Transportation Investments in Response to Economic Downturns (2014) / Chapter Skim
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Pages 63-107
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From page 63... ...
This chapter describes the provisions and objectives of the grants, the challenges that federal and state government managers encountered in managing them, and ARRA's impact on transportation spending and on construction employment. Alternative provisions for a transportation stimulus program that might increase benefits (i.e., stimulus impact and long-term transportation benefits)
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Source: GAO 2011b, 4.) Apportionment of Funds Most ARRA transportation funds were distributed to state and local government agencies according to procedures of established federal highway, transit, and airport grant programs.
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] .1 Two newly created discretionary grant programs, high-speed rail grants and TIGER grants (called Supplemental Discretionary Grants for a National Surface Transportation System in Title XII of ARRA)
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. Matching Funds Waiver No matching contribution to projects was required from recipients of most ARRA transportation grants; that is, projects could be 100 percent federally funded.
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March 31, 2011 March 31, 2012 Highways: Capital grants to states through 27.5 68 88 federal-aid highway program; capital projects on Indian reservations and federal lands Passenger rail Capital grants to states for intercity 8.0 1 7 passenger rail Amtrak 1.3 91 100 Transit: Capital grants to transit agencies 8.4 62 86 Aviation FAA facilities 0.2 65 94 Capital grants to airports 1.1 95 98 Multimodal (TIGER grants) : Capital grants 1.5 5 38 to state or local government agencies for highways, transit, rail, or ports; awarded competitively Marine: Grants to small shipyards 0.1 76 92 All programs 48.1 56 73 Source: GAO 2011a, 5; GAO 2011b, 4, 8; Recovery Accountability and Transparency Board 2012a.
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From page 68... ...
Recipients also were required to report on funds obligated and expended and numbers of projects begun and completed. ADMINISTRATION OF ARRA TRANSPORTATION GRANTS The following were the apparent purposes of the special rules for transportation grants that ARRA imposed: • To ensure timely distribution and expenditure of the federal funds; • To ensure that the benefit of the federal funds was not offset by reductions in recipients' spending of their own funds, through the maintenance-of-effort requirement; • To target spending to geographic areas experiencing the greatest economic hardship, through the priority assigned to projects in dis tressed areas; and • To provide transparency through public reporting requirements.
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The first subsection below describes difficulties that transportation grant recipients reported in attempting to comply with ARRA's administrative provisions. The second subsection considers how state and local government grant recipients' responses to the program may have obscured its actual impact on transportation spending, total government spending, project selection, and spending rate.
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Apportionment of Funds Most state officials interviewed for the committee affirmed that distributing ARRA funds according to procedures of established federal transportation grant programs facilitated distribution of the funds and allowed projects to be initiated quickly (Meyer 2012, 10)
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confirmed that the suballocated funds were spent more slowly. State officials reported confusion over award requirements for the passenger rail grant program administered by the Federal Railroad Administration (FRA)
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. Matching Funds Waiver Presumably, the intent of the ARRA waiver of the normal requirement that grant recipients contribute a share of the funding of each project receiving federal transportation aid was to ensure that no state or local government would be obliged to refuse the offer of extra federal aid for lack of matching funds.
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Obligation and spending in the new competitive grant programs, TIGER grants and high-speed rail, had been much slower than in other programs (Table 3-1) , and GAO found that obligation and spending of funds that the states suballocated to local governments for locally selected and managed highway projects were slower than for state projects (GAO 2011b, 8–11)
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federal aid they could expect to receive. In a 2010 report to Congress on ARRA, the U.S.
