Surface Transportation: Preliminary Observations on Efforts to
Restructure Current Program (06-FEB-08, GAO-08-478T).
The nation has reached a critical juncture with its current
surface transportation policies and programs. Demand has outpaced
the capacity of the system, resulting in increased congestion. In
addition, without significant changes in funding mechanisms,
revenue sources, or planned spending, the Highway Trust Fund--the
major source of federal highway and transit funding--is projected
to incur significant deficits in the years ahead. Furthermore,
the nation is on a fiscally unsustainable path. Recognizing many
of these challenges and the importance of the transportation
system to the nation, Congress established The National Surface
Transportation Policy and Revenue Study Commission (Commission)
to examine current and future needs of the system and recommend
needed changes to the surface transportation program, among other
things. The Commission issued its report in January 2008. This
testimony discusses 1) principles to assess proposals for
restructuring the surface transportation program and 2) GAO's
preliminary observations on the Commission's recommendations.
This statement is based on GAO's ongoing work for the Ranking
Member of this Committee, the Chairman of the House
Transportation and Infrastructure Committee, Senator DeMint, as
well as a body of work GAO has completed over the past several
years for Congress.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-478T
ACCNO: A80552
TITLE: Surface Transportation: Preliminary Observations on
Efforts to Restructure Current Program
DATE: 02/06/2008
SUBJECT: Accountability
Federal funds
Funds management
Policy evaluation
Program evaluation
Road surfaces
Transportation costs
Transportation legislation
Transportation planning
Transportation policies
Trust funds
Program goals or objectives
Program implementation
GAO High Risk Series
Highway Trust Fund
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GAO-08-478T
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United States Government Accountability Office:
GAO:
Testimony:
Before the Committee on Environment and Public Works, U.S. Senate:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Wednesday, February 6, 2008:
Surface Transportation:
Preliminary Observations on Efforts to Restructure Current Program:
Statement of JayEtta Z. Hecker:
Director, Physical Infrastructure Issues:
GAO-08-478T:
GAO Highlights:
Highlights of GAO-08-478T, a testimony before the Committee on
Environment and Public Works, U.S. Senate.
Why GAO Did This Study:
The nation has reached a critical juncture with its current surface
transportation policies and programs. Demand has outpaced the capacity
of the system, resulting in increased congestion. In addition, without
significant changes in funding mechanisms, revenue sources, or planned
spending, the Highway Trust Fund�the major source of federal highway
and transit funding� is projected to incur significant deficits in the
years ahead. Furthermore, the nation is on a fiscally unsustainable
path. Recognizing many of these challenges and the importance of the
transportation system to the nation, Congress established The National
Surface Transportation Policy and Revenue Study Commission (Commission)
to examine current and future needs of the system and recommend needed
changes to the surface transportation program, among other things. The
Commission issued its report in January 2008.
This testimony discusses 1) principles to assess proposals for
restructuring the surface transportation program and 2) GAO�s
preliminary observations on the Commission�s recommendations. This
statement is based on GAO�s ongoing work for the Ranking Member of this
Committee, the Chairman of the House Transportation and Infrastructure
Committee, Senator DeMint, as well as a body of work GAO has completed
over the past several years for Congress.
What GAO Found:
GAO has called for a fundamental reexamination of the nation�s surface
transportation program because, among other things, the current goals
are unclear, the funding outlook for the program is uncertain, and the
efficiency of the system is declining. A sound basis for reexamination
can productively begin with identification of and debate on underlying
principles. Through prior analyses of existing programs, GAO identified
a number of principles that could help drive an assessment of proposals
for restructuring the federal surface transportation program. These
principles include (1) defining the federal role based on identified
areas of national interest, (2) incorporating performance and
accountability for results into funding decisions, and (3) ensuring
fiscal sustainability and employing the best tools and approaches to
improve results and return on investment. GAO developed these
principles based on prior analyses of existing surface transportation
programs as well as a body of work that GAO developed for Congress,
including its High-Risk, Performance and Accountability, and 21st
Century Challenges reports. The principles do not prescribe a specific
approach to restructuring, but they do highlight key attributes that
will help ensure that a restructured surface transportation program
addresses current challenges.
Principles For Evaluating Restructuring Proposals:
* Define the federal role based on areas of national interest.
* Incorporate performance and accountability for results into funding
decisions.
* Ensure fiscal sustainability and employ the best tools and approaches
to improve results and return on investment.
Source: GAO.
In its report, the Commission makes a number of recommendations for
restructuring the federal surface transportation program. The
recommendations include significantly increasing the level of
investment by all levels of government in surface transportation,
consolidating and reorganizing the current programs, speeding project
delivery, and making the current program more performance- and outcome-
based and mode-neutral, among other things. GAO is currently analyzing
the Commission�s recommendations using the principles that GAO
developed for evaluating proposals for restructuring the surface
transportation program. Although this analysis is not complete, GAO�s
preliminary results indicate that some of the Commission�s
recommendations appear to be aligned with the principles, while others
may not be aligned. For example, although the Commission identifies
areas of national interest and recommends reorganizing the individual
surface transportation programs around these areas, it generally
recommends that the federal government pay for 80 percent of project
costs without considering whether this level of funding reflects the
national interest or should vary by program or project.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-478T]. For more information, contact
JayEtta Z. Hecker at (202) 512-2834 or [email protected].
