The Role of Public Works Infrastructure in Economic Stimulus

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The Role of Public Works Infrastructure in

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R40107

CRS Report for Congress

Prepared for Members and Committees of Congress

The Role of Public Works Infrastructure in Economic Stimulus

Summary

Interest in using federal government spending to stimulate U.S. economic recovery has intensified

recently in response to indicators showing significant deterioration of the economy. Policymakers

at all levels of government are debating a range of options to address these problems. Some favor

using traditional monetary and fiscal policies. Others, however, favor making accelerated

investments in the nation’s public infrastructure in order to create jobs while also meeting

infrastructure needs. This report is an overview of policy issues associated with the approach of

using infrastructure as a mechanism for economic stimulus.

When most people think about infrastructure, they probably have in mind systems that are

publicly provided and are important to the productive capacity of the nation’s economy. Today,

policymakers define the term more broadly to include both publicly and privately owned systems

and facilities and categories that vary considerably in the degree of historic federal investment in

building or rebuilding physical structures. A relatively new dimension in today’s context is the

notion of coupling public works with investments in environmentally friendly systems that

incorporate renewable technologies or energy efficiency—called “green infrastructure.”

Academics, economists, and policymakers debate two issues concerning the contribution of

infrastructure investment to the economy. One is the effects of infrastructure investment on

productivity and growth, including job creation. The second related issue is the role of

infrastructure spending, which is typically a long-term activity, as a short-term mechanism to

stimulate a faltering economy. Research conducted over time has resulted in a general consensus

that there can be positive returns on productivity of investing in infrastructure. Many experts now

argue that infrastructure spending could be an important source of stimulating labor demand and

enhancing U.S. productivity through investments in roads, bridges, water systems, etc. Still, some

analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key

issue: timing. By definition, the goal of stimulus spending is to get money into the economy

swiftly. But that objective can conflict with the reality of building infrastructure projects that

typically are multiyear efforts with slow initial spendout. Spending advocates counter that

because the current recession is expected to be of long duration, projects with extended

timeframes can still contribute to the economy’s recovery, and that investments that improve

long-term productivity are preferable to options that focus on consumption as a stimulus tool.

The overriding question in debating infrastructure spending as part of economic stimulus is, what

will the stimulus buy? Two important considerations are, will the proposal produce stimulus

quickly, and will it produce a significant amount of stimulus, relative to its budgetary cost.

Because of the urgency of responding to the recession, stakeholder groups have been preparing

lists of projects that are “ready to go,” but the criteria for developing these lists are largely

unknown. There is tension between the goal of funding activities that will create jobs quickly and

the desire to invest in projects that will have sustained value that contributes to U.S. productivity.

A critical issue for all levels of government is ensuring accountability for funds that will be spent

through a stimulus program, to assure the public that decisions involving public dollars are made

quickly yet with transparency, efficiency, and sufficient accountability.

This report will not track legislative developments; other CRS reports referenced here will do so.

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The Role of Public Works Infrastructure in Economic Stimulus

Contents

Introduction ................................................................................................................................1

The Context: Current Economic Conditions ..........................................................................1

Defining Infrastructure in Today’s Context ............................................................................3

Infrastructure and the Economy...................................................................................................5

Productivity and Output ........................................................................................................5

Infrastructure Job Creation ....................................................................................................6

The Contribution of Infrastructure to Economic Stimulus ......................................................9

Issues........................................................................................................................................ 11

Setting Priorities and Determining Funding Needs .............................................................. 12

“Ready to Go” Projects ....................................................................................................... 14

Getting the Job Done: Resource and Governance Issues ...................................................... 16

Is There a Role for “Green Infrastructure” as Part of Economic Stimulus? ........................... 18

Tables

Table 1. Number of Direct and Indirect Jobs Per $1 Million of Output Produced by the

Water, Sewage and Other Systems Industry ..............................................................................8

Table A-1. Usual Lead Roles in Infrastructure Categories .......................................................... 21

Appendixes

Appendix. Infrastructure Sector Categories ............................................................................... 21

Contacts

Author Contact Information ...................................................................................................... 45

Acknowledgments .................................................................................................................... 45

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The Role of Public Works Infrastructure in Economic Stimulus

Introduction

Policymakers at all levels of government are debating a wide range of options for addressing the

nation’s faltering economic conditions. One option that is receiving attention is accelerated

investments in the nation’s public infrastructure—that is, highways, mass transit, airports, water

supply and wastewater, dams, locks, canals, passenger rail, and other facilities—in order to create

jobs while also promoting long-term economic growth.

This report presents policy issues associated with using infrastructure as a mechanism for

economic stimulus. It begins with two contextual aspects of this discussion, what is the current

economic condition and how to define infrastructure. The report then reviews the role of

infrastructure investment in economic growth generally and in contributing to stimulating a

faltering economy. It discusses key issues, such as setting priorities, resource and governance, and

the possible role of “green” infrastructure as part of economic stimulus. Finally, it includes an

Appendix with descriptions of a number of infrastructure categories that have recently been

mentioned for inclusion in economic stimulus legislation in the 111th Congress.

The Context: Current Economic Conditions

Interest in government spending to stimulate economic recovery has intensified recently in

response to economic indicators showing significant and continuing deterioration of the national

economy. In the third quarter of 2008, real gross domestic product (GDP, the economy’s total

output of goods and services) fell by 0.5%, and the December 2008 Blue Chip Economic

Indicators consensus forecast was for real GDP to decline by 1.1% for all of 2009 and for the

unemployment rate to reach 8.1% by the end of 2009.1 In November, the unemployment rate

stood at a 15-year high of 6.7%. Further, on December 1, the nonpartisan National Bureau of

Economic Research officially declared that the U.S. economy has been in recession since

December 2007; a recession is defined as a broad contraction of the economy not confined to one

sector. The economy reportedly lost jobs every month in 2008 for a total of 1.9 million for the

year.

Fiscal problems are affecting all levels of government. In December, the National Association of

State Budget Officers and the National Governors Association reported significant weakening of

fiscal conditions in nearly every state and budget gaps for the current fiscal year of approximately

$30 billion, in addition to more than $12 billion that has already been cut from state budgets.

States face growing expenditure pressures as the economy deteriorates, including increased

funding of public assistance programs such as Medicaid. States also face long-term issues such as

funding pensions and maintaining and repairing infrastructure.2

Local governments also are dealing with fiscal pressures. A September survey by the National

League of Cities found that city finance officers expect revenue from property, sales, and income

taxes to decrease by 4.3% in 2008. The survey also found that 79% of cities expect their finances

Blue Chip Economic Indicators, Aspen Publishers, vol. 33, no. 11, December 10, 2008. The Blue Chip forecast is an

average of about 50 separate forecasts.

National Governors Association and National Association of State Budget Officers, The Fiscal Survey of States,

December 2008, pp. vii-viii, http://www.nasbo.org/Publications/PDFs/Fall2008FiscalSurvey.pdf.

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The Role of Public Works Infrastructure in Economic Stimulus

to worsen in 2009, because of a lag between current economic conditions and effects on city

revenue.3 Consequently, cities are laying off workers, raising fees, closing municipal facilities

such as libraries, and cancelling or postponing projects.

Much of the public responsibility to build, operate, and maintain infrastructure resides with

localities. Cities and states that normally rely on the bond market to finance long-term projects

recently have found that market less accessible, as a fallout from financial turmoil on Wall Street,

meaning that it is more difficult to borrow money. Municipal bonds, if they can be sold, are lately

commanding higher interest rate yields, making it more costly for states and cities to borrow.

These higher rates are causing officials to scale back, delay, or cancel projects.

As a result of these conditions, states, which under their constitutions are not permitted to operate

in deficit, and cities are increasingly looking to the federal government for assistance on a range

of policies and projects. Organizations representing states and municipalities have issued agenda

documents with both policy and short-term and long-term assistance recommendations for

Congress and the Administration, including infrastructure, health care reform, housing, benefit

programs for individuals, budget relief and help in accessing capital, and governance.4

The concept of countering the effect of recessions with legislation to spur job creation through

increased spending on public works infrastructure is not new. In recent decades, Congress has

done so on several occasions. For example, in 1983 (P.L. 98-8) and 1993 (P.L. 103-50), Congress

appropriated funds to a number of existing federal infrastructure and public works programs in

hopes that projects and job creation would be stimulated quickly.5

At least two factors are new this time. One is the severity of the economic downturn (reportedly

the worst in 50 years6) which is widely expected to be of long duration, not short. Another is the

fact that the current debate about a job-creating stimulus program is merging with discussion

among infrastructure advocates that has been ongoing for years about the need for investment to

address problems of aging and deteriorating public works. These infrastructure problems have

been increasingly recognized by policymakers and the public at large.7 It is argued that the U.S.

investments in public infrastructure have declined significantly in recent decades, to the point that

this country is underinvesting in its critical assets, and is failing to construct new facilities or

adequately maintain existing systems. The perception that current investment levels are

inadequate is in part supported by data which show that, relative to GDP, infrastructure spending

has declined about 20%, from 3.06% in 1959 to 2.40% of GDP in 2004. During this same period,

spending has shifted from predominantly on capital (63% in 1959, compared with 46% in 2004)

Michael A. Pagano and Christopher W. Hoene, City Fiscal Conditions in 2008, National League of Cities, Research

Brief on America's Cities, September 2008,

http://66.218.181.91/ASSETS/A49C86122F0D4DBD812B91DD5777F04D/CityFiscal_Brief_08-FINAL.pdf.

National Governors Association, Economic Recovery: A Federal-State Partnership, November 13, 2008,

http://www.nga.org/Files/pdf/0811ECONOMICRECOVERY.PDF; U.S. Conference of Mayors, Main Street Economic

Recovery, A Call to Action, December 2, 2008, http://www.usmayors.org/mainstreeteconomicrecovery/documents/

mser-plan-20081203.pdf; National League of Cities, An Agenda for the Nation,

http://www.nlc.org/ASSETS/063AF2E28AA9495CB21EFC5F8EBBA0FA/AgendaForNewAdmin.pdf.

For information, see CRS Report 92-939, Countercyclical Job Creation Programs, by (name redacted).

Dan Weil, Roubini: Worst U.S. Recession in 50 Years, November 20, 2008,

http://moneynews.newsmax.com/streettalk/roubini_worst_recession/2008/11/20/153349.html.

See Robert L. Reid, "The Infrastructure Crisis Special Report," Civil Engineering, January 2008,

http://pubs.asce.org/magazines/CEMag/2008/Issue_01-08/article1.htm.

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to operation and maintenance (37% in 1959, compared with 54% in 2004).8 In a growing

economy, infrastructure should hold its own, but other data show that spending by government at

all levels has declined from a high of $1.37 per capita in 1960 to $0.94 per capita in 2004 (in

2006 dollars).

During the presidential campaign, candidate Barack Obama pledged to invest in rebuilding the

nation’s infrastructure, especially transportation systems, in order to create jobs.9 Since

November, President-elect Obama has highlighted immediate investments in infrastructure

projects as a key element of his plans to revitalize the economy:

The Obama-Biden emergency plan would make $25 billion immediately available in a Jobs

and Growth Fund to help ensure that in-progress and fast-tracked infrastructure projects are

not sidelined, and to ensure that schools can meet their energy costs and undertake key

repairs starting this fall. This increased investment is necessary to stem growing budget

pressures on infrastructure projects. In addition, in an environment where we may face

elevated unemployment levels well into 2009, making an aggressive investment in urgent,

high-priority infrastructure will serve as a triple win: generating capital deployment and job

creation to boost our economy in the near-term, enhancing U.S. competitiveness in the

longer term, and improving the environment by adopting energy efficient school and

infrastructure repairs. In total, Obama and Biden's $25 billion investment will result in 1

million jobs created or saved, while helping to turn our economy around.10

For now, details of the new Administration’s economic stimulus plan, including how much of the

total will be devoted to infrastructure and to which infrastructure sectors, are unclear.

Defining Infrastructure in Today’s Context

Most people probably think about roads, airports, or water supply when they refer to

infrastructure, having in mind the types of systems or facilities that are publicly provided and are

important to the productive capacity of the nation’s economy. But some analysts argue that such a

conception is too narrow. Accordingly, the term might be defined more broadly to also include

spending by the private sector, such as by private utilities that provide electricity or natural gas. In

addition, other types of public investment, such as public buildings, may not add directly to the

productive capacity of the economy but do represent assets in the nation’s capital stock.

The current discussion includes no single definition of infrastructure or list of categories or types

of infrastructure that might receive assistance as part of economic stimulus, and ultimately it will

be defined by those who are responsible for crafting the legislation. The lack of a definition is not

unlike infrastructure discussions that have occurred in the past (see the box “What is

Infrastructure?” below). Today, policymakers and stakeholder groups appear inclined to define

the term broadly to include facilities and categories that vary considerably in the degree of

historic federal investment in building or rebuilding physical structures (e.g., highways compared

with public schools) and systems that have a long history of combined public and private

ownership (water resource projects as well as electric transmission systems, some of which are

U.S. Congressional Budget Office, Trends in Public Spending on Transportation and Water Infrastructure, 1956 to

2004, August 2007, p. 23.

http://www.barackobama.com/issues/economy/#jumpstart.

http://change.gov/agenda/economy_agenda/.

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federally owned, for example). See Table A-1 in the Appendix for information on the level(s) of

government or the private sector that typically are responsible for infrastructure. Indeed, today

there is considerable blurring between public and private infrastructure, raising more frequent

questions about what should be the role of government, including the federal government, in

providing infrastructure services. In part, this is due to increasing reliance on the private sectors—

through contract operations, full ownership and other arrangements—to provide functions and

services that typically are thought of as public. Examples include prisons, passenger rail, and

postal services and mail delivery. A relatively new dimension in today’s context is the notion of

coupling public works with investments in environmentally friendly systems that incorporate

renewable technologies or energy efficiency—called “green infrastructure” (see discussion

below).

The Appendix to this report provides descriptions of a number of infrastructure categories that

have recently been mentioned for inclusion in economic stimulus legislation in the 111th

Congress. The descriptions include information on conditions, performance, and funding needs;

discussion of investment in each category as a mechanism for economic stimulus; and longer

term issues.

What is Infrastructure?

In contrast to today’s discussions about how infrastructure will be defined in economic stimulus legislation, past

debate among researchers has been more conventional. There is no standard or agreed definition of the term

“infrastructure,” and the concept in policy terms has been and remains fluid, including both public and private

systems, services, and even amenities. Nearly 30 years ago, infrastructure was debated because of concern that the

nation’s public works infrastructure was believed to be suffering from severe problems of deterioration, technological

obsolescence, and insufficient capacity to serve future growth. The focus of debate was on the nature, extent, and

severity of poor physical condition, technological adequacy, and capacity of public works systems and about decisions

by government at all levels on spending priorities to meet physical and management needs. All of these issues remain

relevant and topical today.

Public and private reports at the time analyzed and critiqued the issue, and many sought to define the term

“infrastructure.” One of these, issued by the Council of State Planning Agencies, defined the term as public service

and production facilities, which include “a wide array of public facilities and equipment required to provide social

services and support private sector economic activity,” commonly roads, bridges, water and sewer systems, airports,

ports, and public buildings, and may also include schools, health facilities, jails, recreation facilities, electric power

production, fire safety, solid waste disposal, and telecommunications. ( Roger Vaughan and Robert Pollard, Rebuilding

America, Vol. I, Planning and Managing Public Works in the 1980s, Council of State Planning Agencies, 1984, pp. 1-2.)

