MAP-21: Opportunities Lost

MAP-21: Opportunities Lost
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BY Joshua L. Schank
President & CEO
Eno Center for Transportation

Although MAP-21 represents a positive step forward in many ways, it also embodies many disappointments. There were substantial ambitions of reform heading into this reauthorization process. The last bill, SAFETEA-LU, was widely perceived as a pork-filled example of Congressional excess, exemplified in the popular imagination by the “Bridge to Nowhere.” It spawned two national commissions to review and reform the federal program and its funding structure, not to mention studies from the Brookings Institution, the Reason Foundation, the Bipartisan Policy Center, the Carnegie Endowment, and others on the same subject. Meanwhile, strong advocacy groups such as Building America’s Future, Transportation for America, the Chamber of Commerce, and others geared up for an attempted overhaul. With substantial federal and private resources behind reform and a new President coming in, it appeared that the potential for full-blown reform was high.

Of course that is not what happened. The American Recovery and Reinvestment Act (ARRA) spent considerable funds on transportation but did not aim to reform how they were spent. The Administration spent most of their remaining political capital on health care, asked Congress to put forward an 18-month extension of surface transportation law upon expiration of SAFETEA-LU, and to this day has never publicly released a reauthorization proposal. Congress wound up settling for a two-year bill with incremental reforms that, while a positive first step, fall short of what many had hoped to achieve.

Last month we discussed some of the positive reforms in MAP-21. In this piece, we discuss its flaws that need addressing. These are some of the fundamental issues the transportation community needs to focus on over the next two years as we consider the successor to MAP-21.

MAP-21 Flaws

1. Lack of Adequate Discretionary Spending

There are traditionally two kinds of spending in federal surface transportation bills – formula and discretionary. Formula funds are distributed to grantees by a formula spelled out by Congress in legislation. Discretionary spending, by contrast, is typically distributed at the discretion of the Secretary of Transportation based on criteria set forth in legislation. It should be no surprise that Congress prefers to leave little discretion to the Executive Branch, and thus favors formula programs. Most federal highway and transit money – historically about 80 percent – has been distributed by formula. But MAP-21 boosts that percentage to over 92 percent, leaving less than eight percent of funds to the discretion of the U.S. Department of Transportation.

This is problematic for several reasons. First, discretionary programs have the ability to be more performance and outcome-based because they can be distributed on a competitive basis. Grantees applying for discretionary programs have to demonstrate how they will use the funds to accomplish the goals Congress has articulated, whereas formula grantees do not. Second, the competitive nature of discretionary programs may encourage innovation, as applicants seek to maximize the benefits of every federal dollar in order to be more competitive. They also seek to improve their chances by bringing more state and local revenue to the table, thus increasing leveraging capability of federal funds. Finally, discretionary grant programs are helpful in funding multimodal programs of transportation investment. It is challenging to construct effective formula programs targeting multiple modes because each mode would wind up fighting for a specific percentage of the funds. Discretionary programs are ideal for multimodal, multi-jurisdictional investments, such as freight, that have large national benefits but are capital-intensive and located primarily in one region.

When the reauthorization process began, there was hope for a multimodal discretionary freight program as well as a multimodal discretionary metropolitan program. Such programs could have targeted investments toward places that demonstrated clear national benefits in their proposals. Unfortunately, there continues to be substantial hostility within Congress to discretionary programs, which are often labeled as “executive earmarking.” This narrow perspective fails to account for the genuine, rigorous, and typically effective analysis that is often performed by experts in the field. It also ignores the fact that Congress can play an important role in approving grantees under these programs. For example, under the New Starts program, a discretionary grant program for transit capital investment, USDOT makes recommendations to Congress regarding grants and then Congress approves them. A joint grant approval process like this one could be emulated for new grant programs. It is essential that we work to create new programs for freight and metropolitan investments across modes in the next bill.

2. National Goals and Performance Measures are Weak

One of the most significant reforms in MAP-21 is the establishment of national goals and performance measures. The legislation directs USDOT to work with states and Metropolitan Planning Organizations (MPOs) to develop performance measures related to pavement condition, safety, congestion, emissions, and freight. States are then directed to set performance targets for each of these measures.

Unfortunately, the national goals carry little weight. They are stated, which is better than not being stated, but beyond that they have little impact. The point of establishing national goals is to use these goals to shape the structure of the program and the performance measures by which investment decisions are evaluated. Simply stating the national goals, and then developing performance measures with little relationship to them, is grossly insufficient.