[End of section]
Madam Chairman and Members of the Committee:
We appreciate the opportunity to present our preliminary observations
about the recent report of The National Surface Transportation Policy
and Revenue Study Commission (Commission).[Footnote 1] The Commission
was given a broad mandate that includes examining the current condition
and future needs of the surface transportation system, identifying
alternative revenue sources, and providing specific recommendations
regarding changes to the surface transportation program's design and
operations, federal policies, and legislation. The Commission's January
2008 report is the culmination of over 18 months of work to fulfill the
mandate set by Congress, and we applaud the Commission's efforts.
The Commission's report comes at a time when our nation has reached a
critical junction with the current surface transportation
program.[Footnote 2] For example, the Highway Trust Fund was created in
1956 to finance the construction of the interstate highway system. That
system is now complete. However, the federal highway program's
financing and delivery mechanisms have not substantially changed, and
the program's continued relevance in the 21st century is unclear. The
federal role in surface transportation has also grown over the years,
and the Highway Trust Fund now funds a variety of highway, transit, and
even some rail programs. In addition, without significant changes in
funding mechanisms, revenue sources, or planned spending, the Highway
Trust Fund is projected to incur significant deficits in the years
ahead. As a result, in 2007, we added financing the nation's
transportation system to GAO's High Risk List.[Footnote 3] Furthermore,
the growing demand has outpaced the capacity of the transportation
system over the past several decades. The result is apparent:
increasing number of hours spent inching along clogged roads and
highways, especially at rush hours and other times of peak demand. The
economic implications are significant, ranging from wasted fuel and
time as cars idle in traffic to increased costs for businesses as the
system grows more unreliable. In addition to burdening the economy,
congestion can harm the environment and health of the nation's
citizens.
Addressing these challenges is complicated by the breadth of the
nation's surface transportation network--encompassing highway, transit,
and rail systems and ports that are owned, funded, and operated by both
the public and the private sectors. Moreover, surface transportation
policy decisions are inextricably linked with aviation, economic,
environmental, and energy policy concerns. In addition, the federal
government's financial condition and fiscal outlook are worse than many
may understand.[Footnote 4] Specifically, the federal budget is on an
imprudent and unsustainable path--heightening concern about the
solvency of the Highway Trust Fund because other federal revenue
sources may not be available to help solve the nation's current
transportation challenges. Addressing these challenges requires
strategic and intermodal approaches, effective tools and programs, and
coordinated solutions involving all levels of the government and the
private sector. Yet in many cases, the government is still trying to do
business in ways that are based on conditions, priorities, and
approaches that were established decades ago and are not well suited to
addressing 21st century challenges. Consequently, we have called for a
fundamental reexamination of the nation's transportation policies and
programs.[Footnote 5]
My remarks today focus on (1) principles to assess proposals for
restructuring the surface transportation program and (2) our
preliminary observations on the Commission's recommendations. My
comments are based on our ongoing work for the Ranking Member of this
Committee, the Chairman of the House Transportation and Infrastructure
Committee, Senator DeMint, as well as a body of work that we have
completed over the past several years for Congress.[Footnote 6] We
conducted our work on the Commission's recommendations in January and
February 2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
In Summary:
We have called for a fundamental reexamination of the nation's surface
transportation program because, among other things, the current goals
are unclear, the funding outlook for the program is uncertain, and the
efficiency of the system is declining. A sound basis for reexamination
can productively begin with identification of and debate on underlying
principles. Through our prior analyses of existing programs, we
identified a number of principles that could help drive an assessment
of proposals for restructuring the federal surface transportation
program.[Footnote 7] These principles include (1) defining the federal
role based on identified areas of national interest, (2) incorporating
performance and accountability for results into funding decisions, and
(3) ensuring fiscal sustainability and employing the best tools and
approaches to improve results and return on investment. We have also
developed a series of illustrative questions that can be used to
determine the extent to which restructuring proposals are aligned with
each principle. We developed these principles and illustrative
questions based on prior analyses of existing surface transportation
programs as well as a body of work that we have developed for Congress,
including GAO's High-Risk, Performance and Accountability, and 21st
Century Challenges reports. The principles do not prescribe a specific
approach to restructuring, but they do provide key attributes that will
help ensure that a restructured surface transportation program
addresses current challenges.