In a 1983 report to Congress about policies regarding condition of the nation’s infrastructure, the Congressional

Budget Office (CBO) analyzed seven categories of infrastructure: highways, public transit systems, wastewater

treatment works, water resources, air traffic control, airports, and municipal water supply. These seven systems,

CBO said, “share the common characteristics of capital intensiveness and high public investment at all levels of

government. They are, moreover, directly critical to activity in the nation’s economy.” CBO noted that “the concept

of infrastructure can be applied broadly to include such social facilities as schools, hospitals, and prisons, and it often

includes industrial capacity, as well.” ( U.S. Congressional Budget Office, Public Works Infrastructure: Policy Considerations

for the 1980s, April 1983, p. 1.)

Five years later, CBO utilized a similar but consolidated categorization of infrastructure (highways, aviation, mass

transit, wastewater treatment, and water transportation) based on a definition that those facilities:

provide a foundation or basic framework for the national economy, and in which federal policy plays a

significant role.... This definition excludes some facilities often thought of as infrastructure–such as

public housing, government buildings, private rail service, and schools–and some environmental

facilities (such as hazardous or toxic waste sites) where the initial onus of responsibility is on private

individuals. ( CBO, New Directions for the Nation's Public Works, September 1988, pp. xi-xii.)

CBO’s current infrastructure focus is on highways and roads, mass transit, rail, aviation, water transportation, water

resources such as dams and levees, and water supply and wastewater treatment—facilities that “draw heavily on

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federal resources, share the economic characteristics of being relatively capital intensive and producing services under

public management that facilitate private economic activity.” (CBO, Trends in Public Spending on Transportation and

Water Infrastructure, 1956-2004, August 2007, p. 1.)

In 1984, Congress enacted legislation that established a National Council on Public Works Improvement with a

mandate to analyze and report to Congress and the President on the state of public works infrastructure systems

(P.L. 98-501). The Council provided yet another definition of infrastructure and included nine categories of systems in

its analyses: highways, streets, roads, and bridges; airports and airways; public transit; intermodal transportation (the

interface between modes); water supply; wastewater treatment; water resources; solid waste; and hazardous waste

services. These categories, the Council said, have strong links to economic development and generally have a

tradition of public sector involvement. Facilities have high fixed costs and long economic lives. Taken as a whole, the

services that they provide “form the underpinnings of the nation’s defense, a strong economy, and our health and

safety.” ( National Council on Public Works Improvement, Fragile Foundations: A Report on America's Public Works,

Final Report to the President and Congress, February 1988, p. 33.)

Following the 2001 terrorist attacks in the United States, policymakers turned attention to protecting the nation’s

“critical infrastructure” from physical or cyber attacks. In the context of homeland security, that term is quite broadly

defined to encompass certain socioeconomic activities that are vital to the day-to-day functioning and security of the

country; for example, transportation of goods and people, communications, banking and finance, and the supply and

distribution of electricity and water.

Infrastructure and the Economy

Academics, economists, and policymakers debate two key issues concerning the contribution of

infrastructure investment to the economy. One is the general issue of the effects of infrastructure

spending and investment on productivity and growth. The second related issue is the role of

infrastructure spending, including short-term job creation, as a countercyclical tool in stimulating

a faltering economy.

Productivity and Output

The question of whether or how the availability of public infrastructure, and investments in public

infrastructure, influence productivity and growth has long interested academics. One economist

describes the issue as follows:

The argument is simple. Infrastructure is a public good that produces positive externalities

for production. The provision of adequate infrastructure is a necessary condition for private

firms to be productive. Even if infrastructure is also provided for its amenity value (i.e. for

its direct utility value to individuals) it is obvious that it plays a central role in generating

external effects that fundamentally alter the capacity of the economy to produce goods and

services. Just imagine an economy without roads or telephones to think about the impact that

infrastructure has on productivity.11

Few would argue that infrastructure isn’t important to economic activity. But, important in what

precise ways, and to what degree (e.g., new construction or maintenance of existing systems), are

questions that have interested researchers. Thus, public roads are important, but by themselves,

they don’t produce anything. Yet they are linked in complex ways to economic growth.

Francisco Rodriguez, Have Collapses in Infrastructure Spending Led to Cross-Country Divergence in per Capita

GDP?, Wesleyan University Department of Economics, Wesleyan Economics Working Papers No. 2006-013, April

2006, p. 3.

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Economically, what is important are the services that roads provide in transporting goods and

people, mitigating congestion, etc.

Academic interest in the issue of economic payoff associated with public infrastructure spending

was motivated in part by recognition of declines in public investment in the early 1970s and

declines in economic productivity growth at about the same time. The question for researchers

was whether there was linkage, or causality, between public investments and economic

productivity and, consequently, whether underinvestment in infrastructure helped to explain the

slowdown in productivity growth. Research reported in the late 1980s found that there are very

large returns on investment from infrastructure spending and, by implication, argued that part of

the U.S. productivity slump in the 1970s and 1980s was due to a shortfall of investing in

infrastructure. Some of this early work found that a 10% rise in the public capital stock would

raise multifactor productivity (meaning, changes in economic output resulting from the

combination of labor, capital, materials, fuels, and purchased services) by almost 4%.12 This was

a very high estimate and, as such, was very controversial. Subsequent investigations by others

found that the initial results were highly sensitive to numerous factors, such as minor changes in

data, or time period, or sectors of the economy that were analyzed.

During the 1990s, further research on this issue modified the methodology used to analyze the

economic effects of investing in public infrastructure and either affirmed or challenged the

findings of the initial work. Although not all subsequent studies found a growth-enhancing effect

of public capital, a general consensus has developed over time that there are positive returns on

investment in public infrastructure, but that the impact is less than was first reported.13 Some of

this research suggests that investments in energy infrastructure have the greatest impact on longterm private employment and investment, followed by mass transit, and water and sewer.

Another important conclusion of more recent research is that both the average return and range of

return to the economy vary, based on the type of infrastructure and the amount of infrastructure

already in place. In other words, the larger the existing stock and the better its efficient use and

current quality, the lower will be the impact of new infrastructure. Also, the effect of new public

investment will crucially depend on the extent to which spending aims to alleviate bottlenecks in

the existing network of infrastructure systems and facilities.14

Infrastructure Job Creation

One of the ways in which Congress has tried to spur job growth and stem job losses to mitigate

the impact of economic downturns is by directly raising demand for (i.e. increasing spending on)

goods and services. That is to say, Congress has substituted increased federal spending for

David Alan Aschauer, "Is Public Expenditure Productive?," Journal of Monetary Economics, vol. 23, no. 2 (March

1989), pp. 177-200. This research was reviewed and expanded in Alicia H. Munnell, "Infrastructure Investment and

Economic Growth," Journal of Economic Perspectives, vol. 6, no. 4 (Fall 1992), pp. 189-198.

For review of the economic literature on this issue, see U.S. Congressional Budget Office, Trends in Public Spending

on Transportation and Water Infrastructure, 1956 to 2004, August 2007, pp. 6-9; and Richard A. Krop, Charles

Hernick, and Christopher Frantz, Local Government Investment in Municipal Water and Sewer Infrastructure: Adding

Value to the National Economy, U.S. Conference of Mayors, Washington, DC, August 14, 2008,

http://www.usmayors.org/pressreleases/uploads/LocalGovtInvtInMunicipalWaterandSewerInfrastructure.pdf.

Ward Romp and Jakob de Haan, "Public Capital and Economic Growth: A Critical Survey," European Investment

Bank Papers, vol. 10, no. 1 (2005), pp. 40-70.

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decreased consumer purchases. Most often in the postwar period, Congress has focused its efforts

at direct job creation by increasing federal expenditures on public works.15

When Congress has considered raising spending on infrastructure to help stimulate a flagging

economy, “how many jobs will be created” is a commonly asked question. Although all spending

increases labor demand through direct and multiplier effects, the nature and number of jobs varies

in the first round. Job creation estimates often are based on input-output (I-O) models of the

economy. These models show, for example, the dollar value of concrete produced by the

nonmetallic mineral product manufacturing industry and the dollar value of steel produced by the

primary metal manufacturing industry that are used by the construction industry to produce its

various final outputs (e.g., bridges, roads). The output requirements from each intermediate and

final goods industry must then be converted to employment requirements. Thus, job creation

estimates reflect employment directly and indirectly dependent on/supported by demand for an

industry’s products. Induced jobs, that is, the number of jobs that result from purchases of goods

and services made by those in direct and indirect jobs, may be included as well. Estimates of

induced jobs are considered tenuous, however. 16

Job creation estimates vary from one source to another depending in part on industry definition,

data sources, and time period. The Federal Highway Administration (FHWA) is the source of the

most widely cited estimate of jobs supported by federal highway investments. According to the

FHWA’s latest update, in 2007, an expenditure of $1 billion on highway construction (without a

state match of $250 million) could support 27,822 direct, indirect, and induced jobs. The FHWA

analysis is careful to observe that it addresses jobs supported by highway investments, not jobs

created17 Alternatively, an employment requirements table that the U.S. Bureau of Labor Statistics

(BLS) makes publicly available for use by researchers, which differs from that used by the FHWA

(and does not include induced jobs), suggests that, in 2007, 13,860 jobs were directly and

indirectly dependent on $1 billion of spending in the construction industry (i.e., construction of

buildings, heavy and civil engineering construction including highways, and specialty trade

contractors).18 The 13,860 direct and indirect jobs per $1 billion of total construction expenditures

in 2007 is somewhat more than the 11,768 direct and indirect jobs estimate of the FHWA for each

$1 billion of highway expenditures in 2006.

Another example of an infrastructure job creation estimate is provided by a CRS analysis based

on the U.S. Bureau of Economic Analysis’ Regional Input-Output Modeling System (RIMS II)

and the BLS’ employment requirements table described above. It suggests that between 8.1217

and 12.6231 direct and indirect jobs might be created for each $1 million spent on water reuse

activities such as Title XVI projects carried out by the Department of the Interior, which provide

supplemental water supplies by reclaiming and reusing wastewater and naturally impaired ground

and surface water. Within the utility sector, the “water, sewage and other systems industry” is the

proxy in this analysis for water reuse infrastructure activities. Unlike the BLS and FHWA models,

RIMS II provides state estimates of job creation. (See Table 1.) Through its use of regional data,

For information, see CRS Report 92-939, Countercyclical Job Creation Programs, by (name redacted).

For more methodological information, see CRS Report R40080, Job Loss and Infrastructure Job Creation During

the Recession, by (name redacted).

U.S. Department of Transportation, Federal Highway Administration, Employment Impacts of Highway

Infrastructure Investment, http://www.fhwa.dot.gov/policy/otps/publications.htm.

For a fuller discussion of estimates from the FHWA and BLS models, see CRS Report R40080, Job Loss and

Infrastructure Job Creation During the Recession, by (name redacted).

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RIMS II addresses one of the caveats mentioned by the FHWA, namely, the reliance of national

models on average data which may differ from combinations of construction materials and labor

inputs in the specific geographic areas where projects are undertaken.

Table 1. Number of Direct and Indirect Jobs Per $1 Million of Output Produced by

the Water, Sewage and Other Systems Industry

State

Number of Jobs

State

Number of jobs

Alabama

9.1932

Montana

9.6492

Alaska

6.0846

Nebraska

6.6034

Arizona

7.0133

Nevada

7.5986

Arkansas

9.0811

New Hampshire

6.2295

California

6.9482

New Jersey

5.9976

Colorado

7.3899

New Mexico

8.9694

Connecticut

5.7617

New York

5.4324

Delaware

5.0235

North Carolina

8.4947

District of Columbia

0.6645

North Dakota

8.1289

Florida

7.8063

Ohio

7.2427

Georgia

7.6997

Oklahoma

9.2469

Hawaii

7.5041

Oregon

8.3032

Idaho

9.1590

Pennsylvania

6.5001

Illinois

6.9948

Rhode Island

5.4505

Indiana

7.4542

South Carolina

7.9244

Iowa

7.7909

South Dakota

8.5481

Kansas

8.7923

Tennessee

7.2497

Kentucky

8.6829

Texas

7.9209

Louisiana

9.1763

Utah

9.2335

Maine

7.3596

Vermont

7.8595

Maryland

6.7175

Virginia

7.5986

Massachusetts

5.8627

Washington

6.6501

Michigan

6.5337

West Virginia

6.7946

Minnesota

6.4996

Wisconsin

6.6528

Mississippi

9.0894

Wyoming

7.8923

Missouri

7.0257

United States

8.1217

Source: Data supplied to the Congressional Research Service by the U.S. Bureau of Economic Analysis (U.S.

Department of Commerce), Regional Product Division from the Regional Input-Output Modeling System (RIMS

II).

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The Contribution of Infrastructure to Economic Stimulus

Since mid-2008, there have been increasing calls for Congress and the Administration to address

the nation’s significant economic difficulties through a variety of policy approaches.19 On the one

hand, some argue that economic stabilization can best be achieved through monetary policy (i.e.,

the Federal Reserve’s ability to adjust interest rates), coupled with automatic fiscal stabilizers.20

Others support a fiscal stimulus, and policymakers are debating a range of options for doing so.

In February 2008, Congress and the Administration agreed to legislation (P.L. 110-185) that

prominently included tax rebates for individuals as a means of stimulating the ailing economy.

Effects of that legislation on the economy are not yet fully known.21 Under discussion now is a

second stimulus package, and in that connection, many others now advocate using direct fiscal

stimulus through a combination of short-term infrastructure investments, state fiscal relief, and

expanded unemployment insurance and food stamps. A wide range of experts—including

economists who generally differ in their economic policy views, such as Martin Feldstein22 and

Paul Krugman23—contend that, because neither consumers nor businesses are spending, a

massive infusion of government spending is needed quickly to energize economic activity.

Infrastructure investment, it is argued, will be an important source of stimulating labor demand,

which is lacking in the current labor market, and enhancing U.S. productivity through longneglected investments in roads, bridges, water systems, etc.24

Somewhat ironically, the nation’s economic downturn presents an opportunity, according to this

view, to stimulate the economy by spending on projects to address unmet infrastructure needs.

These needs are presented in the finding of the American Society of Civil Engineers (ASCE) that

the condition of the nation’s infrastructure merits a letter grade of “D” and that U.S. funding

needs total $1.6 trillion. ASCE reported the condition of a dozen categories of infrastructure,

including roads (“Americans’ personal and commercial highway travel continues to increase at a

faster rate than highway capacity, and our highways cannot sufficiently support our current or

projected travel needs”), dams (“the number of dams identified as unsafe is increasing at a faster

rate than those being repaired”), wastewater (“the physical condition of many of the nation’s

16,000 wastewater treatment systems is poor, due to a lack of investment in plant, equipment and

other capital improvements over the years”), and schools (“The Federal government has not

assessed the condition of America’s schools since 1999, when it estimated that $127 billion was

For additional information, see CRS Report R40104, Economic Stimulus: Issues and Policies, by (name redacted),

(name redacted), and (name redacted).

