee approach.
    When we look at increasing gas and diesel taxes, I know it 
is a great concern to everyone as we consider the situation in 
our country, but we also need to remember that we are making 
investments that have long term and important consequences and 
that the cost of the amount for the average driver, if we had 
an increase, would be less than one Starbucks coffee a week. 
And putting into perspective what the benefit is against the 
costs, I think we can clearly see that the benefit outweighs 
the costs.
    Finally, we believe that States, cities, and counties 
should also be given the flexibility to consider tolling where 
appropriate and to pursue public-private partnerships where we 
believe that the public interest is best served.
    Thank you very much for this opportunity to testify.
    Ms. Schwartz. Thank you. We will hold questions until we 
finish the other testimony.
    [The prepared statement of Debra Miller follows:]

   Prepared Statement of Deb Miller, Secretary, Kansas Department of 
                             Transportation

    Good morning. I am Debra L. Miller, Secretary of the Kansas 
Department of Transportation. Today I am appearing on behalf of the 
American Association of State Highway and Transportation Officials 
(AASHTO).
    As your committee begins its work on crafting a budget blueprint 
for the next ten years, I'm appreciative of this opportunity to 
describe for you the very significant challenges that we face in 
funding and financing our surface transportation system over both the 
short- and long-term. I understand that this year's Budget Resolution 
is particularly important because it will be the first document the 
House considers in making budget assumptions for the new surface 
transportation authorization bill.
    While the upcoming authorization provides an excellent opportunity 
to reform and improve the national surface transportation network, 
several key obstacles remain in our way before we can get there.

            FIRST, SHORT-TERM HIGHWAY TRUST FUND INSOLVENCY

    Spending from the Highway Trust Fund is exceeding the levels of 
revenues flowing into it. What was hoped for when SAFETEA-LU was 
enacted was that between trust fund reserves and current cash flow, 
that there would be sufficient revenue in the Highway Trust Fund to 
fund all of the commitments in highway and transit investments 
guaranteed in the bill. In September, 2008, when USDOT announced that 
insolvency of the highway program was imminent, Congress transferred $8 
billion back into the Trust Fund from the General Fund to enable USDOT 
to honor the commitments made to states through October, 2009. That 
action kept the program solvent and enabled billions in highway 
investments to continue.
    However, based on recent reports from USDOT, because revenues are 
coming in at a rate slower than expected and expenditures are occurring 
at a rate faster than anticipated, the $8 billion may not be sufficient 
to sustain the program all the way until September 30, 2009. Current 
revenue projections show that interim relief may be required to avert a 
cash flow crisis that could occur as early as July 2009.
    A second facet of this short-term crisis is what happens in FY 
2010. While we are committed to completing the next authorization on 
schedule, and commend House Transportation and Infrastructure Committee 
leadership for plans to compete House action by mid-summer, the 
possibility remains that additional time will be required for the 
House, Senate and the Administration to agree on a final bill. Interim 
funding should be provided in the second quarter of this year to assure 
that there is no interruption in the highway program in either FY 2009 
or FY 2010.



             second, need to cancel $8.7 billion rescission
    SAFETEA-LU contains a provision mandating a rescission of $8.7 
billion of contract authority from the highway program on September 30, 
the last day of fiscal year 2009. In addition to a recent series of 
rescissions starting in 2002 that total almost $20 billion, the $8.7 
billion rescission provision would result in the cancellation of vital 
projects in every region of the country by a similar amount. We were 
pleased that with widespread support, Senate Finance Committee Chairman 
Max Baucus of Montana and Senator Kit Bond of Missouri had planned to 
include the cancellation of this rescission in the American Recovery 
and Reinvestment Act (ARRA). However, at the last minute, this did not 
prove possible. Cancellation of this $8.7 billion rescission must take 
place prior to September, 30, in order to preserve the balance of 
contract authority the States have on hand as guaranteed by SAFETEA-LU.

 THIRD, NEED TO SUSTAIN HIGHWAY AND TRANSIT PROGRAM CONTRACT AUTHORITY

    The FY 2010 Budget outline released by the Obama Administration in 
February includes a proposed budget scorekeeping change that would 
eliminate contract authority for the transportation program. This would 
have a devastating impact on transportation financing, and consequently 
transportation investment. What distinguishes transportation trust fund 
financed programs from others is the linkage to dedicated user fees, 
first enacted in 1956 for highways and later extended to transit and 
aviation with the ability to use contract authority. The predictability 
that contract authority provides is essential for states and local 
governments to make long-term commitments to major transportation 
investment projects. In 1998 with the passage of the TEA 21 
legislation, Congress recognized this unique budget situation and 
established funding guarantees tied to the trust funds. By subjecting 
transportation investment to the vagaries of the annual appropriations 
process, the proposed scorekeeping change strikes at the heart of the 
job creation goals of the economic recovery effort by undermining the 
ability to make multi-year commitments. Congress must reject this 
proposed change and preserve contract authority for the highway, 
transit, and aviation programs.

          FOURTH, COORDINATION WITH CLIMATE CHANGE LEGISLATION

    Congress plans to act on Climate Change and Energy legislation on a 
schedule that coincides with that planned for transportation 
authorization. If a cap and trade or a carbon tax are applied to oil 
refineries to reduce greenhouse gas emissions, the result will be 
passed on to consumers through higher fuel prices, similar to what 
would happen if fuel taxes were increased. Three important recent 
studies have documented the important role fuel taxes are expected to 
play in supporting future federal highway and transit investment. A 
National Academy of Sciences Transportation Research Board (TRB) study 
reported in 2006, that the highway and transit programs could continue 
to rely on fuel taxes as their primary source of funding for the next 
15 years. Both the National Surface Transportation Policy and Revenue 
Study Commission (2008) and the National Surface Transportation 
Infrastructure Finance Commission (2009) recommended that Congress 
increase funding for the Highway Trust Fund by raising fuel taxes, 
before transitioning program support to vehicle miles traveled (VMT) 
taxes between 2021 and 2025.
    Finding viable ways to reduce transportation-related greenhouse gas 
emissions to the levels acceptable and viable ways to increase Highway 
Trust Fund revenues to the level needed are both important. Action on 
one must not inadvertently preclude action on the other. It is quite 
possible that action in one arena could complement what is needed in 
the other. Coordinated action will be important.

 DOCUMENTATION OF FEDERAL HIGHWAY AND TRANSIT INVESTMENT NEEDS BY TWO 
                         NATIONAL COMMISSIONS.

    Two of the best actions to taken by Congress in SAFETEA-LU were the 
appointment of two commissions to study the future of the highway and 
transit programs. The twelve-member National Surface Transportation 
Policy and Revenue Study Commission in its January, 2008 report stated 
that to meet future surface transportation investment requirements for 
highways, transit and rail that the nation needs to invest $225 billion 
per year through 2050. They found that the U.S. was currently investing 
at only 40% of this amount. The fifteen-member National Transportation 
Infrastructure Finance Commission in its February, 26, 2009 report 
stated that to meet future highway and transit investment requirements 
that the nation needs to invest at an rate of $200 billion per year. 
Those highly regarded commissions have clearly outlined for Congress 
the scale of the investment needed for the country's future.

                 AUTHORIZATION FUNDING NEEDS, 2010-2015

    There are two challenges which will have to be addressed in the 
next surface transportation authorization bill.
A. Sustaining Current Highway and Transit Programs.
    Revenues are flowing into the Highway Trust Fund at rate billions 
of dollars below the current rate of obligations for future spending. 
That means that come October 1, 2009 the first day of the next fiscal 
year, unless Congress provides sufficient revenues to close this gap, 
as is shown in the charts below, the highway program will face a 
cutback of $20 billion or more for FY 2010. The transit program will 
face similar drastic reductions on year later in FY, 2011, unless 
additional revenue is provided.
    What this means, is that just when the economic recovery program is 
in the midst of creating thousands of jobs through highway and transit 
investments, the bottom will drop out from under the core highway and 
transit programs and thousands of workers will have to be laid off. No 
matter what, it is vital at a minimum to sustain the current highway 
and transit programs at not less than their current levels of funding.
B. Meeting Skyrocketing Construction Costs.
    In addition to years of steady growth in inflation, from 2004 to 
2008 construction prices soared for steel, concrete, asphalt, and 
construction machinery. It is estimated that between 1993, the year in 
which federal fuel taxes were last adjusted, and 2015, the purchasing 
power of the federal transportation program will have declined by 80 
percent. To restore the purchasing power to that of 1993, federal 
highway funding will have to be increased from $43 billion in 2009 to 
$75 billion by 2015, and federal transit funding would have to be 
increased from $10.3 billion in 2009 to $18.5 billion in 2015.


       SCALE OF SIX-YEAR SURFACE TRANSPORTATION INVESTMENT NEEDED

    AASHTO believes that in addition to the core highway and transit 
programs, there are two additional funding priorities which need to be 
addressed in this authorization cycle.
A. Freight Funding Needed to Meet Capacity Crisis
    The nation is entering the early stages of a freight transportation 
capacity crisis. Truck volumes are expected to double by 2040 and rail 
freight to increase by 60 percent. Highways, railroads, ports, 
waterways, and airports all require investment well beyond current 
levels to maintain, much less improve, their performance. Investment is 
needed to fix freight bottlenecks, improve intermodal connections, 
build bridges to eliminate unsafe highway-rail crossings, and fund 
freight corridor improvements. AASHTO recommends that a freight program 
be funded at $42 billion per year, from resources outside the Highway 
Trust Fund.
B. Intercity Passenger Rail Network Overdue
    AASHTO believes we are overdue for the United States to provide a 
robust intercity passenger rail network that provides competitive, 
reliable, and frequent passenger service, comparable to world-class 
systems in other countries. Current service should be brought up to a 
good state of repair. Ultimately service should expand to include high-
speed rail corridors, regional corridors, and long-distance service. 
Federal funding of $35 billion over six years is needed to begin the 
capital investment required.

                      $545 BILLION FUNDING NEEDED

    Based on these considerations, in order to sustain the federal 
highway and transit programs, restore their purchasing power, and begin 
needed investment in the national freight system network and in 
intercity passenger rail, Congress should:
     Fund the federal highway program at $375 billion between 
2010 and 2015, with the annual program funding level reaching $75 
billion by 2015.
     Fund the federal transit program at $93 billion between 
2010 and 2015, with the annual program funding level reaching $18.5 
billion by 2015.
     Fund the freight program at $42 billion between 2010 and 
2015, from resources outside the Highway Trust Fund.
     Fund the intercity passenger rail program at $35 billion 
between 2010 and 2015, from resources outside the Highway Trust Fund.


                   HOW TO PROVIDE THE REVENUES NEEDED

    To provide the revenues needed, Congress will need to utilize a 
diversified portfolio of revenue options. In order to reach the funding 
targets, Congress should consider a menu of options including, but not 
limited to:
     Indexing existing and new Highway Trust Fund sources of 
revenue
     Increasing the gas tax
     Increasing the diesel tax
     Discontinuing motor fuel tax exemptions that reduce 
Highway Trust Fund receipts (i.e., eliminate exemptions or reimburse 
them from the General Fund)
     Reinstituting collection of interest on Highway Trust Fund 
balances
     Increasing General Fund transfers for transit, and 
providing General Fund support for intercity passenger rail
     Issuing tax credit bonds to help fund major surface 
transportation project investments
     Allocating portions of any carbon tax or cap-and-trade 
auction proceeds that reflect transportation's impact on greenhouse gas 
emissions
     Dedicating a share of customs revenues for transportation 
purposes
     Enacting a bill-of-lading charge for all highway and rail 
freight, to be dedicated for freight infrastructure improvements
     Authorizing container fees in support of freight needs
     Creating a dedicated source of revenue outside the Highway 
Trust Fund to support a freight program including investments in 
national and regional corridors
     Creating a dedicated funding source for intercity 
passenger rail
     Enacting fees based on annual highway miles traveled
     Providing authority for tolling where determined by states 
to be an appropriate funding solution
    In addition, Congress should maintain at least the current federal 
share (45 percent) of total capital investment in the highway and 
transit portions of the national surface transportation system. At the 
same time, state and local governments must maintain their current 
transportation investment levels.
    To the maximum extent practicable, Congress should eliminate 
earmarking. Funding levels for earmarks should be no more than the 1991 
ISTEA levels (5 percent of the total program) and set-asides for 
narrowly defined programs should be reduced. In addition, all earmarked 
projects should be derived from a capital improvement program or a 
statewide transportation improvement program that has been adopted by 
the respective state department of transportation.
    Given the magnitude and diversity of needs, Congress should grant 
states maximum access and flexibility to use a mix of funding and 
financing tools most appropriate for each state. This includes use of 
public-private partnership opportunities that combine the management 
efficiency and innovation of the private sector with public sector 
social responsibility and job generation concerns. Where government 
policies, laws, and regulations impede private investment, acceptable 
alternatives for reducing these impediments should be developed. The 
best place to start would be expanding the existing inventory of 
innovative program delivery tools:
     Removing or increasing the national volume cap on the 
amount of Private Activity Bonds that can be issued for highway and 
intermodal transportation projects
     Enhancing and recapitalizing the State Infrastructure 
Banks
     Reforming the Transportation Infrastructure Finance and 
Innovation Act (TIFIA) and Railroad Rehabilitation & Improvement 
Financing (RRIF) programs to broaden the availability and enhance the 
attractiveness of federal credit assistance
     Removing federal limitations on the ability of state and 
local governments to raise toll revenues and to apply such revenues to 
multimodal transportation projects and activities within the same 
corridor or region as the tolled facility
    Also, we must adopt a long-range approach to funding the surface 
transportation system that gradually moves away from dependence on the 
current motor fuels tax to a distance-based direct user fee such as a 
fee on vehicle miles traveled. If a VMT fee is to be part of the long-
term solution, Congress should direct the vehicle manufacturers to 
begin incorporating the necessary technology into the fleet so that a 
VMT fee can potentially be phased in over the 2016--2021 surface 
transportation authorization period. In the interim period, Congress 
should consider developing a simple highway user fee option based on 
self-reporting of annual vehicle miles traveled that could be collected 
along with annual vehicle registration fees. To expedite research and 
development, the next transportation bill should fund a proof of 
concept, multi-state tests of a VMT-based funding approach at $50 
million per year for 2010, 2011, and 2012 with a report to Congress by 
2013.
    And finally, Congress should assure that any climate change 
legislation that creates a new revenue source, either through a carbon 
tax or cap-and-trade, provides substantial funding for transportation 
proportional to transportation's impact on greenhouse gas emissions, 
and dedicate a sufficient portion of these revenues to support 
intercity passenger rail, transit, highway operations, bicycle and 
pedestrian projects, and freight programs that reduce greenhouse gas 
emissions.
    In conclusion, investing in transportation is unlike any other 
federal government spending. Transportation dollars are converted to 
physical assets that will last for 50 to 100 years to provide future 
generations with a modern mobility network. At the same time, such 
investments create and maintain well-paying ``Made-in-America'' jobs. 
In the short-term, ensuring stable funding for transportation 
infrastructure will be a critical component of the economic recovery 
effort. And for the long-term, increased transportation investment will 
not only help sustain economic recovery, but also keep the United 
States globally competitive, reduce congestion on our roadways, save 
lives, and improve the overall quality of life.
    Mr. Chairman, members of the Committee, the subject you have under 
discussion today is of vital national importance. It is in the interest 
of us all to take on the challenge as vigorously and effectively as we 
can. On behalf of the Kansas Department of Transportation and of the 
AASHTO member states, I promise that we will continue to work with you 
in that effort.

    Ms. Schwartz. Dr. Atkinson.

                  STATEMENT OF ROBERT ATKINSON

    Mr. Atkinson. Thank you, Madam Chairman, and Mr. Ryan and 
members of the committee.
    I welcome the opportunity to present the results of the 
National Service Transportation Infrastructure Finance 
Commission Report, which we released probably about 3, 4 weeks 
ago, the executive summary here and it is summarized in my 
testimony.
    As you know, we were created in the last reauthorization in 
section 11142, and we were given a relatively narrow mandate 
with a long-term view. The mandate essentially was how much 
money do we need at the Federal level to sufficiently fund the 
system, and secondly, how should we go about raising that 
money.
    We did not have a charge nor did we look at issues around 
how that money should be invested. So we have not taken 
positions on should we fund particular parts of the system.
    There were 15 members who were appointed to the Commission. 
They represent a range of different backgrounds, a different 
range of different political orientations, but the key factor 
there is we came up with a consensus document that all of us 
agree to. And also, I want to acknowledge Commissioner Kathy 
Ruffalo, who is here with us today, and also Tamar Henkin, who 
was staff director for the Commission and want to thank them 
and other commissioners for the hard work.
    As Secretary Miller alluded to, the core bottom-line 
message is that we are simply not raising enough funds either 
at the Federal level or the State and local level to 
sufficiently meet the needs of the system. We believe we have 
estimated that to essentially--to basically meet the needs, we 
would have to add an additional $25 billion a year. If went to 
start to improve the system, so to keep it from deteriorating 
and make modest improvements in conditions and performance, we 
would need an additional $64 billion a year at the Federal 
level.
    The question is how should we go about doing that. In our 
view, we need to be thinking about what are the core principles 
by which we raise those funds. In our analysis of over 40 
different funding mechanisms, we applied a set of principles to 
those to evaluate those. And some of those principles include 
we need to be able to sustain--we need to be able to generate 
funding on a sustainable basis, we think that users should bear 
the full cost of using the system to the fullest extent 
possible, we think that any funding framework should encourage 
efficient investment and avoid waste.
    And finally, we think the funding framework should support 
energy and environmental goals. Now, obviously, you can't 
accomplish all of those with every single solution, but you can 
try to get there.
    In the short run, there simply are not a lot of easy 
answers. Like Secretary Miller, we believe that in the short 
run, a core principle should be that we maintain the integrity 
of the Highway Trust Fund, and that means both moneys going in 
should simply be coming from user fees that are already there 
in the highway Trust Fund and going out, the money should go 
out to the transportation system and not be diverted to other 
non-transportation uses.
    In terms of the actual short-run solutions, we propose 
raising the gas tax by $0.10 on an immediate basis, raising the 
diesel tax by $0.15, $0.13 of that would basically just make up 
for the loss of inflation since 1993 and $0.02 of that would be 
added to our special freight fund that we believe needs to be 
created.
    We would also propose doubling the heavy vehicle use tax. 
This was a tax that the last time was increased was in 1983. If 
you double it today, you would get back to purchasing power in 
inflation-adjusted dollars. So both of our gas tax increase and 
our heavy vehicle use tax basically bring those programs back 
to where they were in 1993 or 1983 and bring them back to where 
they would have been absent inflation.
    We also propose indexing all of the Highway Trust Fund 
revenues with the exception of truck sales taxes, index going 
forward to the CPI.
    While we think it is important do, that is not going to 
solve the problem particularly in the long run. We think in the 
long run our Commission has come up with a pretty strong 
consensus that we believe that the best answer is moving to a 
VMT, or vehicles miles traveled, tax system. For two reasons we 
say that. One is we think the sustainability of fuel taxes to 
fund the system is eroding more quickly than many people 
believe.
    And it certainly could erode more quickly in unexpected 
ways. If, for example, there were significant electric battery 
technology breakthroughs that you could, for example, get 100 
or 200 miles on a battery charge, you could see many, many 
consumers switching over, particularly for second cars, to an 
electric vehicle. No gas consumption whatsoever. They would be 
using the highway system, the road system without paying any 
fees. While that is good for the environment, it certainly is 
not sustainable for the transportation system.
    The second piece of this is even if there were not a 
problem with regard to sustainability, we believe that moving 
to a VMT system is a better system because it is more of what 
we would call a direct user fee whereas a highway and gas tax 
is what we would call an indirect user fee.
    For example, Oregon did a pilot program on the VMT, The 
Oregon Department of Transportation. They got a couple hundred 
volunteers, they asked them to participate in this, the program 
was a great success. They tested it technologically. But one of 
the interesting findings of that report, of their final report, 
was that users of that system, even though they essentially 
paid the same amount in VMT at the gas pump in gas taxes, they 
used the system less. They drove about 9 percent less. And in 
some way, it is sort of irrational if you believe in people as 
rational maximizers who respond to price signals.
    But what people actually are, they look at signals, and 
with the VMT they knew they were being charged by the mile. So 
they used the system more efficiently. They may have taken 
transit more, they may have done trip combining, a variety of 
things. And when you look around the world, there are various 
studies of congestion pricing and other direct pricing means, 
you find that people do use the system more efficiently because 
of the pricing signal.
    So we readily acknowledge in this recommendation that some 
have concerns with it.
    Let me address two of the key issues I think and why we 
think they can easily be dealt with.
    The major concern people have with the VMT system is 
privacy. And there is a belief somehow that you if you have the 
system, you will be transferring data about your trip to the 
government or whoever is receiving the funding. We strongly 
argue that that would be an inappropriate system design. You 
can create a system that only transfers the amount of money 
that you owe. This is what Oregon did, for example. When an 
Oregon driver went to pay at the pump for their gas, they only 
transferred the amount of money that they owed in the fee. So 
the Oregon DOT did not know, the Oregon Treasury did not know 
where someone drove, when they drove. All they knew is that 
they owed $4.12.
    We believe that you can design a system that way, it should 
be designed that way, because if you can't--if you don't 
preserve Americans' privacy on this, it is, first of all, not a 
good system and secondly, it wouldn't be accepted. So we do 
believe you can address privacy.
    The second issue is with administration. We think that you 
can design and build a system that would be administratively 
efficient, but one of the things that we believe in this 
reauthorization there should be, and we have recommended a 
number of pilot programs and studies to really data test this, 
get it to the next level, get it ready so that in the next 
reauthorization, you all have the information you need to 
decide whether to go forward.
    This is something other countries are already doing. The 
Germans are charging their heavy vehicles with a satellite 
based VMT. A number of studies have shown that it increased 
trucking efficiency in Germany. The Dutch are doing this in 
2014. Every single car and light-duty vehicle in the 
Netherlands will be paying by a VMT charge in 2014. In Denmark, 
2016, every single car will do this. So other nation's are 
moving ahead.
    We think there needs to be a number of other supplements, 
and I agree with Secretary Miller. This should not be a debate 
in our view about gas taxes versus pricing or gas taxes versus 
tolls. The need is so great we need to do all of the above.
    So we propose a number of recommendations with regard to 
tolling. We would argue that we should allow tolling for new 
capacity, as well as tolling on interstates' existing lanes for 
congestion relief in metros above million people. We would 
expand the Interstate Highway Reconstruction and Rehabilitation 
Pilot program to five slots.
    In addition, we would propose that some of the moneys, if 
there were an increase in the Highway Trust Fund, some of those 
moneys go into a tolling incentive program to states and local 
governments so they have more ability to bring toll projects on 
line.
    And then we would also propose increasing the State 
infrastructure bank funding $5 million a year, each year for 
the next 6 years and raise the ceiling on private activity 
bonds from $15 billion to $30 billion.
    The reason we say that even those are essentially State 
revenues is that the needs are so great, particularly for new 
capacity, when you build a new interstate or a new lane in the 
metropolitan area, the gas tax revenues will make up about 15 
percent of the costs. So you just simply cannot get there, 
particularly in metropolitan areas adding capacity whether it 
is road or transit.
    So with that, let me close and say and thank you for 
inviting us to present, and we would be happy to help in any 
way as we go forward.
    Thank you very much.
    [The prepared statement of Robert Atkinson follows:]