The Commission's report makes a number of recommendations designed to
restructure the federal surface transportation program. The
recommendations include significantly increasing the level of
investment by all levels of government in surface transportation,
consolidating and reorganizing the current programs, speeding project
delivery, and making the current programs more performance-and outcome-
based and mode-neutral, among other things. We are currently analyzing
the Commission's recommendations using the principles that we have
developed for evaluating proposals to restructure the surface
transportation program. Although our analysis is not complete, our
preliminary analysis indicates that some of the Commission's
recommendations appear to align with the principles, while others may
not. For example:
* Although the Commission identifies areas of national interest and
recommends reorganizing the individual surface transportation programs
around these areas, it generally recommends that the federal government
pay for 80 percent of project costs without considering whether the
national interest varies by program or project.
* The Commission emphasizes the need to make the program more
performance-and outcome-based, but does not directly link overall
project funding to performance.
* Although the Commission encourages the use of alternative financing
tools, including tolling, congestion pricing, and public-private
partnerships, it also places a number of restrictions on these
mechanisms. It is unclear how these restrictions would affect the
proposed expansion and potential benefits of such tools.
Background:
Transportation programs, like other federal programs, need to be viewed
in the context of the nation's fiscal position. Long-term fiscal
simulations by GAO, the Congressional Budget Office, and others all
show that despite a 3-year decline in the federal government's unified
budget deficit, we still face large and growing structural deficits
driven by rising health care costs and demographic trends. As the baby
boom generation retires, entitlement programs will grow and require
increasing shares of federal spending. Absent significant changes to
tax and spending programs and policies, we face a future of
unsustainable deficits and debt that threaten to cripple our economy
and quality of life.[Footnote 8] This looming fiscal crisis requires a
fundamental reexamination of all government programs and commitments.
Although the long-term outlook is driven by rising health care costs,
all areas of government should be re-examined. This involves reviewing
government programs and commitments and testing their continued
relevance and relative priority for the 21st century. Such a
reexamination offers an opportunity to address emerging needs by
eliminating outdated or ineffective programs, more sharply defining the
federal role in relation to state and local roles, and modernizing
those programs and policies that remain relevant. We are currently
working with Congress to develop a variety of tools to help carry out a
reexamination of federal programs.[Footnote 9]
The nation's surface transportation programs are particularly ready for
reexamination. This would include asking whether existing program
constructs and financing mechanisms are relevant to the challenges of
the 21st century, and making tough choices in setting priorities and
linking resources to results. We have previously reported on the
following factors that highlight the need for transformation of the
nation's transportation policy.
* Future demand for transportation will strain the network. Projected
population growth, technological changes, and increased globalization
are expected to increase the strain on the nation's transportation
system. Congestion across modes is significant and projected to worsen.
* National transportation goals and priorities are difficult to
discern. Federal transportation statutes and regulations establish
multiple, and sometimes conflicting, goals and outcomes for federal
programs. In addition, federal transportation funding is generally not
linked to system performance or to the accomplishment of goals or
outcomes. Furthermore, the transportation program, like many other
federal programs, is subject to congressional directives, which could
impede the selection of merit-based projects.
* The federal government's role is often indirect. The Department of
Transportation (DOT) implements national transportation policy and
administers most federal transportation programs. While DOT carries out
some activities directly, it does not have control over the vast
majority of the activities it funds. Additionally, DOT's framework of
separate modal administrations makes it difficult for intermodal
projects to be integrated into the transportation network.
* Future transportation funding is uncertain. Revenues to support the
Highway Trust Fund--the major source of federal highway and transit
funding--are eroding. Receipts for the Highway Trust Fund, which are
derived from motor fuel and truck-related taxes (e.g., truck sales) are
continuing to grow. However, the federal motor fuel tax of 18.4 cents
per gallon has not been increased since 1993, and thus the purchasing
power of fuel tax revenues has eroded with inflation. Furthermore, that
erosion will continue with the introduction of more fuel-efficient
vehicles and alternative-fueled vehicles in the coming years, raising
the question of whether fuel taxes are a sustainable source of
financing transportation. In addition, funding authorized in the
recently enacted highway and transit program legislation is expected to
outstrip the growth in trust fund receipts. Finally, the nation's long-
term fiscal challenges constrain decision makers' ability to use other
revenue sources for transportation needs.
Recognizing many of these challenges and the importance of the
transportation system to the nation, Congress established The National
Surface Transportation Policy and Revenue Study Commission (Commission)
in the Safe, Accountable, Flexible, Efficient Transportation Equity
Act--A Legacy for Users (SAFETEA-LU).[Footnote 10] The mission of the
Commission was, among other things, to examine the condition and future
needs of the nation's surface transportation system and short and long-
term alternatives to replace or supplement the fuel tax as the
principal revenue source to support the Highway Trust Fund. In January
2008, the Commission released a report with numerous recommendations to
place the trust fund on a sustainable path and to reform the current
structure of the nation's surface transportation programs. Congress
also created the National Surface Transportation Infrastructure
Financing Commission in SAFETEA-LU and charged it with analyzing future
highway and transit needs and the finances of the Highway Trust Fund
and recommending alternative approaches to financing transportation
infrastructure.[Footnote 11] This Commission issued its interim report
this past week, and its final report is expected by spring of 2009. In
addition, various transportation industry associations and research
groups have issued, or plan to issue in the coming months, proposals
for restructuring and financing the surface transportation program.