Automatic stabilizers are built-in changes in government spending and taxation, such as income taxes and

unemployment compensation that increase and decrease automatically to dampen economic cycle fluctuations. For

example, in recessionary times, payment of unemployment benefits injects more money into the system and stimulates

demand.

See CRS Report RL34349, Economic Slowdown: Issues and Policies, coordinated by (name redacted).

Martin Feldstein, "The Stimulus Plan We Need Now: The President-Elect Won't Have to Wait Till January to Act,"

The Washington Post, October 30, 2008, p. A23.

Paul Krugman, "Let's Get Fiscal," The New York Times, October 16, 2008.

Jared Bernstein, Senior Economist, Economic Policy Institute, Testimony before the U.S. House Committee on

Ways, and Means, Hearing on Economic Recovery, Job Creation and Investment in America, October 29, 2008,

http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7463.

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needed to bring facilities to good condition. Other sources have since reported a need as high as

$268 billion”). 25

While there is growing momentum for more infrastructure investment, some analysts are cautious

about the effectiveness of this type of fiscal stimulus because of one key issue: timing. This

concern was described in testimony by the Director of the Congressional Budget Office.

The timing of fiscal stimulus is critical. If the policies do not generate additional spending

when the economy is in a phase of very slow growth or a recession, they will provide little

help to the economy when it is needed.... Poorly timed policies may do harm by aggravating

inflationary pressures and needlessly increasing federal debt if they stimulate the economy

after it has already started to recover.

****

For federal purchases [of goods and services, such as infrastructure spending], the primary

issue in targeting the spending is that of timing ... because many infrastructure projects may

take years to complete, spending on those projects cannot easily be timed to provide stimulus

during recessions, which are typically relatively short lived.26

By definition, the goal of stimulus spending is to get money into the economy swiftly. But that

objective conflicts with the reality of building infrastructure projects that typically are multiyear

efforts with slow initial spendout. CBO notes that public works projects are likely to involve

expenditures that take a long time to get underway and also are spread out over a long time. Even

those that are “on the shelf” generally take time to inject money into the economy. For major

infrastructure, such as highway construction and water resource projects, the initial rate of

spending can be 25% or less of the funding provided in a given year.27 Based on CBO

information, the National Governors Association reported spendout rates for several infrastructure

categories:

•

About 68% of highway and 45% of transit obligations spend out over the first

two years of a project.

•

About 19% of airport obligations spend out in the first year and another 42% in

year two.

•

About 24% of drinking water and wastewater obligations are expended over two

years, and 54% over three years.28

Economist Mark Zandi, who favors a fiscal stimulus package that includes increased

infrastructure spending, also cautions that it takes a substantial amount of time for funds to flow

to builders, contractors, and the broader economy. “Even if the funds are only used to finance

American Society of Civil Engineers, Report Card for America's Infrastructure, 2005, http://www.asce.org/files/pdf/

reportcard/2005_Report_Card-Full_Report.pdf.

Peter R. Orzag, Director, Congressional Budget Office, Testimony before the U.S. Senate Committee on Finance,

Hearing on Options for Responding to Short-Term Economic Weakness, January 22, 2008, pp. 5, 8.

Ibid., pp. 19, 22.

National Governors Association, Economic Recovery: A Federal-State Partnership, November 13, 2008, pp. 11-12.

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projects that are well along in their planning, it is very difficult to know just when the projects

will get underway and the money spent.”29

Advocates of infrastructure spending have two responses to this concern. First, they point out that

because economists now expect the current recession to be of long duration (longer than 12

months), projects with extended timeframes can still contribute to the economy’s recovery, which

is likely to be a two-year undertaking. Thus, the general concern about timing is less relevant,

compared with previous shorter recessions, they say. Second, because every major infrastructure

category has significant backlogs of projects that are “ready to go” except for funding, advocates

are confident that large amounts of actual construction work can begin quickly (see discussion

below, ““Ready to Go” Projects”).

Some economists contend that public infrastructure investments stimulate economic growth only

if the impact of the infrastructure outweighs the adverse effects of higher taxes that are needed to

finance the investment, or if it outweighs the adverse effects of spending cuts in other areas, such

as properly maintaining existing public works systems. Higher deficits that result from stimulus

spending slow economic growth in the long run, it is sometimes said, because government

borrowing crowds out private investment.30 Critics of this view say that this concern is valid in

non-recessionary times when the economy is working at full capacity, because under those

circumstances, government spending just changes the mix of jobs with no change in the overall

quantity or quality of labor. According to this view, government spending in a recession affects

resources and labor that are idle, and it does not fully displace private investment.

Other economists say that if federal assistance merely provides fiscal relief by paying for

spending that would have occurred anyway—that is, if federal dollars merely substitute for or

replace local dollars invested in the same activity—it provides no economic stimulus. In

response, state and local public officials say that that is not the case in today’s economy. Because

of the current recessionary pressures that they face, states and cities have been cancelling

infrastructure projects. Another way of describing this situation could be to say that what is under

discussion is really not entirely about stimulus, but it is better termed holding state and local

governments harmless in order to encourage them to carry out projects that they couldn’t

otherwise do, because of budget shortfalls.

Issues

Funding infrastructure is a long-term investment, not quick-fix spending, that should lead to

something durable, useful, and financially productive. The long-term nature of such investments

can be at odds with the stimulus goal of quickly injecting money into the economy. Thus, the

overriding question in debating infrastructure spending as part of economic stimulus is, what will

the stimulus buy? Two important considerations regarding any fiscal stimulus proposal are, will

Mark Zandi, Chief Economist, Moody’s Economy.com, Testimony before the House Committee on Small Business,

Hearing on “Economic Stimulus for Small Business: A Look Back and Assessing Need for Additional Relief,” July 24,

2008, p. 7.

According to this argument, by issuing large amounts of debt to finance spending, government drives up interest

rates. In turn, businesses are unwilling to spend on new plants and equipment. Thus, government’s actions crowd out

private investment and reduce the economy’s long-run growth rate. See, for example, Ronald D. Utt, More

Transportation Spending: False Promises of Prosperity and Job Creation, The Heritage Foundation, Backgrounder No.

2121, April 2, 2008, http://www.heritage.org/Research/budget/upload/bg_2121.pdf.

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the proposal produce stimulus quickly, and will it produce a significant amount of stimulus,

relative to its budgetary cost. These issues are explored in the remainder of this report.

Setting Priorities and Determining Funding Needs

Traditionally, setting priorities for infrastructure spending is based on a combination of factors.

Estimates of funding needs are one factor that is commonly used as a measure of the dimension

of a problem and to support spending on some activities relative to others, as in: funding needs

for X are much greater than for Y, therefore, society should spend more heavily on X.

In the infrastructure context, funding needs estimates try to identify the level of investment that is

required to meet a defined level of quality or service. Essentially, this depiction of need is an

engineering concept. It differs from the concept of “ready to go” projects (discussed below),

which is being used in connection with stimulus proposals. It also differs from economists’

conception that the appropriate level of new infrastructure investment, or, the optimal stock of

public capital (infrastructure) for society, is determined by calculating the amount of

infrastructure for which social marginal benefits just equal marginal costs.

The last comprehensive national infrastructure needs assessment was conducted by the National

Council on Public Works Improvement that was created by the Public Works Improvement Act of

1984 (P.L. 98-501). The Council reported in 1988 that government outlays for public works

capital totaled about $45 billion in 1985 and that a commitment to improve the nation’s

infrastructure “could require an increase of up to 100 percent in the amount of capital the nation

invests each year.”31 This estimate of future needs by the Council may have been imprecise

because of the inherent difficulties of needs assessments, something its report discusses in

detail.32 It is worth highlighting a few of these key difficulties as a cautionary note when

attempting to interpret infrastructure needs assessments discussed in the Appendix to this report

and elsewhere.

One of the major difficulties in any needs assessment is defining what constitutes a “need,” a

relative concept that is likely to generate a good deal of disagreement. For this reason, some

needs assessments are anchored to a benchmark, such as current provision in terms of physical

condition and/or performance. This current level of provision may be judged to be too high by

some and too low by others, but nonetheless it provides a basis for comparison as future spending

needs can be estimated in terms of maintaining or improving the current condition and

performance of the infrastructure system. Needs estimates in highway and public transit are

calculated in this way by the U.S. Department of Transportation (DOT). The Environmental

Protection Agency (EPA) similarly estimates total U.S. funding needs for wastewater treatment

facilities. EPA defines a “need” as a project, with associated costs, that addresses a water quality

or public health problem existing as of January 1, 2004.33

Other federal agencies estimate the funding necessary to bring the current infrastructure system to

a state of good repair. The resulting funding estimate is sometimes referred to as the infrastructure

National Council on Public Works Improvement, Fragile Foundations, A Report on America’s Public Works: Final

Report to the President and the Congress, Washington, 1988, p.2.

Ibid., chapter 2.

U.S. Environmental Protection Agency, Clean Watersheds Needs Survey 2004, Report to Congress, January 2008.

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“backlog.” Again, among other problems, such as inventorying the current condition of

infrastructure and calculating repair costs, the needs estimate is affected by judgments about what

constitutes a state of good repair. It is worth noting, too, that needs assessment are often

conducted by organizations with a vested interest in the outcome. This is most obviously a

concern when a needs assessment is conducted by an advocacy group, but may also occur with

government agencies.

A second major difficulty with needs assessments is estimating future conditions, especially

consumer demand for services that infrastructure provides. To begin with, estimating demand is

difficult because it is based on a host of assumptions such as the rate of population and economic

growth. Typically, the longer the time period over which conditions are forecast, the harder it is to

accurately predict them. Particularly hard to predict, and, thus, the effect they have on

infrastructure needs, are structural changes in the economy and technological change. In addition,

however, consumer demand can vary enormously depending on how a service is financed and

priced, as well as other public policy decisions including regulation and conservation. For

example, highway infrastructure is primarily financed by fuels and other taxes that provide a

vague signal or no signal at all about the total cost of driving, particularly the external costs such

as the fuel and time wasted in congested conditions. Highway tolls, on the other hand, particularly

those that fluctuate in line with congestion, provide a direct price signal for a trip on a certain

facility at a certain time of the day. Pricing highway infrastructure in this way has been found to

reduce travel demand, thereby affecting infrastructure need. 34 Consumer demand can sometimes

be met without infrastructure spending. For example, water supply needs can be reduced by

employing water conservation methods.

Finally, it is worth mentioning that the need for public funding to supply infrastructure, including

federal support, may often be an open question because the roles of the public and private sector

can and do shift over time. Even within the public sector, the roles of federal, state, and local

governments change and these shifting intergovernmental relationships may even affect the

assessments of infrastructure needs.

A third major difficulty with infrastructure needs assessments is that needs estimates for

individual elements of public infrastructure are rarely comparable. Some assessments include

only capital spending, others include both capital and operation and maintenance (O&M)

spending. Some estimates of need are developed for the purposes of short-term, fiscally

constrained spending plans, while others are developed to assess long-term needs based on

current system condition and performance, future demand, and the effects of pursuing different

policy options. Some needs assessments are for public sector spending by all levels of

government, while others focus only on federal spending. Furthermore, needs estimates are rarely

directly comparable because of differing underlying assumptions, such as those about economic

and population growth, based on when the assessment is being done and for what purpose.

Needs surveys are likely to be conducted at different times, thus will be expressed in different

years’ dollars. Comparing dollar estimates of infrastructure needs from different assessments is

difficult. Many estimates are prepared in nominal dollars for the reference year, while others,

particularly multi-year estimates, are sometimes prepared in constant dollars for a base year.

See U.S. Department of Transportation, Federal Highway Administration and Federal Transit Administration, 2006

Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance, Washington, DC, 2007, chapter

10, http://www.fhwa.dot.gov/policy/2006cpr/index.htm.

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Because there are different ways to inflate and deflate nominal dollar estimates, it should not be

assumed that dollar estimates for the same year are necessarily comparable.

Because of major differences in coverage and methodology, individual needs assessments cannot

be added together to provide a single estimate of future public infrastructure needs, despite the

political desire to do so. Moreover, as needs assessments are typically prepared separately, there

may be instances where a need for a type of infrastructure is included in more than one estimate,

resulting in double counting, and other instances of omission, resulting in undercounting. As

separately estimated, these assessments also ignore competitive and complementary situations in

which spending levels in one area may affect needs in another. For example, in the case of

transportation infrastructure, an improved freight rail line might reduce the need to improve the

highway system to accommodate truck traffic.

“Ready to Go” Projects

In September 2008 the House approved a job creation stimulus bill with $25 billion in FY2009

supplemental funding for highway, public transit, airport, passenger rail (Amtrak), wastewater

and drinking water, water resources, and public school modernization/renovation programs (H.R.

7110). Under the legislation, which failed in the Senate, most of the funding was to go to projects

that could award contracts based on bids within a certain number of days of enactment, generally

120 days. Because of the urgency of responding to the economic downturn, emphasis has been on

projects that could move to construction in 90 or 120 days, which are often referred to as “shovel

ready” or “ready to go” projects.

In an effort to support arguments for generous spending levels in a new stimulus bill, interest

groups have come forward recently with lists and estimates of “ready to go” projects. These lists

are fluid and evolving.

•

In November, the National Governors Association identified $43 billion in

“shovel ready” projects for roads ($18.9 billion), transit ($8 billion), passenger

rail ($0.5 billion), wastewater ($9.2 billion), and drinking water projects ($6.0

billion). This estimate was essentially a compilation of information from other

organizations. 35

•

In mid-December, the U.S. Conference of Mayors identified $63 billion in “ready

to go” projects in more than 400 cities. This list included nearly 9,000 projects

for highways ($24.6 billion), transit ($8.8 billion), airports ($4.5 billion),

passenger rail ($1.1 billion), wastewater and drinking water ($18.9 billion), and

schools ($4.8 billion).36 The list was 30% bigger (in dollars) than an estimate

from this group released 10 days earlier.

•

State and local water agencies have reportedly identified from $9 to $20 billion in

wastewater treatment projects and $10 billion in drinking water projects that are

““ready to go”.”37

National Governors Association, Economic Recovery: A Federal-State Partnership, November 13, 2008,

http://www.nga.org/Files/pdf/0811ECONOMICRECOVERY.PDF.

U.S. Conference of Mayors, “Ready to Go” Jobs and Infrastructure Projects, December 19, 2008,

http://www.usmayors.org/mainstreeteconomicrecovery/documents/mser-plan-20081219.pdf

Inside EPA, “States Seek over $9 Billion for Clean Water Projects in Stimulus Bill,” September 12, 2008; “AWWA

(continued...)

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•

The American Association of State Highway Transportation Officials identified

more than 5,100 road and highway projects totaling $64 billion, and the

Association of Public Transit Officials identified more than 700 transit projects

totaling $12.2 billion that are “shovel ready.”38

•

The American Public Works Association identified more than 3,600 “ready to go”

projects in 43 states totaling $15.4 billion for roads, water supply and wastewater,

and other local public works.39

It is difficult to know what to make of such estimates, since the criteria used to develop them are

largely unknown. Generally, the term “ready to go” is being used to refer to projects that lack

funding but otherwise have been designed, engineered, and have cleared environmental

permitting and other requirements, such as necessary land acquisition, and are ready to proceed.