   Prepared Statement of Robert D. Atkinson, Chair, National Surface 
           Transportation Infrastructure Financing Commission

    Chairman Spratt, Mr. Ryan, and members of the Committee, I 
appreciate the opportunity to address the issue of budgeting for 
transportation before this committee and to share with you the relevant 
findings and recommendations of the National Surface Transportation 
Infrastructure Financing Commission, of which I serve as the commission 
chair. I am also President of the Information Technology and Innovation 
Foundation.
    Congress established the National Surface Transportation 
Infrastructure Financing Commission in the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users and charged it 
with analyzing future highway and transit needs and the financings of 
the Highway Trust Fund and making recommendations on alternative 
approaches to funding and financing surface transportation 
infrastructure. The Commission has recently completed and released our 
final report entitled ``Paying Our Way: A New Framework for 
Transportation Finance.'' The recommendations offered in this report 
focus on transforming the way we, as a nation, pay for critically 
needed surface transportation investments. The report is signed on 
behalf of all fifteen Commissioners and represents a carefully 
deliberated consensus of opinion about the various strategies that we 
believe, together, can help solve our surface transportation investment 
crisis and provide a useful road map for transitioning to a new 
financial policy framework.
    Today, I will share with you those findings and recommendations 
that I believe would be of most interest to the Committee on the Budget 
and relevant to this hearing. I will highlight the Commission's 
findings and recommendations as they relate to surface transportation 
investment and, in particular, near and longer-term budget implications 
as well as describe the full menu of options that the Commission 
considered.

                     BACKGROUND: A SYSTEM IN CRISIS

    Our surface transportation system has deteriorated to such a degree 
that our safety, economic competitiveness, and quality of life are at 
risk. As a nation, we have reaped the benefits of previous generations' 
foresight and investment, generations that developed and built a 
transportation system that became the envy of the world. Over the last 
few decades we have grown complacent, expecting to be served by high-
quality infrastructure, even as we devoted less and less money in real 
terms to the maintenance and expansion of that infrastructure. Real 
highway spending per mile traveled has fallen by nearly 50 percent 
since the federal Highway Trust Fund was established in the late 1950s. 
Total combined highway and transit spending as a share of gross 
domestic product (GDP) has fallen by about 25 percent in the same 
period to 1.5 percent of GDP today. By not adjusting the tax rate for 
inflation, federal gas tax receipts have experienced a cumulative loss 
in purchasing power of 33 percent since 1993--the last time the federal 
gas tax was increased. And, not only have we failed to make the needed 
and substantial investment; we have failed to pursue the kind of 
innovation necessary to ensure that our infrastructure meets the 
demands of future generations.
    An ever-expanding backlog of investment needs is the price of our 
failure to maintain funding levels--and the cost of these needed 
investments grows yearly. Without changes to current policy, the 
Commission has estimated that revenues raised by all levels of 
government for capital investment will total only about one-third of 
the roughly $200 billion necessary each year to maintain and improve 
the nation's highways and transit systems. At the federal level, the 
investment gap is of a similar magnitude, with long-term annual average 
Highway Trust Fund (HTF) revenues estimated to be only $32 billion 
compared with required investments of nearly $100 billion per year. The 
Commission relied heavily on previous efforts by the U.S. Department of 
Transportation, the National Surface Transportation Policy and Revenue 
Commission, and others to define the extent of the needs and forecast 
revenues for the future. The Commission did, however, develop its own 
refinements to account for currently available information as well as 
our own hypotheses for the future (see Chart 1 and 2).



    Meanwhile, the federal Highway Trust Fund faces a near-term 
insolvency crisis, exacerbated by recent reductions in federal motor 
fuel tax revenues and truck--related user fee receipts (see Chart 3). 
This problem will only worsen until Congress addresses the fundamental 
fact that current HTF revenues are inadequate to support current 
federal program spending levels. Comparing estimates of surface 
transportation investment needs with baseline revenue projections 
developed by the Commission shows a federal highway and transit funding 
gap that totals nearly $400 billion from 2010--15 and that grows 
dramatically to about $2.3 trillion through 2035.



                 THE COMMISSION'S DELIBERATIVE PROCESS

    To guide our work, the Commission developed a set of overarching 
principles to guide consideration of funding and finance approaches: 
The funding framework should:
     support enhancing mobility of all system users.
     generate sufficient funding to meet investment needs on a 
sustainable basis.
     cause users to bear the full cost of using the system to 
the greatest extent possible.
     encourage efficient investment.
     incorporate equity considerations.
     support energy and environment goals.
    The Commission recognizes that there are inherent tradeoffs among 
these principles, which require some balancing among them. Working from 
the principles, the Commission developed systematic evaluation criteria 
to apply to a wide range of funding approaches. In recognition of the 
supporting role that financing mechanisms can play in leveraging 
resources--as distinct from the underlying revenue-raising mechanisms 
that generate net new resources--the Commission considered alternative 
financing approaches. The Commission developed specific policy 
recommendations to help narrow the federal funding gap and transform 
the funding and finance framework for the nation's investment in 
surface transportation infrastructure.

                     THE COMMISSION'S KEY FINDINGS

    The Commission arrived at the following findings of relevance to 
this Committee and this hearing:
     There is no easy ``silver bullet'' solution to the problem 
of insufficient funding. As an important corollary, not all approaches 
work equally well throughout a geographically and economically diverse 
country. The Commission therefore assembled a broad menu of options for 
Congress to consider, with an assessment of the pros and cons of each 
approach.
     The current federal surface transportation funding 
structure that relies primarily on taxes imposed on petroleum-derived 
vehicle fuels is not sustainable in the long term and is likely to 
erode more quickly than previously thought--due in large measure to 
heightened concerns regarding global climate change and dependence on 
foreign energy sources, which are creating a drive for greater fuel 
efficiency and new vehicle technology.
     The current indirect user fee system based on taxes paid 
for fuel consumed provides users with only weak price signals to use 
the transportation system in the most efficient ways. This results from 
three primary factors: system users are typically unaware of how much 
they pay in fuel taxes; fuel taxes and other user fees account for less 
than 60 percent of total system revenue (with other revenues unrelated 
to use, such as general fund transfers, dedicated sales taxes and 
others making up the remainder), so that users do not bear the full 
costs of their travel; and fuel taxes have no direct link to specific 
parts of the system being used or to times of the day and thus cannot 
be used to affect these kinds of traveler choices.
     A federal funding system based on more direct forms of 
``user pay'' charges, in the form of a charge for each mile driven 
(commonly referred to as a vehicle miles traveled or VMT fee system), 
is the right foundation for the future. The Commission cast a wide net, 
reviewed many funding alternatives, and concluded that the most viable 
approach to efficiently fund federal investment in surface 
transportation in the long run will be a user charge system based more 
directly on miles driven (and potentially on factors such as time of 
day, type of road, and vehicle weight and fuel economy) rather than 
indirectly on fuel consumed. At the same time, this choice for the 
federal system provides a foundation for state and local governments 
that choose to use it to implement their own mileage-based systems that 
piggyback on the federal system in order to raise their share of needed 
revenues in ways that spur more efficient use of the system. The 
Commission believes that such a system can and should be designed in 
ways that protect users' privacy and civil liberties, that does not 
interfere with interstate commerce, and that support goals for carbon 
reduction. Moreover, greater use of pricing mechanisms, including both 
targeted tolling and broad-based VMT pricing systems, can spur more 
efficient use of our highway network and, by shifting demand to less 
congested periods of the day or to other modes, may in some areas of 
the country, reduce the need for additional capacity investments.
     We cannot afford to wait for a new revenue system to be 
put in place to start addressing the fundamental investment challenge. 
And, in the short term, effective and feasible options are limited. 
Given the significant current funding shortfall, the Commission 
concluded that the best near-term options for federal investment are 
increases to current federal fuel taxes and other existing HTF revenue 
sources. While the Commission believes these are the best near-term 
approaches, we acknowledge that other options are possible should 
Congress choose to pursue different revenue measures.
     Federal actions can and should help expand the options 
available to states and localities to fund their shares of investment. 
While many state and local funding options are not reliant on the 
federal government for implementation, several key federal actions 
could help facilitate and encourage the greater application of some--
specifically, user-backed funding approaches such as tolling and 
pricing--to help meet a portion of state and local government 
investment needs.
     Funding and financing are not the same. Financing 
approaches are not a substitute for solving the underlying problem of 
insufficient funding. Properly structured financing techniques and 
governmental financial programs, including those focused on 
facilitating partnerships with the private sector, can play an 
important role in meeting our investment needs. Their success, however, 
will depend on their ability to leverage new revenue streams to repay 
upfront capital investments. Even with this, financing approaches will 
have limited positive impact if not coupled with substantial net new 
resources.

                         POLICY RECOMMENDATIONS

    The Commission realizes that the transition from the current 
funding and finance model to a new model cannot be made overnight and 
that the immediate needs are simply too critical to wait until such a 
system is put in place. The Commission therefore makes the following 
recommendations for a multi-pronged approach to meet both short-term 
and longer-term challenges.
   ensuring the security and sustainability of the highway trust fund
    The Commission recognizes the fundamental value of the Highway 
Trust Fund--not only today but also as the appropriate foundation for 
any new user-based revenue system for surface transportation investment 
in the future. The Commission therefore offers an overarching 
recommendation to preserve the Highway Trust Fund mechanism and take 
any necessary actions to help ensure its security and sustainability in 
the near and longer term. This should include ensuring the integrity of 
the HTF structure premised on the link between user fees and 
transportation spending upon which the Trust Fund is based. It also 
should include continued efforts to reduce and minimize tax evasion and 
methods to align spending and receipts, with interest earned on any 
balances accruing to the Trust Fund.
    As an important side note, I and other commissioners view the 
proposed budget scoring change included in the Administration's FY 2010 
Budget that would eliminate contract authority for the transportation 
program as quite troubling. The Commission's emphasis on the link 
between system use and funding would be severely undermined by such a 
change. Further, contract authority provides critical predictability 
for state and local governments to enter into multi-year commitments 
for major transportation projects. This predictability has proven 
invaluable not only to supporting states' ability to enter into multi-
year contracts but also to facilitating financing arrangements that 
span multiple years and even authorization periods. The Commission 
views protection of the Highway Trust Fund mechanism and the link to 
system use as critically important to preserving and improving the 
nation's ability to meet surface transportation investment needs and to 
do so in an efficient manner. Moreover, in an era of growing concern 
over global climate change, ensuring that more, not less, of overall 
funding for surface transportation comes from user fees, as opposed to 
general fund subsidies, is critical to help send the right price 
signals for efficient system use and minimizing carbon emissions.

              ADDRESSING IMMEDIATE FEDERAL FUNDING CRISIS

    The Commission reviewed a wide range of options and concluded that 
the most viable option to meet near-term needs is to rely on existing 
HTF sources. The Commission, therefore, recommends that Congress enact 
a modest 10 cents increase in the federal gasoline tax, a 15 cents 
increase in the federal diesel tax--with 2 cents of the diesel tax 
proposal recommended to be dedicated for freight-related investments--
and commensurate increases in all special fuels taxes. In addition, the 
Commission recommends that these taxes be indexed to inflation going 
forward. These adjustments should be enacted in conjunction with the 
upcoming reauthorization of the federal surface transportation 
programs. The Commission recognizes that the increases recommended here 
are not easy to achieve, especially in the context of the current 
economic recession, and that even larger increases would be even more 
difficult to enact. The Commission, however, views the need for this 
increase as critical to begin to stem the degradation of the Highway 
Trust Fund investments. It is also important to note that increases in 
fuel taxes, even in an economic slowdown would not have a 
contractionary effect on the economy as long as they are accompanied by 
increases in surface transportation investment--such investments 
therefore creating jobs across the country.
    The Commission also recommends doubling the Heavy Vehicle Use Tax 
(HVUT) to account for the fact that it has not been increased since 
1983, and indexing the HVUT and the excise tax on truck tires to 
inflation going forward. Meanwhile, the Commission recommends 
maintaining the current sales tax on tractors and trailers, which as a 
sales price-based tax is inherently adjusted (at least relative to the 
price of these items). The Commission considered a number of 
alternative freight-related revenue sources but determined that, while 
several of them may be viable options in targeted circumstances, most 
did not fairly account for the wear and tear on our transportation 
system by the freight community. The Commission therefore concluded 
that the best way to increase broad-based funds from freight sources in 
the short run is by adjusting the fees that the entire trucking 
industry currently pays into the Highway Trust Fund.
    Together, these adjustments to current HTF funding mechanisms 
approximate the amounts required to recapture the purchasing power of 
the motor fuel taxes lost to inflation since 1993--the last time the 
federal HTF taxes were raised--and the purchasing power of the Heavy 
Vehicle Use Tax since 1983, the last time it was raised. These 
adjustments translate into approximately $20 billion per year in 
additional revenue for the Highway Trust Fund. While this is necessary 
to fund the current level of federal commitments and helps alleviate a 
portion of the funding gap, it does not eliminate it--closing 
approximately 43 percent of the ``cost to maintain'' federal funding 
gap and 31 percent of the ``cost to improve'' gap based on the 
Commission's estimates. Addressing the remaining annual funding gap 
will require either more substantial increases in current taxes or 
additional revenue from other sources, or both.

            POSITIONING FEDERAL FUNDING FOR THE LONGER TERM

    Beyond the Commission's near-term recommendations and in order to 
transition to the longer-term solution of funding based on mileage 
charges, the Commission recommends that the transition to a new funding 
framework based on more direct user charges be commenced as soon as 
possible and that a goal of deployment by 2020 be established Because 
of the complexity inherent in transitioning to a new revenue system and 
the urgency of the need, the Commission recommends that Congress embark 
immediately on an aggressive research, development, and demonstration 
(RD&D) program. This would identify and address critical policy 
questions such as privacy, administrative methods and costs, impacts to 
rural users, point of collection issues, the difference between 
passenger and freight vehicle deployment, and the interplay with 
climate change and other national policy goals. Comprehensive study of 
these issues will better inform Congress as it debates whether or not 
to move forward with a VMT system. The Commission recommends that 
Congress use the reauthorization of the federal surface transportation 
programs to make significant investments in VMT research and technology 
programs, including a variety of demonstration programs of mileage-
based user fee systems.
    The Commission notes that simply shifting from one revenue system 
to another will help but not solve the under-investment problem if 
rates are not set at sufficient levels and maintained over time to meet 
the needs. While a mileage-based direct user fee system is sustainable 
in the long term, it will suffer at least some of the same consequences 
as the motor fuel tax system if rates are not set and maintained at 
adequate levels. For illustrative purposes, the Commission estimates 
that to meet the base case ``Need to Maintain and Improve'' annual 
investment level, the federal VMT fee assessed on all miles driven, 
regardless of the system where they occur, would be roughly 2.3 cents 
per mile for cars (equivalent to a 48.4 cents gas tax). For a VMT 
system to raise the same amount of revenue as the Commission's 
recommendations to increase current motor fuel and truck-related taxes, 
the fee level for cars would be about 1.4 cents per mile. The fee level 
that equals current motor fuel and truck-related tax revenue would be 
about 0.9 cents per mile. These rates would be somewhat higher if 
assessed only on miles traveled on the federal-aid highway system as 
opposed to all highway miles. However much revenue Congress decides to 
raise at the federal level, the Commission believes it is critical to 
move forward with a VMT fee system.
    Once a national VMT fee system is in place, and assuming that rates 
are set at a sufficient level, the need for the motor fuel--based 
revenue sources for the federal HTF will be eliminated. To the extent, 
however, that surface transportation fuels are subject to a charge in 
the future to account for their carbon emissions (e.g., a carbon tax or 
priced through carbon trading), an appropriate portion of those 
proceeds should be credited to the HTF and dedicated to funding carbon-
reducing transportation strategies.

    FACILITATING NON-FEDERAL INVESTMENT IN THE SHORT AND MEDIUM TERM

    Beyond the immediate steps necessary to address the federal funding 
crisis and position the nation for a new direct user charge system, the 
Commission believes steps are imperative to expand the ability of 
states and localities to use other options to fund non-federal surface 
transportation infrastructure investment. Historically, states and 
localities have contributed over 55 percent of transit and highway 
capital investment, and they have shouldered primary responsibility for 
the extensive costs of operating and maintaining the system. The 
Commission believes that carefully targeted federal incentives can help 
spur new approaches at the state and local level, including tolling and 
pricing, thereby fostering greater overall investment that will in turn 
allow federal HTF dollars to go farther. The Commission offers the 
following recommendations for federal policy and programs to help 
facilitate state and local investment:
     Expand the ability of states and localities to impose 
tolls on the Interstate System by allowing tolling of net new capacity; 
allow tolling of existing Interstate capacity in large metropolitan 
areas (of 1 million or more in population) for congestion relief; 
expand the Interstate Highway Reconstruction and Rehabilitation Pilot 
Program from three slots to five; and support standardization of 
tolling and information systems by completing necessary rulemaking 
regarding electronic tolling and interoperability.
     Reauthorize the federal credit program for surface 
transportation (originally authorized by the Transportation 
Infrastructure Financing and Innovation Act of 1998 and now commonly 
referred to as TIFIA) with a larger volume of credit capacity, 
broadened scope, and greater flexibility to make credit commitments. In 
conjunction with core credit assistance, authorize incentive grants to 
support and encourage the development and financing of user-backed 
projects. Such funding from the HTF could leverage considerably more 
funding at the state and local level than it would cost the federal 
government. The Commission recommends a total of $1 billion per year in 
budget authority for the TIFIA program for the following purposes:
    Credit Assistance ($300 million in annual budget authority)--to 
fund core credit assistance. The Commission also recommends several 
programmatic refinements.
    Pre-construction Feasibility Assessment Grants ($100 million in 
annual budget authority)--designed to address a key obstacle that 
states and localities face in advancing user fee-backed projects.
    Capital Cost Gap Funding Grants ($600 million in annual budget 
authority)--to provide incentive grants to states to complement TIFIA 
credit assistance. Recognizing that there are many projects for which 
partial (but not 100 percent) funding through user-backed revenue 
streams is possible, this program would provide grant funding to help 
close a portion of the estimated gap between the amount of capital for 
construction that can be derived from future user fees and the amount 
necessary to complete and maintain the facility for its useful life. 
Such a program could help spur states and localities to seek to build 
more new projects that rely at least in part on user-backed revenues, 
allowing federal funds to go farther since they would be supplemented 
by additional user-based revenues.
     Invest $500 million per year ($3 billion over a six-year 
authorization period) to re-capitalize State Infrastructure Banks 
(SIBs) and continue to allow states to use their federal program funds 
for this purpose. Providing this level of capitalization could help 
support a wide range of smaller projects that have the potential to 
leverage user-backed payments and other new revenue streams but that 
lack access to capital markets on a cost-effective basis.
     Take actions to facilitate and encourage private-sector 
financial participation where this can play a valuable role in 
providing cost-effective and accelerated project delivery, and support 
user fee--based funding approaches to meet capacity needs and, in 
particular, urban congestion. At the same time, ensure that appropriate 
governmental controls are in place to protect the public interest. 
Federal policy should also recognize the respective purviews of federal 
and state governments and should preserve and support the ability of 
state and local officials to impose appropriate restrictions on these 
arrangements.
     Expand the highway/intermodal Private Activity Bond (PAB) 
program from its current $15 billion national volume cap to $30 billion 
and limit the use of the program to projects that create net new 
capacity. Once the current turmoil in the financial markets subsides, 
it is anticipated that the existing capacity of the PAB program will be 
consumed quickly and more states and local sponsors will be looking to 
take advantage of this mechanism to lower financing costs for projects 
with private-sector financial participation.

