1. Closing the Gap: Financing Regional Transportation Needs NYU Wagner Rudin Center for Transportation Policy and Management June 4, 2008 Remarks by JayEtta Hecker, Director U.S. Government Accountability Office

2. 2 Reflections on “The Funding Crisis” Excessive focus on “the funding GAP” can divert needed focus on the “what”, “who”, and “how” of national and regional public transportation infrastructure policies GAO has called for a comprehensive restructuring of the federal role & clear definition of national interests and desired performance outcomes. Economic significance of well-performing transportation system creates an urgency for moving toward cost-effective allocation of scarce transportation dollars.

3. 3 Four Key Points for Discussion: 1.Drivers compelling need for comprehensive federal reforms 2.GAO “Principles” for reexamination 3.How more specifically defined national interests and performance outcomes can drive reforms 4.State/Regional opportunities Vis-à-vis federal programs of future Reforming from within

4. 4 1. GAO Work Has Identified Drivers Requiring Comprehensive Reexamination of Federal Role Degrading system condition & performance Absence of clear and distinct national interests Rare link of federal funding to system performance Absence of C/B or ROI focus for infrastructure investments Impending highway trust fund shortfall Progressive deterioration of user-pay base Long term fiscal imbalance

5. 5 2. GAO Calls for Restructuring Federal Surface Transportation Program & Recommends Focus on Underlying Principles Well-defined goals based on identified areas of national interest Clearly defining the federal and other roles in achieving each goal Incorporating performance and accountability into federal funding flows Employing the best tools and approaches to emphasize return on investment Ensuring fiscal sustainability.

6. 6 3. Restructuring Would be Driven by Defining Specific Areas of National Interests and Performance Goals Energy/Environmental Externalities of Transportation? Reliability and Flow of Interstate Freight? National Connectivity? Maintenance/Upgrading of the Interstate? Transportation Safety and Security? Metropolitan Congestion?

7. 7 Specifying Different Goals and Levels of Federal Interests Could Contribute to a Rational & Efficient Alignment of Roles and Responsibilities Each goal will have varying levels of BENEFICIAL INTERESTS among varied parties--e.g.  Local governments/municipalities/citizens interest in metropolitan congestion?  States interest in regional connectivity/economic development/bridge condition?  State and MPO incentives to address regional corridors/sustainability of primary reliance on earmarked programs?  System users interest in system performance?  Commercial users interest in reliable freight flows? Weakening user-pay base, high federal match, proliferation of earmarks, and stove-piped programs can create “moral hazard” distorting choices of system owners and users

8. 8 Distinct federal programs/goals could be better served by differentiated tools direct financing vs. enabling and incentivizing others grants vs. loans vs. guarantees competitive, merit-based vs. formula allocation varying match levels promoting appropriate institutional capacities and authorities promoting more consistent and efficient pricing of infrastructure/internalizing full social and economic costs

9. 9 Importance of federal role in advancing Direct Pricing of Transportation Infrastructure promote efficient use of existing infrastructure movement toward internalizing more of social and economic costs in decisions of system owners & users minimize moral hazard effect on system owners and users generate more accurate signals of new investment priorities

10. 10 4. State/Regional Opportunities vis-a-vis federal program/reform/”reauthorization” Focus on importance of strategic reform vs. more “parochial” interests Support differentiation of priority areas requiring federal support (e.g. environment/energy leadership; interstate freight, multi-region corridors) from areas with strong state and local interests/ability to address Promote federal support for more strategically aligned regional entities Support reduction of explicit and implicit barriers to tolling

11. 11 State/Regional Opportunities independent of federal program reform Strive to overcome splintered mgt of infrastructure in region Optimize focus on performance of existing systems/networks Promote cost/benefit driven investment and decision making Promote improved public “ownership” of costs/trade offs Establishment of state legal framework for expansion of road pricing and use of PPPs

12. 12 Sources: GAO Studies Document the Need for Systemic Reform of Federal Transportation Policies and Programs January 2005 - Absence of C/ B Analysis, Transportation Investments (GAO 05-172) September 2005 – Promise of ITS Falls Short (GAO 05-943) June 2006 – Challenges and Strategies of Expanding Use of Tolling (GAO 06-554) November 2006 – Intercity Passenger Rail Options (GAO 07-15) June 2007 – Barriers to Inter-modal Transportation (GAO 05-727) September, 2007 - Forum on Reexamination (GAO 07-1210SP) July 2007 – Promoting Efficient Use of Existing Infrastructure (GAO 07-920) August, 2007 – Federal Policy Toward Freight Railroads (GAO 07—94, 07-770) January 2008 – Federal Role in Freight Mobility (GAO 08--287) January 2008 – Trends in State Highway Contracting (GAO 08--198) February 2008 – Observations on Surface Policy Commission (GAO 08--478T) February 2008 – Protecting the Public Interest in PPPs (GAO 08--44) March 2008 – Restructuring Federal Surface Transportation Programs (GAO 08— 400) May 2008 – Challenges and Investment Options for the Nation’s Infrastructure (GAO-08-763T)

13. 13 Recap: Structural policy and institutional reforms to promote more rational and cost-effective allocation of scarce transportation dollars are AT LEAST AS IMPORTANT as developing “financing” strategies for “Closing the Gap”. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Optimizing HOW money is collected, distributed, and used will itself affect HOW MUCH is needed and what impact transportation “investments” will have.