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. Data Collection and Reporting GAO initially observed numerous difficulties of grant recipients in complying with ARRA jobs reporting requirements and of federal agencies in providing guidance and concluded that the reports were of unknown validity (GAO 2009, 40)
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State Views on Improving Administration Frequently mentioned preferences of state transportation officials interviewed for the committee concerning the administration of a transportation stimulus spending program included the following (Meyer 2012, 12–13)
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The outcomes depend on how ARRA affected governments' total spending, total transportation spending, and transportation spending priorities. Conceivably, altering ARRA rules could have resulted in a mix of projects with greater stimulus benefits (e.g., by accelerating construction)
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, to free funds to satisfy higher state priorities; • Designate as ARRA-funded already programmed or anticipated projects that could be undertaken quickly, to satisfy the timeliness requirement of ARRA; and • Divert administrative, engineering, and other resources to the start-up of ARRA projects and away from projects, including normal federal aid projects, that were subject to more lenient deadlines, also to satisfy the timeliness requirements. These likely state responses complicate the task of determining the net impact of ARRA on total transportation spending, on total government spending, on the projects selected for funding, or on the acceleration of spending.
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ARRA project data show that pavement improvement was the most common ARRA project type, because such projects easily satisfy the ARRA timeliness requirements. However, state officials reported that the states identified as ARRA funded some projects that already had been programmed, or would have been programmed, within the ARRA spending deadline, freeing the federal aid and state funds that had been dedicated to those projects to be used for other purposes.
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TRANSPORTATION SPENDING AND CONSTRUCTION EMPLOYMENT DURING ARRA This section presents trends for indicators related to the ARRA transportation program's impact through the period of ARRA's operation: • Obligations and expenditures of ARRA transportation funds and recipients' reported uses of funds, • Total government highway and transit spending and sources of funds, • Employment on ARRA projects as reported by grant recipients, and • Total highway construction and maintenance employment. The section concludes with summary observations on the responses of state and local governments to the transportation grants and the impact of the grants on spending and transportation construction employment.
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Obligations and Expenditures of ARRA Funds The grant recipient reporting that ARRA mandated indicates how successfully recipients satisfied ARRA timeliness requirements and the kinds of projects designated to receive ARRA funds. State and local government agencies receiving apportionments of ARRA transportation funds met essentially all the obligation deadlines in the major ARRA transportation programs: 50 percent of highway funds obligated by June 30, 2009, and 100 percent by March 2, 2010; 50 percent of transit funds by September 1, 2009, and 100 percent by March 5, 2010 (Committee on Transportation and Infrastructure 2011)
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, the federal outlay preceded actual spending by recipients. Recipients' Reported Uses of Funds GAO, in its review of ARRA transportation spending, observed that ARRA's obligation deadlines caused state and local government agencies selecting projects for ARRA funding to favor relatively simple projects that could be initiated quickly, in particular, pavement improvements in the highway program and bus purchases in the transit program.
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As noted above, the ARRA funds obligated for a particular project type do not necessarily indicate the net impact of ARRA on total spending for that type. Grant recipients may have been able to designate alreadyplanned projects as ARRA funded, freeing the funds that would have been spent on those projects for other purposes (e.g., projects that would have been difficult to qualify for ARRA funding)
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FIGURE 3-3 ARRA obligations for FTA programs, by project type. (Note: rehab = rehabilitation.
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Therefore, the available data are inconclusive with regard to the impact of ARRA on the composition of highway capital spending. Similarly, the increase in the bus expenditures share of total transit capital expenditures in 2009 and 2010 compared with the 2006–2008 average suggests that ARRA funding may have accelerated bus purchases.
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Twenty-two percent of ARRA public investment spending [a category of ARRA programs defined by the Council of Economic Advisors and including federal spending and grants for health, education, 2 Possible causes of this pattern have been examined by Coibion et al.
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Total ARRA public investment outlays through the third quarter of 2012 were $241 billion. Total ARRA outlays other than public investment (tax cuts, aid to individuals, and state fiscal relief)
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Total Public Highway and Transit Spending and Sources of Funds The impact of the ARRA transportation grants depends on how they changed total transportation spending. ARRA required that each state receiving ARRA transportation funds certify that it would maintain the level of spending it had planned before passage of the act, in the period February 2009 through September 2010, for the types of projects eligible for ARRA funding.
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Depressed economic conditions persisted after most ARRA funds had been spent in 2009–2011; therefore, if state and local governments reduced transportation spending in 2012 and 2013 because the ARRA funding eliminated some needs, the overall stimulus impact of ARRA also would be reduced. This subsection presents historical data on U.S.