              THE PATH FORWARD--CONCLUSIONS AND NEXT STEPS

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to share the findings and recommendations of the National 
Surface Transportation Infrastructure Financing Commission with you 
today and for your interest in considering the Commission's findings in 
the context of setting the budget blueprint for the next ten years and 
beyond. On behalf of the Commission, I can state that the Commission 
members have appreciated the opportunity to serve on the Commission and 
to help Congress embark on this new era of surface transportation 
funding and to achieve a new and sustainable funding framework for the 
future. In offering Congress the results of our analytical and 
deliberative process, we recognize that there are no easy solutions. 
Looking to the future, however, we believe that transitioning to a 
system based more directly on use of the system, especially a mileage-
based user fee system, is the right foundation.
    I would be happy to answer any questions you may have.

    Ms. Schwartz. Thank you for your testimony and appreciate 
some of your explanations.

                   STATEMENT OF TYLER DUVALL

    Mr. Duvall. Thank you, Madam Chairman. We greatly 
appreciate the opportunity to appear before the committee 
today, Highway Transit System Finance, which was once 
considered a pretty uninteresting topic has become a fairly 
important national policy debate in recent years.
    I am not going to spend a lot of time talking about the 
2009 issues, which we can talk about it in a Q&A session, but I 
don't think the range of options are particularly great to deal 
with the shortfall that you are going to be dealing with in 
about 4-5 months. I want to focus more on long-term policy 
issues.
    The Federal Government, in my view, has a very unique 
opportunity to transform the Nation's transportation investment 
strategy in the next authorization bill. Over the past 4-plus 
years, to Congressman Blumenauer's point, the Transportation 
policy community has achieved a very high degree of consensus 
about the need for major reform, and including many of the 
elements of that reform. That policy consensus, however, is not 
translated into a national political consensus, which is why we 
are talking today. I think it is likely that will only happen 
when Congress, the Obama administration, and particularly 
America's business leaders, really decide that reform is 
necessary and agree subsequently on the implementation elements 
of that reform.
    Far too often, the transportation debate in the U.S. has 
really been consumed with discussions about symptoms, not 
causes. In our view, my view, the society of former assistant 
secretaries, the basic problems with the current strategy are 
as follows:
    First, there is an underemphasis on quality of investment 
as compared to quantity of investment. A myriad of economic 
studies in the last 10-15 years basically show that we have had 
a dramatic decline in the returns on public investments, 
particularly in the highway sector. That is a fairly natural 
result of a huge network. We have built the largest highway 
system, I think, by a factor of two, twice as big as any other 
highway system in the world. But the projects that get done 
earliest in time are the ones that generate the highest 
returns.
    So a natural result of any well-capitalized network is you 
see returns decline over time. But that's not the whole 
explanation. I think what is increasingly happening in the 
United States--earmarking has gotten a lot of attention, but I 
think earmarking is really just a part of the story, is that 
quantitative analysis, comparative economic analysis, using net 
present value calculations, something that every other country 
in the world that invests in the size that we invest in 
utilizes.
    So you look at the costs of the project, you look at the 
benefit stream over time, and you evaluate projects based on 
that metric. That is fundamental to every private sector entity 
in the world who invests in capital businesses that utilize 
that mechanism.
    We do not utilize that extensively in the United States. 
That is a very simple change. It is one that will produce much 
more transparency and disclosure to the public about which 
investments are the best ones, which ones are not. And I think 
you can have a lot of disagreement about the benefit, but 
assuming we are talking about the same concepts, over time you 
will see a convergence of views on how to do an adequate cost 
benefit analysis for these projects.
    The reason this matters is because an annual surface 
transportation budget of $55 billion that produces 10 percent 
returns a year is going to produce far more public benefits 
than a program that is investing $70 to $75 billion a year. 
Particularly if these are long-term investments, if you are 
looking at a 30-40 year horizon of benefits, it is pretty clear 
that if you have a flawed investment strategy, you are going to 
see a lot less bang for the buck than if you had a really good 
investment strategy.
    So I think it is really important that we talk not just 
about how much we are spending but how well we are spending, 
and I would encourage you to look beyond the ``bridge to 
nowhere'' discussion. It is an interesting discussion. It has 
obviously focused people's attention on this problem. But the 
reality is the fundamental processes we use today I think are 
lengthy, which should produce better results, but in many ways 
is producing the worst of both worlds. So we spent a lot of 
time planning projects, but the outcomes of that planning 
process is not producing the right projects.
    I think the other really critical problem is that the 
Federal Government's current strategy is not leveraging 
additional resources. The GAO has done analysis on the extent 
to which increases in Federal spending crowd out State and 
local spending and found that a meaningful percentage of State 
and local spending is crowded out in that process.
    If the Federal Government simply made a strategy shift and 
identified basically leveraging non-Federal capital as a 
specific objective with Federal capital similar to what 
Secretary Geithner is talking about when he talks about the 
Treasury programs that will be unveiled in the next week or so, 
bringing in additional capital, reducing risk for other 
investors, my sense is you would see a flurry of investment 
activity in the United States. There is a lot of pent-up demand 
to invest in U.S. infrastructure, but the Federal program today 
is not currently constructed to unleash that capital.
    This is, again, a fairly simple policy change. And the 
reason this matters to this committee is, again, if you are 
talking about a $50 billion investment, if it produces a total 
of $130 billion of investment, that is a big difference than if 
it produces $250 billion or $300 billion. And we are here at 
this point in time, I think, capable of unleashing that capital 
investment in U.S. transportation systems.
    There is little question also that in addition to 
unleashing capital inadequacies in the current program that the 
current structure is really not driving system efficiency. So 
you have got the upfront capital investment. That is a bit 
flawed or fairly flawed, but it is also not driving operational 
efficiencies once we do invest. In fact, the Federal Government 
asks very few questions about how systems perform once they 
have been invested in. This is a problem both on the highway 
and transit side. And I think virtually every economist and 
independent expert that has looked at this issue has concluded, 
as Rob has just testified, that the highway system in the 
United States is wildly mispriced. The charges on the people 
who use that system bears little or no relation to the cost of 
that system.
    Nowhere is that more true than in the Washington, D.C. area 
and Los Angeles, all of the major metro areas. You are talking 
about a dramatic mispricing of highway capacity in the United 
States, which is producing all kinds of economic distortions, 
environmental impacts. And this is a policy consensus.
    Back to Congressman Blumenauer's point. I think if you rack 
and stack the entities in the United States that have talked 
about this issue and have basically agreed--you have got the 
GAO, the Brookings Institute, the Washington Post, New York 
Times editorial page, the Cato Institute, the Environmental 
Defense, NRDC, the Reason Foundations, EPA and U.S. DOT 
experts, and now President's Obama's budget, that is a powerful 
bipartisan group of people that are saying a lot of the same 
thing about the nature of this problem. The difference is we 
have just not gotten that bipartisan policy consensus to 
translate into a political consensus, and hopefully that will 
happen in the next authorization bill.
    A couple of potential policy responses that I think could 
get done in this next authorization legislation. I think it is 
helpful to kind of think about what does that mean in terms of 
specific proposals.
    One, I would really reform existing programs to establish 
meaningful reward components for project sponsors that use 
Federal grants to attract other investment, and to operate 
systems more efficiently. Federal grants are really powerful 
when they are used to drive State and local reform. They are 
not particularly powerful when they are just used as a handout 
without performance strings attached.
    We ran a nationwide competition in the last administration 
with a very small amount of Federal dollars. It produced 
sweeping proposals from metropolitan areas in the United States 
to do different things with pricing, with transit and with 
technology, very small amounts of Federal dollars produce a lot 
of State and local change. And I would encourage you all to 
think about that when crafting the next piece of legislation.
    The other thing I think that is important, I think the 
Federal Government should start to rely more extensively on 
loans and other credit assistance, not just grants. The 
department operates a mini-infrastructure bank today called the 
TIFIA program. That is a very powerful tool to leverage a lot 
of additional capital without a lot of costs to Federal 
taxpayers. You can make that program more friendly. You can 
make the credit terms even more favorable to State and local 
borrowers, but do not lose sight of the opportunity to use 
Federal credit, not simply grants, to drive change at the State 
and local level.
    The other thing I think, as I mentioned previously, we 
really need to reform the transportation planning process. Too 
often it is politics, relationships, and other non-economic 
criteria that are driving a lot of these investment decisions. 
I think the planning process at a minimum should disclose for 
the public ranking these projects using a clear, transparent 
data on a mode-neutral basis. We should not, on a Federal 
level, decide this investment is good over this one simply 
because it happens to be a certain mode of transportation. We 
should be indifferent to that, invest in what works and not 
invest in what doesn't work.
    Let me conclude by talking real quickly about a VMT tax.
    Rob mentioned that in his report, which is a great report. 
I would encourage you all to read that.
    A VMT tax is getting all kinds of attention. I think there 
are great benefits to it. It clearly changes the current course 
we are on, which is a push towards fuel efficiency and economy, 
but it reverses the problems associated with the fuel economy 
producing fewer revenues. But if you don't use differential 
pricing as a part of it, it is not clear that it delivers 
benefits in excess of the gas tax.
    I think you have got to have a tailored charging system. 
Simply charging a rural driver to drive 80 miles on an 
interstate in the middle of nowhere in uncongested conditions 
five times what you charge a person driving three miles in a 
heavily congested highway in an urban area is not good policy. 
Actually, it produces the exact sort of perverse incentives 
that you don't want to create, which is to flood the highway 
system during rush hour.
    So a tailored VMT tax is a completely different animal than 
an untailored one, and I would encourage you all to have a 
vigorous policy discussion about that.
    Let me conclude by saying this is a tremendous opportunity. 
The United States is obviously the world leader in many, many 
things. We are no longer the world leader in transportation. We 
have seen our infrastructure deteriorate; the quality and the 
performance is not what it should be. You have got a great 
opportunity. I think Federal policy could drive a sweeping 
change to how we move in the United States and how we invest. 
If we don't do it, you will see bubbling up with State and 
local experiments, but I think it is far more efficient at the 
end of the day to have the Federal Government use its capital 
weight and its regulatory policy to drive change in this area.
    [The prepared statement of Tyler Duvall follows:]

  Prepared Statement of Tyler D. Duvall, Consultant, Former Assistant 
 Secretary for Transportation Policy, U.S. Department of Transportation

    Chairman Spratt, Ranking Member Ryan, I greatly appreciate the 
opportunity appear before the Committee today. Highway and transit 
system finance, once considered a relatively uninteresting topic, has 
now become an important national policy debate. This is due to the 
confluence of a variety of factors, including: anxiety related to 
projections of federal highway trust fund revenue shortfalls ; growing 
public dissatisfaction with current transportation system performance; 
an emerging consensus among a variety of policy experts; a legacy of 
wasteful projects; and an array of real world policy experiments around 
the globe.
    With respect to immediate term federal surface transportation 
spending, there appears to be little doubt that prior to the end of the 
fiscal year, Congress will once again be forced to grapple with the 
fiscal reality of annually spending billions more than is collected 
through taxes. USDOT's inspector general Calvin Scovel summed it up 
when he said at recent Congressional hearing, ``the bottom has fallen 
out of the highway trust fund.'' Given the state of the economy and 
recovery efforts, it would be economically unwise to raise gasoline or 
diesel taxes. This leaves limited options for 2009 beyond increasing 
the general fund contribution and/or reducing/slowing spending.
    Going forward, however, the federal government has a unique 
opportunity to transform the nation's transportation investment 
strategy. This Committee could play a leadership role in that 
transformation if it so chooses. Over the past four plus years, the 
terms of the debate about transportation have fundamentally changed, 
and the transportation policy community has achieved a high degree of 
consensus about the need for major reform. That policy consensus has 
not yet translated into any sort of national political consensus, 
however. It is likely that that will only happen when Congress, the 
Administration and America's business leaders decide that major reform 
is necessary and subsequently agree on the implementation elements of 
such reform.
    Before discussing specific ways to improve upon the country's or 
the federal government's current transportation finance strategies, it 
is critical that the problem be defined correctly. In fact, far too 
often, the transportation debate in the U.S. has been consumed by 
discussions about symptoms, not causes. The basic problems with the 
current strategy are described below. Each can be remedied through 
Congressional action, and each has direct bearing on the work of this 
Committee.
    1. There is an under emphasis on quality as compared to quantity of 
investment. A variety of economists have analyzed the social returns 
generated from highway investments in recent years and each has 
concluded that we are getting less and less from our investments.\1\ In 
other words, a $1 invested today is producing far less in the way of 
reduced congestion, improved safety and enhanced business productivity 
than a $1 invested 30 years ago.
---------------------------------------------------------------------------
    \1\ Chad Shirley and Clifford Winston (2004), ``Firm Inventory 
Behavior And The Returns From Highway Infrastructure Investments,'' 
Journal of Urban Economics, Volume 55, Issue 2; Marlon G. Boarnet and 
Andrew F. Haughwout (2000), Do Highways Matter? Evidence and Policy 
Implications of Highways' Influence on Metropolitan Development, 
Brooking; M.I. Nadri and T.P. Mamuneas (1996), Contribution of Highway 
Capital to Industry and National Productivity Growth, FHWA, USDOT; 
citied in USDOT (1997), Transportation in the United States: A Review, 
USDOT (http://ntl.bts.gov/data/titustxt.pdf).
---------------------------------------------------------------------------
    Some of this decline is the natural result of having an already 
massive transportation system. The earliest projects completed in the 
development of a new network are often the ones that deliver the most 
long-term benefits. However, there are strong reasons to conclude that 
other factors are at work in driving down societal returns. Most 
important among these is the lack of quantitative analysis in 
determining how to allocate transportation investment dollars and 
select projects at all levels of government. In the absence of this 
analysis, political forces, relationships and other non-economic 
considerations typically prevail.
    Any successful capital intensive business in the private sector 
selects projects using some form of net present value and/or rate of 
return analysis. Projects that score poorly using these metrics are 
either shelved indefinitely or substantially modified. Unfortunately, 
the majority of surface transportation projects in the U.S. are pursued 
with little or no comparative economic analysis. The federal government 
requires that any federally funded highway or transit project navigate 
a labyrinth of complex process requirements prior to commencing 
construction. While these requirements do an excellent job of 
preventing rash decisions, they have done far too little to encourage 
productive and innovative investments. As a result, our current 
approach is often the worst of both worlds--lengthy and expensive 
processes without the productive outcomes that are supposed to attach 
to process-laden decisions. This perverse strategy is the natural 
result of poorly defined federal/state/local authority roles and 
responsibilities.
    Why should this matter to Congress? Because resources are always 
limited (something this Committee probably appreciates more than any 
other), it is imperative that we understand with some degree of 
certainty what national investments can be expected to produce in the 
future. An annual national surface transportation investment of $70 
billion that produces a societal return of three percent per year will 
yield dramatically fewer overall public benefits than an investment of 
$55 billion that produces an annual societal return of ten percent. 
Since these investments are intended to last many years, small 
differences will produce large disparities in results.
    The national discussion regarding the ``Bridge to Nowhere'' has 
stimulated growing public hostility to wasteful federal earmarks, but 
it has not ushered in a nationwide consensus for an alternative 
investment approach with clearly defined criteria and rigorous post-
investment analysis. In short, budget and policy are inextricably 
linked, and the timing is quite ripe for a major Congressional re-
assessment of these programs.
    2. Federal investments do not adequately leverage non-federal 
investments or promote system efficiencies. The federal government does 
not own or operate the vast majority of the nation's surface 
transportation systems. Instead, it contributes approximately 40% of 
highway and transit capital dollars and roughly 20% of all highway and 
transit dollars (figures vary from year to year). When the federal 
government invests, just as any other investor, it should have 
confidence that the owners and operators of the systems in which it 
invests have the right incentives. In other words, will the owner/
operator efficiently design, capitalize, finance and manage the 
underlying assets?
    With a few exceptions (the recently enacted stimulus legislation 
being prominent among them), current federal programs typically require 
minimum state or local funding matches and safety thresholds. These are 
broad-based regulatory requirements, however, not a targeted policy. 
What is badly lacking in the current framework is a specific focus on 
attracting capital from other sources that are likely to have better 
information and better incentives than the federal government. Thus, 
even if we were able to achieve federal reforms designed to increase 
investment returns on federal dollars as discussed above, we would 
still be missing an opportunity to specifically use those dollars as a 
means to generate investment interest from non-federal sources.
    So, from the perspective of this Committee, the answer to the 
question of how much to spend at the federal level should vary 
depending on the degree to which such spending ``crowds out'' other 
spending or stimulates other spending. $50 billion of federal spending 
that facilitates an additional $80 billion in state, local and private 
sector spending should be considered differently than $50 billion that 
facilitates $150 billion in state, local and private sector spending. 
The former is the current policy, while the latter is achievable only 
with reforms. A 2004 GAO report that studied state and local spending 
in the last economic downturn found that, ``in 2002, states and 
localities contributed 54 percent of the nation's capital investment in 
highways, while federal funds accounted for 46 percent. However, as 
state and local governments faced fiscal pressures and an economic 
downturn, their investment from 1998 through 2002 decreased by 4 
percent in real terms, while the federal investment increased by 40 
percent in real terms.'' \2\
---------------------------------------------------------------------------
    \2\ GAO-04-802, FEDERAL-AID HIGHWAYS, Trends, Effect on State 
Spending, and Options for Future Program Design.
---------------------------------------------------------------------------
    There is little question that the federal program is 
underperforming when it comes to attracting capital from other sources, 
but it is also failing when it comes to promoting operational 
efficiencies. In fact, as currently constructed, the federal program is 
largely indifferent to how well surface transportation systems perform 
once they are constructed. With respect to the highway system, we have 
witnessed a precipitous decline in travel time performance (i.e. 
congestion) and reliability in the last 30 years. Contrary to media 
accounts, bridge safety and National Highway System pavement quality 
have actually improved modestly in the last 15 years.
    Virtually every economist and independent transportation expert 
that has analyzed U.S. highway policy in the last 10 years has 
concluded that our highway system is badly mispriced (charges to system 
users are not linked to the true costs of travel) and that the current 
reliance on taxes (as opposed to direct user fees) is a chief culprit. 
The recently completed National Surface Transportation Infrastructure 
Financing Commission agreed with this assessment saying, ``the current 
indirect user fee system based on taxes paid for fuel consumed provides 
users with only weak price signals to use the transportation system in 
the most efficient ways.''
    The just released Congressional Budget Office report entitled 
``Using Pricing to Reduce Traffic Congestion'' identifies congestion 
pricing as ``one fundamental way of improving efficiency'' and 
recommends a variety of federal policy options to encourage state and 
local implementation. The USDOT's 2006 Conditions and Performance 
Report for the first time attempted to model the costs to maintain 
current highway system conditions and performance if ``universal'' 
congestion pricing was implemented and found that costs would be 
reduced by a dramatic 27.5%.
    The 2008 version of this report is expected to build substantially 
upon this analysis, and I would encourage the Committee to review its 
findings closely. In fact, there are few, if any, policy ideas that 
garner the support of the General Accountability Office, the Brookings 
Institute, the Washington Post and New York Times editorial pages, the 
Cato Institute, Environmental Defense, the National Resources Defense 
Council, the Reason Foundation, experts at USDOT and EPA and the 
President's budget, among others. The best way to implement pricing and 
utilize corresponding revenues are indeed subjects of intense debate, 
but the degree of policy consensus that has emerged on this point in 
just the last three years is impressive.
    Highway pricing strategies can be successfully integrated with 
transit investment and operational strategies, particularly in 
metropolitan areas. Because federal highways and transit programs are 
not integrated, our transit investments are typically made with little 
reference to highway policies or likely highway demand in the exact 
same corridor. For this and other reasons, a series of studies over the 
last 25 years have revealed a systematic underperformance in actual 
transit ridership relative to predicted ridership in the New Starts 
Program. In two Federal Transit Administration analyses conducted in 
the last six years, actual ridership for New Starts projects was 68.9% 
and 74.5% of forecasted ridership. In addition, the gap between 
revenues generated from passengers and total operating expenditures for 
U.S. transit systems more than doubled in nominal dollar terms from 
1995 to 2006 according to the American Public Transportation 
Association 2008 Public Transportation Fact Book.