Principles to Assess Proposals for Restructuring the Surface
Transportation Program:
Through our prior analyses of existing programs, we identified a number
of principles that could help drive an assessment of proposals for
restructuring the federal surface transportation programs. These
principles include (1) defining the federal role based on identified
areas of national interest, (2) incorporating performance and
accountability for results into funding decisions, and (3) ensuring
fiscal sustainability and employing the best tools and approaches to
improve results and return on investment.
Define Federal Role Based on Identified Areas of National Interest:
Our previous work has shown that identifying areas of national interest
is an important first step in any proposal to restructure the surface
transportation program. In identifying areas of national interest,
proposals should consider existing 21st century challenges and how
future trends could have an impact on emerging areas of national
importance--as well as how the national interest and federal role may
vary by area. For example, experts have suggested that federal
transportation policy should recognize emerging national and global
imperatives, such as reducing the nation's dependence on foreign fuel
sources and minimizing the impact of the transportation system on
global climate change. Once the various national interests in surface
transportation have been identified, proposals should also clarify
specific goals for federal involvement in the surface transportation
program as well as define the federal role in working toward each goal.
Goals should be specific and outcome-based to ensure that resources are
targeted to projects that further the national interest. The federal
role should be defined in relation to the roles of state and local
governments, regional entities, and the private sector. Where the
national interest is greatest, the federal government may play a more
direct role in setting priorities and allocating resources as well as
fund a higher share of program costs. Conversely, where the national
interest is less evident, state and local governments, and others could
assume more responsibility. For example, efforts to reduce
transportation's impact on greenhouse gas emissions may warrant a
greater federal role than other initiatives, such as reducing urban
congestion, since the impacts of greenhouse gas emissions are widely
dispersed, whereas the impacts of urban congestion may be more
localized.
The following illustrative questions can be used to determine the
extent to which proposals to restructure the surface transportation
program define the federal role in relation to identified areas of
national interest and goals.
* To what extent are areas of national interest clearly defined?
* To what extent are areas of national interest reflective of future
trends?
* To what extent are goals defined in relation to identified areas of
national interest?
* To what extent is the federal role directly linked to defined areas
of national interest and goals?
* To what extent is the federal role defined in relation to the roles
of state and local governments, regional entities, and the private
sector?
* To what extent does the proposal consider how the transportation
system is linked to other sectors and national policies, such as
environmental, security, and energy policies?
Incorporate Performance and Accountability into Funding Decisions:
Our previous work has shown that an increased focus on performance and
accountability for results could help the federal government target
resources to programs that best achieve intended outcomes and national
transportation priorities. Tracking specific outcomes that are clearly
linked to program goals could provide a strong foundation for holding
grant recipients responsible for achieving federal objectives and
measuring overall program performance. In particular, substituting
specific performance measures for the current federal procedural
requirements could help make the program more outcome-oriented. For
example, if reducing congestion were an established federal goal,
outcome measures for congestion, such as reduced travel time could be
incorporated into the programs to hold state and local governments
responsible for meeting specific performance targets. Furthermore,
directly linking the allocation of resources to the program outcomes
would increase the focus on performance and accountability for results.
Incorporating incentives or penalty provisions into grants can further
hold grantees and recipients accountable for achieving results.
The following illustrative questions can be used to determine the
extent to which proposals to restructure the surface transportation
program incorporate performance and accountability mechanisms.
* Are national performance goals identified and discussed in relation
to state, regional, and local performance goals?
* To what extent are performance measures outcome-based?
* To what extent is funding linked to performance?
* To what extent does the proposal include provisions for holding
stakeholders accountable for achieving results?
* To what extent does the proposal create data collection streams and
other tools as well as a capacity for monitoring and evaluating
performance?
Ensure Fiscal Sustainability and Employ the Best Tools and Approaches
to Improve Results and Return on Investment:
We have previously reported that the effectiveness of any overall
federal program design can be increased by incorporating strategies to
ensure fiscal sustainability as well as by promoting and facilitating
the use of the best tools and approaches to improve results and return
on investment. Importantly, given the projected growth in federal
deficits, constrained state and local budgets, and looming Social
Security and Medicare spending commitments, the resources available for
discretionary programs will be more limited--making it imperative to
maximize the national public benefits of any federal investment through
a rigorous examination of the use of such funds.[Footnote 12] The
federal role in transportation funding must be reexamined to ensure
that it is sustainable in this new fiscal reality. A sustainable
surface transportation program will require targeted investment, with
adequate return on investment, from not only the federal government,
but also state and local governments, and the private sector. The user-
pay concept--that is, users paying directly for the infrastructure they
use--is a long-standing aspect of transportation policy and should, to
the extent feasible and appropriate, remain an essential tenet as the
nation moves toward the development of a fiscally sustainable
transportation program. For example, a panel of experts recently
convened by GAO agreed that regardless of funding mechanisms pursued,
investments need to seek to align fees and taxes with use and
benefits.[Footnote 13]
A number of specific tools and approaches can be used to improve
results and return on investment including using economic analysis,
such as benefit-cost analysis in project selection; requiring grantees
to conduct post-project evaluations; creating incentives to better
utilize existing infrastructure; providing states and localities
greater flexibility to use certain tools, such as tolling and
congestion pricing; and requiring maintenance of effort provisions in
grants. The suitability of the tool and approach used varies depending
on the level of federal involvement or control that policymakers desire
for a given area of policy. Using these tools and approaches could help
surface transportation programs more directly address national
transportation priorities and become more fiscally sustainable.