But that is not a standardized definition found in law, regulation, or technical guidance. Arguably,

it is in the interest of those that are developing the lists to present estimates that demonstrate

significant needs. Some projects may have permits, but sponsors might lack easements to or

ownership of land in question. Experts point out that, unless a project has already been bid (a

time-consuming process), even with all permits in hand, it still may not be able to proceed in 90

or 120 days. Without a recognized methodology for vetting them, the true status of the projects

that stakeholder groups have identified is uncertain.

Many of the “ready to go” lists include estimates of job creation that is expected to result from the

identified projects. For example, the Conference of Mayors says that 790,910 jobs will be created

from the infrastructure projects on its mid-December list. The methodology for deriving these

estimates is often unstated, but in many cases is based on that used by the FHWA (discussed

above).

Two additional issues are apparent. One is whether spending undertaken as part of a stimulus

program will represent investment in long-term assets for society. Some of the lists prepared by

stakeholder groups identify projects with some description (for example, the Conference of

Mayors list), but others only identify state-by-state project totals. Critics contend that lists of

“ready to go” projects are likely to include many with marginal value, such as projects with plans

that have been backlogged for some time because they lack sufficient merit, but for which there

now is an opportunity to get funding. Under a stimulus program, the majority of actual funding

decisions will be made by state and local officials with responsibility for determining priorities.

Proponents believe that citizens will hold public officials accountable for the quality of projects.

A second issue, related to the first, concerns the tension between funding activities that will create

jobs quickly and the desire to invest in projects that will have sustained value. This also relates to

the issue of timing, discussed previously. Critics worry that projects will be small and won’t solve

(...continued)

Members Asked to Contact Congress on Drinking Water Infrastructure and Stimulus Bill,”

http://www.awwa.org/Government/Content.cfm?ItemNumber=3821&navItemNumber=1618.

American Association of State Highway and Transportation Officials, AASHTO State Survey Ready to Go Highway

and Bridge Infrastructure Projects, December 5, 2008, http://www.transportation.org/sites/”ready to go”/docs/Readyto-Go%20Survey12-09.pdf; American Public Transit Association, Legislative Update: Economic Stimulus Package

Remains Under Consideration, December 11, 2008,

http://www.apta.com/government_affairs/washrep/documents/2008december11.pdf

American Public Works Association, Ready to Go Local Public Works Projects, November 2008.

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long-term problems or have strategic value. One such critic of additional infrastructure spending

noted, “If additional infrastructure is worthwhile, it should be constructed. Such determinations

are most likely to be accurate, however, when they are made without the haste associated with an

attempt to respond to economic weakness.”40

Proponents of a new stimulus program can be expected to try to balance the dual objectives of

spending money quickly and investing for the long-term. Some types of public jobs programs

may support jobs that have little long-term impact, such as hiring workers to sweep streets or rake

leaves, sometimes called “make work.” Projects that involve substantial new construction are

slower to complete and to impact jobs, but often have a political appeal because of high visibility

to the public. Some infrastructure, such as highway resurfacing and minor road repairs or

replacement of pumps and compressors at water facilities, does benefit the value of the nation’s

capital assets and can be done more quickly than new construction. Likewise, acquiring new

clean fuel buses or rehabilitating transit stations can occur more rapidly than extending collector

sewer lines into unsewered communities. Many public officials are hoping that there will be room

in an emerging stimulus program for both short-term and long-term infrastructure projects.

Getting the Job Done: Resource and Governance Issues

Two additional issues are important in considering how infrastructure stimulus spending is done.

One is whether there will be adequate labor and other resources available to supply activities on

the scale that some now contemplate. The other is how policymakers will ensure accountability

for federal funds that will be spent.

Currently, the state of the U.S. economy is such that there is excess capacity of both labor and

materials for infrastructure projects. Large number of workers are unemployed, especially in the

construction sector, which reported a 12.1% unemployment rate in November 2008.41 It is widely

believed that a large number of those workers (many of whom had been employed in residential

construction) could be employed on infrastructure construction projects, but how transferable

those skills are to infrastructure projects is an open question. There is unlikely to be total

substitutability, that is, unemployment will not disappear. It is possible, however, that some skills

or expertise could become scarce, as a result of increased demand due to greater construction

activity in multiple sectors.

The same is true regarding materials used in construction. Industry officials believe that supplies

of materials such as concrete and steel, and equipment such as pipes and valves, are adequate to

meet additional demand, or will be available when needed. As with labor, however, it is an open

question whether greatly increased demand across multiple sectors will lead to some scarcities.

Resource issues also encompass the capacity of government to oversee projects that will be

undertaken through a stimulus program. Some stakeholder groups advocate a stimulus program in

which funds are directly disbursed by the federal government in the form of grants to project

sponsors. This would differ from the current practice of most infrastructure assistance programs

Alan Viard, Resident Scholar, American Enterprise Institute, Testimony before the U.S. House Committee on Ways

and Means, Hearing on Economic Recovery, Job Creation and Investment in America, October 29, 2008,

http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7468.

U.S. Department of Labor, Bureau of Labor Statistics, “Employed and unemployed persons by occupation, not

seasonally adjusted,” December 5, 2008.

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in which federal funds are provided to states, and they in turn select qualified projects and

distribute monies locally. Some local government groups contend that state agencies are slow to

make decisions and award funds, thus frustrating the goal of stimulating economic activity

quickly. Unsurprisingly, states prefer that stimulus funds be allocated and distributed according to

established selection and delivery mechanisms that include criteria for project priorities and

eligibilities and contain fiscal safeguards, such as auditing requirements. Altering such procedures

would be highly disruptive, states say.42 If a stimulus program were to feature direct federal

grants, federal agencies would face significant additional grants management responsibilities for

which most are likely to be unprepared.

Another concern of some stakeholder groups is with programmatic and other requirements that

typically apply to receipt of federal assistance. These range from program-specific planning

mandates, procurement rules, and set-asides for purposes such as assisting economically

disadvantaged communities, to cross-cutting requirements dealing with a variety of

environmental, social, economic, and other issues, such as compliance with the Clean Air Act,

Civil Rights Act of 1964, and the Davis-Bacon Act. These cross-cutting requirements promote

and regulate national policy goals such as equal employment opportunity or protection of

endangered species. Some groups contend that it would be appropriate to suspend these

requirements in order to facilitate project spending, but not all are likely to support doing so.

Waiving existing rules and policies that govern financial assistance programs could be seen as

undercutting the numerous policy objectives that the requirements are intended to meet. Further,

projects that are considered ““ready to go”” in terms of planning, design, etc. arguably have

already complied with all or most of these requirements, so waiving them may not affect project

timing.

State match requirements present a different issue, according to some groups. They propose that

Congress temporarily waive requirements in some programs that states must match a percentage

of the federal funds that they receive with non-federal money. For example, the federal programs

that provide assistance for highways, drinking water projects, and wastewater treatment plant

construction require a 20% state match to ensure that states have a fiscal investment in projects

and to enlarge the available pool of funds that can be disbursed to localities.43 Because state

budgets already are severely pressed by the recession, many argue that they do not have the fiscal

resources for this type of match, especially if a stimulus program provides a much larger amount

of funds than states have recently been receiving.44

The overriding governance issue, for all levels of government, is ensuring accountability for

funds that will be spent through a stimulus program. The amounts of federal dollars committed to

such a program are likely to be enormous (some advocates are proposing $850 billion or more in

total stimulus, to include as much as $350 billion for infrastructure) and other direct spending,

making it particularly important for the public to be assured that decisions involving public

“EPA, States Weigh Easing SRF Rules to Speed Stimulus Spending,” Inside EPA, December 19, 2008.

The state match also benefits jobs. For example, the FHWA employment impacts estimates, discussed on page 7,

indicate that if states are required to include a 20% match, then $1 billion in federal funds supports 34,779 direct and

indirect jobs, or 6,979 more jobs than if no state match is required.

The Clean Water Act’s wastewater assistance program provides an example. FY2008 funding for this program

totaled $689 million; it was allocated among the states by formula. If a state was allocated $50 million of the total, it

was required to provide a $10 million match H.R. 7110 (110th Congress) would have provided $6.5 billion in FY2009

supplemental funds for the Clean Water Act program. The same state that received $50 million in FY2008 would have

received $470,775,500 under H.R. 7110 and would be required to provide a 20% match totaling $94,155,100.

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dollars are made quickly yet with transparency, that investments are made in quality projects, and

that projects have adequate oversight. One group, Building America’s Future, recommends that

states and cities should have to track and report on how the money is spent and how many jobs

are created.45 How this issue will be addressed legislatively is unknown for now.

Is There a Role for “Green Infrastructure” as Part of Economic

Stimulus?

President-elect Obama’s agenda includes plans to “create millions of green jobs” through a

variety of actions, such as increased use of renewable sources of electricity (i.e. wind and solar),

home weatherization, and development and implementation of “next generation” vehicles.46 The

concept that he and others advocate is, broadly speaking, to couple growing the economy and

creating jobs with investments that will promote clean energy and environmental protection.

Several interest groups have stepped forward with proposals for inclusion in a stimulus package.

Among these, the Center for American Progress (CAP), a public policy and research think tank,

has recommended green investment projects totaling $100 billion as part of “A Strategy for Green

Recovery.”47 Also, the Apollo Alliance, a coalition of labor, environmental, business, and

community leaders, has proposed a 10-year, $500 billion program to create five million “green”

jobs.48

Several questions arise concerning these proposals. First, what, exactly, is “green infrastructure?”

The term is less precisely defined than is traditional infrastructure (see page 8), which some

“green” advocates now refer to as “gray infrastructure.” It has been defined as “strategically

planned and managed networks of natural lands, working landscapes and other open spaces that

conserve ecosystem values and functions and provide associated benefits to human populations,”

including natural elements such as wetlands and grasslands.49 For example, it describes the

management of stormwater runoff through the use of natural systems, or engineered systems that

mimic natural systems, to treat polluted runoff before it reaches streams or lakes. But in the

current context of economic stimulus, the term extends more broadly to include support for

constructing the manufacturing infrastructure to develop and commercialize various technologies

that are more energy efficient (e.g, advanced vehicle batteries) or more environmentally friendly

(e.g, investments in renewable energy sources and the electricity grid to transmit and distribute

clean energy). Particular attention has been given to mass transit projects that can decrease energy

consumption and reduce global warming pollution and other projects such as retrofitting schools

and public buildings to use clean energy.

“Building America’s Future Applauds President-elect Obama’s Commitment to Infrastructure,” December 6, 2008,

http://investininfrastructure.org/newsroom/12-6-08_response_to_obama.pdf. Building America’s Future is a coalition

created by California Governor Schwarzenegger, Pennsylvania Governor Rendell, and New York City Mayor

Bloomberg to advocate on infrastructure issues.

http://change.gov/agenda.

Will Straw and Michael Ettlinger, How to Spend $350 Billion in a First Year of Stimulus and Recovery, Center for

American Progress, December 5, 2008, pp. 12-14,

http://www.americanprogress.org/issues/2008/12/pdf/second_stimulus.pdf.

Apollo Alliance, Data Points: Economic Outcomes of The Apollo Economic Recovery Act, 2008,

http://apolloalliance.org/apollo-14/data-points-the-new-apollo-program-fact-sheet/.

http://www.greeninfrastructure.net/content/definition-green-infrastructure.

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A second question is, can investment in “green” projects occur quickly enough to help stimulate

the economy out of the current recession? That is, are there “ready to go” “green” projects? As

previously discussed, the key to stimulus spending is to get funds moving quickly into the

economy. However, many of the proposals by green economy proponents were not conceived for

the purpose of quickly stabilizing or increasing the number of jobs in the nation, or in industries

particularly hard hit by the current recession. Studies like that of CAP recommend categories of

projects to create green jobs, such as full funding of federal energy-efficiency programs, which

“can start stimulating the economy relatively rapidly” and others, such as new authorization for

grants to states to support manufacturing plant retooling to produce clean and energy-efficient

technologies, that are “less fast-acting.” Eighty percent of CAP’s recommended funding would be

for “less fast-acting” programs.50 Critics say that the types of “green” projects under discussion

are pricey and would do little to stimulate the economy quickly, but proponents contend that

“green” investments represent a downpayment on long-term economic growth and should be

done even over a somewhat longer time period.

One environmental advocacy group, American Rivers, reportedly has identified 194 water-related

green infrastructure projects totaling $1.1 billion that are “ready to go” within six to nine months.

The types of projects include installing green roofs, raingardens, and permeable pavement that

can reduce the need for new wastewater treatment plants and stormwater and sewer pipes;

restoring wetlands and natural floodplains; and planting urban forests.51

A final question is, what is the job creation potential of “green infrastructure”investments?

Although all stimulative spending ultimately increases labor demand, the first round effects vary

by the type of spending. This question is addressed in a recent CRS report. According to the CRS

analysis,52 estimating the number of jobs dependent upon green infrastructure activities presents a

greater challenge than estimates related to infrastructure projects as traditionally defined. The

basis for most data collection by U.S. statistical agencies is the North American Industry

Classification System (NAICS). It currently does not identify separately so-called green

industries (e.g., those that utilize renewable resources to produce their outputs, or those that

manufacture goods which minimize energy use). Within NAICS, the electric utility industry is

disaggregated into hydroelectric, fossil fuel, nuclear, and other power generation, transmission,

and distribution. Such renewable sources of energy production as wind, solar, and biomass are not

uniquely recognized; they are included in the "other" category. If harnessing the wind to produce

electricity and plant material to produce biofuel requires a substantially different mix of inputs

than relying on coal and gasoline, for example, the conventional input-output (I-O) model does

not seem well-suited as a basis for estimating the number of jobs supported by these green

activities. Similarly, within NAICS, the building construction industry does not have a unique

category for “green” retrofitting (e.g., installing additional insulation, fluorescent lighting, or

energy-efficient heating and air-conditioning systems). Retrofitting likely requires a combination

of inputs from supplier industries that differs from the mix for the top-to-bottom construction of

buildings, once again making use of conventional I-O models problematic.

Will Straw and Michael Ettlinger, How to Spend $350 Billion in a First Year of Stimulus and Recovery, Center for

American Progress, December 5, 2008, pp. 12-14,

http://www.americanprogress.org/issues/2008/12/pdf/second_stimulus.pdf.

http://www.wwn-online.com/articles/69929/.

CRS Report R40080, Job Loss and Infrastructure Job Creation During the Recession, by (name redacted).

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This recognized difficulty generally is either not mentioned, or how it is dealt with is not

described, in analyses of green job creation, according to the CRS report. The CAP study,

mentioned above, does address the problem. The researchers explain that because "the U.S.

government surveys and accounts that are used to construct the input-output tables do not

specifically recognize wind, solar, biomass, building retrofitting, or new mass transit as industries

in their own right," they created synthetic industries by combining parts of industries for which

data are available. The researchers provided an example in the case of the biomass "industry:"

they constructed it by combining the farming, forestry, wood products, and refining industries;

then they "assigned relative weights to each of these industries in terms of their contributions to

producing biomass products."53

As discussed in CRS Report R40080, Job Loss and Infrastructure Job Creation During the

Recession, further complicating the matter is the context and manner in which estimates of green

jobs generally are presented. Studies often develop employment projections based on differing

sets of assumptions and time horizons. For example, some attempt to estimate the number of

direct and indirect jobs 10 or more years in the future that are supported by an assumed increase

in the demand for energy that is met by an assumed shift during the projection period from coal to

wind and geothermal power generation. Some reports also include induced employment (see

“Infrastructure Job Creation” above), but this is not always made clear. In addition, some analyses

relate to a particular state. Their results may not be generalizeable to other areas, because state

economies have different mixes of industries and may not be able to provide any or all of the

inputs for a particular green output. The analyses also may express job estimates per unit of

power generated by renewable resources and saved by increased demand for energy-efficient

products and equipment, rather than per dollar of investment in green activities. And, the

assumptions and methodologies underlying the job creation estimates often are not clearly

articulated, which makes thoughtful review of the results very difficult. For these reasons,

policymakers considering which if any green infrastructure programs to fund to create and

preserve jobs in the near term to mitigate the recession's impact on U.S. workers may not find

helpful many green economy studies.

