STATEMENT OF
UNDER SECRETARY FOR POLICY
U.S. DEPARTMENT OF TRANSPORTATION
ROY KIENITZ
BEFORE THE
COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON SELECT REVENUE MEASURES
U.S. HOUSE OF REPRESENTATIVES
JULY 23, 2009
Chairman Neal, Ranking Member Tiberi, and Members of the Subcommittee:
Thank you for inviting me to appear before you today to discuss long-term financing options for the Highway Trust Fund.
I appeared before you a month ago to discuss the short-run problems facing the Highway Trust Fund; today I would like to focus more on a set of guiding principles for evaluating the long-term options for funding the Highway Trust Fund.
The principles that should be reflected in a long-term plan for funding the surface transportation system begin with our goals for the transportation system. We want a transportation system that will enhance the Nation’s economic competitiveness, improve transportation safety, improve energy efficiency, and enhance livability. We need a transportation funding system that will support the achievement of these goals.
In the long run, one of our key goals is to increase the economic competitiveness of our Nation by investing more aggressively in our future. Just as past generations built the transcontinental railroad, the Erie Canal, and the Interstate Highway System, so our generation must build the transportation infrastructure that our Nation will need in the 21st Century. Enhancing our economic competitiveness requires a transportation system that reduces costs and is more reliable for both passengers and businesses. We need a transportation system that achieves a state of good repair and that achieves a high level of performance. Increasing the economic competitiveness of our transportation system will also require us to target our investment more carefully by using the best analytical tools available.
We also need to make sure that our investment allows us to begin making progress on halting the seemingly inexorable growth of greenhouse gases in our atmosphere, and that means reducing the carbon footprint of the Nation’s transportation system. About 28 percent of the greenhouse gases generated in the United States are attributable to transportation, so we need to build a more energy-efficient transportation system. We need to build a sustainable model for transportation in the 21st Century, built on cleaner energy and reduced environmental costs.
We also need to make sure that our transportation investment enhances the livability of our communities. We need to build a transportation system that gives our citizens the choices they want – to get to their destinations by the transportation mode of their choice, whether that is driving, or public transportation, or bicycling, or walking. When people choose public transportation, we need to make sure that intermodal connections are safe and easy – from transit to intercity rail, from transit to air, and from highways to transit. We need to make sure that the transportation system doesn’t impose excessive external costs on our local communities. We need to make sure that Americans, whether they live in urban areas or rural areas, have access to our bus, rail, and aviation systems that is cost-effective for users and society as a whole. We need to integrate our planning processes for transportation, land use, and housing so that we build communities where our transportation systems and land use patterns are made for each other.
In order to achieve these goals, we need a system of transportation funding that is both adequate to address the needs of the Nation’s economy and sustainable with respect to changing economic circumstances. Transportation patterns will change. Prices of fuel will rise and fall. New technologies will emerge. We need a robust transportation funding system that can continue to generate the revenues we need in spite of changes in the environment within which the transportation system operates.
We also need a transportation funding system that is flexible with respect to the surface transportation needs it can support. All the surface transportation modes make an important contribution to meeting the Nation’s surface transportation needs; we need a funding system that can meet the funding needs of all these modes. We need to be able to invest in the kinds of transportation infrastructure that will meet the Nation’s objectives of safety, economic competitiveness, energy efficiency, and livability. A transportation funding system that is restricted to funding only certain kinds of transportation cannot meet these needs efficiently.
ENSURING THE ADEQUACY OF SURFACE TRANSPORTATION FUNDING
The first principle for funding the surface transportation system is that the funding system be adequate to address the needs of the Nation’s economy. There is considerable reason to believe that our current funding system is not adequate to our needs.
In some respects, the nation’s inventory of roads, bridges, and transit systems has steadily improved. Over the past ten years, we have expanded our highway network by more then 80,000 miles, enough to circle the globe more than three times, and the number of route-miles of transit systems has increased by 44,000 miles. The percentage of miles traveled that is on highways in good condition has increased from 39 percent to 47 percent; the percentage of bridges that are structurally deficient or functionally obsolete has declined from 32 percent in 1998 to 27 percent in 2008, and the average condition of the Nation's transit buses has improved from 2.94 to 3.01 (3.0 = "fair").
Still, there is much work to do. We need to bring our Nation’s highways, bridges, and transit systems up to a state of good repair, both to improve safety and to enhance economic competitiveness. About 53 percent of highway miles traveled are on roads that are in less than “good” condition. Almost 30 percent of our bridges are structurally deficient or functionally obsolete. Almost 22 percent of our transit buses – and 32 percent of our transit rail cars – are over-age, while 76 percent of our transit bus facilities and 56 percent of our transit rail facilities are in less than good condition. We don’t even know the condition of our railroads and ports, because we don’t gather any data on that in a systematic way.