The following illustrative questions can be used to determine the
extent to which proposals to restructure the surface transportation
program ensure fiscal sustainability and employ the best tools and
approaches to improve results and return on investment.
* To what extent do the proposals reexamine current and future spending
on surface transportation programs?
* Are the recommendations affordable and financially stable over the
long-term? To what extent are the recommendations placed in the context
of federal deficits, constrained budgets, and other spending
commitments and to what extent do they meet a rigorous examination of
the use of federal funds?
* To what extent do the proposals discuss how costs and revenues will
be shared among federal, state, local, and private stakeholders?
* To what extent are recommendations considered in the context of
trends that could affect the transportation system in the future, such
as population growth, increased fuel efficiency, and increased freight
traffic?
* To what extent do the proposals build in capacity to address changing
national interests?
* To what extent do the proposals address the need better to align fees
and taxes with use and benefits?
* To what extent are efficiency and equity tradeoffs considered?
* To what extent do the proposals provide flexibility and incentives
for states and local governments to choose the most appropriate tool in
the toolbox?
Preliminary Observations on the Commission's Recommendations:
The Commission makes a number of recommendations designed to
restructure the federal surface transportation program so that it meets
the needs of the nation in the 21st century. The recommendations
include significantly increasing the level of investment by all levels
of government in surface transportation, consolidating and reorganizing
the current programs, speeding project delivery, and making the current
programs more performance-and outcome-based and mode-neutral, among
other things. We are currently analyzing the Commission's
recommendations using the principles that we have developed for
evaluating proposals to restructure the surface transportation program.
Although our analysis is not complete, our preliminary results indicate
that some of the Commission's recommendations address issues included
in the principles. For example, to make the surface transportation
program more performance-based, the Commission recommends the
development of outcome-based performance standards for various
programs. Other recommendations, however, appear to be aligned less
clearly with the principles.
Preliminary Observations on the Commission's Recommendations As They
Relate to the National Interest and Federal Role:
In its report, the Commission identifies eight areas of national
interest and recommends organizational restructuring of DOT to
eliminate modal stovepipes. In particular, the report notes that the
national interest in transportation is best served when (1) facilities
are well maintained, (2) mobility within and between metropolitan areas
is reliable, (3) transportation systems are appropriately priced, (4)
modes are rebalanced and travel options are plentiful, (5) freight
movement is explicitly valued, (6) safety is assured, (7)
transportation decisions and resource impacts are integrated, and (8)
rational regulatory policy prevails. We and others have also identified
some of these and other issues as possible areas of national interest
for the surface transportation program. For example, at a recent forum
on transportation policy convened by the Comptroller General, experts
identified enhancing the mobility of people and goods, maintaining
global competitiveness, improving transportation safety, minimizing
adverse environmental impacts of the transportation system, and
facilitating transportation security as the most important
transportation policy goals. [Footnote 14] The Commission report also
recommends restructuring DOT to consolidate the current programs and to
eliminate modal stovepipes. We have also identified the importance of
breaking down modal stovepipes. Specifically, we have reported that the
modal structure of DOT and state and local transportation agencies can
inhibit the consideration of a range of transportation options and
impede coordination among the modes.[Footnote 15] Furthermore, in the
forum on transportation policy, experts told us that the current
federal structure, with its modal administrations and stovepiped
programs and funding, frequently inhibits consideration of a range of
transportation options at both the regional and national
levels.[Footnote 16]
Some of the Commission's recommendations related to the national
interest and the federal role also raise questions for consideration.
Although consolidating and reorganizing the existing surface
transportation programs, as the Commission recommends, could help
eliminate modal stovepipes, it is not clear to what extent eliminating
any of the existing programs was considered. Given the federal
government's fiscal outlook, we have reported that we cannot accept all
of the federal government's existing programs, policies, and activities
as "givens." Rather, we have stated that we need to rethink existing
programs, policies, and activities by reviewing their results relative
to the national interests and by testing their continued relevance and
relative priority.[Footnote 17] It is not clear from the Commission's
report that such a "zero-based" review of the current and proposed
surface transportation programs took place.
