The federal-aid transportation program will surely continue but there is a growing sense among the lawmakers on Capitol Hill that Congress may be forced to abandon the practice of multi-year authorizations. The prevailing fiscal and political environment makes it difficult if not impossible to raise hundreds of billions of discretionary dollars in a single legislative package.

At current levels of spending, a five-year authorization would require approximately $270 billion, but highway trust fund revenue and interest over the same time frame is projected to generate only $195 billion (CBO estimate)--- leaving an unfunded shortfall of $75 billion. For a six-year bill, the unfunded shortfall would reach $90 billion. Where would that money come from (short of using the kind of accounting gimmickry that the Senate has been accused of doing in its MAP-21 bill )?

Hence, short-term bills (annual or bi-annual) requring only relatively modest amonts of offsets or general fund supplements may become the acceptred practice instead. The fact that the Senate has barely scraped up enough funds for a two-year bill while the House has been unable to come up with any plausible funding for its five-year bill, suggests that the days of multi-year transportation authorizations may indeed be over.

As the prompt suggests, local governments, businesses and voters are indeed feeling urgency about the state of our infrastructure amid the confusion emanating from Washington. As if to demonstrate just how serious they are about the issue, citizens across the political spectrum are voting to spend their money on transportation – despite an ongoing a fiscal crisis and the anti-government rhetoric that permeates political discourse.

Absent strong federal leadership, states, cities and local communities are indeed stepping out on their own, raising funds from innovative sources, and doing what they can to make it happen.

But left to shoulder the burden entirely alone, these communities’ noble efforts won’t be enough to meet the challenges we’re facing. These communities are stepping forward, but in the hopes that the federal government will take the next step with them and support them along the way.

The role for the federal government in transportation is indeed changing, evolving from being the driving factor that it was during the interstate era to being more of a partner in helping localities meet their changing needs. And their needs are a national concern, because they bear on whether Americans have a safe, reliable way to get to work, and whether goods can get to market. No developed nation in the world leaves these matters of basic infrastructure entirely to chance.

But there seems little doubt that, for the foreseeable future, federal resources will be constrained, and that makes it more imperative than ever that we set goals for the investment, and measure progress toward those goals. That’s why provisions to do that in the Senate’s bipartisan transportation bill, MAP-21 bill are so important.

It’s time we figure out what matters most, and what will get the best bang for the buck.

Local communities raising money for transportation are following a tried-and-true blueprint that rewards accountability and specificity: When they know what transportation dollars are going to buy — this new transit line, that new busway, this new bridge project — and who is accountable for implementation, measures to fund those projects pass close to 70 percent of the time.

Such was the case with the transit-funding Measure R in Los Angeles, which earned a two-thirds majority vote. Having passed the tax, Los Angeles is now seeking federal help with low-cost loans that can build 30 years worth of projects in 10. Local bootstraps are great for getting off the ground, but they only get you so far up the ladder if the federal rung is missing.

These innovators aren’t pressing for “devolution,” they’re simply looking for a dance partner.

Whatever the outcome of the current Congressional process on authoriziing federal surface transportation programs, the longer-term trend is clear: the federal share of transportation investment is, at best, stagnating and, at worst, declining. These circumstances reverse a trend of half a century or more of growing federal surface transportation funding. It is evident that a greater portion of this funding and investment burden will now fall on states and localities.

But that is not the same thing, as devolution. There remains an important, if still inadequately defined, federal role in transportation. There are national goals and national purposes in transportation, and some projects are clearly national (to greater or lesser degrees) in scope and impact. There is, however, no clear line between these national, state, and local interests. Most "mega" projects involve a mix of interests: CREATE in Chicago has obvious local and Illinois benefits, but this program of rail and grade crossing improvements is probably most significant, in terms of the national benefits that it would generate.

Similarly, the ARC project (the proposed trans-Hudson River commuter rail tunnel), cancelled by Governor Christie after decades of planning and the initiation of construction, would have offered enormous benefits to the citizens and business firms of New Jersey and to the economy of the entire New York City region, but there were, and remain, strong reasons for a substanital federal role in this project, because of the impact of economic growth in the New York City region on national well-being and prosperity.

As Rob Puentes has noted, this is not an "either-or" situation, one of national versus state or local goals. Many programs and projects will involve all these interests, in varying measures and degrees, and the sources of funding should reflect this mix of purposes. What this debate demonstrates, however, is the need to define national goals more precisely, to reform the institutions that plan and program capital investments in the transportation sector, and to focus on performance and outcomes. These reforms are more urgent than ever, in the context of shrinking resources and the need to invest wisely in the more beneficial programs and projects.

And, if states and localities must do more, than Congress should remove the federal barriers to such state and local initiative and flexibility, such as the prohibition on tolling the Interstate Highway System, and should stop discouraging states and regions from attracting private capital to their transportation investment programs. Instead, the federal government should incentivize and reward those states and localities that do more to attract new sources of public and private investment capital to transportation. Federal funds and programs should, also, be used to leverage these new public and private sources, through the expansion of loan and credit enhancement programs, like TIFIA.

At a time of fiscal crisis and constrained resources, we must make the most of what we have through better analysis and programming, through targeting and prioritizing investments, and through holding all levels of government to greater accountability, in achieving results, in terms of both national and local goals and purposes. Designing a national program around these values is essential to the provision of a national transportation system that can serve as the foundation of economic growth and an improved quality of life.

The question of devolution in this context is provocative – but it's not an either/or. What we need is a new type of federal partnership with state and metropolitan leaders, along with local governments and the private sector that's in-step with current realities.