                          POTENTIAL RESPONSES

    A variety of federal approaches relevant to this Committee are 
available to address these concerns in the context of the 
reauthorization of SAFETEA-LU, including:
     reform existing programs to establish meaningful reward 
components for project sponsors that use federal grants to attract 
private investment and operate transportation systems more efficiently. 
Over $150 billion of global private equity infrastructure capital has 
been formed in recent years (in spite of a relatively de minimis level 
of federal statutory support). Hundreds of billions of dollars of debt 
capital are also available for U.S. infrastructure projects.
    It is now apparent that if Congress established programs and 
policies favorable to this capital, those figures would grow 
dramatically. It is also clear that this and subsequent capital will 
find a home in counties with more receptive policies, including Europe, 
Asia, South America, Canada, Mexico and Africa. Through its formal 
partnerships with urban areas in 2007 and 2008, USDOT also demonstrated 
that small amounts of federal discretionary dollars provided powerful 
operational efficiency incentives for pioneering state and local 
officials.
    Rewards could take the form of additional grants for other 
projects, ratings priority in competitive grant programs and increased 
programmatic/regulatory flexibility. A variety of federal tax code 
changes could also provide greater incentives for non-federal 
investment.
    Specifically, the recently enacted stimulus package includes a new 
$1.5 billion program with broad implementation discretion for the 
Secretary of Transportation. A strong policy case could be made that 
the Department should utilize these resources to develop major projects 
that leverage private capital, test innovative risk sharing procurement 
strategies and promote new technologies.
     increase emphasis on federal loans and other credit 
assistance, not just grants. In addition to leveraging non-federal 
investments, such an emphasis provides multiple additional benefits: 1) 
it encourages the utilization of user fees--a more efficient payment 
mechanism than gasoline taxes; 2) it is significantly less expensive to 
the federal taxpayer than pure grants; 3) it reduces the risk of 
``wasteful'' projects since credit provision requires more public and 
private lender oversight of underlying project economics; and 4) it 
reduces the cost of capital for infrastructure projects relative to 
other capital investments. The Department's TIFIA program could be 
greatly expanded in order to achieve these benefits.
     reform the transportation planning process to ensure that 
economic criteria is fundamental in project and plan decisions. Absent 
compelling circumstances, the highest rated project alternative 
(regardless of mode of transportation), using a present value of net 
benefits, should be pursued for all federally funded projects with 
project costs in excess of $100 million. In addition, statewide and 
metropolitan transportation plans (required under federal law) should 
rank and disclose project lists using a net present value calculation.
     clearly define the relative roles of the federal 
government, state government, local government/authority and the 
private sector. Until the relative roles of the various entities 
involved in infrastructure finance are clearly defined, budget and 
policy outcomes will be sub-optimal. Today, the federal government 
attempts to be all things to all constituencies. A better approach 
would be to identify a more limited number of areas for federal focus 
and provide clear discretion and performance targets related to those 
roles.
     assess transportation ``needs'' (and budgetary 
requirements) more accurately by separating condition and performance. 
Both recently concluded national commissions assess our system 
``needs'' by largely assuming that spending and new capacity are the 
only available response in the near term to ensure that current system 
performance is either maintained or improved. As was revealed in the 
2006 Conditions and Performance Report described above, large 
improvements in performance can be achieved with efficient pricing and 
technology proposals, not simply capacity expansion. In turn, pricing 
will send a clear signal to governments and investors as to where 
capacity constraints are most economically important (as well as 
provide revenues for such expansion). Maintaining and improving 
physical conditions requires improved targeting of capital resources so 
that the highest return rehabilitation and preservation investments are 
made.

                               VMT TAXES

    With the recent comments of Secretary LaHood, as well as the 
recommendations of the Financing Commission, the concept of a 
federally-imposed vehicle miles traveled tax (VMT) has received growing 
attention. Such a tax offers the policy advantage of revenue 
sustainability even as the light and heavy duty vehicle fleets become 
more fuel efficient (through market forces and expected regulations). A 
VMT tax also offers the policy potential of tailoring travel charges 
more specifically to costs. In this regard, a VMT tax could conceivably 
achieve revenue and congestion relief policy objectives simultaneously.
    However, from a policy perspective, a federally-imposed flat fee 
VMT may not be materially superior to a gasoline tax. In fact, even 
though the focus has been on revenue generation, the majority of 
benefits from such a system would come from the ability to 
differentiate charges more efficiently than traditional gas/diesel 
taxes. A driver who drives 90 miles on an uncongested rural interstate 
in a Volkswagen Jetta is imposing close to zero marginal costs on the 
transportation system or other transportation users. Another Jetta 
driver that travels 3 miles at 8:30 am on the Capital Beltway here in 
Washington, DC is often imposing more than $2.00 in costs on other 
drivers. Under a flat VMT regime, the first Jetta driver may pay 20 
times more (depending on the charge) than the second Jetta driver. To 
the extent the system does not adjust for this mispricing, the 
transition and administrative costs are likely to overwhelm the 
incremental benefits the VMT may enjoy over gas/diesel taxes at the 
federal level (to say nothing of the political complexities associated 
with the federal government administering the charge). An additional 
research area related to the VMT tax that deserves more attention is 
its impact on fatality rates.
    Regardless of one's views of the VMT tax in the future, a more 
aggressive deployment of current pricing technologies will achieve many 
of the theoretical benefits of a VMT tax in the near term. The 
technical sophistication of ``open road'' electronic tolling has 
advanced greatly in the last 10 years, even as implementation costs are 
declining. Just months following procurement, roads can be outfitted 
with sophisticated pricing technologies that provide powerful new speed 
and reliability choices for drivers. Almost 20 different metropolitan 
areas in the U.S. are developing projects today using readily available 
technologies. While the federal government is not the revenue collector 
in these projects, targeted federal assistance is proving crucial.

                               CONCLUSION

    Meaningful reforms to our country's transportation finance policies 
will not come about easily or instantly. Clear leadership from Congress 
and the Obama Administration, backed by a growing body of policy 
research and an emerging bipartisan policy consensus, can move the 
debate from one focused on theory to one focused on real world 
implementation. Budget and policy are inextricably linked in this 
effort. Spending more without a coherent investment strategy and 
without clear policy objectives will be a largely fruitless endeavor.

    Chairman Spratt [presiding]. Thank you very much. I am 
sorry I was not here for your full presentations. Mr. Conrad 
and I had a meeting with the President this morning, and 
obviously that pre-empted this only by a small margin.
    And the person that has been most consistent about seeing 
that we investigated, looked farther into the future and 
considered alternatives for building roads, bridges, and needed 
infrastructures is Earl Blumenauer, which I am going to yield 
my time to him.
    [The prepared statement of Mr. Spratt follows:]

Prepared Statement of Hon. John M. Spratt, Jr., Chairman, Committee on 
                               the Budget

    Good morning. Today's House Budget Committee hearing on 
transportation will help inform the Committee and the FY2010 Budget 
Resolution on our investment needs and financing options, not only for 
the next highway and transit bill, but for a longer-term vision of 
transportation. This is a significant year for transportation. First, 
our transportation programs have been charged with pulling our economy 
out of a recession and into a recovery. The American Recovery and 
Reinvestment Act included $48 billion in transportation investments 
that create construction jobs now and larger economic returns with 
completion. But our programs will have a second opportunity to put a 
floor under vanishing jobs--4.4 million jobs were lost since the start 
of the recession. The current highway bill, SAFETEA-LU, expires at the 
end of Fiscal Year 2009 and will need quick reauthorization in order to 
protect and increase blue-collar construction jobs.
    We welcome our witnesses, Ms. Debra L. Miller, Secretary of 
Transportation for the State of Kansas and member of the American 
Association of State Highway and Transportation Officials (AASHTO), Dr. 
Robert D. Atkinson, Chairman of the National Surface Transportation 
Infrastructure Financing Commission, and Mr. Tyler Duvall, consultant, 
and former Assistant Secretary of Transportation Policy at the U.S. 
Department of Transportation.
    Before we hear from our Ranking Member and then our panel, I yield 
my time to Mr. Blumenauer for a additional comments.