The Commission also recommends an 80/20 cost sharing arrangement for
transportation projects under most programs--that is, the federal
government would fund 80 percent of the project costs and the grantee
(e.g., state government) would fund 20 percent. In addition, the
Commission recommends that the federal government should pay 40 percent
of national infrastructure capital costs. These proposed cost share
arrangements suggest that the recommended level and share of federal
funding reflects the benefits the nation receives from investment in
the project--that is, the national interest. However, the report offers
no evidence that this is the case. Rather, the proposed cost share
arrangements appear to reflect the historical funding levels of many
surface transportation programs without considering whether this level
of funding reflects the national interest or should vary by program or
project. For example, the Commission recommends that the federal
government pay for 80 percent of the proposed intercity passenger rail
system. However, we have found that the nation's intercity passenger
rail system appears to provide limited public benefits for the level of
federal expenditures required to operate it,[Footnote 18] raising
questions as to whether an 80 percent federal share is justified.
Preliminary Observations on the Commission's Recommendations As They
Relate to Performance and Accountability:
The Commission proposes to make the surface transportation program
performance-and outcome-based, and its recommendations include several
performance and accountability mechanisms. In particular, the
Commission recommends the development of national outcome-based
performance standards for the different federal programs. The
Commission recommends that states and major metropolitan areas also be
required to include performance measures in their own transportation
plans, along with time frames for meeting national performance
standards. To receive federal funding, projects must be listed in state
and local plans, be shown to be cost-beneficial, and be linked to
specific performance targets. In addition, the Commission recognizes
the importance of data in measuring the effectiveness of transportation
programs and overall project performance and recommends that an
important goal of the proposed research, development, and technology
program be to improve the nation's ability to measure project
performance data.
Although the Commission emphasizes the need for a performance-and
outcome-based program, it is unclear to what extent some of the
Commission's recommendations are aligned with such principles. For
example, the Commission recommends that overall federal funding be
apportioned to states based on state and local transportation plans,
rather than directly linking the distribution of funds to state and
local governments' performance in meeting identified national
transportation goals.[Footnote 19] In addition, although the Commission
recognizes the importance of data in evaluating the effectiveness of
projects, the Commission does not recommend the use of post-project, or
outcome, evaluations. Our previous work has shown that post-project
evaluations provide an opportunity to learn from the successes and
shortcomings of past projects to better inform future planning and
decision making and increase accountability for results.[Footnote 20]
Preliminary Observations on the Commission's Recommendations As They
Relate to Fiscal Sustainability and the Use of the Best Tools and
Approaches:
The Commission recommends a range of financing mechanisms and tools as
necessary components of a fiscally sustainable transportation program.
These mechanisms include an increase in the federal fuel tax,
investment tax credits, and the introduction of new fees, such as a new
fee on freight and a new transit ticket tax. Experts at our forum on
transportation policy also advocated the use of various financing
mechanisms, including many of the mechanisms recommended by the
Commission, arguing that there is no "silver bullet" for the current
and future funding crisis facing the nation's transportation
system.[Footnote 21] The Commission also recognizes that states will
need to use other tools to generate revenues for their share of the
recommended increase in investment and to manage congestion. Therefore,
the Commission supports fewer federal restrictions on tolling and
congestion pricing on the interstate highways system and recommends
that Congress encourage the use of public-private partnerships where
appropriate. In addition, the Commission recognizes the growing
consensus that, with more fuel-efficient and more alternative-fuel
vehicles, an alternative to the fuel tax will be required in the next
15 to 20 years. To facilitate a transition to new revenue sources, the
Commission recommends that Congress require a study of specific
mechanisms, such as mileage-based user fees.
It is unclear, however, whether some of the Commission's
recommendations are fiscally sustainable--both over the short and the
long-term--and encourage the use of the best tools and approaches. For
example, the Commission recommends a substantial investment--
specifically, $225 billion per year--in the surface transportation
program by all stakeholders. However, the level of investment called
for by the Commission reflects the most expensive "needs" scenario
examined by the Commission,[Footnote 22] raising questions about
whether this level of investment is warranted and whether federal,
state, and local governments can generate their share of the investment
in light of competing priorities and fiscal constraints. In addition,
while much of the increased investment in the surface transportation
program would come from increased fuel taxes and other user fees, some
funding would come from general revenues. Such recommendations need to
be considered in the context of the overall fiscal condition of the
federal government. Finally, while the Commission recommends enhanced
opportunities for states to implement alternative tools such as
tolling, congestion pricing, and public-private partnerships, it also
recommends that Congress place a number of restrictions on the use of
these mechanisms, such as requirements that states cap toll rates (at
the level of the CPI minus a productivity adjustment), prohibit the use
of revenues for non-transportation purposes, avoid toll rates that
discriminate against certain users, and fully consider the effect
tolling might have on diverting traffic to other facilities. The
potential federal restrictions must be carefully crafted to avoid
undermining the potential benefits.