PROMOTING SUSTAINABILITY OF THE TRANSPORTATION FUNDING SYSTEM
The funding system for surface transportation must not only be adequate; it must also be able to sustain the appropriate level of funding in the presence of fuel price and technology changes. Serious concerns have been raised about the ability of the fuel tax to support even current funding requirements. The National Surface Transportation Infrastructure Financing Commission, authorized in SAFETEA-LU by this Committee, concluded that improvements in fuel economy threaten the sustainability of transport funding. The Department of Energy forecasts that the average fuel economy of the U.S. vehicle fleet will rise from 20.4 miles per gallon (MPG) in 2009 to 28.9 mpg in 2030. The Administration estimates that this will result in a stream of fuel tax revenues that grow in nominal terms but falls in real, inflation-adjusted terms. The Financing Commission, however, believes that this forecast could well understate the actual increase in fuel efficiency. If fuel prices increase more sharply than expected, or if vehicle technologies (such as alternative fuels and battery technologies) change more quickly than expected, or if concerns about global warming become more compelling, efforts to improve fuel efficiency could reduce fuel tax revenues faster than currently forecast. The revenue generated by the fuel tax is vulnerable to these changes in fuel prices, technology, and environmental concerns. We will probably need a more diverse, flexible funding system to enhance the sustainability of our surface transportation funding system.
THE FLEXIBILITY OF THE TRANSPORTATION FUNDING SYSTEM
Meeting the Nation’s goals of improving economic competitiveness, increasing fuel efficiency, and enhancing safety and livability will require a surface transportation funding system that is adaptable to whatever modes of transportation are best suited to meeting these objectives. We need to be able to direct infrastructure investment toward rail and port and bicycle projects as well as highway and transit projects. One weakness of the fuel tax is that, because it is paid by only one mode of transportation, it inevitably creates pressures to spend revenues only on that mode of transportation. While it can be argued that expenditures on other modes divert traffic from highways and thus benefit highway users, and that expenditures on less environmentally damaging transportation modes reduce the environmental impact of the transportation system, the benefits of these policies are difficult to quantify and therefore will inevitably be debated. Looking ahead, we will need to consider how to make our system for financing of transportation investment better suited to meeting the Nation’s objectives of economic competitiveness, energy efficiency, and livability.
THE FUNDING SYSTEM MUST SUPPORT IMPORTANT SURFACE TRANSPORTATION REFORMS
Our approach to achieving these national transportation goals of economic competitiveness, safety, energy efficiency, and livability relies on several key strategies, and it is important for our funding system to support these strategies.
First, because economic competitiveness is such a compelling objective for our surface transportation system, it is important for that system to be designed to address national needs for an efficient 21st Century economy. When supply chains reach across America, it is important to have a funding system that provides national funding to address national needs as well as local funding to address local needs.
Second, improving the Nation’s economic competitiveness requires us to achieve our transportation goals with maximum cost effectiveness, which in turn requires us to draw upon the best available economic analysis to guide our transportation infrastructure investment decisions. In the Transportation Investment Generating Economic Recovery (TIGER) Discretionary Grants and High-Speed Rail portions of our Recovery Act programs, we have called upon grant applicants to provide benefit-cost analyses of their proposed investments. The systematic analysis of all costs and benefits of an investment project that incorporated important factors such as travel time and mobility, safety, and environmental impacts would help decision makers identify projects that generate the greatest value for society. For projects designed to maintain or rebuild existing infrastructure, we will be calling on states and local authorities to make greater use of asset management techniques to reduce the costs of maintaining their infrastructure in a state of good repair over the long term. If we invest more efficiently, we can get more from every dollar that we invest – more economic productivity, more safety benefits, more accessibility, more sustainability, and more livable communities.
Third, we need to improve accountability by making greater use of performance measures for our transportation system. When we invest tax dollars in transportation infrastructure, people have a right to know what performance they can expect from that investment. We need to measure how well our transportation system is performing and report back on whether we are meeting our performance objectives. We need to demonstrate that we are using the public’s tax dollars responsibly and that people are getting the performance improvements they paid for.
Finally, we want our investments in the surface transportation system and the transportation system more broadly to incorporate the latest technologies, and to take advantage of the opportunities that new technologies present to us. We need to make greater use of Intelligent Transportation Systems, both to reduce highway congestion and to improve safety in all our modes. We will move promptly to implement the positive train control requirements in last year’s Rail Safety Improvement Act, and we will provide the resources necessary to deploy the Next Generation Air Transportation System. And, of course, new technology will be the basis of more energy-efficient and safer cars, trucks, and other vehicles.
Thank you for the opportunity to appear before you today to discuss long-term funding options for the Highway Trust Fund. I believe that this challenge offers us an opportunity to chart a new course for transportation infrastructure investment in the United States over the years to come. I look forward to working with Congress and transportation stakeholders to make this a reality.
I will be pleased to respond to your questions.