    Mr. Blumenauer. Thank you very much, Mr. Chairman.
    I appreciate what the witnesses have established as a great 
platform for the conversation.
    And I would like to just pick up where my friend, Mr. Ryan, 
left off, talking about vision. Because I think this is running 
through the conversation here is what is the nature of the 
Federal partnership. And I, of course, always cringe when you 
beat up on Republicans for the ``bridge to nowhere.'' I think 
you have taken enough grief for that. But that is okay. You can 
work that out with Don Young. And I am pleased that in part, as 
a result of that experience, that we have moved forward to make 
the earmarking more transparent and to reduce it pretty 
dramatically.
    I am willing to, just for a moment, not talk about that 1 
percent of transportation funding. We can come back and deal 
with it. But my impression is listening to our witnesses that 
even if the 1 percent of ear marking funding disappeared and 
was put back into the system, we would be in exactly the same 
boat. In fact, it would displace some things that we needed, 
anyway.
    So looking at the big picture, and I appreciate Congressman 
Ryan and Mr. Duvall talking a little bit about vision and 
value--because I hope that is what we can do as a committee 
because we want to squeeze more value out of this system--there 
are opportunities. For instance, maybe if we just had a uniform 
match ratio. We don't pay people more to build a bridge than to 
have a transit program, for instance, which might, in and of 
itself, be a little bit of an improvement so that it is mode 
neutral.
    One of the discussions I had with the last administration, 
and was a little frustrated that we couldn't move to the point 
of how we actually moved along to squeeze more value. As we 
speak, there are people in the Department of Transportation who 
are cranking away on cost effectiveness formulas that have no 
relationship at all to how any transit system in the country 
operates. But it adds years of costs--I see my friend from 
Northern Virginia, no amount of Federal subsidy will make up 
for the cost to inflation of delay for the Dulles metro 
connection. We have skyrocketed those costs.
    So I guess what I want to come back to here with our 
witnesses is dealing with the notion that even if we are doing 
some reform, even if we change the nature of the Federal 
partnership, which I hope we do, what I am hearing--and Mr. 
Duvall, you said the messy short-term 5- or 6-month problem, 
but I want to go back to that because we are faced with a 
Federal Government that has not dealt with any inflationary 
adjustment since 1993.
    Is there any amount of tinkering around the edges that will 
replace the amount of costs, 80 percent, I think you said, 
Madam Secretary? Can you just help set that context in terms of 
what we should do while we are talking about reform, while we 
are talking about squeezing out more value, the notion of 
having more budget headroom.
    Ms. Miller. I guess I will start.
    I would just say a couple of things.
    One, I want to pick up on the remark you made about 
earmarks. It is an easy topic to kick around and make fun of, 
but the point you made is exactly right. If there were no 
earmarks and the dollars flowed back in, it wouldn't even come 
close to solving the problems we are facing.
    We have, as a country, underinvested in transportation for 
decades. And the report that Dr. Atkinson was the chairman of, 
it is an excellent report--and if you have time just to read 
the executive summary, I would strongly recommend it--and I 
think they draw that conclusion very clearly. We have 
underinvested, and we have been living off the investment that 
was made really by our grandparents.
    And once you have done that, getting caught up in 
infrastructure is a very difficult thing to do. Anytime you 
have seen a city who has allowed their street structure to 
completely deteriorate, the costs are so huge, I think that it 
is very hard to get caught up. I think that is where we are in 
our country.
    So clearly, tinkering around the edges might stave off the 
absolute collapse, but it won't get us to where we need to be. 
We need not only to reform the system but to change the way 
that we are funding it, and I think we need to change our 
language, even.
    And one of the things that I try to do when I talk in our 
State about what we are doing, is use the term ``investment'' 
and I feel so strongly about that. We are creating investments. 
And I don't know why we haven't, as a Nation, been able to make 
that clearer that this isn't just taxes and spending. It is 
creating things of value. And that is what we are building the 
back bone of our economy on. And we have completely lost that 
focus.
    I will get back to your point before I get off on a tangent 
here. But I think sometimes if you think about the visual image 
of our country and our communities, we have allowed something 
that is very important to deteriorate. So when you look at our 
communities, we don't even look like a prosperous Nation when 
you look at our transportation systems.
    Mr. Blumenauer. If I could turn to Dr. Atkinson, as I 
hear--you had a very diverse group of people on the Commission 
and you arrived at what I understand is a unanimous vote at the 
end. But it is one of sort of an ``all of the above.'' You are 
talking about gas tax, you are talking about freight charges, 
you are dealing with Ms. DeLauro's vision of an infrastructure 
bank. You have all of these that, in your judgment, are 
necessary. Do I have that right? To make up for 16 years of 
just sort of on cruise control.
    Mr. Atkinson. One of the first and most striking things for 
our group is you look at the need. There is a chart that we 
have. It has the cumulative funding gap. If you just want to 
maintain the system and make modest improvements through 2035 
and there is no revenue change now, it is a $2.7 trillion gap. 
So we can have a discussion about efficiency versus money or 
this versus that. At the end of the day, there has to be more 
money.
    I am a big believer in efficiency. This system isn't as 
efficient by any means as it could be and should be, but we 
also have to have more revenues. And we went through a lot of 
different options, Congressman, and there were many that we 
rejected for a number of different reasons. The ones we picked 
we thought there needs to be all of those together.
    So part of the challenge in this debate is there are some 
people who say only gas taxes and no tolls or other people say 
no gas taxes and only tolls. The magnitude of our problem is so 
great in our view that we really need to be focusing on all of 
that right now.
    Mr. Blumenauer. Mr. Chairman, I want to express my 
appreciation for your willingness to have this hearing and for 
us to just sort of put on the table, I think there are a wide 
range of areas in the budget that we are going to have 
different fault lines. I hope that this is one area where 
people from different philosophical, partisan, and geographic 
areas, can come together to represent the same sort of 
consensus and need that we are hearing from each and every one 
of our communities and from the broad cross-section of business 
labor environment that this is an area that we need to move 
forward.
    I appreciate your courtesy to allow us to explore it here 
this morning.
    Chairman Spratt. Thank you.
    Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    Mr. Duvall, I want to ask you a couple of questions about 
the VMT. I am a fairly new to this issue in that I haven't read 
your executive summary. And I have only heard about these. So I 
want to ask you just to give me the VMT 101. How are these 
systems designed to protect the privacy concerns which you 
mentioned, which I clearly share. How does the mechanism work, 
how does it work literally at the gas pump and all of that. 
Walk me through that, will you?
    Mr. Atkinson. The way it would likely work is you would 
have an on-board-unit, OBU, that would be on the car.
    Mr. Ryan. Installed by the manufacturer?
    Mr. Atkinson. Ideally installed by the manufacturer. And 
this unit would have several parts to it. It would have a 
clock, so it would know what time of day you were driving, and 
it would have a one-way receiver to know where your car is. 
Your car would know where it is. No one would know where your 
car is. There is no way a system like that can be done so that 
it is--if it is a one-way system, there is no way anybody could 
know where your car is if they could read the data on your on-
board unit.
    So your on-board unit would have a clock----
    Mr. Blumenauer. Cell phone.
    Mr. Atkinson. When you have a cell phone--Verizon actually 
knows where I am right now within about 30 yards. When you have 
a toll transponder, that could actually be a system that is 
much more private than the current toll transponder system. 
When I go over the Bay Bridge at 5 o'clock on a Friday, the 
State of Maryland knows that someone in my car went over that 
at 5 o'clock. This system would not pass this information 
along.
    Mr. Ryan. It would be designed so it would be 
technologically impossible for that information to be passed.
    Mr. Atkinson. Yes. Let me walk through to be specific on 
that.
    The other component of this OBU would have a pricing table 
in there. So it would have a table that says if you are driving 
on the beltway and it is 8 in the morning, you are going to pay 
this rate; and if you are driving on a rural road in the middle 
of the night, you will pay this rate. It all gets put together, 
and there is a series of charts.
    And the other piece of this would be State and governments 
could also piggyback on top of this. Right now they have gas 
taxes.
    So you would go to the gas pump and you would buy your gas. 
And what they did in Oregon is they would deduct the gas tax so 
cars that still had--that were older cars would still pay the 
gas tax. New cars would pay the VMT.
    Mr. Ryan. So old cars would be gas tax and VMT?
    Mr. Atkinson. No. As they transition in, you would only do 
one.
    If you are a new car, you are paying the VMT. The gas tax 
gets deducted, you then pay the VMT, and all that is 
transferred to the pump and then back into the computer system 
is you owe $1 to the State of Illinois and $1.50 to the 
Federal.
    Mr. Ryan. And the gas retailer remits it to the State?
    Mr. Atkinson. Yes. Or the State and Federal.
    Now, the one component of this, we would argue this system 
should be designed so that the consumer or the passenger has 
the choice. The only way you would ever want that data to be 
transferred is if you felt there was some discrepancy in your 
bill, and you didn't think you drove that, you would be able 
to, on your own choice, be able to then share the data on your 
OBU and say, Wait a minute, according to my OBU, I drove this. 
That would be an opt-in system. Only the driver of the car 
would make that choice.
    Mr. Ryan. So when you are filling up, the OBU, there is a 
scanner or a reader on the pump that reads the OBU and 
transfers that into the price of the gas bill?
    Mr. Atkinson. Correct and deducts the gas tax.
    Mr. Ryan. And deducts the gas tax. Older cars, just the gas 
tax. Newer cars with the OBU used on it, deduct it from the gas 
tax, the retailer remits it back to the State and Federal 
Government accordingly.
    Mr. Atkinson. That is correct.
    Mr. Ryan. And when you were saying having States piggyback 
on the Feds, are you saying that States set their own? Because 
each state has their own level of gas tax. Each state sets 
their own rates, piggybacks their own rate on it?
    Mr. Atkinson. Yes.
    Mr. Ryan. When I take my family to Florida, I am going 
State by State by State, I am paying that State's fee when I go 
through that State.
    Mr. Atkinson. That is correct, just as you would pay that 
fee.
    Mr. Ryan. So when I go from Wisconsin to the Illinois 
border, I am paying the Illinois rate as I am driving through 
Illinois?
    Mr. Atkinson. That is correct. We strongly recommend that 
any system be fully transparent and a display on a display 
device the actual rate you are paying and also put this on the 
Internet so people could, for example----
    Mr. Ryan. So people could plan a trip accordingly.
    Mr. Atkinson. Plan a trip so people would know how much 
they are going to have to pay for that trip.
    Mr. Ryan. So if I want to take a loop around Chicago, that 
is going to be one rate, and if I want to take rural roads 
around, that would be a different rate. That is how you 
envision this?
    Mr. Atkinson. That would be ultimately be decided by each 
individual State if they chose to do that.
    Mr. Ryan. Okay. But the Fed would be flat.
    Mr. Atkinson. That would be a flat rate.
    We recommend on the Federal system that the Federal rate 
only apply to the national highway system. That is obviously a 
policy question that could apply on all roads or just the NHS. 
But the State rate--or there could be a local rate. Some 
localities have gas taxes too, for example.
    Now the only caveat we have there is we do think at some 
point that there needs to be some mechanism at the Federal 
level, ideally in DOT, of some adjudication system because you 
don't want to have pricing set in a way that would interfere 
with interstate commerce.
    Mr. Ryan. It sounds like that would be an issue.
    What is the comparison for the average mile-per-gallon car 
under this system versus a gas tax system? Obviously, it is the 
rate you set it at, but is the goal here to get extra revenues? 
And how much more per mile would you be paying? What are the 
comparisons?
    Mr. Atkinson. We model that extensively in the report. We 
don't make a recommendation whether the VMT can be done to 
simply replace the current 18.4 cents. It could be done to 
augment it to 28.4, which is our recommendation on the gas tax, 
it could be done more. That is obviously a choice you all would 
make.
    If we were to simply match the current HTF revenues, the 
average rate per mile would be .9 cents a mile, in other words, 
less than a penny a mile. If we were to match the 18.4 cents 
plus 10 cents, the rate would be 1.4 cents a mile.
    Mr. Ryan. That is what I was trying to get at.
    Mr. Duvall, quick question because I want to get to others.
    Give us some more specifics of your testimony about how we 
can leverage private capital on these kinds of projects. How 
can we have a system where public money, which is pretty much 
all these budgets are, just public money, how can we transfer 
to a system that uses public money to leverage and can join 
private money in these kinds of projects?
    Mr. Duvall. I think the best way to do it is through either 
the reform of the Federal program structure to provide specific 
incentives to sponsors that are leveraging additional--not just 
private but not non-Federal resources. Private capital is going 
to come into the U.S. infrastructure in two forms: mainly 
equity capital in which the investor gets some sort of 
operating or rights to a revenue stream or rights to a revenue 
stream directly from the facility, a toll road or some other 
direct payment mechanism. But it also comes in through credit 
markets.
    And obviously, what has happened with credit markets in the 
last 6 months is seriously impaired, I think, the valuations 
with a lot of infrastructure assets along with everything else.
    What has not been deterred is the formation of private 
equity capital to invest a infrastructure. They would love to 
invest in the U.S., unfortunately, we are a relatively closed 
market to bring this capital in place. Federal programs should 
be structured, in my view, to give preferences, ratings 
criteria that drive utilization of these other capital 
sources--the Federal dollar could be stretched substantially 
further than it is stretched today. In fact, I think a lot of 
times as I said, it is really crowding out these other 
opportunities.
    So if the Federal Government became a seed lender or 
provider of capital, I think the Capital Beltway project here 
in Washington, D.C. is a good example of that. They took about 
$400 million of Federal grants and leveraged another $1.3 or 
$1.4 billion in investment off that that you will see waves of 
capital flow into the U.S. system if you did that.
    If you don't do it in the United States, the money will go 
to Europe, Asia, and South America, which is where it is going. 
You have to reform the programs, the over-arching policies. And 
you have got this credit tool that is extremely powerful at the 
department. Very patient lending terms. 30- to 35-year terms, 
very cheap principals and interest payments, deferral of those 
payments over long periods of time. That has become the major 
source for funding huge projects in the United States today.
    I really would look at that program, look at ways to make 
it more hospitable to private capital.
    Mr. Ryan. Very intriguing.
    Chairman Spratt. The other person on the committee who has 
been a persistent supporter of public works in general and in 
infrastructure, in particular, is Rosa DeLauro, and she has to 
leave for a leadership meeting.
    So I would like to recognize Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman, and I thank 
my colleagues, and I thank the panel.
    Dr. Atkinson, the Commission is correct when it says that 
there is no easy--there is no silver bullet to the solution to 
the infrastructure problem. The Commission made many 
recommendations but at its heart subjected a shift, as I 
understand it, from our current funding approach that is based 
largely on indirect user fees, the gas tax, and a new system 
based around direct user charges in the form of the VMT.
    In the short-term, what I gather the Commission recommends 
an increase in gas tax to preserve the Highway Trust Fund until 
we get to a new direct user-charge system. I think this 
represents a key and important change, but I am not sure that 
the Commission fully acknowledges that the capital markets, 
including central banks, pension funds, sovereign wealth funds, 
and others--they have a growing interest, as I think Mr. Duvall 
pointed out here. They have a growing interest in 
infrastructure investment. And that these sources of private 
capital haven't been fully engaged or harnessed to build new 
assets.
    Let me just say there is an estimate 2006-2007, the world's 
20 largest global infrastructure funds raised nearly $130 
billion. Last year, Treasury Secretary Mary Peters noted that 
there was upwards of $400 billion available in private sector 
in the private sector right now for infrastructure investment.
    The Commission does suggest facilitating and encouraging 
private sector financial participation and expansion of the 
Federal credit program, tax credit bonds, further investment in 
State infrastructure banks. But it appears--and I may be 
wrong--that you are lukewarm to the idea of a national 
infrastructure bank. And I do, and others have--we have 
legislation in this area modeled on the European investment 
bank that, in our view, harnesses private dollars that we can 
put toward big projects like high speed intercity rail.
    How, in your view, can we best attract these substantial 
private dollars, what real changes we make in the immediate 
term to move away from our current system which is so reliant 
on the Highway Trust Fund and look at these in innovative ways 
in which we may again harness that private capital.
    And Mr. Duvall and Ms. Miller, if you care to comment, I 
would love to hear your comments as well.
    Mr. Atkinson. I don't know that I concur. I don't know that 
I would say we are lukewarm to the idea. I think we were 
suggesting some considerations that might be thought about if 
an NIB were to go forward.
    There is also some--one of the purposes of an NIB, at least 
from some supporters of it, is about project selection; and 
that fell into a category that we just simply didn't look at. 
We didn't deal with how the money is spent. So the question of 
how it is raised, you are absolutely right, that there is an 
enormous ability to raise more----
    Ms. DeLauro. It may not have been--you know, I take it--not 
the scope, but I think you might concur that, with a new entity 
in place, you could take a look at a wide range of 
infrastructure projects across the spectrum; and, in fact, 
whether it is environmental or energy or telecommunications, 
that kind of lifts it out of the current way in which we take a 
look at projects that are of national interest or for the 
common--I am sorry to interrupt.
    Mr. Atkinson. Sure. That is one of the arguments; and, 
again, that--we did not have a position on that simply because 
that really wasn't our charge to look at that.
    With regard to the part that was our charge--and that is 
about how do you raise the funding--again, our core point was 
that financing can play a critical role. I have an entire 
chapter on it, chapter 7 of the report, that goes through the 
financing questions, looks at the pros and cons and suggests 
some ideas.
    With regard to an NIB in particular, we would have really 
two main suggestions, if you will. One is, if an NIB were to be 
created, in our view it needs to consider the role of TIFIA and 
perhaps bring TIFIA into that, rather than have two separate 
and perhaps competing entities.
    The second is that one of the key needs, if you will, is 
really what--and Tyler alluded to this a little bit--is more 
seed capital, if you will. I think that is a key role that an 
NIB could play.
    Because a lot of the cases here is that there is private 
capital out there, but the challenges to get projects ready for 
private capital--and in some cases States are hard-pressed to 
got the monies to do early stage project development. And if 
you can help them with that, getting projects ready, getting 
them planned, getting all the studies done--and Secretary 
Miller knows much more about that than I do--then you can then 
take those projects out to the private marketplace and get them 
funded.
    But that in our view is a key role that an NIB could play, 
and if it were to be created we think should be considered.
    Ms. DeLauro. Mr. Chairman, can I get a quick comment from 
our other two witnesses? I know my time is--and then I will 
leave. Mr. Duvall and then Secretary Miller.
    Ms. Miller. Thank you very much. I will just say a couple 
of things.
    One, when we look at these options, it seems to me that we 
need to explore and probably utilize all of them. And to the 
extent we can get private capital into transportation, I am all 
for that, because we definitely need the investment.
    I think we need to always remember there is a difference 
between financing and revenue; and while additional financing 
techniques can be helpful, we can't ignore the fact that we 
need additional revenue into the program.
    And a final thing I would say is that every State is 
different. Actually, as much we are the same, I am amazed how 
different we are. So this wouldn't necessarily hold up for 
others, but, in the State of Kansas, the total revenue into our 
State program, Federal funds make up 20 percent of it. And that 
is at our State level. That is not if we also look at what 
locals are doing.
    So to make the point that it is the Federal Government who 
is carrying the weight of all of the investment and crowding 
out State and local investment I think is just not correct. I 
mean, certainty that is not what I have seen in my State.
    Mr. Duvall. I think there is little question that a 
properly structured institution could leverage substantial 
resources. There is--now, you have got to be clear, though, 
that there is not a free lunch, that private investors are not 
investing in projects for fun. They want to generate returns.
    And I think, to Rob's point, you do need to drive revenue 
creation from some of these projects. I think particularly in 
some of the heavily congested quarters you will have extremely 
so-called revenue-positive assets that will spill off excess 
cash to basically invest in other transportation facilities 
within that quarter. I think that, actually, the Dulles project 
is going to utilize basic revenues backed by--issued against 
the toll road to finance huge parts of the capital construction 
for a transit project.
    There is little question that in these heavily constrained 
corridors you have got a lot of revenue-generating 
opportunities; And if the Federal Government took a policy 
stance, either through an infrastructure bank created or 
through a reform of program structures, that it could drive 
huge deployment of capital.
    What has happened throughout the rest of the world needs to 
be learned and brought to the United States. This is a mega-
trend around the globe. We are late to the party, so to speak, 
on this.
    The other thing is you have got a really short-term 
opportunity in the stimulus bill. There was a billion and a 
half dollars allocated to the Department of Transportation with 
broad discretion to craft a program, including $200 million of 
that that could go to this lending program Rob mentioned. I 
think a good policy experiment would be to really utilize those 
program dollars to leverage a huge amount of additional 
opportunities and see what happens. So, I mean, you could take 
a slug of capital that is available today, discretionary to the 
Department, and really test these concepts more clearly.
    The other thing, by the way, real quick, is the Tax Code in 
the United States also needs to be amended to be more favorable 
to this. You have got a lot of hostility under the current 
code, I think, towards private capital. There was some 
adjustment in the last authorization bill to give a slug of 
private activity bond money to these projects. That is what 
financed the capital beltway project. It would not have 
happened without that Tax Code change. But if you can level the 
capital into the capital costs to some extent between private 
and public sector borrowers, you will see an explosion of 
interests on this idea in the U.S.
    Ms. DeLauro. Thank you very, very much; and I thank you, 
Mr. Chairman.
    There is much to discuss in the President's budget outline 
that talks about an infrastructure bank, capitalized at $5 
billion a year over 5 years. I think we also have to take a 
look at a way in which we view what we have as assets in terms 
of this--you know, we are not moving to capital budgeting, but 
how we view what we have as assets rather than as liabilities, 
if you will, in terms of trying to and how you can utilize that 
methodology as well as in terms of moving forward.
    Thank you very, very much, Mr. Chairman. Thank you. I look 
forward to working with you.
    Chairman Spratt. Mr. Jordan.
    Mr. Jordan. I thank the Chair and the panel.
    I would like to get maybe two questions in if I can for the 
panel.
    First, I want to go back to the VMT concept. I find this 
whole idea of concern, particularly the privacy issue--I think 
it is, as the doctor pointed out, it is one thing if Verizon 
knows where you are at; it is quite another if the Federal 
Government has the potential to know where your car is at all 
times. So I think that is a valid concern that we need to look 
at and be cognizant of.
    But, Mr. Duvall, you pointed out in your comments, 
references briefly the implications this could have for rural 
America, which--I represent 11 counties. Obviously, people in 
rural areas now drive more and pay more in gas tax. But talk to 
me about how it would work--and any of you can comment on 
this--the adjustments, how that would be made. And is it just 
from the State level, or would it be from the Federal level?
    I want to make sure I understand that as well, at least how 
you envision that and the impact on rural America. And 
particularly you, Secretary, representing the State of Kansas.
    Mr. Atkinson. Well, Representative Jordan, with regard to 
the first point, I completely agree with you that it is 
inappropriate for the Federal Government to know about 
individual trips that American citizens take. I do believe that 
you can design and should design a system that would be fully 
privacy and civil liberty protective.
    Now that is not to say there won't be a political 
perception--a perception issue among Americans who will be 
concerned about this. But I think in the reality of it, though, 
you can build a system that--you could even build a system if 
you wanted to, for example, that said under no circumstances 
can that data ever be transferred off the OBU. That could be a 
policy choice. We would rather leave that up to an individual. 
If an individual chooses to have that data transferred, that is 
up to them.
    There was a Christian Science Monitor editorial on this, 
and it made the analogy, which I think is a good analogy, is 
when you or I watch NBC Nightly News, our TV knows that is 
receiving the NBC signal; NBC doesn't know that I am receiving 
it. And that is essentially the same thing with this.
    With regard to the rural point, the rural concern, I think 
it is important to note, as you did, that if you are driving 80 
miles in a rural environment to get to work and back, you are 
going to be paying a lot more in the gas tax than you would be 
if you were driving in a city and driving 10 miles a day. I 
don't see why that would be any different, frankly, with a VMT. 
It would essentially be the same. The only difference really is 
vehicle choice. If rural users used more fuel-efficient 
vehicles, they would be worse off. If they use less fuel-
efficient vehicles, they might be better off.
    Ms. Miller. Yeah. I would add to that, I--coming from a 
rural State, this is certainly an issue that comes up. I think 
that there could be advantages, quite frankly. When I think 
about how it could play out, I think that our citizens would 
welcome the idea that when they are driving on a rural two-lane 
roadway the per mile charge would be less than when they are 
driving on an interstate roadway or on a congested urban 
interstate. So I think certainly the rural issues could be 
addressed and could be addressed in a way, quite frankly, that 
would be beneficial.
    Mr. Jordan. Is it your vision that that would be done at 
the State level or Federal? How would that work?
    Ms. Miller. I have to say, I think there are a lot of 
issues that still need to be teased out of this and figured 
out. As a State person, what I would hope ultimately is that 
the Federal Government would lead, that we would a VMT taxing 
system that would be available then to States and locals and 
that would all have the opportunity to----
    Mr. Jordan. One quick question and I want to come back to 
the Secretary for the second question.
    Mr. Duvall. Yeah. I think there is a concern that--as Rob 
mentioned in his testimony, that the objective should be to 
charge people the true cost of driving, driving along an 
uncongested rural interstate for hours and hours in a very 
light passenger vehicle imposes very little cost on the system 
or to other users. So the pricing mechanisms should be tailored 
towards the cost you are imposing on the system. So I think 
there is a concern of a national VMT that is not adjusted for 
those issues.
    Mr. Jordan. I want to move to high-speed rail. This is an 
issue in our State. Our Governor is looking at doing this, 
putting money, both stimulus dollars and State transportation 
dollars. I am getting comments from some of our local 
officials, some of our mayors who want to do it. Frankly--I 
will be honest and up front. I don't--I think the burden is 
really high to justify doing that in the kind of district that 
I represent in the State that I come from, west central Ohio.
    Your thoughts on high-speed rail, the potential--would it 
be sustainable? Would there be the demand there? What would be 
the cost up front? And I want to go to the Secretary who is, 
again, from a rural State and in many ways like the part of 
Ohio that I get to represent.
    Ms. Miller. Well, I am not sure I am the best person to 
answer the question in terms of is it sustainable. I guess I 
would say almost as much as--I don't know--I am a citizen or an 
observer of transportation, I think the notion of our country 
much more aggressively pursuing a high-speed rail is a good 
one.
    When I look at our State and think about the uses of those 
things, quite frankly, I don't think we are a good candidate 
for the system. I think that, generally speaking, we are 
talking about the more crowded corridors, California, on the 
east coast. And certainly we have the same issues, some cities 
and citizens who are very interested and excited. But when I 
start looking at the cost, quite frankly, I don't think it 
makes sense in our area. But I think for our country it makes a 
great deal of sense; and there are places where, in fact, it 
could be sustainable.
    Mr. Duvall. Yeah, I would agree. You have got to focus any 
sort of national capital investments in high-speed rail along 
relatively a small number of heavily traveled corridors.
    The key policy issue in the U.S. is not simply how to pay 
for these systems up front, though. It is what is the operating 
model going to be. As we have seen with Amtrak, we have an 
operating model that is just not delivering as much efficiency 
as could be delivered. I think what you have seen in Europe and 
Asia is basically more efficient operating models with clear 
incentives to cap the public subsidies. What you don't want to 
create is a Federal program that just perpetuates operating 
subsidies indefinitely.
    Mr. Jordan. Well said. Well said.
    Doctor, then my time is up.
    Mr. Atkinson. I don't have any comments on the areas we 
looked at.
    Mr. Jordan. Great. Thank you, Mr. Chairman.
    Chairman Spratt. Ms. Schwartz.
    Ms. Schwartz. Thank you, Mr. Chairman.
    I wanted to actually see if we could focus a bit--we have 
talked a good bit about roads and bridges and highways, and I 
know we are focusing mostly on how do we finance all that. But 
I have particular interest in rail and light rail. And as we 
look at financing mechanisms, the issue to me is both how do we 
maintain the roads and bridges and highways that we have and 
rail. But how do we actually make an investment in the future?
    I think your testimony suggested that--and your 
recommendations had suggested ways to maintain what we are 
already doing--in fact, if anything, go back to previous levels 
of funding to make sure we have the money in the system--but 
really does not make the kind of investment in the future that 
I believe that a lot of Americans are really interested in 
seeing us do.
    And I think to just look at the last couple of years--and I 
represent part of Philadelphia and the suburbs of Philadelphia. 
So it is an urban/suburban area. When we saw gasoline at $4 a 
gallon, you saw really changed behavior. We had an increase 
of--overall, a 5 percent increase in the use of public transit. 
But, at the height, it was almost a 20 percent increase in the 
use of our public transportation system. And we were almost 
over capacity. The system almost--was using old cars that they 
weren't so sure they should use and not sure they could meet 
that capacity.
    So I assume you agree that we have an overreliance on 
foreign oil. But one of our goals here is to figure out how we 
can both fund our system but also reduce our use of oil for a 
variety of reasons, and that does mean rail.
    So I really wanted to just ask about how--I guess ask both 
the Secretary and then ask Dr. Atkinson, too, to just comment 
particularly on how public transit could be positively 
affected. Because there are many Americans who sit in traffic 
every day that lose literally time and dollars every day and 
certainly over the course of a year, as well as the high cost 
of fuel and using their cars.
    If you could actually speak to how financing mechanisms--
whether they are adequate to the task of really making the kind 
of investment in rail that we currently have and potentially 
light rail systems in the future that are proposed. And 
everyone always says, too expensive; we can't possibly do. But 
if we actually are going to end our reliance on foreign oil and 
if we are actually going to reduce the use of oil overall, 
because the planet requires it, and reduce costs to American 
families over time, could you speak to how your proposals and 
your thoughts would relate to really making the kind of 
investment in rail in this country that we have yet to do?
    Do you want to start, Secretary Miller?
    Ms. Miller. I would be happy to.
    The AASHTO proposal does contemplate exactly what you said, 
that we need considerably larger investments in transit 
generally and in a high-speed rail network specifically; and we 
have recommended $35 billion in a 6-year reauthorization cycle.
    I think there has been a tendency in our country, for 
whatever reason, to kind of talk in terms of either/or terms, 
you either support transit or you support highways; and that 
is, quite frankly, nonsensical. We have underinvested in both. 
We need both.
    Enormous investments in transit would still not change the 
fact that we need additional investments in highways, nor would 
additional investment in highways negate the need for transit. 
And I think you are exactly right. To the extent we want to 