Robert Pollin, Heidi Garrett-Peltier, and James Heintz, et al., Green Recovery: A Program to Create Good Jobs and

Start Building a Low-Carbon Economy, Center for American Progress, Washington, D.C., September 2008, p. 20,

http://www.americanprogress.org.

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Appendix. Infrastructure Sector Categories

This Appendix provides descriptions of a number of infrastructure categories that have recently

been mentioned for inclusion in economic stimulus legislation in the 111th Congress. The sectors

are highways and bridges (page 22), transit (page 23), airports (page 25), passenger rail (page 27),

water resources (page 30), wastewater (page 32), drinking water (page 34), electric transmission

(page 36), schools (page 39), federal public buildings (page 41), and broadband (page 42).This

list is not meant to be exclusive or definitive of categories that Congress and the Administration

may consider. Evolving legislative proposals may include assistance for some or all of these, and

could include others, as well. The descriptions include information on conditions, performance,

and funding needs of each category; recent federal assistance; discussion of investment in each

category as a mechanism for economic stimulus; and identification of other key issues for the

sector. Table A-1 summarizes the level(s) of government and/or the private sector that typically

are responsible for financing, policy, and standard setting for the infrastructure categories

described in the Appendix.

Table A-1. Usual Lead Roles in Infrastructure Categories

Category of Public

Works

Capital Financing

Ownership, Operations

and O&M Financing

Public Works Policy

and Standard Setting

Highways and Bridges

- interstate

- non-interstate

Federal/State

State/Local/Federal/Private

State

State/Local/Private

Federal

State/Local

Transit

State/Local/Federal

Local/Private

Local/Federal

Airports

Local/Private/Federal

Local/Private

Local/Federal

- ports (landside)

- navigation/dredging

- major dams

- nonfederal dams

- levees/flood protection

Local/Private

Federal/Private

Federal/Local/Private

Private/Local

Local/Private/Federal

Local/Private

Federal/Private

Federal/Local/Private

Private/Local

Local/Private

Local/Federal

Federal

State

Federal

Passenger Rail

Federal/Amtrak/State

Federal/State

Wastewater

Local

Federal/State

Drinking Water

Local/Private

Federal/State

Electric Transmission

Private/Federal/Local

Federal/State

Schools

Local

Local/State

Federal Public Buildings

Federal

Broadband

Private

Federal

Water Resources

Source: Exhibit IV-2 in National Council on Public Works Improvement, Fragile Foundations: A Report on

America’s Public Works, Final Report to the President and the Congress, Feb. 1988, modified and updated by CRS.

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Highways and Bridges54

There are almost 4 million miles of highways in the United States.55 The vast majority of these

highways are owned and operated by state and local governments, 20.4% and 76.5% respectively.

Only 3.1% of highway mileage is federally owned and almost all of this mileage is in national

parks, national forests, military bases, and other federal facilities. Just over 75% of U.S. highways

are in rural areas, but these highways carry only 35.9% of total traffic as measured by vehicle

miles traveled (VMT), and of this rural total almost half is on rural interstate highways and other

major arterial highways. Conversely, the much smaller urban highway system carries fully 64.1%

of all traffic, with urban interstates alone accounting for 15.4% of the total. The U.S. highway

system has almost 600,000 bridges. Again, state and local governments own and operate almost

all of the bridges in the U.S. system. As is the case for the highway system, a relatively small

number of bridges carry the bulk of national traffic. Interstate highway bridges and bridges on

arterial highways carry almost 90% of average daily traffic (ADT), with urban interstate bridges

alone carrying almost 35% of ADT.

Conditions, Performance, and Funding Needs

There is broad consensus in the transportation community that U.S. highway and bridge

infrastructure is in need of considerable investment in the years ahead, largely to accommodate

future growth in passenger and especially freight traffic. This need exists in spite of the fact that

increased federal, state, and local spending over the last decade and a half has, according to the

Department of Transportation, generally resulted in measurable improvement to the condition and

performance of much of the nation’s highway and bridge system. This improvement has been

particularly notable for bridges, where the number of structurally deficient bridges was cut almost

in half between 1990 and 2007. According to a 2007 report by a congressionally established

commission, spending on surface transportation by all levels of government needs to average

somewhere between $145 billion and $276 billion per year depending on whether the goal is to

maintain the existing system at a high level or expand the system to facilitate system growth.56

This compares with expenditure of $68 billion on surface transportation nationwide in 2007. It

should be pointed out, however, that there are other estimates of need that are considerably below

the levels espoused by the Surface Commission.

Federal Assistance

The federally operated, state administered, federal-aid highway program is the major conduit for

federal funding of surface transportation infrastructure. FY2009 authorizations for this program

amount to almost $42 billion. The majority of funding in the federal-aid program is provided

through seven formula programs (also referred to as apportioned programs). Among these is a

separate bridge program. Because of transferability and flexibility provisions in the program,

states have considerable leeway in spending funds for various types of surface transportation

Prepared by (name redacted), Specialist in Transportation Policy.

U.S. Department of Transportation. Federal Highway Administration and Federal Transit Administration, 2006

Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance, Washington, DC, 2007,

http://www.fhwa.dot.gov/policy/2006cpr/.

National Surface Transportation Policy and Revenue Study Commission, Transportation for Tomorrow. Washington,

D.C. December 2007, http://www.transportationfortomorrow.org/final_report/.

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infrastructure. The existing federal-aid program was last authorized in FY2005, and this

authorization expires at the end of FY2009. Legislation reauthorizing the program is likely to be

considered during the 1st Session of the 111th Congress, and this issue is still expected to dominate

the congressional transportation agenda during the year ahead. 57

Highways and Bridges as a Mechanism for Economic Stimulus

Building and repairing highway and bridge infrastructure is often seen as a way to put people and

assets to work constructively and to create economically valuable assets during a recessionary

period. The principal argument against infrastructure spending is that it tends to be countercyclical, meaning that the slow spending nature of many large infrastructure projects is such that

the benefit to the economy does not arrive in full measure until after the recession is largely over.

For example, large bridge and highway construction projects often take multiple years to plan and

construct. Transportation industry groups counter this argument in part by pointing out that there

is an existing backlog of projects in the states that are “ready to go” and could put people and

assets to work in short order. The American Association of State Highway and Transportation

Officials (AASHTO), the principal interest group for this sector, has compiled a list of over 5,200

projects that it believes could be started quickly, creating a significant number of new jobs in the

process.58 According to AASHTO and others, focusing on these projects would make a significant

dent in the existing national backlog of projects that could not be constructed for many years if

their funding was to rely on the current federal-aid highway program.

Issues for Highways and Bridges

There is some concern that using “ready to go” project lists will not result in building the most

important infrastructure and will not necessarily build it in the places most impacted by the

ongoing recession. 59 For example, Utah is identified as having the largest share of projects in the

AASHTO “ready to go” list, yet unemployment is below the national average in that state. There

also are concerns that there are insufficient resources, labor, management, equipment, materials,

etc., to allow for speedy spending of stimulus funds. An additional concern is that many states

have announced cutbacks in infrastructure spending due to their own budget problems. As a

result, the extent to which stimulus spending might serve as a substitute for foregone state

spending is unclear, thus raising questions about whether the stimulus will provide the levels of

infrastructure improvement and jobs that are expected by proponents.

Transit60

Public transit infrastructure includes the track, stations, vehicles, and associated facilities and

equipment owned and operated by more than 6,000 transit providers in urban and rural areas. The

main forms of public transit service, known as “modes,” are bus, heavy rail (subway and

elevated), commuter rail, light rail, paratransit (also known as demand response), and ferryboat.

About 60% of transit trips are made by bus, followed by heavy rail (29%), commuter rail (4%),

For further information on the program and reauthorization, see CRS Report R40053, Surface Transportation

Program Reauthorization Issues for the 111th Congress, coordinated by (name redacted).

AASHTO. Press Release, “5,000 Ready-To-Go Projects Could Put Millions to Work” December 5, 2008.

Leonhardt, David, “Piling up Monuments of Waste,” The New York Times, November 19, 2008.

Prepared by (name redacted), Specialist in Transportation Policy.

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and light rail (4%). Demand response accounts for a little more than 1% of all transit trips, and

ferryboat a little less than 1%.61

Conditions, Performance, and Funding Need

As a result of increases in overall government spending over the past decade, transit service

provision has grown, and the condition and performance of transit systems have generally

improved. Nevertheless, in its most recent assessment of transit needs, the Department of

Transportation estimated that the capital cost to maintain the current condition and operational

performance of transit systems in the United States from 2005 through 2024 is 25% more

annually than is currently being spent by all levels of government. In 2004, transit capital

spending by all levels of government was $12.6 billion, $3.2 less than the $15.8 billion that DOT

estimated will be needed annually over the next 20 years.62

Federal Assistance

The federal transit program administered by DOT’s Federal Transit Administration (FTA) is a

collection of individual programs, each with different funding distribution mechanisms and

spending eligibility rules. The two major transit programs are the Urbanized Area Formula Grants

Program and the Capital Investment Program. Of the $10.4 billion authorized by SAFETEA (P.L.

109-12) for transit programs in FY2009, the Urbanized Area Formula Program accounts for about

40% of the total ($4.2 billion), and the Capital Investment Program accounts for 43% ($4.5

billion). The Capital Investment Program has three elements, the Bus and Bus Facilities Capital

Program, the Rail Modernization Program, and the New Starts Program that are funded on a

roughly 20-40-40 percentage share of program funds respectively. The remaining 17% of federal

transit monies ($1.7 billion) authorized by SAFETEA in FY2009 funds several other programs,

such as the Other Than Urbanized Area Formula Program (commonly referred to as the Rural

Formula Program), the Elderly Individuals and Individuals with Disabilities Formula Program,

the Jobs Access and Reverse Commute Program, as well as state and metropolitan planning,

research, and FTA operations. Although federal transit programs focus on supporting capital

expenses, about 30% of federal funding goes for operational expenses.

Transit as a Mechanism for Economic Stimulus

There were a number of proposals in 2008 for federal transit spending in addition to funding

already authorized. Early on these proposals had to do mainly with helping transit agencies cope

with an increase in fuel prices that caused a jump in operating costs and demand. Later in the

year, as the poor health of the economy became more apparent, proposals were geared more

toward economic stimulus and job creation. In October, the American Public Transportation

Association (APTA) identified 559 “ready to go” projects worth about $8 billion, projects that

could begin within 90 days of funding availability. In a second survey in mid-December, APTA

American Public Transportation Association, 2008 Public Transportation Fact Book, Washington, DC, June 2008,

tables 5 and 54, http://www.apta.com/research/stats/factbook/documents08/2008_fact_book_final_part_1.pdf.

U.S. Department of Transportation, Federal Highway Administration and Federal Transit Administration, 2006

Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance, Washington, DC, 2007,

http://www.fhwa.dot.gov/policy/2006cpr/index.htm.

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identified 736 projects worth $12.2 billion. 63 In a U.S. Conference of Mayors report published in

mid-December, 726 “ready to go” transit projects worth $8.8 billion were identified. 64

A general criticism of surface transportation infrastructure funding as economic stimulus is that it

tends to spend out slowly, and it is thought that transit funding generally tends to spend out more

slowly than highway funding. Another issue is that many “ready to go” projects identified by

APTA and the Conference of Mayors are for bus and rail vehicle purchases, manufacturing that is

dominated by foreign companies. Thus, despite domestic content requirements for foreign made

vehicles bought using federal funds, some transit capital spending may not create as many jobs in

the United States as hoped. 65 Some might also question the historic bias in the federal transit

program toward capital rather than operating expenditures, when research suggests that operating

expenses tends to create more jobs, more quickly.66 Another issue is whether federal spending

will merely replace rather than supplement state and local level spending, reducing the

effectiveness of stimulus spending. A final issue is whether a large increase in transit spending

will improve transit service where it is most needed and encourage new ridership, or alternatively

will result in little used facilities that require long-term government support.

Issues for the Transit Sector

Despite rising patronage over the past decade, government’s share of transit industry expenses has

continued to rise. Fares and other operating revenue now cover only about 30% of industry costs.

A long term issue for the transit industry, therefore, will be how to improve service and attract

new riders without requiring substantially more support from federal, state, and local government.

In terms of federal support for transit, one of the biggest challenges over the next few years will

be the amount of funding available from the Highway Trust Fund. The Mass Transit Account of

the Highway Trust Fund is the source of approximately 80% of federal transit program monies,

with the remaining 20% drawn from the general fund of the U.S. Treasury. Although the transit

account is in somewhat better financial shape than the Highway Account, it is clear that current

revenue into the transit account will not sustain FTA programs and activities at current levels.

Airports67

Civil aviation public infrastructure is composed mostly of airports and air traffic control facilities.

Only airports will be discussed in this section. Overall, only about one-quarter of airports are

publicly owned, typically by state and local governments, yet these airports represent the vast

majority of utilized airport capacity, particularly that used for commercial aviation operations.

Privately owned airports predominantly serve general aviation. According to the Federal Aviation

American Public Transportation Association (APTA), “Public Transportation Projects Will Create Thousands of

Jobs,” Transit News, October 29, 2008; and APTA, “Now is the Time for a Transportation Policy with a New Vision

that Creates Economic Prosperity, Promotes Energy Independence, and Reduces our Nation’s Carbon Footprint,”

Transit News, December 18, 2008.

U.S. Conference of Mayors, Mainstreet Economic Recovery, “Ready to Go” Jobs and Infrastructure Projects,

December 19, 2008, http://www.usmayors.org/mainstreeteconomicrecovery/documents/mser-plan-20081219.pdf.

“Growing Stimulus Raises Many Questions,” Transportation Weekly, December 18, 2008.

Brian D. Taylor and Kelly Samples, “Jobs, Jobs, Jobs: Political Perceptions, Economic Reality, and Capital Bias in

U.S. Transit Subsidy Policy,” Public Works Management and Policy, vol. 6, no. 4 (April 2002), pp. 250-263.

Prepared by (name redacted) and (name redacted), Specialists in Transportation Policy.

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Administration (FAA), there were 20,341 airports in the United States at the end of 2007.68 Of

these, 5,221 were civil public use airports, with a more limited nationally significant 3,411

airports in the FAA’s current National Plan of Integrated Airport Systems (NPIAS) and therefore

eligible to receive Airport Improvement Program (AIP) grants.

