Issues to Be Considered During Deliberations to Reauthorize the Federal-Aid Highway Program

Published by the Government Accountability Office on 1990-03-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                    United States General Accounting         Office

                     Issues   to Be Considered      During   Deliberations      To
For Release
on Delivery          Reauthorize   the Federal-Aid       Highway      Program
Expected at
9:30 a.m. EST
March 19, 1990

                     Statement of
                     John W. Hill,     Jr.
                     Associate   Director,   Transportation        Issues
                     Resources,    Community, and Economic
                     Development Division

                     Before the
                     Subcommittee    on Water Resources,
                     Transportation,    and Infrastructure
                     Committee on Environment       and Public        Works
                     United States Senate

Mr. Chairman      and Members of the         Subcommittee:

We appreciate        the opportunity           to testify    on issues Lhis
Subcommittee        will     deliberate       as it begins the legislative           process
to reauthorize          a possible       $70 billion,     5-year,      federal-aid    highway
program.        The Congress faces difficult              decisions       on how best to
spend available           federal     dollars    to meet highway and bridge           needs.
However, the federal              government      cannot be expected to meet these
transportation           challenges      alone.     Federal,    state,     and local
governments       must all find new and better               ways to address the
nation's      transportation          problems.

our testimony today will           focus on our work that parallels   several
issues to be considered           by this Subcommittee.   In summary, our work
to date has shown that:

       --   Increased     funding will      be needed      for      the Interstate    4R
            Program (restoration,          resurfacing,          rehabilitation,     and

       --   Projected  Highway       Trust Fund revenues             are expected    to
            exceed authorized        commitment levels.

       --   Tolls   are a viable,       alternative       revenue source that can
            provide    states with      additional      funds to meet their   highway

       --   The Combined Road Plan demonstration                   block grant is
            allowing      states  increased flexibility              to target spending         to
            their    priority    needs.

       --   State highway laws vary in the degree to which they
            parallel  federal  statutes.    In this regard, there are
            options  available   if Congress decides to relax state

            compliance      with federal   laws on environmental    protection,
            prevailing      wage, minority    contracting,  and highway design.

I would     like to discuss  each of these issues in more detail,
starting      with our work on the Interstate  4R program.


Although     construction        of the Interstate           component of the federal-
aid highway system is nearly                 complete,     continual      attention      is
needed to preserve          the nation's          investment     in the Interstate
System.      The Administration's              national    transportation         policy    '
endorses the need to preserve                  the nation's      transportation
facilities       and provides       that federal-aid          highway programs will
emphasize capital          maintenance.           The Interstate       System represents
only 1 percent       of all road mileage,               but it accounts        for over 20
percent    of the total         vehicle      miles driven.         The Congress recognized
the need to protect           this investment           in the 1987 reauthorization,
when it provided,          through      fiscal      year 1992, an annual funding              level
of $2.8 billion         for the Interstate            4R Program.       This level,
however,     falls    considerably          short of what is presently              needed to
preserve     the system.          According         to the Department        of
Transportation        (DOT), 4R needs are expected to run between $4.7
billion    and $6.1 billion           annually,       or a total     of between $88.6
billion    and $116.4 billion,              through     2005, just to maintain           1985
road conditions.

According   to our preliminary      analysis    of these estimates,     3/4 of
these funds will      be needed to improve existing       road conditions    and
to add approximately      10,000 lane miles.         The remaining   funds will
be needed to address future       repair     needs.   Even with additional
lane miles,   Interstate    congestion     is expected to increase,

lEntitled  M vin
           o,         er'ca:
dated February   1990.
particularly       in urban areas.     Overall,    DOT   estimates     that   between
21,ooo and 25,000 additional         lane miles are       needed to accommodate
additional       capacity.  In addition,      because    DOT accounts   for highway
and bridge needs separately,         the estimated       $24 billion  that states
require      for 4R bridge work is not reflected          in DOT's 4R needs


Over the past few years a great deal of discussion                          has focused on
a perceived       surplus      balance in the highway account that could be
spent on the nation's             highways and bridges.             In a May 1989 report
to the Senate Appropriations                 Committee,       we pointed    out that the
highway account balance,               which was about $10.5 billion            at the end
of fiscal      year 1989, was not actually                a surplus.      These funds will
be needed to pay outstanding                 commitments.         However, the account can
support      a higher      level of program activity              because future    total
revenues over the fund's               authorized     life     are expected to exceed the
level    of future       authorized        commitments.        At the time of our review,
the anticipated          amount of uncommitted             funds at the end of the
 authorization        period was $7.4 billion.                However, if the authorized
 level of commitments            were increased,         DOT believes     that a safety
cushion of at least             $1 billion      would be necessary        to guard against
unforeseen       disruptions        to highway tax revenues or inaccurate
 revenue projections.

Unfortunately,      the severity    of the General Fund deficit       and the
use of various       trust fund balances    to mask the deficit     have made
the concept underlying        trust  funds quite different      in reality.      In
the current      budget environment,     the reality  is that any drawdown of
the Highway Trust Fund balance can only be accomplished               by
increasing     the deficit    or at the expense of other federal          programs.


Increasingly,           the Congress,       states     and DOT are viewing              toll
 financing         as a funding     mechanism that can give                 states more
flexibility           and control     over transportation              spending.        Although
tolls       are generally       prohibited       on roads built           with federal        funds,
the 1987 highway act authorized                    a toll     pilot     program.        Under the
g-state        pilot    program,    federal      funding      is limited        to 35 percent        of
project        costs,     as compared to 75 to 90 percent                  under other highway
programs.            The work we are performing             for this Subcommittee               shows
that states           have made limited        progress       on the pilot          projects.      Only
Delaware,          Georgia,    and Pennsylvania           have started         construction       on
their      projects.        Five other participating                states--California,
Florida,        Texas, South Carolina,             and West Virginia--are                in the
planning         stages.     One state,       Colorado,       has decided not to proceed
with its project            unless it receives            additional        federal     money.