Concluding Observations:
In conclusion, the magnitude of the nation's transportation challenges
calls for an urgent response, including a plan for the future. The
Commission's report offers one way forward. Over the coming months,
other options to restructure and finance the surface transportation
program will likely be put forward by a range of transportation
stakeholders. Ultimately, Congress and other federal policymakers will
have to determine which option--or which combination of options--best
meets the needs of the nation. There is no silver bullet solution to
the nation's transportation challenges and many of the options, such as
reorganizing a large federal agency or allowing greater private sector
investment in the nation's infrastructure, could be politically
difficult to implement both nationally and locally. The principles that
we identified provide a framework for evaluation. Although the
principles do not prescribe a specific approach to restructuring, they
do provide key attributes that will help ensure that a restructured
surface transportation program addresses current challenges. We will
continue to assist the Congress as it works to evaluate the various
options and develop a national transportation policy for the 21st
century that will improve the design of transportation programs, the
delivery of services, and accountability for results.
Madam Chairman, this concludes my prepared statement. I would be
pleased to respond to any questions that you or other Members of the
Committee might have.
GAO Contact and Staff Acknowledgement:
For further information on this statement, please contact JayEtta Z.
Hecker at (202) 512-2834 or [email protected]. Individuals making key
contributions to this testimony were Elizabeth Argeris, Nikki Clowers,
Barbara Lancaster, Matthew LaTour, Nancy Lueke, and Katherine Siggerud.
[End of section]
Related GAO Products:
Long-Term Fiscal Outlook: Action Is Needed to Avoid the Possibility of
a Serious Economic Disruption in the Future. GAO-08-411T. Washington,
D.C.: January 29, 2008.
Freight Transportation: National Policy and Strategies Can Help Improve
Freight Mobility. GAO-08-287. Washington, D.C.: January 7, 2008:
A Call For Stewardship: Enhancing the Federal Government's Ability to
Address Key Fiscal and Other 21st Century Challenges. GAO-08-93SP.
Washington, D.C.: December 2007.
Highlights of a Forum: Transforming Transportation Policy for the 21st
Century. GAO-07-1210SP. Washington, D.C.: September 2007.
Public Transportation: Future Demand Is Likely for New Starts and Small
Starts Programs, but Improvements Needed to the Small Starts
Application Process. GAO-07-917. Washington, D.C.: July 27, 2007.
Surface Transportation: Strategies Are Available for Making Existing
Road Infrastructure Perform Better. GAO-07-920. Washington, D.C.: July
26, 2007.
Highway and Transit Investments: Flexible Funding Supports State and
Local Transportation Priorities and Multimodal Planning. GAO-07-772.
Washington, D.C.: July 26, 2007.
Railroad Bridges and Tunnels: Federal Role in Providing Safety
Oversight and Freight Infrastructure Investment Could Be Better
Targeted. GAO-07-770. Washington, D.C.: August 6, 2007.
Intermodal Transportation: DOT Could Take Further Actions to Address
Intermodal Barriers. GAO-07-718. Washington, D.C.: June 20, 2007.
Performance and Accountability: Transportation Challenges Facing
Congress and the Department of Transportation. GAO-07-545T. Washington,
D.C.: March 6, 2007.
High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January
2007.
Fiscal Stewardship: A Critical Challenge Facing Our Nation. GAO-07-
362SP. Washington, D.C.: January 2007.
Intercity Passenger Rail: National Policy and Strategies Needed to
Maximize Public Benefits from Federal Expenditures. GAO-07-15.
Washington, D.C.: November 13, 2006.
Freight Railroads: Industry Health Has Improved, but Concerns about
Competition and Capacity Should be Addressed. GAO-07-94. Washington,
D.C.: October 6, 2006.
Highway Finance: States' Expanding Use of Tolling Illustrates Diverse
Challenges and Strategies. GAO-06-554. Washington, D.C.: June 28, 2006.
Highway Trust Fund: Overview of Highway Trust Fund Estimates. GAO-06-
572T. Washington, D.C.: April 4, 2006.
Highway Congestion: Intelligent Transportation Systems' Promise for
Managing Congestion Falls Short, and DOT Could Better Facilitate Their
Strategic Use. GAO-05-943. Washington, D.C.: September 14, 2005.
Freight Transportation: Short Sea Shipping Option Shows Importance of
Systematic Approach to Public Investment Decisions. GAO-05-768.
Washington, D.C.: July 29, 2005.
Highlights of an Expert Panel: The Benefits and Costs of Highway and
Transit Investments. GAO-05-423SP. Washington, D.C.: May 6, 2005.
21st Century Challenges: Reexamining the Base of the Federal
Government. GAO-05-325SP. Washington, D.C.: February 2005.
Highway and Transit Investments: Options for Improving Information on
Projects' Benefits and Costs and Increasing Accountability for Results.
GAO-05-172. Washington, D.C.: January 24, 2005.