both move away from foreign oil sources and deal with climate 
change issues, we are going to have to see increased investment 
in transit. I think it is important for our country.
    Tyler made the point--and I would concur with it--that one 
of the things that I think you really do see, even from people 
who come from a lot of different ideological places, there is 
actually a great deal of agreement around these transportation 
issues. And so I think we can get to an agreed vision. I think 
figuring out how to fund it becomes the more complicated one. 
The transit really has to be a part of whatever we do.
    Ms. Schwartz. Dr. Atkinson; and then, Mr. Duvall, I ask you 
to weigh in on this, too.
    Mr. Atkinson. Congresswoman, as I alluded to before, I am 
not in the position really to comment on what kinds of 
investment we should be making, whether it should be high-speed 
rail or not. One of the things our Commission did agree to, 
though, is that the increased funding should go to transit, 
should go to highways, should go to making the system work 
better.
    I think one key point, though, is, as we found in our study 
and in looking at a lot of different studies around the world 
and in this country, the system driving is essentially 
underpriced. So in the 1970s, the average driver--the amount of 
funding for the entire system that came from user fees--in 
other words, gas taxes, car registration fees and tolls--was 
around 74 percent. Today, it is about 60 percent. So, in other 
words, what we are really doing in this country is we are 
subsidizing driving and, at the same time, we are working to 
reduce greenhouse gas emissions. That is why we think it 
needs----
    Ms. Schwartz. Which is inconsistent.
    Mr. Atkinson. It is completely inconsistent. It is like the 
policy 10 years ago when we were--I hope I don't offend any 
members--funding--we were subsidizing tobacco but trying to get 
people not to smoke. An inconsistent policy at best. Somewhat 
what we are doing today. And I think a key there is if you----
    Ms. Schwartz. I hope we are not doing it anymore. But, 
anyway----
    Mr. Atkinson. We are not doing it anymore.
    But if you think about one of the advantages of a VMT or 
pricing is that it basically lets people pay more of the full 
cost of what they are using. And that is why a number of 
studies show that if you move towards VMT what you get is an 
increase in transit or other modes because it now becomes more 
economical. They are paying their full share.
    Ms. Schwartz. The whole cost-benefit analysis that a family 
or an individual might make starts to be--it changes. If you 
actually can make sure it is even, it is a level playing field, 
it is not, in fact, a cost benefit to be able to--and I think 
you are right. We have to look at the policy as we create it, 
that we don't actually highly subsidize roads, bridges, and 
highways and encourage highway driving when, in fact, there is 
an option.
    But people need to have a reasonable option, and they need 
to see it both financially, but they also need to know that the 
system is well funded enough to get close enough to their homes 
and to actually also be comfortable when they are using it and 
safe and all--and reliable. And all the things, we know, take 
some dollars.
    Mr. Atkinson. If I can just make one last quick last point 
to that point.
    We strongly advocate that people should be paying the full 
cost of it, but we don't argue--there are some people who would 
argue--and I know you are not saying this--that we should price 
the system to force people off roads. We don't believe that. I 
think if we price it----
    Ms. Schwartz. My constituents would not be happy with that.
    Mr. Atkinson. My last point would be, one of our Commission 
members is Lee Sander, who is the Executive Director of the 
Metropolitan Transportation Authority of New York, runs 
essentially the bridges and the transit system and the buses. 
And Lee is a very strong supporter of this report and this 
Commission's findings, particularly on VMT, because he realizes 
exactly that point, this makes it a more economically viable 
system for transit.
    Ms. Schwartz. If there is a moment to--if the Chair will 
indulge, Mr. Duvall, be very, very quick.
    Mr. Duvall. I concur with the comments. Clearly, you cannot 
ignore highway demand when doing transit investments in the 
United States. The projections for demand for rail are driven a 
lot of times by the subsidies to the highway sector. Pricing a 
highway, as Rob said, though, is a pro-mobility strategy and 
not only provides incentives for providing transit, but it also 
increases the performance of the highway itself. So you can 
handle a lot more capacity in a specific corridor using 
pricing. It really is a win-win policy.
    But we have pursued investments on this side of transit, 
kind of ignoring the fundamental problems on this side over 
here, the highway side; and it is just not a sustainable 
strategy.
    Ms. Schwartz. I just encourage you to talk about rail as 
you talk about--as part of some of the solutions to the issues, 
particularly to energy independence. Thank you.
    Chairman Spratt. Mrs. Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman.
    I know that Mr. Jordan asked a question about rural 
highways, and I want to follow up on that.
    I am from Wyoming, which is the lowest population State in 
the Nation and the ninth largest in terms of surface area. We 
have absolutely no intrastate air service. We have no rail 
transportation. We are totally dependent on our highways; and 
Wyoming has 29 people per lane mile, while the national average 
is 128. Because of this, Wyoming's per capita contribution to 
the highway account is $314; and the national average 
contribution is $109.
    So my question, Dr. Atkinson, is how can we ensure fair 
treatment for rural Western States whose low population alone 
does not tell the whole story of their significance to our 
highway system?
    Mr. Atkinson. Well, I smile because in some ways that gets 
into the donor/donee question; and that was a question that 
simply again was not in our purview. We didn't focus on that 
question, and it is clearly a question of concern to some 
States more than other States.
    Having said that, I do think that one of the--both a 
challenge and perhaps an opportunity to move to a system more 
along the lines of what we have described in here is one of the 
things that happens in the U.S. is that adding capacity in a 
rural highway is not as expensive as adding capacity in a big 
metropolitan area. And monies are tight and so monies go--may 
in some cases go away from a rural area to a metro area to pay 
for that capacity. If you can rely more on a system where we 
pay for some of that very expensive needed capacity in 
metropolitan areas with tolling and pricing, it can free up 
monies that would go to a rural area or a rural State, 
potentially.
    Mrs. Lummis. Thank you.
    A follow-up question. Dr. Atkinson, the current Surface 
Transportation Reauthorization Bill includes an estimated $24 
billion in earmarks. Your Commission has recommended a 
transparent earmark system, which I applaud. Could you 
elaborate a little on findings by your Commission on how 
earmarking has affected the quality and direction of our 
Federal transportation dollars?
    Mr. Atkinson. We didn't actually look at that question in 
any level of depth. I think the biggest problem with earmarks--
and not--let me preface--the biggest problem is the perceptual 
problem. It erodes America's trust in the system. Americans I 
think believe that most of the money is going to projects that 
aren't worthwhile. And while--so I think that is the biggest 
problem.
    The second problem--there are certainly problems with some 
earmarks, and we think that there should be more transparency. 
There should be a straighter forward process. But, as I alluded 
to earlier, earmark reform is a useful thing to do, but it 
certainly cannot be the answer. It can be part of the answer.
    Mrs. Lummis. Thank you.
    Mr. Duvall, in the interest of controlling construction 
costs, which have been referenced, have you examined how much 
Davis-Bacon requirements have increased the cost of 
transportation projects?
    Mr. Duvall. Personally, I have not. There are a number of 
studies that refer to that, and you get a range of estimates. I 
think a number of States have--many of the major construction 
States have their own prevailing wage laws already, many Davis-
Bacon. So the Federal policy doesn't have much of an impact at 
all there.
    I will say, generally speaking, you know, national policies 
should be conducive to competition. But I think Davis-Bacon is 
in some ways an argument that is just not at the core of 
transforming our system in the U.S.
    I would also say construction costs obviously were driven 
entirely or a lot by Chinese and Indian demand for commodities. 
That demand has collapsed. It is actually a great time to be 
constructing today relative to certainly a year ago; and, 
hopefully, that will sustain for the foreseeable future.
    Mrs. Lummis. That is an excellent point.
    Mr. Chairman, my next question is for Secretary Miller. You 
mention your goal of $545 billion in transportation funding 
through 2015; and that, of course, is beyond the capacity of 
the current highway trust fund. You mentioned a number of 
revenue sources. And, as our country battles this economic 
downturn, is now the time to be raising taxes which would have 
adverse economic consequences? And what alternatives could you 
recommend?
    Ms. Miller. Well, certainly I think as we look at the 
recession that we are in, you know, Congress, everyone, we are 
going to have to balance out what seems to be in the best 
economic interests of the country. I think certainly long-term 
quality investment is important. I think that you can see the 
creation of jobs that you get from a transportation program as 
being beneficial to an economy. Whether or not you feel that 
you can also raise taxes at that time I think is an open 
question.
    But I also think that, severe though this recession may be, 
it is still ultimately going to be for a period of time and 
then our country is going to come out of this without question. 
And what we really need to be focused on is long term what 
should our investment level be in transportation and how should 
we get there. And if the short-term issue of the recession is 
that we can't do it today because of the recession, I certainly 
don't think it negates getting there; and I don't think that 
the length of the recession is going to be such that we can't 
start beginning to address it. And, ultimately, we will have to 
address it by looking at the issue of revenues.
    Mrs. Lummis. Mr. Chairman, I certainly concur that 
deferring tax increases during tough economic times is a really 
good idea; and thank you very much, Mr. Chairman.
    Chairman Spratt. Thank you, Mrs. Lummis.
    Mr. Doggett.
    Mr. Doggett. Thank you, Mr. Chairman; and thank you for the 
testimony each of you have provided.
    Dr. Atkinson, as you know, over one-fourth of the 
greenhouse gas emissions, the pollution that we have in 
greenhouse gases in this country comes from the transportation 
sector. In my hometown of Austin, Texas, the metropolitan 
planning organization has taken on its own initiative to place 
as one of the criteria in the planning process for long-range 
transportation plans and for the transportation improvement 
program how different projects affect greenhouse gas emission 
pollution. Do you think that is a desirable consideration for 
all of our MPOs and for transportation planning in general?
    Mr. Atkinson. Well, I may take somewhat of a heretical view 
here in the sense of, number one, speaking personally, I think 
that greenhouse gas emissions and global warming is a critical 
issue that we have to deal with as a Nation.
    While I think that better land use planning--and, by the 
way, my Ph.D. is in city and regional planning, so I have long 
planning experience. While I think better land use planning is 
important and encouraging other modes is important, I don't 
think that can be the only answer. I think that, ultimately, 
the only sustainable answer is essentially nongasoline burning 
vehicles.
    I really think that the only way to solve this--if you put 
in place all of the planning and zoning and other types of 
measures, we still are not going to reduce VMT very much just 
because of population growth, for no other reason. It is not to 
say we shouldn't take those steps. We could encourage those 
steps. But, at the end of the day, the real answer has got to 
be----
    Mr. Doggett. I don't think my MPO has any zoning authority. 
It is just that one consideration that they used in developing 
their long-range transportation plans. I am just asking you if 
you think that should be a consideration in developing----
    Mr. Atkinson. I do think that it should be a consideration, 
as long as they also consider other factors as well and don't 
have that be the only factor.
    Mr. Doggett. Of course.
    Secretary Miller, as you know, for the first time in the 
economic recovery legislation we have provided that some of the 
funds would flow directly to metropolitan planning 
organizations. Has there been any problem with that in Kansas?
    Ms. Miller. Well, the suballocation to areas over 200,000, 
I mean, that has gone on in reauthorization bills long before 
this. So money going directly to areas over 200,000 is actually 
common in transportation. No, it certainly has not provided us 
with any problems.
    Mr. Doggett. Giving them more authority over those 
allocations as we did in the economic recovery legislation has 
worked well in Kansas?
    Ms. Miller. Certainly the way it has worked in the economic 
stimulus bill is exactly the way we have always handled those 
funds in Kansas.
    Mr. Doggett. Well, I certainly do think, as Dr. Atkinson 
said, developments here in Congress like the Republican road to 
nowhere, earmarking of that type does cause a lack of public 
confidence. In Texas, it has been the Texas Department of 
Public Transportation that has been--or the Texas Department of 
Transportation. There is not too much ``public'' in it in terms 
of funding any kind of rail systems--that has caused a great 
deal of public confidence. They are heavy on arrogance, and 
they are light on accountability. I am sure quite different 
than the way the Kansas department operates.
    They, for example, took all of the economic recovery money 
that they spent in my home county and devoted it to one tollway 
exchange. They have devoted, I think, the largest proportion of 
the funds that they received in the economic recovery 
legislation to building tollways around Houston, while 
neglecting rural roads and many roads that may not be 
expressways but are the primary means of travel.
    I just don't see any way to defend channeling more money to 
the Texas Department of Transportation, given the arrogance 
with which it has approached the transportation needs in our 
State, and certainly don't see any way to support a tax 
increase, given the way that they have chosen to allocate with 
a minimum amount of public input, unlike our metropolitan 
planning organizations, the dollars that they have just 
received which really provided a massive Federal bailout to 
Governor Perry and this mismanaged Texas Department of 
Transportation.
    So while I am eager to address the concerns that each of 
you have raised, the idea of just channeling more money to a 
State agency that continues to have more arrogance than fiscal 
responsibility is not something that I can support.
    I yield back.
    Chairman Spratt. Mr. Etheridge of North Carolina.
    Mr. Etheridge. Thank you, Mr. Chairman; and thank you for 
calling this hearing.
    Let me thank each of you for being here.
    When we start talking about our investments and 
infrastructure, we get a lot of support from a lot of folks. My 
question, though, is one of the challenges--one of the great 
challenges when we start talking about the upgrading of our 
national infrastructure, most folks when they hear--they are 
concerned about the road in front of their house or the street 
in front of their house. That sort of how they think of it. And 
if it is in good shape, the roads are okay. And if it is not, 
then somebody needs to be doing something.
    So my question is this--and let me preface and ask 
Secretary Miller, you first, simply because I served in the 
State legislature. I chaired the appropriation subcommittee 
dealing with transportation. Then I chaired the overall 
appropriations committee.
    It is amazing how parochial people get when it comes to 
appropriating money. And I am going to ask you another question 
about earmarks in just a minute, but my question to you is one 
that I think is difficult to deal with. We talk to you in terms 
of a broad spectrum of allocating resources, whatever percent 
that goes to State and whatever that may do. But it has been my 
experience the challenge is always the scrap between the urban 
and the rural. I would be interested in your thoughts, since 
Kansas has an awful lot of rural areas and concentrated urban 
areas, how that balance works out.
    I know in North Carolina we have urban--which is called 
power funds, dedicated at the State level and Federal. I don't 
know how Kansas does it. I would be interested in your thoughts 
of additional investments made, how you allocate that resource 
and make it work.
    Ms. Miller. You are exactly right. When you get right down 
to making the final decisions, it becomes very parochial; and a 
good decision is when it takes care of the roads you are most 
concerned about and the bad decision is when you are spending 
the money someplace else.
    In terms of Kansas, we have been pretty successful as a 
State not tumbling too deeply into the rural/urban split. We 
have never divided our dollars up so that certain areas of the 
State are getting a set amount of money; and, to date, that has 
been acceptable. I sort of sense a greater rural/urban spat 
developing in our State.
    One of the things we have tried to do as a State DOT in 
recent years--certainly I hope that none of our cities would 
describe us as arrogant or unwilling of having dollars spent. I 
spend a lot of time going to communities. We do what we call 
local consult meetings where we invite in regional people to 
talk about their priorities. We have tried to use collaborative 
decision making processes so people can have confidence in it; 
and one of the things we try to do is to help people understand 
that these are your regional concerns, but you need to 
understand these over here.
    But I have to say certainly, any time I am in a regional 
area, they are most concerned about their projects. And it is 
just--as you know, you are a politician--it is just a balance. 
Everyone in the State has to feel like they have a fair 
opportunity; and they have to feel like at least if not always, 
at least at times, their needs are represented. And if we can't 
figure out some way to do that, we are just never going to be 
successful.
    Mr. Etheridge. It ultimately comes down to local politics 
at the end of the day.
    Either one of you want to comment just briefly on it, or do 
you agree?
    Mr. Duvall. I think it is the major policy problem. I mean, 
coming up with a national framework is basically, as you said, 
driven by this problem in the U.S. North Carolina is a 
microcosm of the U.S., and policies in Charlotte should be very 
different than policies in the rest of the State. You have got 
different challenges.
    In rural areas in most of the U.S., it is a maintenance, 
rehabilitation, and a safety problem. I mean, you have got a 
rural safety crisis, actually, in a lot of places in the U.S., 
particularly in the southeast; and I think you need a different 
policy prescription. Now, the question is, does the Federal 
program allow that? I mean, it is pretty flexible today, so it 
does. But does it take the next step, which is really kind of 
drive these solutions more efficiently. And that is----
    Mr. Etheridge. When you talk about safety, you are talking 
about really two different pots if you are talking about the 
allocation. Then you have got a safety issue that overrides the 
others you have to deal with.
    Let me come back very quickly. Someone touched on earmarks, 
and I think folks around here get overly sensitive. And I think 
the truth is, whether it is earmarked at the Federal level, the 
State level or the local level or the council level, you have 
earmarks.
    When you ultimately decide on who is going to get a road, 
as you said, Secretary Miller, it comes in front of my house, I 
am happy. If it goes in front of Dr. Atkinson's house and mine 
hasn't been fixed, you have earmarked that piece of money, 
wherever it came from. And most folks, whether they live in the 
urban sector or the rural sector, they really don't care. It is 
the road in front of their house. And as long as it is 
prudent--it is an interesting concept, but at the end of the 
day it is all driven--hopefully driven by good policy. But 
there are political decisions as you get to that policy.
    Either one of you want to comment on that?
    Ms. Miller. Well, I would make a couple of comments. I want 
to be careful about what I say here, because I know earmarks 
really are a very sensitive issue.
    I guess, first, I would say that over the years with our 
congressional delegation, we have worked closely with them; and 
I would have to credit them. They work regularly with our 
Department. We rarely get earmark dollars in our State that are 
not designed to be used on projects that I would describe as 
high priority. They are not frivolous places to spend money.
    I have two observations that I think make the earmark 
situation difficult to deal with. One is that, increasingly, 
the planning process that is laid out in Federal law requires 
multiple steps, you know, a lot of collaboration. But an 
earmark project can just be written into law and all of a 
sudden it has the same or greater priority than projects that 
have been flowing through this planning process. So I think 
this inequity is developing in terms of how we get to things.
    And then the final thing that tends to happen, there is a 
tendency--and we all fall into it because we are trying to 
balance out and make people happy--of giving smaller amounts of 
money to lots of projects. So we get a lot of earmarked 
projects which are $900,000 for a project that might ultimately 
might cost $75 million to build, and the $900,000 isn't even 
sufficient really to design the project. So we find some way to 
start using it, doing some planning processes and getting it 
started. Sometimes it certainly leads to a good project, but we 
are spending a lot of money doing some level of design. And I 
know all of the reasons why it is impossible to do this, but 
sometimes if we could at least put more money into fewer things 
but of more consequence, it would feel like we were getting 
somewhere with the process.
    Mr. Etheridge. And you also have got that at the State 
level, too?
    Ms. Miller. Absolutely.
    Mr. Etheridge. I would think it would be much greater there 
than at the Federal level.
    Ms. Miller. Just a very quick diversion. We have ultimately 
chosen to divide up money to all the cities and counties in the 
State of Kansas out of the recovery dollars so that they can 
choose their own project. We are right in that process. We used 
a formula to figure out what it was. But for the dollars we 
kept at the State level, we are only funding six projects. I 
think they are excellent projects. I feel like I can defend 
them to you. I can defend them to our State. I have not been 
criticized for it.
    But when you only do six projects in a State, you certainly 
end up with lots of regions of the State who did not get a 
project; and there is a huge tendency to break it down into 
smaller but less significant pieces.
    Mr. Duvall. I think the other issue with the earmarks was 
mentioned. The outlay rate of the earmarks is significantly 
slower than the outlay rate of nonearmarks in the program. And 
that is because, you know, a lot of times, as was mentioned, 
the project costs are well in excess of the earmarks.
    So the States take two strategies. They either divert money 
from other projects that are higher priority or they leave 
money lying around. And by the time--when I left the Department 
7 weeks ago, we had estimated there is $13 billion in 
unobligated prior year earmarks. Now, all of those are not 
sitting around for years and years, but a lot of them were 
sitting around for years and years. So I think at a minimum 
there should be some provision that funds not spent within some 
period of time should be----
    Mr. Etheridge. Thank you, Mr. Chairman. I yield back.
    Chairman Spratt. Thank you, Mr. Etheridge.
    Mr. Bishop of New York.
    Mr. Bishop. Thank you, Mr. Chairman; and I thank the panel.
    Let me start--the questions that Congresswoman Lummis were 
asking certainly took the point of view that this is the wrong 
time to raise taxes. And I know that none of the three of you 
are economists. I am certainly not.
    As I understand the recommendations of your committee, Mr. 
Atkinson, or your group, a 10 cent per mile increase in the 
gasoline tax would cost the average car owner approximately $60 
a year per car, but it would generate approximately $20 billion 
worth of revenue that could then be used to invest in 
infrastructure projects. Is it not reasonable to assume that if 
there were, in fact, some sort of cataclysmic economic 
consequence from spending $60 more per year per car that that 
would be offset by spending $20 billion in infrastructure and 
creating or maintaining 8 or 900,000 jobs? Is that a reasonable 
assumption to make?
    Mr. Atkinson. Exactly reasonable. If taxes--if they are 
offset by spending--so you bring the money in but then you 
spend it, you have not created either an expansionary or a 
contractionary effect on the economy. It is neutral. So if you 
raise taxes in a downturn but then you don't increase 
spending--in other words, you reduce the deficit--that is 
contractionary. If you do surplus spending like the stimulus 
bill, that is expansionary. But if you raise the gas tax by 10 
cents and then use all that money and get it out there into 
investment projects, that has no effect on the economy one way 
or the other in the short run.
    Mr. Bishop. Mr. Duvall, do you agree with that assessment?
    Mr. Atkinson. I think it depends on the quality of the 
investment. I do think it is a tough time to be taking money 
out of consumers' pockets now, even at the magnitude you are 
talking about. So if you do invest the funds to produce high 
returns, that is a different question. But, as I said in my 
testimony, I am not sure we have the mechanisms in place to 
produce really high returns.
    Mr. Bishop. Let us stay on that for a second, because there 
were two commissions. One was the Policy Commission, which your 
former boss chaired; and one was the commission that Dr. 
Atkinson chaired. The Policy Commission recommended an increase 
in the fuel tax of between 25 and 40 cents a gallon. Your 
recommendation was 10 cents a gallon. Secretary Peters issued a 
minority report in which she indicated that she did not support 
any increase in the fuel tax, either in the short run or the 
long run.
    We have both a short-run and a long-run problem. It seems 
to me how we deal with the short-run problem makes the long-run 
problem either easier or more difficult to contend with. So if 
we were to follow Secretary Peters' recommendation--and based 
on what you just said, I am going to guess that you concur with 
her assessment--if we don't raise the fuel tax or come up with 
some other short-term mechanism of increasing funding into--or 
simply maintaining funding into the highway trust fund, if we 
were to then have a shortfall in investment, A, what do you see 
the implications of that being; and, B, how does that possibly 
make our long-term problem easier to contend with?
    Mr. Duvall. I guess my view is, now and then, is that you 
have got to reform the program before you can justify 
substantial tax increases, precisely because the question at 
the end of the day is what are we getting in this investment. 
It is a capital investment. Any investors should be looking at 
the returns that are going to generate from the investment, and 
I just don't think there is the confidence level right now.
    It is not simply earmarking. I think there is a structural 
problem with the process requirements, with the allocation of 
resources at a very broad level.
    So I guess my view is let us have a serious reform debate 
right now. Let us get the reform right and then let us talk 
about increased spending. Because I think increased spending 
could produce a lot of great things, or it could produce not a 
lot of great things.
    Mr. Bishop. Secretary Miller or Dr. Atkinson, could you 
respond to that?
    Ms. Miller. Well, one thing I would like to at least get on 
to the table is, if you are talking about a short-term and a 
long-term problem, there is also a short, short-term problem. 
That is the fact that, you know, we are likely not to have 
sufficient money to get beyond September of this year; and, 
absent any kind of action, there would be literally a 50 
percent loss of funding in fiscal year 2010.
    As we are moving beyond the recession, I think the point 
that spending on transportation create jobs and help sustain 
the economy is an important one; and I think that clearly has 
to be dealt with before we get to the issue of reform. AASHTO, 
along with a number of organizations, has called for 
performance measures, accountability techniques. I think there 
is absolutely no question if we are going to ask for additional 
monies so that we can make greater investments, we also have to 
be willing to show citizens what they are going to be getting 
for it in a transparent and accountable way; and I think we are 
ready and prepared to do that.
    But I also think we can't put off dealing with any of the 
funding issues until we feel like we have got all the reform 
agendas right or we will really have tanked our national 
program.
    Mr. Bishop. Dr. Atkinson?
    Mr. Atkinson. One of the things that I think is important 
to realize from our perspective on the Commission is if you 
simply relied on solving this problem in the future just with 
the gas tax--in other words, a very large gas tax increase--you 
do reduce the move towards more innovative ways of raising 
funding in the future.
    At the same time, though, if you don't do anything, you 
just say we are only going to wait for the reforms and the new 
innovative funding, our view is that the problem is so severe 
in the short run that really just isn't fair to Americans who 
have to face the system they have to face today. So that is why 
we came up with the 10 cent increase there, with the notion 
that it is a temporary measure.
    Mr. Bishop. It is a bridge----
    Mr. Atkinson. It is a bridge to somewhere.
    Mr. Bishop. Bad metaphor, perhaps.
    Mr. Duvall. Can I just say really quickly that I don't 
think it is going to take 10 years to reform some of these 
programs to achieve what we are talking about here. I mean--and 
maybe it is a semantics issue, but when I talk about reform, 
there are very kind of, you know, straightforward, relatively 
easy, tough politically but policy-wise relatively easy things 
to do to restructure this program to achieve better outcomes. 
And all I am saying is I wouldn't jettison those just because 
we have an urgent problem. That is part of the urgent problem, 
is fixing those issues, in my view.
    Mr. Bishop. Thank you.
    My time has expired. Thank you, Mr. Chairman.
    Chairman Spratt. I beg your pardon. Mr. Schrader of Oregon.
    Oh, Mr. Connolly, if you are here to claim your time, you 
are next. You barely made it.
    Mr. Connolly. Thank you, Mr. Chairman; and I appreciate 
very much our panel being here today.
    I would like to ask two questions.
    I have just spent the last 14 years in local government 
chairing one of the largest counties in the United States and 
have intersected with the Federal Government on almost 
everything we are talking about: big highway projects; big new 
interstates; the only Federally owned bridge in the United 
States, the Woodrow Wilson Bridge; and the largest single 
transit expansion in the United States, Rail to Dulles.
    Rail to Dulles as an idea started 47 years ago. We signed 
the full funding grant agreement just last week. That is warp 
time in Federal Government context.
    I believe that in my own experience--and I would like you 
to comment--that, frankly, the way we do transit versus 
highways and bridges absolutely discourages people from even 
looking at the transit option. The Federal Government pretty 
much is hands-off once it decides the size of the funding pie 
and the slice to go to your State with respect to roads and 
bridges. I mean, there is the need for process and so forth. 
But, by and large, it is up to Kansas to decide which projects 
to fund once it gets its Federal funding.
    Not so in transit. In transit, you have to go through an 
enormous bureaucratic process. And, as Mr. Blumenauer 
indicated, it creates delays, just the very nature of the 
process itself, which adds cost. The Federal Government decides 
on whether your financing program is viable, whether the 
public-private funding may work, whether you have met their 
environmental standards. They set a cost-effectiveness cap, 
which in my own opinion is, frankly, rather arbitrary. And all 
of that adds costs, all of that makes it very difficult to seek 
Federal funding or financing.
    Here we are in the Nation's capital and the full funding 
grant agreement we agreed to last week will freeze Federal 
participation at $900 million, which means that the Federal 
participation in a rail line to the national capital airport, 
Dulles Airport, will be, at the most, 16 percent. What other 
OECD capital would that be true? That is certainly not what 
happened at Charles de Gaulle. It is certainly not what 
happened in London. It is certainly not what happened in Tokyo. 
It is certainly not what happened in Rome.
    So I would like your comments on don't you think as we look 
at the Surface Reauthorization Act that maybe we need have more 
parity in the approach to transit as a funding spigot with 
roads and bridges so that more people might find it accessible 
and approachable?
    And then the second question, if we get to it, just picking 
up on the whole idea of privatization, which I have also had a 
lot of experience with and I think it is both good and bad, but 
I would cite--Tyler, it is good to see you here today--the 
Dulles Greenway, which is a major toll road--piece of toll road 
out in Loudoun County getting commuters here to Washington, 
D.C., is entirely privately owned and privately operated. The 
problem is the costs of operation without public participation 
has risen so high that the tolls have become almost 
intolerable. We have even had Republican conservative Members 
of this body introduce legislation to cap private tolls on a 
private facility, which is an interesting point of view from an 
ideological point of view. So I just caution that privatization 
is not always a panacea.
    If you would like to comment, we will start maybe with Dr. 
Atkinson.
    Mr. Atkinson. Well, thank you.
    I can't really comment on the transit part, because it 
really wasn't our purview. But let me talk just a bit about the 
tolling question there.
    I think one of the things that it reflects is that we 
underprice the system to begin with. So the fact that they are 
having to charge high prices means that that is what it costs 
to have an unsubsidized road. I think the answer is more 
towards moving to have people pay the full cost.
    One of the problems with the challenge the Greenway faces 
is it is competing for free. So when I am out in Leesburg, I am 
making a choice. Do I want to come back to the District on 7, 
or do I want to come back to the Dulles Toll Road? I don't pay 
anything to go on 7 except time. And I think if I were paying 
something to go on to 7, in other words, a user charge, just 
like I was on the Greenway, it would make that balance work 
better, just like it makes the balance work better with 
transit.
    Ms. Miller. Well, Mr. Chairman, I am not the best conferee 
on behalf of AASHTO or our States to talk about--our State DOT 
doesn't own any of the big transit agencies. In our State, they 
are owned locally. But it has seemed to me also over the years 
that there are different approaches used by the Federal Transit 
Administration, Federal Highway Administration. I would concur 
with your basic premise that we need to have some parity, 
really, I think as we move forward into the future; and as we 
talk about issues to reform, I think that is one that should be 
on the table.
    Mr. Duvall. How are you doing, Congressman? Good to see you 
again.
    I definitely agree that there is--it is basically a 
creature of the fact that you have got a discretionary program 
on the transit side and formula programs on the highway side. I 
think what you need to do is start adding some discretion at 