Conditions, Performance, and Funding Needs

According to the FAA’s NPIAS, the estimated capital needs of airports from 2009 through 2013 is

$49.7 billion (in 2008 dollars), approximately $9.9 billion a year.69 The estimates contained in the

NPIAS do not include projects that are ineligible for AIP funding. A more comprehensive

accounting of airport project costs by the Government Accountability Office estimates the costs

of airport capital development for the period 2007 through 2011 to be $14 billion a year (in 2006

dollars).70

FAA’s estimate of airport infrastructure needs, as contained in the NPIAS, are obtained from

airport master and state system plans and are reviewed for AIP eligibility and conformity with

FAA forecasts of aviation activity. The GAO estimate is based on FAA’s estimate of capital needs

contained in the NPIAS, but also includes capital projects that are not included in the NPIAS, e.g.

projects that are ineligible for federal grants under the AIP.

Federal Assistance

GAO calculated that public spending on airport capital improvements averaged about $13 billion

per year between 2001 and 2005 (in 2006 dollars). Of this amount, $3.6 billion per year was

funded from the federal Airport Improvement Program (AIP), $6.5 billion from airport bonds,

$2.2 billion from the Passenger Facility Charge (PFC, a local tax levied by an airport), and $0.7

billion from state and local contributions. 71 The AIP is funded entirely from the Airport and

Airway Trust Fund.

Airport and Air Traffic Control Investment as a Mechanism for Economic

Stimulus

In a letter to the leadership of Congress on December 10, 2008, 12 aviation interest groups called

on Congress to add $1 billion to the AIP program for stimulus purposes. According to these

groups such an additional investment would “provide needed stimulus to both cities and rural

communities in all 50 states,” and in the process create 35,000 high paying jobs (although it is

unclear how this number was derived). 72 In a separate letter on December 31, 2008, to Senator

Federal Aviation Administration, Administrator’s Fact Book, Washington, DC, July 2008,

http://www.faa.gov/about/office_org/headquarters_offices/aba/admin_factbook/media/July_2008_Fact_Book.pdf.

U.S. Department of Transportation, Federal Aviation Administration, National Plan of Integrated Airport Systems

(NPIAS), 2009-2013, Washington, DC, 2008,

http://www.faa.gov/airports_airtraffic/airports/planning_capacity/npias/reports/media/2009/npias_2009_narrative.pdf.

U.S. Government Accountability Office, Airport Finance: Observations on Planned Airport Development Costs and

Funding Levels and the Administration’s Proposed Changes in the Airport Improvement Program, Washington, DC:

June 2007, GAO-07-885, http://www.gao.gov/new.items/d07885.pdf.

Ibid.

http://www.aci-na.org/static/entransit/ga_joint_stimulusletter_dec08.pdf.

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Harry Reid, the American Association of Airport Executives stated that “the FAA has indicated

that $1.7 billion could be used for “ready to go” projects – projects that can be bid and under

contract within 180 days.”73 In addition to these estimates, numerous U.S. airports have asked

that projects at their airport be considered for stimulus spending.

Issues for the Air Transportation Sector

Infrastructure needs for airports are expected to increase because air traffic is expected to grow

significantly over the next few decades. FAA forecasts that revenue passenger enplanements will

grow from 765 million in 2007 to 1,293 million in 2025, an average annual increase of 3.0%.74

Estimating infrastructure needs, however, presents a number of difficulties. Predicting the future

is difficult and, although the FAA has a reasonably good record for accuracy in its activity

forecasts, the FAA itself has pointed out that since the events of 9/11, the instability of the

industry has led to larger errors in the agency’s short-term forecasts.75 The recent unpredictability

of fuel prices, a major component of aviation business costs, also brings a degree of uncertainty to

aviation forecasts. In addition, the issue of quality versus quantity arises when considering airport

stimulus spending. Approximately 73% of all airline enplanements takes place at the nation’s 35

busiest airports. Obviously, anything that can be done to increase capacity and decrease delays at

these airports has a significantly greater impact on national aviation connectivity than is the case

at non-congested airports. In recent years the FAA has tried to emphasize funding infrastructure

projects at these airports as part of its Operational Evolution Plan (OEP). Public discussions of

airport stimulus spending thus far make it unclear whether and/or how prioritization of funding

requests from a national benefit perspective will be part of the decision-making process for the

distribution of additional AIP assistance.

Passenger Rail76

Amtrak is the nation’s only provider of intercity passenger rail service. It operates trains over a

network covering around 22,000 miles, 97% of which is owned by freight rail companies. The

portion of the network that Amtrak owns, the Northeast Corridor (the NEC, running from

Washington, D.C. through New York City to Boston), includes some of the most heavily used

sections of track in the nation, shared by Amtrak, commuter rail operations, and freight

operations. Amtrak was created in 1970 by the federal government to preserve some intercity

passenger rail service while allowing private railroad companies to discontinue their moneylosing passenger rail service. Amtrak is structured as a private company, but virtually all of its

stock is held by the federal government.

http://www.aaae.org/_pdf/_govpdf/12-18-08%20Stimulus%20II.pdf.

U.S. Department of Transportation, Federal Aviation Administration, Aerospace Forecasts, Fiscal Years 2008-2025,

Washington, DC, 2008, http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/20082025/media/2008%20Forecast%20Document.pdf.

U.S. Department of Transportation, Federal Aviation Administration,, Aerospace Forecast Fiscal Years 2006-2017,

Washington, DC, 2006, p. 51, http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/20062017/media/FAA%20Aerospace%20Forecast.pdf.

Prepared by (name redacted) and (name redacted).

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Conditions, Performance, and Funding Needs

Most of Amtrak’s infrastructure was built over 100 years ago, and much of its equipment is over

30 years old. Due to perennial financial problems, Amtrak has regularly deferred investments in

maintaining its infrastructure; it now has an estimated $5-$6 billion backlog in deferred

maintenance. This estimate does not include the cost of major improvement projects.

Speed and reliability are two key features of modern intercity passenger rail service, neither of

which Amtrak is able to offer. In many other countries, electrified trains run on dedicated routes

offering gentle curves and no intersections where roads cross railways at the same level (“atgrade crossings”). This permits average speeds between stations of 125 miles per hour (mph) or

more, with top speeds of 175 mph or more, and good on-time performance. Amtrak’s only “highspeed” electrified line, the NEC, still follows the alignment laid out over a century ago, and still

has curves and several at-grade crossings that restrict speeds. As a result, the average speed of

Amtrak’s high-speed Acela service even between Washington, D.C. and New York City, where

there are no grade crossings, is around 80 mph. In the rest of the country, Amtrak operates over

freight rail lines, where Amtrak’s maximum speed is generally limited to no more than 79 mph.

Although federal law provides that Amtrak is to be given operating priority over freight trains,

Amtrak nevertheless experiences many delays due to freight rail operations, as well as

breakdowns of Amtrak’s aging equipment. Amtrak’s system-wide on-time performance ratio was

71% in FY2008; even on its flagship Acela route, on the NEC where Amtrak controls the

operations of all trains, on-time performance was only 85%.77

Amtrak maintains a transcontinental network with service in 47 states, but it only captures a

measurable share of intercity travel in a handful of relatively short corridors. About 39% of

Amtrak’s ridership occurs on the NEC while another 46% of ridership occurs on relatively shortdistance corridors in other parts of the country. Nationally, Amtrak captures 0.8% of intercity trips

over 100 miles, less than half the market share of intercity bus service (which captures 2.1%).78

Amtrak has been successful in competing with air passenger service between two city pairs in the

NEC. Slightly more people ride Amtrak than fly between Washington, D.C. and New York City

(56% to 44%) while slightly fewer ride the train than fly between New York City and Boston

(41% to 59%).79 However, Amtrak captures only 5% of the air-rail travel market between

Washington, D.C. and Boston. Even though Amtrak has been competitive with the airlines

between many city pairs along the NEC, its real competitor is the automobile. For trips between

50 and 499 miles one way, Amtrak and the airlines combined capture only 2.4% of the market

while personal vehicles capture over 95% of the market.80

Amtrak, Monthly Performance Report for September 2008, “On-Time Performance Report,” p. E-7,

http://www.amtrak.com/pdf/0809monthly.pdf.

U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation

Statistics (BTS), National Household Travel Survey, “America on the Go,” May 2006, p. 6. (Survey conducted in

2001-2002.)

Amtrak’s FY2009 Grant and Legislative Request, p. 12. The road distance between Washington, D.C. and New York

City is about 240 miles, the road distance between New York City and Boston is about 210 miles, and the road distance

between Washington, D.C. and Boston is about 440 miles.

BTS, National Household Travel Survey, “America on the Go,” May 2006, p. 7.

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Federal Assistance

Railroad companies lost money on intercity passenger rail service before Amtrak was created, and

Amtrak has continued to lose money offering that service. As a result, since its creation in 1970

Amtrak has relied on federal assistance to support its operations. In recent years, Congress has

provided around $1.3 billion annually to support Amtrak. The Passenger Rail Investment and

Improvement Act of 2008 (P.L. 110-432) authorized significant increases in Amtrak funding,

about $2.4 billion per year through FY2013. Congress also directed the DOT to issue a request

for proposals from the private sector for the development of high-speed rail in 11 federally

designated corridors. Because there is no dedicated user fee mechanism to raise revenue for rail

investments, as there is for other transportation modes, Amtrak must compete with other funding

priorities from the General Treasury. There is no guarantee that Congress will appropriate funding

at levels close to the amount that it authorized in the recently enacted authorization bill.

Railroad Investment as a Mechanism for Economic Stimulus

While the Federal Highway Administration has attempted to evaluate road building as an

economic stimulus tool by estimating resulting job creation and the timing of federal outlays,

similar analysis specific to the rail sector is not available. However, some of the factors applicable

to road building would appear equally applicable to the rail sector: winter weather would delay

some projects in the northern half of the country, and it is likely that rail maintenance projects

could get underway sooner than could new construction projects. On some routes, Amtrak

receives financial support from state governments, so their approval of projects in some cases

would be necessary. Since Amtrak runs on track owned by the freight railroads for most of its

routes, cooperation from the host freight railroad is necessary. Regulatory approval of upgrades to

freight rail infrastructure is not required, but negotiation with the freight railroad is necessary

because Amtrak operates over their busiest corridors. The issue of publicly-funded improvements

to private property may also arise. Railroad union work rules could be another factor affecting the

jobs impact of funding rail improvements. Also, the transparency of Amtrak’s account keeping

has been an important issue for Congress in the past. Congress may seek to ensure that any

economic stimulus funding for Amtrak is directed towards job-inducing projects rather than

servicing its debt, for instance.

Issues for the Railroad Sector

Since intercity passenger rail service is likely to require operating subsidies in all but the most

densely populated corridors meeting certain conditions, policymakers might consider the longterm public financial commitment that is associated with investments in intercity passenger rail.

Rail can compete with the automobile for trips that are uncomfortably long to drive and where

road congestion is a problem, parking is a concern at the destination city, gas prices are relatively

high, and the destination city has an extensive public transit system. Thus, for most city

destinations it may be difficult for passenger rail service to match the automobile’s flexibility.

Intercity passenger rail can be time competitive with the airlines for trips less than about 350

miles because this is not sufficient distance for the air mode to exploit its speed advantage. 81

Where large cities are approximately this far apart, and there are important intermediate cities on

Train stations are typically located downtown while airports are located on the city fringe and security screening is

more time consuming for air passengers.

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the route, such as in the NEC, then there may be enough of a customer base to run trains as

frequently as the airlines and to fill them, which is necessary to cover operating costs.82

Water Resources83

Water resources infrastructure includes locks, dams, levees, floodwalls, channels, breakwaters,

hydropower facilities, canals, and related structures. A system of shared responsibilities for this

infrastructure has evolved, with programs existing at all levels of government and in the private

sector. While more than 25,000 publicly owned and 54,000 private dams provide the benefits of

flood control, navigation, power generation, and irrigation water, they also pose safety risks and

other challenges as they age. Although federal water resources agencies, principally the Bureau of

Reclamation (Reclamation) and the U.S. Army Corps of Engineers (Corps), played a significant

role in the construction of many large dams, few similar large federal facilities currently are under

construction. The vast majority of U.S. dams were constructed and are maintained without federal

assistance; however, most of the largest U.S. dams were built by Reclamation or the Corps.

Reclamation owns and operates more than 600 dams and reservoirs and 58 powerplants capable

of producing 40 billion kilowatt hours of electricity (enough to serve six million homes). The

Corps also owns and operates more than 600 dams and has 75 hydropower projects in operation

generating 68 billion kilowatt hours annually. Additionally the Corps maintains through dredging

and infrastructure investments the navigation conditions of 900 harbors and nearly 12,000 miles

of commercially active waterways. The Corps constructed, usually with nonfederal participation,

roughly 9,000 miles of the estimated 30,000 miles of the nation’s levees, but only maintains 600

miles. The remaining levees are operated by nonfederal entities, often special districts of local

governments, which are responsible for maintaining the level of protection they provide.

Conditions, Performance, and Funding Needs

Many federal water resources structures were built more than 50 years ago and require

rehabilitation, repair, or replacement to continue to generate benefits. These structures have

contributed greatly to U.S economic development; however, they also have contributed to

environmental degradation, resulting in ongoing efforts to restore aquatic ecosystems. For

example, concerns about aging infrastructure have been raised for years and accompanied by calls

to invest in improved hydroelectric facilities and new locks to reduce outages and improve

efficiency. The federal agencies neither estimate their future infrastructure investment needs nor

conduct national systematic needs assessments, instead they undertake activities pursuant to

congressional direction. The backlog of active federal water resources construction projects that

have been authorized by Congress but have not been completed is roughly $70 billion, and the

backlog of deferred maintenance roughly $4 billion for Reclamation and Corps activities,

Tennessee Valley Authority’s dams and pumped storage facilities, and the water resource projects

financed by the U.S. Department of Agriculture’s Natural Resources Conservation Service

(NRCS). Construction projects in this backlog have not been ranked on their economic or

environmental merit via a competitive or formula basis.

An analysis by the DOT’s Office of Inspector General estimated that reducing travel times between New York City

(NYC) and Washington, D.C. and between NYC and Boston by 30 minutes would generate benefits exceeding the

costs. DOT, OIG, “Analysis of the Benefits of High-Speed Rail on the Northeast Corridor,” Report No. CC-2008-091,

June 26, 2008.

Prepared by (name redacted) and (name redacted), Specialists in Natural Resources Policy.

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Two significant categories of nonfederal water resources infrastructure are nonfederal dams and

levees. The Association of State Dam Safety Officials estimated $36.2 billion was needed to

rehabilitate all nonfederal dams.84 There are no national-level estimates of the investment needs

for other nonfederal flood protection measures, such as levees and flood walls.

Federal Assistance

Recent federal appropriations have been approximately $6.6 billion annually, not including

emergency supplemental appropriations, for water resource activities of federal agencies. The

vast majority of these funds are spent directly by these agencies and are not dispersed through

grants or loans. The Corps typically requires local project sponsors to share construction costs

and uses different cost-share formulas depending on the project purpose. Reclamation projects are

generally financed up front with project users repaying the federal government for allocated

proportions of construction costs. Exceptions include “ability to pay” adjustments for irrigators.