State highway officials             we spoke with favor expanding               the use of
tolls    on federal-aid         highways and view tolls          as an additional
revenue source that can allow them to complete projects                            sooner than
anticipated.          We believe       that limiting    the federal        funding      share to
35 percent       makes it incumbent upon states               to carefully        select
projects      for toll      financing.       If the selected       project      does not
generate      sufficient       revenue,     a state could contribute            more to
finance     the toll      project      than it would under a conventional
federal-aid        highway project.          Only the Texas project           is anticipated
to be totally         financed     with federal      and toll    revenues.

The Administration's           national     transportation     policy      endorses the
concept of increasing           opportunities        to implement     toll   financing     for
transportation       projects.        Under the policy,       state and local
governments     would be allowed          the flexibility      to impose tolls         even
if the roads are built           with federal        funds.

Pour states--Texas,          California,      Florida,       and Georgia--have
committed     themselves       to using state-of-the-art              equipment    to reduce
 congestion     and the costs of collecting              tolls.        For example, under
the system Texas plans to use on its pilot                      project,      a Computer chip
 is placed inside        vehicle    windshields      to keep track of toll           charges.
Vehicles     with the chips do not have to stop to pay the toll;
equipment     reads and charges the user's               account number as the
vehicle     passes through the toll           plaza.       According      to state
officials,      Using this system on the North Dallas                    Tollway   has added
the equivalent       of two lanes of highway during                  rush hour and is
drawing traffic        from other congested           roads in the area.

The Administration's               national    transportation          policy     Calls for a
significant         change in the traditional              relationships           among federal,
state,       and local       governments.        Under the new approach,                the federal
government would focus its transportation                         resources        on highways of
national       significance,          such as interstate          and primary         roads that
are important           to national       defense and commerce.               State and local
governments         would, in turn,          assume greater         responsibility           for
addressing        their      transportation       needs.      DOT acknowledges             that state
and local governments                are frequently      the most appropriate                level  for
decisionmaking            and management, and, given the appropriate                         tools  and
flexibility,          they have a clear incentive               to maintain         the
transportation            infrastructure.

According     to the new transportation             policy,   the restructuring      of
federal,    state,    and local      roles could be accomplished           in part by
replacing     the predominant        categorical       grants with broader      and more
flexible    funding    alternatives.         The five-state      Combined Road Plan
demonstration      program is designed to give states              more control      over
how they spend federal           funds received        for the secondary      and urban
highway systems as well as bridge                funds for these systems and for a

    certain percent   of bridges        off the federal-aid      system.    Our
    ongoing review of this program,           which was initiated      at the request
    of this subcommittee,        offers    some insight    into how sLates,     under
    current funding   levels,       might respond to assuming additional
    management responsibilities.

    Under the demonstration               program,    participating        states    are
    permitted        to combine funds received              for secondary       and urban highway
    systems,       and bridges       off the federal-aid           highway system, and to
    target      their     expenditures       in accordance       with their      needs and
    priorities.           States participating          in the demonstration           pooled
    between 9 percent           and 33 percent        of their       annual highway
    apportionment.            The states       are also responsible          for approving
    design exceptions           and making final          inspections      of their      projects--
    activities         that traditionally         have been federal          responsibilities.

    According        to our preliminary            results,     states have benefited       from
    the flexibility            of being able to pool categorical                grant funds and
    reportedly         have been better           able to target      the funds to meet state
    priorities.           Additionally,         state officials       believe    that the
    flexibility          provided      under the demonstration           could be improved by
    adding additional              categories      of funds, such as Hazard Elimination
    and Rail-Highway            Crossing      funds, to the pool of block grant funds.
    States also have reported                 time    savings from performing         their   own
    final       inspections        and approving       design exceptions.          However, DOT
    has not determined              how state actions         in approving      design exceptions
    and conducting           final     inspections       might affect      highway safety.

    Furthermore,       states  would like to have certain           legislative
    restrictions       under the federal-aid       highway program waived for
    projects      in the demonstration,       such as the 15 percent           minimum/35
    percent      maximum for funding     off-system     bridges.       Since no funding
    level changes were incorporated            in the demonstration,           we cannot
    project      what the results    vould be if funding         levels     were to


    An early plan for the block grant demonstration                    program,     proposed
    by the prior      Administration,       would have waived legislative
    requirements      for states'       compliance     with federal     laws on prevailing
    wages, minority        contracting,      environmental     protection,       and highway
    design.     Had this proposal         been incorporated       into the enacted block
    grant,   it would have permitted            states    to administer      federal-aid
    highway projects         as if they were state-funded           projects--responsive
    only to their       state laws affecting          highway project      administration.
    The block grant demonstration              enacted did not relinquish           the
    federal    requirements.

    State laws and administrative           guidance     in the five demonstration
    states vary in the degree to which they approximate                    federal
    statutes.      The presence of state laws or administrative                  guidance
    similar    to federal   laws does not in itself           predict     how states would
    respond if federal      requirements       were lifted.       State statutes       may be
    repealed     or amended, and state administrative             guidance may change
    from year to year.        However, the fact that states             have afforded
    largely    comparable   protections      to state laborers,         minority
    contractors,      the environment,      and highway safety         suggest that
    federal    and state governments        attach   similar     values to these
    concerns.      At the conclusion      of our work, we expect to provide               the
    Congress with options        to consider      if it decides to relax state
    compliance     with federal     laws on environmental         protection,
    prevailing     wages, minority      contracting,       and highway design.

    This concludes      my testimony.       I will   be glad    to answer    any