The late 20th century model in transportation retained the standard federalism pyramid structure: with the federal government providing resources that rain down from the state, to metropolitan, and ultimately the local level. A new 21st century compact should flip the pyramid by challenging our nation’s state and metropolitan leaders to develop deep and innovative visions to solve the most pressing transportation problems.

The TIGER program is a good example of the federal government acting as a permissive partner in advancing a range of bottom-up investments. And the proposal for a program for transportation modeled after the Education Department's Race-To-The-Top initiative could instill meaningful reforms on the state level, where most decisions are made.

But the initial question is also right in that, in the absence of Congressional action, states and localities are stepping in to finance the kind of major investments necessary to support the next economy.

Increasingly, public infrastructure investment is taking place through innovative finance tools, revolving loan funds, trusts, and so-called ‘banks.’ Most of these offer direct loans at low interest rates to public and private entities, while some also offer grants, loan guarantees, bonds, and other financial instruments. According to forthcoming Brookings research, since 1995 thirty-three states have used infrastructure banks and funds to invest nearly $7 billion in over 900 different projects. These projects range from local road maintenance and highway construction to emergency relief for damaged infrastructure. The structure of the banks and projects in which they invest reflect the diversity of needs and resources across the U.S.

But rather than bringing a tough, merit-based approach to funding, most state banks do not filter projects through a competitive application process. A better approach would be for states to use their infrastructure banks to achieve specific economic goals, e.g., the flow of exports or connect workers to jobs. The projects should be evaluated according to strict return on investment criteria, not selected with an eye towards spreading funding evenly across the state. (Such an approach is analogous for how the federal government should establish a national infrastructure bank.)

States should also think beyond just transportation and create true infrastructure and economic development banks to finance not just roads and rails, but also energy and water infrastructure, perhaps even school and manufacturing development. California’s I-Bank, the Chicago Infrastructure Trust, and Connecticut’s Green Bank offer compelling models.

Make no mistake, none of these are silver bullets, but they do highlight an important point with respect to differences among states and municipalities in the U.S. today. While some states and cities are ambitiously pursuing innovative sources of infrastructure finance—such as partnerships with private and foreign investors—many others are not. For example, only 24 states undertook at least one public/private partnership transportation project since 1989. Florida, California, Texas, Colorado, and Virginia alone were responsible for 56 percent of the total amount of all U.S. transportation PPP projects during this time.

In addition, metro areas around the country are increasingly acting on their own to envision, design, and finance the next generation transportation system in America. Those places—especially in the west—are taxing themselves, dedicating substantial local money, and effectively contributing to the construction of the nation’s critical infrastructure system.

Transit projects in Denver, New Mexico, and the Salt Lake City area are all substantially financed by voter-authorized payroll or sales tax increases and epitomize the new spirit of bottom-up initiative. In metropolitan Phoenix, voters approved a proposition in 2004 that will generate $10 billion or so to expand regional transit service as well as highway upgrades, similar to Los Angeles’ Measure R. Other major metro areas like Las Vegas, Charlotte, St. Louis, Oklahoma City, Seattle, and Milwaukee have also gone to their voters for approval of ballot initiatives to fund a mix of projects and a coalition of business and civic leaders in the Dallas Metroplex is pushing state legislature to give metros in Texas the authority to do the same.

So we should put aside the one-dimensional call for "Devolution, baby!" and recognize that a new partnership is already forming.

The principle of “subsidiarity” postulates that government decisions should occur at the lowest practicable level, for example locally rather than nationally. This principle suggests that it is indeed time to relieve the federal government of the burden of financing transportation infrastructure, and of the onus of having to raise the required fees or taxes, and return these responsibilities to the states. The following reasons come to mind:

1. The purpose of federal financing — completion of the Interstate Highway System — has been virtually achieved, and it is difficult to identify other advantages from federal financing.

2. The disadvantages of federal financing — increased costs and intrusive regulation — are evident and substantial.

3. Congress, unable to increase the taxes dedicated to roads, seeks to use general funds to finance some of the transportation expenditures it considers necessary, thus abandoning the US traditional “user pays” principle for roads.

4. Congress keeps deferring long-term road legislation and substituting short-term-extensions of previous (2005) legislation, thus hindering long-term planning of transportation projects.

5. New methods to pay for road use — such as mileage-based user fees to replace fuel taxes — are more likely to succeed as a result of innovations sought by different states, than if imposed by a federal government seeking a “one size fits all” solution.

Reliance on general funds has the critical disadvantage that allocations to transportation from general revenues have to compete against other legitimate claims such as defense. On the other hand, when funding is by user fees, expenditures on infrastructure are determined by users’ willingness to pay.

I have to admit that, unlike Representative Peter DeFazio, I’ve not read all of the 1,600 plus pages of the Senate bill, but those that I have indicate that it would be best for it to be peacefully laid to rest, in the hope that the next congress could fashion a shorter and better one.

Abandonment of this unfortunate bill would benefit the country economically, because the bill fosters irrelevant spending. For example (as reported by our panelist Ken Orski) the creation of a new “National Endowment for the Oceans, Coasts and Great Lakes” to be housed in the Department of Commerce. It also enables spectacularly wasteful spending, such as the 19th century style Dulles Airport and Honolulu rail connections, which would have vehicles running on rails and stopping at every station.

And it would benefit the federal congress fiscally, and politically:

Fiscally, because congress has run out of money and is desperately seeking savings; and

Politically, because road users — who vote — get a particularly raw deal from the bill, under which, according to John Mica, Chairman of the House Transportation and Infrastructure Committee, some 35 per cent of their payments are diverted to non-road purposes.