the Federal level on the highway side, create parity in terms 
of analysis.
    You are 100 percent correct that it is extremely difficult 
to make discretionary decisions in the Federal Government. And 
I spent 7 years and--I mean, it was a huge frustration for us 
trying to get decisions through this morass.
    So I think to the extent that Congress is going to be 
creating discretionary programs, they should really be looking 
at the processes that are required to produce decisions out of 
those programs, because you will undermine the efficacy of 
these programs to the extent you don't look at process 
requirements. And you are right. These process requirements are 
layered on top of State and metropolitan planning process 
requirements, which are also pretty severe.
    So the short answer to your question is, you are correct. 
There needs to be some serious reevaluation of the process 
requirements for all discretionary programs.
    Secondly, on the question of tolls or privatization, I 
agree with you that it is not a panacea to everything. But, to 
Rob's point, at the end of the day, the real question is, are 
the users of the Greenway paying approximately what it costs to 
be using the Greenway? The one thing the Greenway doesn't do is 
do more peak charging. You could have rush hour charges that 
are--they have some of it, but it is pretty weak. You could 
have free off-peak charges, that kind of stuff.
    The reality is we haven't even scratched the surface for 
the level of discretion people have to shift trip times an hour 
or two hours. If we had a more dynamic system, my sense is, 
based on the travel data we have observed, that you will see 
people shift trip times by an hour and a half and save 
potentially 30 or 40 cents a mile to do so.
    We just--employers would respond to that as well. Employers 
today I think are--obviously, particularly in Tyson's and other 
places, people are flooding these major hubs during rush hour 
precisely because there is not a real price incentive to 
operate more officially and to telecommute and to use other 
modes.
    Mr. Connolly. Thank you.
    Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Schrader.
    Mr. Schrader. Not to belabor the hearing, I appreciate 
everyone's patience, for goodness sakes.
    A couple, I think, quick questions, one for Mr. Atkinson.
    Did the Commission talk about or develop a 20-year time 
horizon to go from the fossil-fuel-based transportation system 
we now have to the vehicle miles traveled or weight mile or 
pick your alternative? Did they talk about how one--because 
businesses, obviously, like some sort of predictability; and I 
think consumers would enjoy that, too. Was there any discussion 
about how you would transition?
    Mr. Atkinson. There was. What we had proposed was 
essentially a process whereby this reauthorization would put in 
place a number of studies, pilot programs, projects that would 
help us get farther down the road in terms of things like a 
free pilot program dealing with issues of privacy, dealing with 
issues of how you would deal with people who don't have bank 
accounts and dealing with securities, how all that would work, 
with the idea that the next reauthorization, if everything is 
positive, then the decision to go forward could go forward.
    The idea then would be that there would be some sort of in-
vehicle requirement, that cars coming off the assembly line in 
some year, say, 2017--2017, let us say, would have this on-
board unit. At some point shortly after that, there would be a 
decision that would say those cars with the onboard unit would 
be paying this VMT fee; cars without it wouldn't.
    And then what would happen, in our view, is that over about 
a 10-year period you transition in the fleet. So, by 2030, you 
would then have cars that still--that are older would have to 
have an aftermarket installation; and then at some point every 
car would pay this VMT.
    Mr. Schrader. I guess what I was looking at is more of an 
economic analysis, like the gas tax or the diesel tax we phased 
out at this rate over this period of time as we got to 10 
years. And then as the--assuming technology----
    Mr. Atkinson. Yes. In our view, you really would not pay--
no one would be paying both of those. So there would be--cars 
would only pay one or the other. And eventually at some point 
you would turn the switch and eliminate the gas tax or call it 
a carbon tax and do something else with it, but it wouldn't be 
used to fund the roads directly.
    A key point is the issue of transparency and 
predictability. We do think you have to have a system that lets 
people know what they are going to have to be paying.
    Mr. Schrader. Last comment. I guess I am a bit of the 
dinosaur generation.
    The privacy issues are still a big deal; and until the new 
generation takes over, where I don't think they have quite the 
concerns that my generation does, I think you are going to be 
up against it when you come to the VMT system. Any 
consideration of doing just a cruder, less costly, simpler 
system using just a weight-mile-based system, at least for the 
business community, and then with the passenger community doing 
something based on type of car to induce smart technologies and 
that sort of thing?
    Mr. Atkinson. If the only concern is that you want to 
somehow pick up vehicles that use very little gas or no gas, 
plug-in hybrids or electrics, then a kind of odometer charging 
would be an okay way to do it. You would just--when you 
register your car every year, you pay on that basis.
    I don't think, though, that ultimately that is the system 
that would give us the most performance. What we want to 
ideally have is a system that would be able to allow congestion 
charging or for trucks, for example, something that is more 
realtime related to weight and the type of road. So in 
trucking--in freight, for example, you could design a system 
that if you are on a road that is not engineered for a heavy 
vehicle you are going to pay more than if you are on a road 
that is engineered for that heavy vehicle. It would be hard to 
do that, practically impossible with just an odometer tax.
    Ms. Miller. There were just a couple of things that I 
wanted to add to the discussion.
    One is that I sat on a committee of the Transportation 
Research Board that looked at the question of the long-term 
viability, the motor fuels tax a number of years ago and 
concluded that, in fact, it isn't sustainable and at that time 
said probably within 15 years we would need to transition. Many 
of the other reports have picked that up, and I would just like 
to point out that the report was actually released 3 years ago. 
So we continue to talk about this 15-year window to transition, 
but I am not sure it is that long.
    Plus, while I can't predict, it just feels like, with all 
of the things that have been happening, that technology might 
start moving more rapidly. So I think if we are going to 
transition in this direction, we need to start getting serious 
about figuring out all of the steps. Because I think a lot of 
those issues are out there.
    And the final thing I would say is I am currently sitting 
on a policy committee for the National Research Council that is 
looking at putting together a research agenda, if you will. And 
certainly the Commission's report had a lot of those elements, 
but a much more step by step by step as a country if we were 
serious here would be a recommendation of a funded program that 
could be put into authorization to help us move in the 
direction of the VMT tax.
    Mr. Schrader. Thank you very much.
    Chairman Spratt. Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair.
    I have two questions, but I am going to make some brief 
comments. Part of that--that is Martin Sable up there from 
Minneapolis, and I am from St. Paul. So part of what I am 
concerned about is we are talking a lot about raising revenue 
for doing new construction. And we have the I-35 W Bridge which 
connected our cities. That fell down, and people lost their 
lives. We also know we have, in Minnesota, many other bridges, 
some as large and significant as the I-35 W bridge that crosses 
the Mississippi River, one of them in my district.
    It has now--in part because of that bridge collapsing--has 
moved up in scale for Minn DOT for replacement. There is more 
urgency for this. But without more revenues, both at a State 
level and a local level, we will continue to fall behind in 
doing what we know we need to do for health and safety. So at 
some point if there is time, if someone wants to chime in and 
respond to my comment on that, I would be interested.
    The question of legislative directives or earmarks, I will 
give you an example of a highway, one. All politics is local. I 
started at the city level, the State local, and the Federal 
level in finishing off a project. County road becomes a major 
highway, divides a city that is three square miles with the 
lake, the churches, the schools on one side, the business 
district on the other.
    For over close to--getting close to 70 years, ``We will fix 
it, we will give you an overpass, we will give you a State 
crossing.'' In the meantime, we have kids crossing the highway 
at dusk, no light, in the morning, in the ice, in the dark, 
four lanes of highway to go to high school. Takes 60 years to 
do it. I am very proud, both as a City Council Member, the 
State legislature, and then here in the Congress, I pushed for 
a legislative directive earmark so the kids aren't standing out 
in the cold in the dark crossing the street. And now it has 
even become a model project for the way it is being built from 
Minn DOT.
    I would like to touch on rail and transit for my original 
questions on this. The longer you sit here, the more questions 
you have.
    We have an option for fighting congestion in our cities, 
and that is going to be investments in transit and intercity 
rail. Heavy highway RAIF bills and commuter trains are an 
important part of our 21st century system. In many cases, these 
passenger trains will share corridors that are owned by private 
freight railroad. And some of the upgrades to do this, both the 
Federal and State governments will be making, will have a 
benefit, I believe, for the passenger rail but it also is going 
to benefit the freight rails.
    So have you talked about any possible savings and 
efficiencies that might be gained by partnering with private 
railroads in these or corridor investments?
    And then to touch a little bit about what was said about 
our transportation and transit starts.
    Eight years we dealt with the new-start process in St. 
Paul, Minneapolis, and I think we paid for a lot of 
consultants. I think we paid for a lot of bureaucrats, and in 
my opinion, we are not building the best system because of the 
analysis that was in there.
    So what advice for those of you who have worked on this 
could you maybe give us as we do our reauthorization. And as 
the Obama administration looks forward, how we should be doing 
new starts? In other words, so we don't just build something 
that isn't the smart, I like the fact that it was New Start, 
but we didn't build the smartest system available.
    So if you could comment on rail, both heavy and light, and 
maybe some of your thoughts about not having kept up with 
inflation with our repair needs.
    Ms. Miller. I am sorry to say again I think in some cases, 
I don't think I am the best person to address some of the rail 
issues or the New Start issues because I haven't been as 
involved in them in our State.
    In a couple of things in terms of rail, I think it is true 
and we do need to have a clear understanding we are talking 
about passenger rail service. We are generally doing that on 
freight rail lines, and that has a lot of consequences both in 
terms of the quality of service you can provide passengers but 
also what sort of upgrades we may need to the system in terms 
of siding so that we can have both surfaces continuing to move. 
And as you look at the projections for freight, for commercial 
freight rail system is going to be stressed as well.
    And somehow or another, just those considerations need to 
be brought to the table, whether or not that is a viable way to 
build a passenger rail system utilizing the freight rail 
network, and if so, how you divide up those costs.
    I think that is a legitimate one for consideration. It is 
certainly one I have a lot of concern about, and I have a lot 
of concern when I look at our State about the issue of freight 
rail movements generally because of what it does to communities 
and to traffic because of lack of rail grade separations. I 
think there are a lot of rail issues we will be dealing with in 
the next 20-30 years in our country.
    The New Start program, I am afraid I can't address very 
well, but even on certainly on the highway side, you know, the 
average length of time it takes to get a project from 
conception to being under construction is far too long. One of 
the things AASHTO looked at is called project delivery, and our 
goal has become to come up with a project delivery mechanism so 
we can deliver better projects in half the time. And I think 
that is going to require both some loosening and changing of 
the Federal regulations, and quite frankly, it is going to 
require some changes just in terms of the way we do business 
that we have under our control.
    One of the other issues, I think, that gets complicated in 
terms of the time frames, this certainly is a frustration for 
States' DOTs. I think everybody has their own frustrations, but 
we are very focused on delivering the project. But we have to 
get a sign-off from both State, local, and Federal 
institutions' resource agencies. And they don't always have the 
same goal that we do.
    So being able to get all of those sign-offs at the same 
time is a difficulty, and I think creating some greater 
priority around participating in that process in a timely way 
would be very helpful.
    But I don't know enough about the New Start program to know 
if that is a factor in those projects.
    Mr. Duvall. I will start with the back on New Starts. I do 
know a little about that.
    I will say, as Congressman Connolly indicated, there is a 
lot of frustration from project sponsors. I would be a little 
careful about critiquing the quality of the work. I mean, the 
FTA career staff who work on this program are extremely good, 
recognized around the world as some of the best modelers and 
analysts with respect to transit investment. Obviously, they 
are working in processes that can themselves get politicized 
and layers and layers of approval.
    Again, I don't have a specific experience with your--maybe 
I do--with your project. But the reality is it is a program 
that needs improvement. We need to look at the process time 
frames. But in terms of the quality of the analysis that is 
being done by these people, it is kind of State of the art, in 
my understanding, around the world. So they should always 
improve it.
    On the rail side, I agree with you that private freight 
rail system in the U.S. is going to undergo some fairly 
substantial changes in the future. You have a lot of shippers 
that are concerned about pricing. At the same time, though, you 
have got a lot of railroads that have huge capital needs that 
they have got to reinvest in their own networks.
    You are going to have to form public-private partnerships 
with these railroads to expand these lines. They own the right 
of way, they own the track, and you are going to need to sit 
down with them and explain these public investments. They will 
partner with you if there are opportunities to do so, though, 
obviously, they will be threatened if it appears you are coming 
in to try to mess around with the efficiencies of their 
network. So it requires a balance, but my sense is they are 
ready to talk. They are certainly willing to co-invest in some 
of these corridors that make sense.
    Let me conclude on I-35. Obviously a horrific, terrible 
story.
    Preservation and maintenance costs in the United States are 
rising, and we have got an expert here to my right. There is no 
question as to percentage total of cost that is going to be 
higher and higher in the future given the age of the system. So 
we need a dedicated commitment to restore the state of good 
repair on existing facilities. That said, bridge quality in the 
U.S. is actually a bit meaningfully better than it was 10 years 
ago. I think the percentage of structurally deficient bridges 
has fallen from 19 percent nationwide to about 12 percent 
today. That is still not great. But it is certainly getting 
better nationwide, but we need to continue to focus on that and 
ensure that the preservation and maintenance costs are covered.
    Chairman Spratt. Mr. Berry.
    Mr. Berry. Thank you, Mr. Chairman.
    I thank all of you for taking your time to appear before 
the committee.
    It seems to me we don't have any problems money won't 
solve. That is a good thing. And I certainly agree with your 
comments about setting priorities and getting focused on a few 
projects and finishing them before we start more. That just 
makes a whole lot of sense. We tried to follow that in our 
office as we do this. But I appreciate all of the other ideas 
that you have brought to us today, and hopefully we are going 
to be able to look at some of those and be able to come up with 
a way to get this job done.
    Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Garrett.
    Mr. Garrett. Good afternoon. I appreciate the chairman for 
having this meeting.
    First of all, I acknowledge, as I am sure my colleagues all 
have, the extraordinary importance that our Nation's 
infrastructure plays in this country and our economy in going 
forward and must be addressed.
    And most, I presume, are the folks who spoke before me who 
have probably advocated for more in additional spending as the 
solution to the problems that face us.
    But I think you have to dig in the weeds a little bit more 
and say, Well, reform is probably needed, maybe the reform is 
actually how we spend the money instead of just saying more 
money thrown into the pot, for a couple of reasons.
    One is that the distribution of highway funds has 
increasingly become politicized over the years. Some folks 
talked about the earmark situation. But just the overall nature 
of how the funds are distributed is politicization at its best.
    And secondly, I think it is true that with additional 
funding simply coming from Washington, the facts show that it 
has not increased the mobility and has not necessarily improved 
the condition of our infrastructure. I cite for that a 2005 
support American Society of Civil Engineers issued a national 
infrastructure report card and roads received a D, stating that 
poor road conditions cost motorists $54 billion in repairs and 
$275 per motorist and so on.
    They had recently released an update to that report in 
2009, and now we have moved from D to D-minus. So throwing the 
money at it through Washington in the mechanism that we are 
doing right now may not be the way to do it.
    Let me throw this out to you. Instead of having the 
decision making made here primarily from Washington, should not 
the decision making actually be made by the folks back at home 
who are actually using the roads and know what is best for 
them? I have cited, for year in and year out, when we have 
these meetings, examples of when I talk to my local county road 
department engineers and what have you, Their preferences on 
how to spend funds and what projects they would like to do and 
how they would like to spend it.
    But they would tell us, you know, Scott, we would like to 
fix this road over here or repair this bridge over here. We are 
restrained in certain ways, shapes, and forms through 
Washington that we have to build it with so much of an edging 
with a guard rail over here and a ``this'' on over here, they 
are restricted.
    So to that end, I have drawn legislation over the years and 
I think the last DOT Commissioner suggested there may be some 
merit to this to allow states to simply opt out of the Federal 
transportation system and allow the States to keep their own 
money in their own respective States and not send it to 
Washington so that they actually keep that 18 some-odd cents 
transportation dollar and make the decisions at home.
    What is wrong with allowing those decisions to be made 
locally and without the encumbrances of Washington so long as 
we can address the issue of interconnectivity and the like.
    Ms. Miller. I will start with that, Congressman.
    One, to begin with, the premise that AFCE first has shown a 
D and then a D-minus, I don't think you can get around the fact 
that we have simply been underinvesting. And even smart 
processes in a grossly underinvested world is going to give you 
deteriorated systems. Everybody can throw out all sorts of 
statistics in terms of the huge growth we have had in vehicle 
miles traveled as contrasted to the increases in the size of 
the system.
    But I think there is no question that while reform is 
necessary, and I think, you know, for one, as our country 
grows, as technology changes, as our needs change, we always 
need to be modernizing and updating and improving our 
processes. And I am not sure we have kept pace with that.
    So I certainly don't disagree with the notion of reform. 
But I would say that to say all we need to do is reform is 
inaccurate. It is an investment problem, and we do need 
investment resources.
    I am not from a State that would advocate just turning the 
Federal program back to State DOTs.
    A couple of things I would say about that is one, with very 
few exceptions, our State is making the decisions about where 
we invest our transportation dollars. We use very collaborative 
processes, and I think--not that you could not find critics, 
because there always are--I think you would find a high level 
of satisfaction, generally speaking in terms of the processes 
we use, in terms of my state.
    Mr. Garrett. So in your State, you find out that your folks 
back at home aren't smart enough to do this by themselves; they 
need Washington to do this?
    Ms. Miller. I don't feel we are being directed 
inappropriately by Washington. Generally speaking, the State 
dollars that flow, particularly on the highway side, the 
terminology that has been used is a federally assisted State 
selected system of projects, and that is generally what we have 
found. I don't feel that we have been mandated to select 
projects that do not make sense for our State. I have seen very 
little evidence of that.
    And the final thing I would say, and in some ways this is 
my own philosophy or conclusion working in this area, I think 
there is a huge national interest in a transportation system 
that matters to our country and our economy. And while I am and 
have spent most of my working career working at the State level 
and would staunchly defend our credibility and our capability, 
I don't think managing a national need for transportation 
through 50 State DOTs gives you the system that you need to 
serve our national needs.
    And I think increasingly, we see freight issues and we sea 
port issues that are having a major impact on our ability to 
have an efficient transportation system, and those issues are 
not going to be solved if you simply flow the program through 
State DOTs.
    So I don't philosophically believe that we are going to get 
the right answers for our Nation if what we do is simply turn 
the Federal program back.
    Mr. Atkinson. This, as you may know, was a question that we 
were required by our authorizing legislation to address and we 
did in the report. And there is an appendix in the report that 
looks at that question.
    We did agree as a commission that we didn't think an opt-
out approach right now was the best way to go. We didn't agree 
actually on what the right Federal role was. We agreed on that, 
but we didn't have full agreement on the right Federal role.
    But one of the areas I do think, though, I guess our 
concern with that would be really two-fold. One was the issue 
around connectivity and national needs, and the second was the 
ability to raise sufficient funds if States are acting only on 
their own.
    The needs are so great right now. We are investing about a 
third of what we really need to invest.
    Having said that, I do think that your point is right on 
the mark which is about giving States the flexibility to do 
what they need to do. The reason States don't have the 
flexibility to do what they can do is because there is no 
accountability. So we have, instead, substituted a system of 
bureaucratic regulation for accountability. And if we move to a 
system that was more based on accountability, one would argue 
that you could move away from some of the restrictions and give 
States more choice.
    Mr. Duvall. Rob's comments are, I think, right on. You have 
a program today that is national in scope but certainly they 
are not national programs. There is the New Starts program, 
which is a national discretionary transit program. On the 
highway side, there was a project of national regional 
significance program that was entirely earmarked.
    So there isn't any discretion at the Federal level to do 
much of anything other than the TIFIA program or the New Starts 
program from an investment standpoint. There is a lot of 
discretion over processes, but those have become somewhat 
rigid. So we are not achieving the right outcomes particularly 
related to the process requirements that we are imposing.
    I think if you had a system of national programs that were 
trying to achieve clearly-defined national objections, the 
program could work. But that is what precisely what we don't 
have today.
    Chairman Spratt. Thank you, Mr. Garrett.
    Anything further?
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    My questions center on two areas, and I apologize for not 
being here earlier. I read the testimony. I was at a defense 
hearing so I am coming here second this morning.
    My concerns involve tolls, and then the other area I wanted 
to discuss this morning a little bit was high speed rail.
    In the area of tolls, I know that particularly, Mr. Duvall, 
I think you have been considering efforts to increase private 
investments and State and local use of tolling. And as you do 
that, do you see a decreased role for the Federal Government in 
transportation funding?
    And I wanted to just share an experience in Ohio with you 
on the tolling issue because what I really see as a shifting in 
the tax burden. I haven't really seen a savings on to the 
public in all of this. And there is an increased cost to users 
on toll roads. I happen to represent the longest segment of the 
Ohio Turnpike. And in the 50 years of its existence, it hasn't 
gotten a dime of Federal money even though it is I-80/90.
    And when I was first elected, I began to look at where do 
all of those Federal gas tax dollars in Ohio go. And boy, did I 
find them. They went into freeways--underline ``free''--to the 
public on I-30, on I-70, going through Columbus so through 
Finley to wall-to-wall Indiana to Pennsylvania all the way down 
our State. And I am looking at our area saying, Oh, this is 
interesting.
    So we have got a double tourniquet. We are taxed on the 
Federal gas tax, the money goes to Washington, and then we are 
tolled on this Ohio Turnpike. So our people are really doubly 
taxed, but they don't get the benefit. The benefit goes to 
other places in the State that don't have toll roads that use 
all of this Federal money. And we have never gotten a dime.
    My argument is they ought to make it free and we ought to 
get our money back up north, the area of the State with the 
highest utility rates and the highest level of unemployment 
right now. It's just very interesting to me.
    So toll roads don't always work in the way you think in 
benefits. It benefits certain individuals, but it doesn't 
really benefit the region, in my opinion.
    So I wanted you to comment on that, Mr. Duvall and Ms. 
Miller.
    Mr. Duvall. There is no question when you kind of pursue 
isolated toll lanes that it can create some distortions and 
inequities. That said, I mean, it is a compared-to-what 
question. You have got a road that has a stable revenue stream 
in that facility. You can recapitalize the asset if you need 
to. I assume the revenues are not going off to education and 
other purposes on the Ohio turnpike?
    Ms. Kaptur. They tried.
    Mr. Duvall. Well, beat them back.
    That is precisely what is being talked about which is a 
creation of a self-financing mechanism so that every 6 years 
you are not trying to--you, as you said, the Ohio Turnpike may 
not be benefiting from Federal grants, but it is certainly 
benefiting from the facts that it has got more than one stable 
cash flow in the United States. So they can maintain it, they 
can preserve it, and they can upgrade it.
    Now, as you said, as a policy matter, it is better to have 
a broadbased tolling strategy if you are going to do tolling 
because you can reduce some of the unfairness and distortions 
and incentives to use other facilities that are untolled.
    But all in all, I think it is better to have toll 
facilities and turnpikes that are continuing to generate 
revenues. They preserve your options, your policy flexibility. 
I know a number of States have talked about taking tolls off. I 
think as a policy matter, that would probably be a long-term 
mistake.
    Ms. Kaptur. The thing is if you encourage the growth of 
other regions, which is what is happening with Federal highway 
dollars because you offer them free roads, unimpeded travel, 
then this part of the State that I represent, which has been so 
economically challenged is really disadvantaged in the flow of 
Federal dollars.
    So it depends on how broad your--how you define the 
economic area. And I wanted to place that on the table.
    I have very little time left, and I wanted to ask Ms. 
Miller in the area of high speed rail. Again, northern Ohio, 
Cleveland to Chicago corridor, Chicago to St. Louis corridor. 
What are some of your thoughts of how we finance and maintain a 
high speed rail system.
    Ms. Miller. I wish I had some good quality thoughts on 
that. We talked briefly and earlier this morning about the 
notion of a national high speed rail network and AASHTO, in its 
recommendations for authorization, recommended that there be a 
national high speed rail program at roughly $35 billion over a 
6 years period of time but that the funding come from outside 
the Highway Trust Fund.
    Certainly, we have got a long list of possible revenue 
approaches to consider, but how that program would be funded 
is, I think, an open question. I think that there is a great 
deal of public interest and appetite for moving to a high speed 
network. But I don't think the funding mechanisms are as clear.
    Ms. Kaptur. Thank you.
    Mr. Atkinson, did you have a comment on that?
    Mr. Atkinson. I just had one on with your concern to the 
toll road in Ohio.
    I think part of your concern is that the users there are 
paying twice and the users of a free road are only paying once. 
And I think in some ways that is one of the reasons why the 
Commission unanimously supported moving to a VMT, because if 
there was a VMT that you people were paying to drive on a road, 
then everybody would pay the same essentially the same rate, if 
you will. So people driving on the free road would also be 
paying, people driving on your road wouldn't be paying the gas 
tax anymore; and it would make these systems much more 
equitable than what we have today where some people are twice 
and some people are only paying once.
    Ms. Kaptur. Would that be hard to administer?
    Mr. Atkinson. It would certainly be a little more difficult 
to administer than what we have today, but we think it 
certainly could be easily administered. That is one of the 
things we need to be focusing on in this reauthorization. The 
Dutch are doing this, the Danes are doing this. You would 
administer this very effectively.
    Chairman Spratt. Just to wrap up.
    Most of the questions I had have been asked by others and 
answered. I go back several years when it appeared that we had 
excess reserves in our Highway Trust Fund, and those who are 
the advocates for more highways, more infrastructure insisted 
that these are user fees that weren't being used, and that was 
a breach of faith with the citizens who had paid that amount of 
money. So we came up with a compromise that largely washed out 
the reserves and left us this year where we are about to be 
short of money.
    Do you think in calculating what we need to fund this 
program, which is substantial and substantially more than we 
provided in the budgets at hand, do you think we need to also 
build in a significant reserve fund in case we have cyclical 
developments in the economy that wipe out the reserve fund from 
time to time?
    Mr. Atkinson. I think the issue of reserve funds and the 
trustworthiness of the Highway Trust Fund are what happens to 
those reserve funds are they siphoned off, and what happens to 
the interest and what--the position we have taken is that 
interest should be stayed within the Highway Trust Fund. If 
that is the case, then building up reserves to me is not a 
problem and frankly is a good thing to do to give you a cushion 
when there are problematic times.
    Ms. Miller. I was going to say I, too, remember, as I used 
to say, our rallying cry was let us spend down the balances. 
That has happened and that happened in spades. So I think 
indisputably if you are going to have a trust fund, you do have 
to have some level of balance because there is always going to 
be some cyclical nature to it. While there was a period of time 
where the balances were much too high and weren't defensible, 
now we are in a situation where there are not adequate 
balances.
    Mr. Duvall. I think for planning purposes, what we have 
discovered in the last few years you can get yourself into 
trouble pretty quickly. Demand changes have pretty big impacts.
    The other thing is some of the taxes in the fund are pretty 
volatile taxes, particularly the heavy truck sales tax which 
swings literally $2 to $3 billion every 5 years. I think some 
of the components are excessively volatile for what you are 
trying to achieve.
    Chairman Spratt. At that point in time there was also a 
popular prescription, and that is, let us get out of this 
business. Let us remit most of these taxes, if not all, back to 
the States and decide how they should be used State to State.
    As I heard what you are all saying in one form or another, 
the Federal Government has to be a participant in this process 
and a lead participant because of the magnitude of the 
requirement and the significance of the shortfall. Without the 
Federal Government, we will simply guarantee that there are not 
enough resources to get the basically required infrastructure 
built, renewed and maintained.
    Am I reading it wrong or right?
    Mr. Atkinson. No. I think that is the one of the major 
conclusions of our commissioned report with the caveat being 
that as other members have said today and other speakers have 
said, that reform is an important point.
    Mr. Garrett. I have seen the report, and I felt the 
addendum was short on addressing what we are looking for in 
there.
    If that is the case, that is presupposed that somehow or 
another the Federal Government is able to produce this source 
of income, whereas the States can't. At the end of the day, it 
all comes from the motoring public out of a gasoline tax or a 
VMT tax. It all comes from the respective States. It is not--
well we do have a Fed that prints money now, but prior to that 
date it comes from the States.
    So it is the same pot of money. It is who is going to be 
the one to shift it around. And I guess I go to Ms. Kaptur's 
comments. In her State, she is not able to shift it around 
quite the way she and her constituency would like to see it 
shifted around. And they are more than willing to pay for it in 
their own States. So it is not--we are not making money down 
here. We are taking it and shifting it around.
    So why is that any better?
    Mr. Atkinson. I think just a couple of factors on that.
    One is there is some reluctance of States to raise fuel 
taxes producing smaller States where there is cross-border 
issues where people feel like if their tax is too high, the 
residents will go across State lines to get cheaper gas. And so 
that does limit, to some extent, the States relying on their 
own.
    However, if we move to a VMT fee, you don't pay based upon 
where you bought your petroleum. You pay on where you are using 
the system. A VMT would reduce that distortion. And maybe that 
is something that needs to be looked at farther down the line.
    Chairman Spratt. Thank you once again for your testimony, 
for your excellent answers and forthright answers.
    I would ask as a housekeeping matter that unanimous consent 
be given so that all members can submit an opening statement 
and, in addition, any questions for the witnesses which they 
were not able to ask today.
    Thank you again for your testimony.
    [Questions for the record and their responses follow:]