Water Resources Investment as a Mechanism for Economic Stimulus

Which water resources activities may be funded as part of a stimulus is central to the types of

benefits that may be expected and whether these investments will be controversial; however, this

central policy decision remains unknown. Instead more attention has been given to the potential

level of investment. The American Society of Civil Engineers estimated that the Corps alone

could use $7 billion for “ready to go” projects, and another $10 billion could be applied to critical

nonfederal dams. 85 H.R. 7110 (110th Congress) included $300 million for Reclamation, with $126

million intended to go toward water reuse projects and the remainder directed toward capital

improvements including rural water supply.

Without information on which Corps projects or project types would be in the $7 billion portfolio,

analysis of potential efficiency, equity, and long-term economic growth and environmental effects

is highly constrained. The universe of Corps authorized projects is heterogeneous across purpose

(i.e., the types of benefits to be produced ecosystem restoration, flood damage reduction,

improved navigation), size, and economic effect. Moreover, many Corps projects are highly

controversial and proceeding with these could be politically problematic. Economic stimulus of

$7 billion would represent significantly more than the roughly $5.5 billion in annual

appropriations for the agency. It is unclear whether or the degree to which the existing level of

annual Corps appropriations is insufficient.86 Of the $7 billion, $3.2 billion is being discussed for

Corps operation and maintenance activities. In FY2006, the agency had estimated its deferred

maintenance well below this amount, at $1.8 billion.87

Task Committee of the Association of State Dam Safety Officials, The Cost of Rehabilitating our Nation’s Dams: A

Methodology, Estimate, and Proposed Funding Mechanisms (Dec. 2002, revised Oct. 2003), p. 4,

http://www.damsafetycoalition.org/files/pdf/asdsoreport.pdf.

A. Herrmann, Testimony by the American Society of Civil Engineers before House Transportation and Infrastructure

Committee on Infrastructure Investment and Economic Recovery, October 29, 2008,

http://transportation.house.gov/Media/File/Full%20Committee/20081029/Herrmann.pdf.

J.L. Floyd and W.C. Holliday, Budget Constraints and Decision Making: Development of Policy Guidelines for

Planning of Civil Works Programs and Projects (Alexandria, VA: Institute for Water Resources, Army Corps of

Engineers, 1997) p. 14.

Department of Defense, Performance and Accountability Report for Fiscal Year 2006, p. 164,

http://www.defenselink.mil/comptroller/par/fy2006/Entire_Document_(7.8_MB).pdf.

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In contrast, the stimulus discussions for Reclamation funding target projects involving

reclamation or reuse of wastewater or naturally impaired ground and surface water, as well as

rural water supply projects. These are nontraditional roles for the agency, but have been supported

through legislation and appropriations in recent Congresses.

Over the decades, Congress has enacted user pays approaches and environmental laws that apply

to water resources projects. The majority of federal water resources projects that could be funded

through a stimulus require nonfederal cost-sharing. Whether and how quickly the nonfederal

sponsors would be able to participate given their own financial situations remains unknown; if

cost-sharing waivers are provided they raise their own equity and efficiency issues. Similarly,

questions arise regarding how quickly these federal activities would be able to start given

environmental planning and protection requirements (e.g., seasonal or other restrictions on

construction due to threatened or endangered species), as well as weather, availability of

materials, and agency contracting constraints.

Issues for the Water Resources Sector

Federal water resource construction activities shrank during the last decades of the 20th century.

Fiscal constraints, changes in national priorities and local needs, few remaining prime

construction locations, and environmental and species impacts of construction all contributed to

this shift. Although these forces are still active, there are proposals for greater federal financial

and technical assistance to address growing pressures on developed water supplies and to manage

regional water resources to meet demands of multiple water uses. Whether and how to adapt the

federal role to current water resources demands, in particular how to select which actions to

authorize and fund, is an ongoing issue for Congress. Similarly, how to systematically address the

aging and operational challenges of existing facilities is a concern; rehabilitation and safety

repairs have largely proceeded on a project-by-project basis.

Wastewater88

Wastewater utilities operate facilities that clean the flow of used water from a community.

Nationally, about 16,000 publicly owned wastewater treatment facilities and 24,000 collection

systems provide these services. The federal government has had significant involvement with

these systems, through setting standards to protect public health and the environment, and

funding to assist them in meeting standards. Nearly all of these facilities are publicly owned and

operated by local governments. Today, ratepayers fund both construction costs and costs

associated with operating and maintaining facilities that serve their communities.

Conditions, Performance, and Funding Needs

Many wastewater systems were built more than 50 years ago and have reached the end of their

useful design lives. Older systems are plagued by chronic overflows during major rain storms and

heavy snowmelt and, intentionally or not, are bringing about the discharge of raw sewage into

U.S. surface waters. The most recent survey of funding needed for wastewater facility projects

estimates that $202.5 billion is needed nationally for projects and activities eligible for federal

Prepared by (name redacted), Specialist in Resources and Environmental Policy.

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assistance under the Clean Water Act (CWA).89 This estimate includes $134.4 billion for

wastewater treatment and collection systems, $54.8 billion to correct uncontrolled overflows from

municipal sewers, and $9 billion for stormwater management. Needs for small communities

represent 9% of the total.

Federal Assistance

The largest federal program for wastewater treatment assistance is administered by the

Environmental Protection Agency (EPA) under the CWA. Since 1973 Congress has appropriated

$78 billion in assistance under this act. Total FY2008 funding was $689 million. Federal funds

are used to capitalize state loan programs (State Revolving Funds, or SRFs), and project loans are

made by states to communities to assist projects on priority lists that are determined by the states,

but according to criteria in the CWA. Loans are repaid to the states. In addition, the U.S.

Department of Agriculture provides assistance through grant and loan programs for communities

with populations of fewer than 10,000 persons. Total FY2008 funding for these USDA programs

was $534 million. Even with federal assistance, local governments are the primary investors in

wastewater and sewer systems. According to the U.S. Census, local governments invested nearly

$14 billion in capital projects and nearly $22 billion in operations and maintenance in 2004-2005.

Wastewater Investment as a Mechanism for Economic Stimulus

As interest in providing economic stimulus through infrastructure investments has grown, states,

localities, and stakeholder groups have attempted to identify wastewater projects that are “ready

to go,” that is, with engineering and permitting complete, but only needing financing. Totals in

these several estimates vary widely. In December, the U.S. Conference of Mayors reported that

cities have identified 3,343 water and sewer projects that are “shovel ready,” but that need $18.9

billion in funding.90 The National Governors Association estimated that $9 billion in wastewater

projects are “ready to go” throughout the country, 91 while the Water Information Network

estimates that nearly $20 billion in wastewater projects are “shovel ready.”92 House-passed H.R.

7110 (110th Congress) included $6.5 billion for wastewater projects, to be funded through the

existing CWA SRF program. With respect to such spending, several questions arise about projects

that may be funded. In terms of efficiency, will wastewater infrastructure funds deliver stimulus

to the economy quickly, or will most spending occur after recovery has begun, since initial

outlays for major infrastructure projects usually are 25% or less of funding provided in a given

year? Also, will stimulus spending for wastewater result in additional investments, or will it

displace other spending that would have gone to the same projects? In terms of equity, one

question is whether stimulus funds will be equitably distributed across regions, between urban

and rural areas, and with recognition of disadvantaged communities. In terms of sustainability, of

U.S. Environmental Protection Agency, Clean Watersheds Needs Survey 2004, Report to Congress, Washington,

DC, January 2008, http://www.epa.gov/owm/mtb/cwns/2004rtc/toc.htm.

U.S. Conference of Mayors, Mainstreet Economic Recovery, "Ready to Go" Jobs and Infrastructure Projects,

December 19, 2008, http://www.usmayors.org/mainstreeteconomicrecovery/documents/mser-report-20081219.pdf.

National Governors Association, Economic Recovery: A Federal-State Partnership, November 13, 2008,

http://www.nga.org/Files/pdf/0811ECONOMICRECOVERY.PDF.

Water Infrastructure Network (WIN), letter to the Honorable Nancy Pelosi and the Honorable John Boehner,

December 18, 2008, http://win-water.org/legislativecenter/2008-12-18stim_ltr.pdf. WIN is a coalition of construction,

engineering, conservation, labor, municipal, and manufacturing organizations.

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particular interest is how to incorporate accountability to ensure that stimulus-funded projects

provide significant water quality benefits.

Issues for the Wastewater Sector

A number of long-term issues are apparent for this sector, beyond those related to short-term

stimulus. First, and broadly, how will communities meet their continuing funding needs for

wastewater pollution control projects, in view of the large identified needs? Communities face

long-standing needs to fund projects to comply with federal standards and projects not

traditionally eligible for federal aid programs, such as major repair and replacement of existing

systems. Second, what is the appropriate federal role in meeting those needs, and will the federal

government play a significant future role in funding capital investments? Third, how should

federal support be delivered? Issues include what is the appropriate state-level mechanism to

administer funding, how should aid be provided (loans versus grants, for example), and should

federal assistance be available to private as well as public entities.93

Drinking Water94

Drinking water utilities have the task of constructing, operating, and maintaining treatment plants,

water supply transmission lines, storage facilities and other infrastructure needed to provide

potable water to communities in both the appropriate quality and quantity. Nationwide, there are

nearly 53,000 community water systems, and roughly 15% of these public utilities are investor

owned. The federal government has been involved in this sector primarily as a regulator, setting

standards to control the quality of public water supplies, but also has provided significant

technical and financial assistance for drinking water infrastructure projects through several

federal programs.

Conditions, Performance, and Funding Needs

The most recent survey of capital improvement needs for drinking water systems, prepared by the

Environmental Protection Agency (EPA), indicated that water utilities need to invest $276.8

billion on infrastructure improvements over 20 years to ensure the provision of safe water and to

comply with federal Safe Drinking Water Act (SDWA) regulations.95 Of the total national need,

EPA estimates that $183.6 billion (two-thirds) is needed for the installation and rehabilitation of

water supply transmission and distribution systems, and $53.2 billion is needed for treatment

facilities. A broader EPA study, the 2002 Gap Analysis, 96 estimates a potential 20-year funding

gap for drinking water capital and operations and maintenance ranging from $45 billion to $263

billion, depending on different revenue and funding scenarios. The agency has cautioned that

outdated and deteriorated water infrastructure poses a fundamental long-term threat to drinking

For additional information, see CRS Report RL31116, Water Infrastructure Needs and Investment: Review and

Analysis of Key Issues, by (name redacted) and (name redacted).

Prepared by (name redacted), Specialist in Environmental Policy.

U.S. Environmental Protection Agency, Drinking Water Infrastructure Needs Survey and Assessment: Third Report

to Congress, June 2005, EPA 816-R-05-001.

U.S. Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap Analysis, EPA816-R-02-020, September 2002.

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water safety, and that in many communities, basic infrastructure costs far exceed SDWA

compliance costs.

Federal Assistance

Local governments traditionally have provided the bulk of financing for drinking water projects.

Notwithstanding the existence of several federal infrastructure funding programs, the U.S.

Conference of Mayors reports that localities continue to provide 95% of investment in drinking

water infrastructure. 97 A key federal program, the drinking water state revolving loan fund

(DWSRF) program, was authorized by the SDWA Amendments of 1996 (P.L. 104-182).

Paralleling the Clean Water Act SRF program, the DWSRF program helps public water systems

finance infrastructure projects needed to comply with federal drinking water regulations and to

protect public health. Under the DWSRF program, states receive capitalization grants to make

loans to water systems for drinking water projects and other eligible activities. Each state

develops a project priority list, based on statutory criteria that emphasize public health protection,

compliance, and economic need. Since FY1997, Congress has provided more than $10.3 billion

for this program, including approximately $829 million for FY2008. Also, as noted above, the

U.S. Department of Agriculture (USDA) administers a loan and grant program for water and

wastewater projects, with eligibility limited to communities having 10,000 or fewer people. For

FY2008, this program received roughly $534 million for drinking water, wastewater, and waste

disposal projects. 98

Drinking Water Investment as a Mechanism for Economic Stimulus

How many job-stimulating projects are actually ready to go? The American Water Works

Association (AWWA), an association of water utility managers and professionals, has identified

$10 billion worth of drinking water infrastructure projects that could move forward rapidly given

funding. Using construction industry multipliers, the association projects that this funding level

could generate 400,000 jobs and bring additional economic benefits to communities.99 In contrast,

the U.S. Conference of Mayors estimates that $15.36 billion in identified ‘ready to go’ water and

wastewater projects could generate133,193 jobs.100 Although much uncertainty surrounds the

estimates associated with the potential benefits of a stimulus package, the backlog of water

infrastructure projects is large. Water sector advocates note that stimulus funding is especially

needed to assist projects pending nationwide that have been hampered by the credit crisis.

Issues for the Drinking Water Sector

Consideration of economic stimulus proposals raises a number of issues pertinent to the water

sector. A key issue concerns the funds distribution mechanism. H.R. 7110 (110th Congress)

anticipated using the DWSRF program as the means for delivering stimulus funds. Such an

U.S. Conference of Mayors, Mainstreet Economic Recovery, "Ready to Go" Jobs and Infrastructure Projects,

December 8, 2008, p. 5, http://www.usmayors.org/mainstreeteconomicrecovery/documents/mser-report-200812.pdf.

For a review of these and other federal programs, see CRS Report RL30478, Federally Supported Water Supply and

Wastewater Treatment Programs, by (name redacted) et al.

American Water Works Association, Massive Stimulus Program Being Readied; Congress Needs to hear from

Drinking Water Sector, Washington D.C. Report, December 11, 2008, http://www.awwa.org.

100

U.S. Conference of Mayors, “Ready to Go” Jobs and Infrastructure Projects , December 19, 2008, p. 1.

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approach would have benefits, as it would take advantage of an established federal-state program

structure that includes criteria for project priorities and eligibilities, and contains fiscal

safeguards, such as auditing requirements. Yet, some local water utility representatives have noted

that the distribution of funds by states under this program can be sluggish. Others have noted that

federal program requirements can pose time-consuming hurdles for projects, slow down project

starts, and ultimately could reduce the effectiveness of economic recovery efforts. Also, how well

do projects identified as “ready to go” complement state funding priorities? Similarly, some

projects viewed as priorities by cities may be outside program eligibility or priority criteria. One

policy question is whether such projects might be made eligible for stimulus funding. Similarly,

should some federal requirements be relaxed, and if so, what might be the public health,

environmental or other trade-offs in doing so? As an alternative or complement to the EPA

program, the National Rural Water Association advocates using the USDA program which has an

estimated $3 billion backlog of water and wastewater projects, and which the association argues

distributes funds more quickly. However, this program is limited to small communities.

Regardless of distribution mechanism, many questions arise. For example, how will priorities be

set: in view of multiple considerations, including speed and efficiency in creating jobs, public

health need, economic need, or ensuring urban/rural or state equity? A broader question concerns

the long-term federal role in water infrastructure financing and how stimulus efforts might affect

it. For example, how might stimulus funding impact congressional efforts to develop a

sustainable funding source to replace or supplement federal appropriations, such as a water

infrastructure trust fund?

Electric Transmission101

The electric power transmission grid for the lower 48 states consists of approximately 160,000

miles of high voltage lines used to move electricity from power plants to load centers. The system

is owned primarily by investor-owned utilities (IOUs); other owners include municipal and other

public power entities (including federal entities), rural cooperatives, and independent

transmission companies. In the West, where solar and wind potential are greatest, two federal

Power Marketing Administrations (PMAs) own and operate a significant portion of the

transmission system. The Bonneville Power Administration (BPA) maintains approximately 75%

of the high-voltage transmission lines in the Northwest, a system of over 15,000 miles of

transmission line in approximately 300 substations. The service area of the Western Area Power

Administration (WAPA) covers 1.3 million square miles and WAPA maintains 17,000 miles of

high-voltage transmission. The nation’s electric generating capacity currently totals about

1,000,000 megawatts; These plants are owned and operated by IOUs, public power, cooperatives,

and independent power producers.