Federal-Aid Highways: Trends, Effect on State Spending, and Options for
Future Program Design. GAO-04-802. Washington, D.C.: August 31, 2004.
Surface Transportation: Many Factors Affect Investment Decisions. GAO-
04-744. Washington, D.C.: June 30, 2004.
Highways and Transit: Private Sector Sponsorship of and Investment in
Major Projects Has Been Limited. GAO-04-419. Washington, D.C.: March
25, 2004.
[End of section]
Footnotes:
[1] Congress created The National Surface Transportation Policy and
Revenue Study Commission in 2005 under section 1909(b) of the Safe,
Accountable, Flexible, Efficient Transportation Equity Act--A Legacy
for Users (SAFETEA-LU) , Pub. L. No. 109-59, �1909(b), 119 Stat. 1471
(Aug. 10, 2005).
[2] In this statement, we use the term "surface transportation program"
to refer collectively to the various surface transportation programs,
such as the federal highway, safety, rail, maritime, and transit
programs.
[3] GAO's audits and evaluations identify federal programs and
operations that, in some cases, are high risk due to their greater
vulnerabilities to fraud, waste, abuse, and mismanagement. In recent
years, we also have identified high-risk areas to focus on the need for
broad-based transformations to address major economy, efficiency, or
effectiveness challenges. Since 1990, we have periodically reported on
government operations that we have designated as high risk. In 2007, we
added financing the nation's transportation system to the High Risk
List. See, GAO, High-Risk Series: An Update. GAO-07-310. Washington,
D.C.: January 2007.
[4] GAO, Long-Term Fiscal Outlook: Action Is Needed to Avoid the
Possibility of a Serious Economic Disruption in the Future, GAO-08-411T
(Washington, D.C.: Jan. 29, 2008) and Fiscal Stewardship: A Critical
Challenge Facing Our Nation, GAO-07-362SP (Washington, D.C.: January
2007).
[5] See GAO, Performance and Accountability: Transportation Challenges
Facing Congress and the Department of Transportation, GAO-07-545T
(Washington, D.C.: Mar. 6, 2007) and 21st Century Challenges:
Reexamining the Base of the Federal Government, GAO-05-325SP
(Washington, D.C.: February 2005).
[6] The previous performance audits were conducted in accordance with
generally accepted government auditing standards. See "Related GAO
Products" at the end of this testimony statement.
[7] These principles were developed as part of our ongoing review of
the evolution of the surface transportation program, which is expected
to be issued in March 2008.
[8] Additional information about GAO's simulations and the Nation's
long-term fiscal challenge can be found at [hyperlink,
http://www.gao.gov/special.pubs/longterm/].
[9] GAO, A Call for Stewardship: Enhancing the Federal Government's
Ability to Address Key Fiscal and Other 21st Century Challenges, GAO-08-
93SP (Washington, D.C.: December 2007).
[10] Pub. L. No. 109-59, �1909(b), 119 Stat. 1471.
[11] Pub. L. No. 109-59, � 11142(a), 119 Stat. 1961.
[12] GAO, Freight Transportation: National Policy and Strategies Can
Help Improve Freight Mobility. GAO-08-287 (Washington, D.C.: Jan. 7,
2008).
[13] GAO, Highlights of a Forum: Transforming Transportation Policy for
the 21st Century. GAO-07-1210SP (Washington, D.C.: September 2007).
[14] GAO-07-1210SP.
[15] GAO, Intermodal Transportation: DOT Could Take Further Actions to
Address Intermodal Barriers. GAO-07-718. Washington, D.C.: June 20,
2007) and GAO-07-1210SP.
[16] GAO-07-1210SP.
[17] GAO-05-325SP.
[18] GAO, Intercity Passenger Rail: National Policy and Strategies
Needed to Maximize Public Benefits from Federal Expenditures. GAO-07-15
(Washington, D.C.: Nov. 13, 2006).
[19] The Commission does recommend giving the National Surface
Transportation Commission, a proposed independent body recommended by
the Commission to oversee development of a national strategic plan for
transportation investment and to recommend appropriate revenue
adjustments to the Congress, authority to increase the federal share
for particular activities as an incentive and to reduce the federal
share of funding when performance objectives are not met.
[20] See GAO, Highway and Transit Investments: Options for Improving
Information on Projects' Benefits and Costs and Increasing
Accountability for Results, GAO-05-172 (Washington D.C.: Jan. 24,
2005).
[21] GAO-07-1210SP.
[22] The Commission examined various scenarios that incorporate
packages of transportation policy options. These scenarios have been
used to identify ranges of potential investment that would be expected
to achieve different performance impacts at various points in time in
the future. While the investment needs presented in the Commission
report were developed using some of the same analytical tools utilized
in previous reports by DOT, such as the Highway Economic Requirements
System, these tools were customized to meet the requirements of the
Commission and supplemented using additional analytical approaches
developed specifically for this study.
[End of section]
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