           Questions for the Record Submitted by Mr. Aderholt

                         DR. ATKINSON TESTIMONY

    The Commission's report maintains it is critical to move to a 
vehicle-miles-traveled [VMT] tax to sustain the Highway Trust Fund in 
the long term. I represent a district with little or no public 
transportation. The vast majority of my constituents commute in their 
vehicles, some over long distances. With a VMT tax, would low-income 
groups be subsidized? If so, what was the Commission's definition of 
``low income'' for determining who should pay?
    Given the current economic environment, can you tell me what would 
be the impact on the economy, climbing out of a recession, of an 
immediate 10-cents-per-gallon increase in the gasoline tax and a 15-
cents-per-gallon increase on diesel fuel.

                       SECRETARY MILLER TESTIMONY

    Has AASHTO (American Association of State Highway Transportation 
Officials) examined how much Federal mandates such as Davis-Bacon and 
Buy America requirements increase the cost of Federal-aid or transit 
projects, as well as the impact of similar State and local 
requirements?
    Do you support increasing the Federal gasoline tax, and if so, why?

                          MR. DUVALL TESTIMONY

    GAO has concluded that the current Federal surface transportation 
spending has a very large substitution effect (states/localities 
substitute Federal spending for their own such that overall aggregate 
infrastructure spending does not increase). Before we spend more or 
raise the gas tax, how would you address this?
    Given that States and localities choose, plan, design, construct, 
and maintain most surface transportation projects and finance some or 
all of their transportation spending with a state gasoline tax, what is 
the essential Federal role and mission?

        Responses to Mr. Aderholt's Questions From Mr. Atkinson

    1. The Commission's report maintains it is critical to move to a 
vehicle-miles-traveled [VMT] tax to sustain the Highway Trust Fund in 
the long term. I represent a district with little or no public 
transportation. The vast majority of my constituents commute in their 
vehicles, some over long distances. With a VMT tax, would low-income 
groups be subsidized? If so, what was the Commission's definition of 
``low income'' for determining who should pay?

    While it is not exactly clear, it is likely that moving to a VMT 
user fee would have no differential impact on rural drivers relative to 
what they currently pay under the fuel taxes, assuming that they two 
are overall revenue neutral. The reason is that drivers now essentially 
pay by the mile, its just that the tax is applied to the burning of 
fuel. So if a rural driver has a car that gets 20 mpg and they drive 40 
miles round trip to work each day, he will pay 36.8 cents per day in 
federal fuel taxes. If they pay a VMT fee of 0.92 cents per mile they 
will also pay 36.8 cents in fuel taxes. If an urban driver drives 10 
miles a day to and from work in a car that gets 20 mpg, he will pay 9.2 
cents in gas taxes and 9.2 cents in VMT. One issue that could lead to 
differences between urban and rural users with a VMT concerns fuel 
efficiency. If rural users (and low income users) drive less fuel 
efficient cars (e.g., older cars) than urban drivers, then a revenue 
neutral shift to a VMT would actually lead them to pay less than they 
would under a gas tax. To answer your specific question, the Commission 
did not define ``low income.''

    2. Given the current economic environment, can you tell me what 
would be the impact on the economy, climbing out of a recession, of an 
immediate 10-cents-per-gallon increase in the gasoline tax and a 15-
cents-per-gallon increase on diesel fuel?

    The answer depends on whether the revenues are invested back into 
the economy and when. If the monies were collected without an increase 
in spending then their would be a contractionary effect on the economy. 
In contrast, if all the revenues raised were immediately invested back 
into the surface transportation system then their would be neither a 
stimulative nor a contractionary effect on the economy. If the there 
was a delay between when the tax revenues are collected and when they 
are expended then there would be a modest contractionary effect during 
this one-time initial phase-in period. However, if policy makers and 
the federal and state DOTs are aware of the tax increase and the likely 
increase in revenues they could plan for this in their expenditure 
plans.

    [Whereupon, at 12:34 p.m., the committee was adjourned.]

                                  