The degree of federal regulatory involvement of the electric power system varies; in general, the

regulatory system for electric power is fragmented and inconsistent. In brief, for transmission, the

Federal Energy Regulatory Commission (FERC) approves transmission rates for IOUs,

independent transmission companies, and provides oversight for the PMAs but generally not for

utilities in most of Texas. The Energy Policy Act of 2005 (P.L. 109-58, § 1241) allows for

incentive rate making for new transmission in an attempt to encourage investment in

transmission. FERC, under Order 679, has approved incentive rate making for many new

101

Prepared by (name redacted), Specialist in Energy and Environmental Policy, and (name redacted), Section Research

Manager.

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projects. 102 New transmission lines must be approved by every state the line crosses and, in many

cases, FERC. For generation, state regulation over power prices varies with the degree of power

market deregulation in the state. Plant siting regulations also vary by state, but siting decisions are

also influenced by federal environmental regulations and access to the transmission system.

Conditions, Performance, and Funding Needs

The transmission grid was developed in patchwork fashion over decades and interconnected to

support system reliability and a limited volume of bulk power sales. The role of the grid has

changed with the partial deregulation of the power market over the past 30 years. The grid is now

being used to carry a large volume of wholesale power sales and serves as a key element in

maintaining competitive power prices in many parts of the nation. This new role for the grid,

combined with low investment since the 1970s, has led to concerns that the grid is overstressed,

and will ultimately fail to operate reliably and serve its new market-enabling function. In addition

to the stress of traditional generators connecting to the grid, expanding the grid to reach remote

areas suitable for developing wind and solar power is an emerging issue both for reliability

concerns and concerns over who will construct the needed transmission.

An overriding issue for both generation and transmission is how the nation may respond to

climate change policies. The future emphasis on renewables and other “green” generating

technologies or carbon sequestration would require large investment in the transmission system.

The demand centers for electricity are in some cases relatively far from renewable resources or

areas that would be geologically favorable for carbon sequestration. Renewable power is

currently more costly than coal and natural gas-fired generation, so incentives or mandates would

be required to meet a Department of Energy’s July 2008 proposed goal of generating 20%

electricity from wind by 2030.103 In general, electric generation capacity will have to expand to

meet future growth. The current financial crisis will probably slow demand growth, but it will

also reduce investment in new power plants and create additional uncertainty about the future

balance of electricity supply and demand.

The two issues of transmission capacity adequacy and reliability, and expansion of generating

capacity generally and renewable power in particular, impact proposals for an extensive grid

modernization program. These modernization proposals take two forms. One is the “smart grid,”

an umbrella term for a series of technologies that would create “an intelligent, auto-balancing [of

supply and demand], self-monitoring grid, that integrates a variety of energy sources with

minimal human intervention.”104 In addition to upgrading the existing grid, a second proposal is

to expand the existing grid with a new ultra-high voltage backbone system, that would allow

renewable power in remote locations to be efficiently moved across the continent to demand

centers.

102

http://www.ferc.gov/industries/electric/indus-act/trans-invest/orders.asp#skipnavsub.

103

Department of Energy, 20% Wind by 2030: Increasing Wind Energy’s Contribution to the U.S. Electricity Supply,

DOE/GO-101008-2567, Washington, DC, July 2008, http://www1.eere.energy.gov/windandhydro/pdfs/41869.pdf.

104

Scott W. Gawlicki, “Demonstrating the Smart Grid,” Public Utilities Fortnightly, June 2008, p. 56.

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Investments required for the power system could be very large. One recent analysis, performed

for the investor-owned electric power industry, suggests a total of $1.5 to $2.0 trillion by 2030

would be required to maintain reliability.105

Federal Assistance

The federal government has numerous incentive programs intended to spur particular electric

power investments in the private sector. These include production tax credits, currently scheduled

to expire at the end of 2009, for wind and some other renewable power sources; tax credits for

certain renewable and clean coal technologies; loan guarantees for nuclear and other low carbon

technologies; and incentive rates for new transmission projects that meet certain criteria. The

current and future effectiveness of these programs has been debated. For example, although the

loan guarantee program was created by the Energy Policy Act of 2005, three years later the

Department of Energy has still issued no guarantees. The production tax credits have often been

used in complex financial transactions to develop new wind farms, but in a recession the

opportunities to conduct these transactions may contract.106

Power Sector Investment as a Mechanism for Economic Stimulus

As noted above, the potential investment requirements for the power sector may range into the

trillions of dollars. Most of these private-sector investments would go into complex, long-lived

privately owned and operated infrastructure, which requires significant up-front planning.

Accordingly, there may be a question of how much short-term stimulus versus long-term benefits

would result from power sector investments. Some larger concepts will require much more

development before specific facilities can be built, such as the ultra-high voltage backbone grid.

Certain smart grid technologies are perhaps ready for wide scale deployment, such as advanced

electric meters, but there is currently no smart grid template ready for a national roll-out.107

Utilities do have many transmission projects planned, and these could perhaps be accelerated or

expanded with federal incentives. 108 In the West, additional federal investment for BPA and

WAPA transmission expansion could provide a means for spurring wind and solar generation

development. However, most of these transmission projects would still require lengthy (several

year) siting approval from each state in which the transmission line would be built.

Issues for the Electric Power Sector

Two fundamental and related issues raised by the potential for greater federal intervention in the

power sector are the role of national planning of a system owned primarily by the private-sector

and federal preemption of state regulation. Certain initiatives, such as a concerted push to install

105

The Brattle Group, Transforming America’s Power Industry: The Investment Challenge 2010-2030, prepared for

The Edison Foundation, November 2008, p. vi.

106

For information on PMA financing and general issues see, CRS Report RS22564, Power Marketing

Administrations: Background and Current Issues, by (name redacted).

107

Scott W. Gawlicki, “Demonstrating the Smart Grid,” Public Utilities Fortnightly, June 2008, p. 51. (“But for all

[the] progress, the smart-grid vision still remains fuzzy for many executives and regulators. Every …[utility]…faces a

different operational and strategic situation, so the smart grid means something different for each utility.”

108

For information on currently planned transmission projects, see North American Electric Reliability Corp., 2007

Long-Term Reliability Assessment, October 2007 (particularly the regional discussions beginning on page 105).

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renewable power or construction of a ultra-high voltage backbone transmission grid, could

require additional federal control over power sector investment decisions. The PMAs could be

used, especially in the West, to create a larger federal presence in the transmission system, thus

allowing greater influence to implement climate change policies. Timely enhancements to the

grid to accommodate new, remote renewable power and smart grid technology may require

federal authority to override what have historically been state decisions. Another crucial issue is

deciding what improvements are necessary to enhance the grid for increased reliability and the

ability to accommodate increased intermittent resources such as wind and solar. While many

concerns have been raised over the reliability of the existing transmission network, actual data is

scarce and a new transmission reliability data gathering system has just started.109 Decisions must

be made whether to promote nuclear power, clean coal, or natural gas-fired plants. Natural gas

has been the main fuel for new power plants since the 1990s, but expanded use of gas raises the

risk of reliance on another fossil fuel for which the nation may ultimately have to rely on large

imports.

Schools110

U.S. Department of Education (ED) data indicate that an estimated 50 million students were

enrolled in public elementary and secondary schools (grades preK-12) in 2008.111 Safe, healthy,

up-to-date school facilities are considered essential for successful educational programs.112

School infrastructure has traditionally been considered largely a state and local responsibility. The

federal government has played a relatively small role in financing school construction and

renovation.

Conditions, Performance, and Funding Needs

Data on school infrastructure needs are extremely limited and difficult to assess in part because of

the wide variation of potential assumptions and definitions regarding both conditions and needs.

At present there is no ongoing federal collection of data on the conditions of schools. However, in

response to concerns about the physical condition of schools and a Congressional mandate, in

2000, ED issued a one-time study with estimates of the costs of needed modernization,

renovation, and repair to school buildings and/or building features.113 It remains the latest reliable

estimate of these needs. This study is based on 1999 survey data collected by ED of 903 public

elementary and secondary schools, weighted to provide a national estimate. These data are based

on surveys of school officials rather that on direct, independent data collection. ED estimated the

costs to bring school facilities into good condition in 1999 at $127 billion.

109

Information on the Transmission Availability System being developed by the North American Electric Reliability

Corp. is available at http://www.nerc.com/page.php?cid=4|62. Also see Energy Information Administration, Electric

Transmission in a Restructured Industry: Data Needs for Public Policy Analysis, December 2004.

110

Prepared by (name redacted), Specialist in Social Legislation.

111

U.S. Department of Education, National Center for Education Statistics, The Condition of Education 2008, June

2008, http://nces.ed.gov/pubs2008/2008031.pdf.

112

Planty, M., and DeVoe, J.F., An Examination of the Conditions of School Facilities Attended by 10th-Grade Students

in 2002. U.S. Department of Education, National Center for Education Statistics, Washington, DC., 2005

113

Lewis, L., Snow, K., Farris, E., Smerdon, B., Cronen, S., and Kaplan, J. Project Officer: B. Greene. Condition of

America’s Public School Facilities: 1999, U.S. Department of Education, Washington, D.C. (Hereafter referred to as

Condition of America’s Public School Facilities.) ED defined good condition to mean that only routine maintenance or

minor repair was required.

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ED found that although most public schools in 1999 were in adequate or better condition, a

significant number were not. The ED survey found that approximately 25% of schools indicated

that at least one type of onsite building was in less than adequate condition. Fifty percent

indicated that one or more building feature(s) was not in adequate condition,114 and 40% indicated

that one or more environmental condition(s) was unsatisfactory.115

Federal Assistance

As noted above, the federal government plays a relatively small role in school infrastructure. It

does, however, provide some indirect support for school construction (mainly by exempting the

interest on state and local governmental bonds used for school construction and renovation from

federal income taxation), and some direct support through federal education programs such as

Impact Aid. The largest federal contribution to school infrastructure occurs via indirect support,

i.e., the foregone revenue attributable to the exemption of interest.

School Infrastructure Investment as a Mechanism for Economic Stimulus

Many school modernization, renovation, and repair projects will require start up time. This will

potentially limit their effectiveness as a quick economic stimulus. However, because many states

and localities face budget shortfalls and may not have funds available for needed school

modernization, renovation, and repair projects, federal investment in these projects would provide

an important alternative source of funding. According to Education Daily, not only are school

districts “increasingly faced with difficult financial choices and must meet daily operating

expenses, like payroll, while delaying higher-priced construction of schools and libraries,” but

they also must confront the unavailability of affordable credit for capital improvements to

schools.116

In a letter to the Speaker of the U.S. House of Representatives, the Committee for Education

Funding argued that “$20 billion spread over a five-year period, has the potential to support an

estimated 50,000 jobs a year. If all new school construction and renovation used the ‘green’

approach energy savings alone would total $20 billion over the next 10 years, while also creating

new and innovative jobs.”117

Issues Regarding School Construction, Modernization, Repair and Renovation

As noted above, school infrastructure needs are significant118 and are affected by a variety of

complicated variables. Not only are the age and physical condition of a school important, but a

variety of other factors are important as well, e.g., shifts in the student population, changes in

114

Building features include roofs, framing, floors, and foundations; exterior walls, finishes, windows, and doors;

interior finishes and trim; plumbing; heating, ventilation and air conditioning; electric power; electrical lighting; and

life safety features. Condition of America’s Public School Facilities.

115

Environmental conditions include lighting, heating, ventilation, indoor air quality, acoustics or noise control, and

physical security of buildings. Condition of America’s Public School Facilities.

116

Frank Wolfe, Credit crisis impairs school funding streams., Education Daily, Vol. 41, No. 183, October 3, 2008.

117

. Committee for Education Funding, Letter to The Honorable Nancy Pelosi, Speaker, U.S. House of Representatives,

December 2, 2008. The Committee for Education Funding is a nonpartisan coalition of education groups.

118

ED estimated the costs to bring school facilities into good condition in 1999 at $127 billion.

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school policies (such as implementing smaller class size), changes in technology, changes in

school instructional practices, energy efficiency requirements, and retrofitting schools to meet

requirements of legislation such as the Americans with Disabilities Act (P.L. 101-336). Currently

there is no regular federal collection of data on the condition of schools. This lack of data makes

accurate projections of school infrastructure needs difficult.

In addition, although there is currently a backlog in needed school infrastructure projects, the

ability of states and localities to finance these projects is particularly strained under current

economic conditions. This raises questions regarding whether or not a greater role for the federal

government in financing school infrastructure should be considered, and if so, what form federal

assistance should take.

Federal Public Buildings119

The Public Building Service (PBS), a component of the General Services Administration (GSA),

is responsible for meeting the space needs of more than 100 federal departments and agencies. In

support of its mission, PBS constructs new buildings, renovates existing ones, and leases space.

When new construction is required, PBS contracts with private sector architects, construction

managers, and engineers to design and build the structure. New construction projects are tailored

for a range of government activities, and may include courthouses, land ports of entry, federal

office buildings, laboratories, and data processing centers. PBS also repairs, alters, and renovates

the 1,500 buildings already in its inventory.120

Conditions, Performance, and Funding Needs

Each year the Public Building Service surveys the housing needs of its client agencies and

determines whether it has space in its existing inventory to meet those needs. In its budget

justification, PBS identifies the construction and renovation projects it believes are needed to

meet the most critical workspace needs, and ranks them in order of priority. In FY2008 and

FY2009, PBS has ranked homeland security projects among its top capital investment priorities,

including the consolidation of homeland security headquarters workspace, and the modernization

of several existing land ports of entry, which it describes as outdated and unable to accommodate

current workloads and technology. PBS also ranked federal courthouses as priorities for capital

investment in FY2008 and FY2009, citing the need for additional space, building systems

modernization – such as replacing failing pipes and obsolete fire alarms – and enhanced security.

Federal Assistance

Construction and renovation projects, as well as other PBS property management activities, are

funded through the Federal Buildings Fund (FBF). The FBF is a revolving fund that is financed

by income from rent charged to occupants of GSA-controlled space, and by additional funds

appropriated by Congress. Funds in the FBF are subject to enactment of new obligational

authority each year, which is referred to as a limitation on the use of revenue. For FY2008,

119

Prepared by (name redacted), Analyst in American National Government.

120

U.S. General Services Administration, FY2008 Congressional Justification, Feb. 12, 2007,

http://www.gsa.gov/gsa/cm_attachments/GSA_BASIC/FY2008_Congressional_Justification_R2EH7_0Z5RDZ-i34KpR.pdf.

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Congress provided just over $1.25 billion for new construction projects ($531 million) and

renovation of existing facilities ($722 million).121 For FY2009, GSA’s budget justification

included a request for $1.31 billion for new construction ($620 million) and renovation ($692

million).122

Federal Building Construction and Renovation as Mechanisms for Economic

Stimulus

The FBF provides capital for construction and renovation projects that typically range from

several million to hundreds of millions of

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