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100,000 80,000 $ Millions 60,000 40,000 20,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capital outlay, all units of government Maintenance and operaƟon, all units of government FIGURE 3-8 Capital expenditures and operating expenditures for highways, current dollars, 2002 to 2011. (Source: FHWA various years, Table HF-10.)
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in 2010 was $10.7 billion higher than in 2007; therefore, state and local governments were able to increase annual highway spending from their own taxes and borrowing by $16.2 billion in 2010 compared with 2007. The increase was not derived from highway user revenues (motor fuel excise taxes, tolls, vehicle registration fees, and licensing fees, mostly dedicated by law to transportation purposes)
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FIGURE 3-10 Federal disbursements for highways and federal highway user fee revenue, 2002 to 2010. (Note: Highway user revenue includes revenue dedicated to highways, as well as revenue dedicated to other purposes or deposited in state general funds.
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. As noted above, the GAO review of the ARRA transportation programs found that obligations and reimbursements in the regular federal-aid highway program slowed in the period in which the states were obligating their ARRA highway funds.
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. The states were able FIGURE 3-12 State taxes and fees devoted to highways, other than user revenues, and state bond proceeds devoted to highways, 2002 to 2010.
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Transit Spending Transit capital expenditures, in current dollars, grew strongly in the 2005–2008 period, but the trend flattened in 2008–2010, according to transit agency financial data reported by the American Public Transportation Association (APTA) (Figure 3-13)
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The long-term trend in these periods was growth in transportation spending and in total state and local government capital spending; the typical response to recessions was slower growth in spending rather than absolute declines.
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The procyclical pattern in state and local government spending may have several undesirable consequences. It may amplify the magnitude of business-cycle fluctuations.
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. As Chapter 1 explained, the grant recipient jobs reports are not a good indicator of the overall employment impact of ARRA because they cover only a minority of ARRA spending and do FIGURE 3-15 Direct jobs supported by U.S.
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. The relatively high cost per job reported for the ARRA transportation programs does not show that these programs were less cost-effective than the others; employment by suppliers to the projects is not known, and public benefits of the facilities constructed offset the cost to the government.
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. Summary Observations The stimulus impact of the ARRA transportation programs depends first of all on how the ARRA funds affected total spending and employment in public transportation construction and operation.
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The trends presented above nonetheless suggest some limited conclusions about the functioning and impact of the ARRA transportation programs. Obligations and Expenditures of ARRA Funds • Essentially all state and local government grant recipients met the stat utory deadlines for obligation of ARRA transportation funds appor tioned to them.
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The share of ARRA highway funds applied to pavement improvement projects was greater than the share of such projects in the normal federal-aid program. Similarly, the share of ARRA transit funds devoted to bus capital expenditures was greater than such expenditures' average share of all transit capi tal spending in recent years.
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The extraordinary transportation funding provided by the federal and state governments in 2008–2010 appears to have offset the spending slowdown that would have been expected on the basis of the historical pattern. ARRA-Supported and Total Highway Construction Employment • The grant recipient–reported jobs supported by ARRA projects indi cate the timing of spending, but the relationship of these data to the actual direct employment impact of ARRA transportation spend ing is unclear.
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Many ARRA transportation construction projects would have been carried out at a later date if the ARRA funding had not been received. In some circumstances, this would be a favorable feature of the use of transportation aid as stimulus -- the net budget cost of the stimulus is less than if stimulus spending is for purchases that would never occur in normal times, and spending during the recession gives government the advantage of lower prices.
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2012. Fiscal Policy Multipliers on Subnational Government Spending.
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2011b. Recovery Act: Funding Used for Transportation Infrastructure Projects, but Some Requirements Proved Challenging.
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Scovel III, Inspector Gen eral, U.S. Department of Transportation, Before the Committee on Transportation and Infrastructure, United States House of Representatives: Ensuring ARRA Funds Are Spent Appropriately to Maximize Program Goals.
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