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The Federal Environment for Surface Transportation Infrastructure
Presentation by Chad Shirley, an analyst in CBO’s Microeconomic Studies Division, to the National Federation of Municipal Analysts.
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The Federal Environment for Surface Transportation Infrastructure
- 1. Presentation to the NationalFederation of Municipal Analysts May 7, 2025 Chad Shirley Microeconomic Studies Division The Federal Environment for Surface Transportation Infrastructure For information about the 2025 NFMA Annual Conference, see https://www.nfma.org/.
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- 3. 2 -300 -250 -200 -150 -100 -50 0 50 100 150 2008 2010 20122014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Actual Projected Outlays Cash inflows End-of-year balance Billions of dollars Data source: Congressional Budget Office, “Highway Trust Fund Accounts—January 2025 Baseline” (January 2025), www.cbo.gov/publication/60870. Annual Cash Inflows, Outlays, and Balances of the Highway Trust Fund’s Highway Account in CBO’s January 2025 Baseline Projections
- 4. 3 -100 -80 -60 -40 -20 0 20 40 60 2008 2010 20122014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Actual Projected Outlays Cash inflows End-of-year balance Billions of dollars Data source: Congressional Budget Office, “Highway Trust Fund Accounts—January 2025 Baseline” (January 2025), www.cbo.gov/publication/60870. Annual Cash Inflows, Outlays, and Balances of the Highway Trust Fund’s Transit Account in CBO’s January 2025 Baseline Projections
- 5. 4 § Options thatwould affect spending: – Limit spending to revenues collected from fuel and other taxes. – Maintain current conditions and performance of the highway system. – Fund all projects for which the expected benefits meet or exceed the costs. § Options that would affect revenues: – Increase existing fuel taxes. – Institute new taxes or fees. – Transfer money from the Treasury’s general fund. Possible Options for the Future of the Highway Trust Fund
- 6. 5 Public Spending forTransportation and Water Infrastructure
- 7. 6 $132 billion Federal government $494billion State and local governments Operation and maintenance: $48 billion (36%) Operation and maintenance: $307 billion (62%) Capital: $84 billion (64%) Capital: $187 billion (38%) Data source: Congressional Budget Office, using data from the Office of Management and Budget and the Census Bureau. See www.cbo.gov/publication/60874#data. Shares of Public Spending for Capital and for the Operation and Maintenance of Transportation and Water Infrastructure, by Level of Government, 2023
- 8. 7 Billions of 2023dollars 0 45 90 135 180 0 45 90 135 180 0 45 90 135 180 0 45 90 135 180 0 45 90 135 180 0 45 90 135 180 Highways Mass transit and rail Aviation Water transportation Water resourcesc Water utilitiesd 144 106 34 65 17 32 4 10 13 28 59 114 2023 2013 2003 1993 1983 1973 1963 2023 2013 2003 1993 1983 1973 1963 2023 2013 2003 1993 1983 1973 1963 Operation and maintenanceb Capitala Data source: Congressional Budget Office, using data from the Office of Management and Budget, the Census Bureau, and the Bureau of Economic Analysis. See www.cbo.gov/publication/60874#data. a. Dollar amounts are adjusted to remove the effects of inflation using price indexes for government spending that measure the prices of materials and other inputs used to build transportation and water infrastructure. b. Dollar amounts are adjusted to remove the effects of inflation using price indexes for government spending that measure the prices of goods and services consumed by governments, including materials and other inputs used to operate and maintain transportation and water infrastructure. c. Includes water containment systems (dams, levees, reservoirs, and watersheds) and sources of fresh water (lakes and rivers). d. Includes water supply and wastewater treatment facilities. Public Spending for Capital and for the Operation and Maintenance of Transportation and Water Infrastructure, by Type of Infrastructure, 1956 to 2023
- 9. 8 Billions of 2023dollars 0 50 100 150 200 0 50 100 150 200 0 50 100 150 200 0 50 100 150 200 0 50 100 150 200 0 50 100 150 200 Highways Mass transit and rail Aviation Water transportationa Water resourcesa,b Water utilitiesc 56 193 28 72 22 28 7 7 13 28 7 166 2023 2013 2003 1993 1983 1973 1963 2023 2013 2003 1993 1983 1973 1963 2023 2013 2003 1993 1983 1973 1963 State and local governments Federal government Data source: Congressional Budget Office, using data from the Office of Management and Budget, the Census Bureau, and the Bureau of Economic Analysis. See www.cbo.gov/publication/60874#data. Dollar amounts are adjusted to remove the effects of inflation using price indexes for government spending that measure the prices of materials and other inputs used to build, operate, and maintain transportation and water infrastructure. a. Outlays for navigation by the Army Corps of Engineers are included in water resources rather than in water transportation. b. Includes water containment systems (dams, levees, reservoirs, and watersheds) and sources of fresh water (lakes and rivers). c. Includes water supply and wastewater treatment facilities. Public Spending on Transportation and Water Infrastructure, by Level of Government and Type of Infrastructure, 1956 to 2023
- 10. 9 Federally Supported Financing Mechanismsfor Transportation and Water Infrastructure
- 11. 10 Data source: CongressionalBudget Office. GAN = grant anticipation note; GARVEE = grant anticipation revenue vehicle. Various Tax-Exempt Bonds for Transportation and Water Infrastructure Type of bond Main financial benefit Other significant advantages Significant disadvantages Government bonds Traditional government bonds The interest income that bondholders receive is generally exempt from federal taxes, so issuers can offer lower interest rates and still attract investors. State and local governments have substantial latitude in choosing which public-purpose projects to finance. Bonds backed by general revenues may be subject to state or local limits on how many can be issued or may require approval by voters. Grant anticipation bonds (GARVEEs for highways, GANs for mass transit) The interest income that bondholders receive is generally exempt from federal taxes, so issuers can offer lower interest rates and still attract investors. Issuance and interest costs can be paid from future federal grants. In some states, GARVEEs are exempt from requirements that new bond issuances be approved by voters. The Federal Highway Administration or the Federal Transit Administration must confirm that projects are eligible for federal grant funding before the bonds are issued. Qualified private activity bonds The interest income that bondholders receive is generally exempt from federal taxes, so issuers can offer lower interest rates and still attract investors. They allow tax-exempt financing to be used to support private investment in infrastructure. Interest rates tend to be higher because interest income is not exempt from the alternative minimum tax, which may discourage some potential investors. The quantity that can be issued for certain purposes is subject to nationwide or state caps.