Worse, the performance measures that are included are not multi-modal, and have little in the way of teeth. There is specificity with respect to highway performance measures—pavement condition, bridge condition, and the National Highway System performance are all made explicit—but transit measures are left to MPOs and operators. Freight measures are confined to the Interstate System, and congestion measures are confined to automobile traffic rather than considering accessibility across all modes. Most importantly, while states and MPOs have to develop targets for performance, there is no carrot for meeting them or stick for failing to meet them. Without any incentive, or at least a timeline for implementation of an incentive, these measures are a good first step but are not yet likely to have a substantial impact. We must work toward improving and strengthening these goals and measures in the next bill.

3. No Progress on Formula Factors

The issue of “rate of return” for states, in terms of how much they receive back from the gas taxes they contribute to the Highway Trust Fund (HTF), has plagued reauthorizations for decades. The fight over formulas and rate of return has always been a frustrating one, because it has typically overwhelmed any potential substantive policy discussion. If states are primarily concerned with how much money they are going to get, as they have been, and no one is paying attention to what we are spending the money on and why, the national benefits of the program are likely to suffer.

With the general fund bailouts of the HTF that have occurred since 2008, and continue under MAP-21, according to the General Accountability Office, all states are “donee” states now. This means that all states receive more back from the federal surface transportation program than they contribute in gas taxes, since there is so much general fund money mixed in. Unfortunately, this has not prevented the “donor-donee” issue from continuing to dominate how funding is distributed. In order to avoid a formula fight, MAP-21 simply maintains the distributions that were in place under SAFETEA-LU. The formulas are in no way adjusted to account for performance, anticipated or actual, and bear only a minimal relationship to needs. Funding is still distributed based on crude measures of “need” such as lane-miles, diesel gasoline consumption, and vehicle-miles travelled. The “equity bonus” component that adjusts each state’s share to account for supposed notions of equity regarding distribution is still present, buried in the SAFETEA-LU formulas, and this distorts the distributions even further.

MAP-21 also increases the rate of return for all states to 95 percent in 2014 – thankfully this will have no impact because all states currently receive back more than 100 percent due to general fund infusions. Unfortunately, if Congress actually agrees on a revenue increase or spending cuts, the 95 percent rate of return could become the default. We need to move beyond these discussions of rate of return and find a way to distribute surface transportation money that has some correlation to investment returns. While donor-donee will always exist in some form, we should approach the next reauthorization will the goal of tying formula funding to factors that encourage outcomes in line with national goals.

4. No Progress on a Long-Term Funding Solution

The most glaring problem with MAP-21 is that it failed to address the long-term funding issues related to the federal surface transportation program. The Congressional Budget Office predicts that under MAP-21, the HTF will maintain an adequate balance through 2014, but faces insolvency in 2015. The Mass Transit Account will fall perilously close to insolvency under MAP-21 and may need to be replenished prior to the expiration of the law. Beyond these immediate concerns is the fact that we will be unable to authorize long-term legislation that allows for good planning practices until a secure, stable, and sustainable funding source is identified. MAP-21 not only fails to identify such a source, it also fails to fund research on potential sources, a roadmap for solving the problem, or even much in the way of incentives for states to increase their own sources of revenue for transportation.

It is disappointing but understandable that neither political party was willing to put forward substantial proposals for gas tax increases during an election year. Unfortunately, there was little evidence of the political courage for such an increase well prior to the election. In the absence of a gas tax increase, it is irresponsible to fail to plan for other potential solutions. Congress could have chosen to cut spending, while increasing the incentives for states and regions to raise revenues. Alternatively they could have created a commission that would recommend a solution to the funding problem and bound themselves to accept it. At a minimum they could have provided more research funding to develop potential solutions to the funding issue. Unfortunately they did none of these things. Instead they punted and kept funding at more or less existing levels while not addressing revenue at all. This poses a serious challenge for the future of the federal program.

Conclusions

MAP-21 represents a substantial step forward on a number of issues, and overall it is preferable to continuing to operate under SAFETEA-LU for the next two years. But it still falls far short of where we need to go in terms of federal transportation policy. As a nation we are in need of a clear national transportation policy, where funds are distributed at least in part on the basis of performance outcomes and national goals, and where funding is secure for the long-term. It is very difficult to move in the direction of performance-based funding without discretionary grant programs, meaningful national goals and performance measures, and less of an emphasis on rate of return. It is impossible to even maintain an effective federal program without a sustainable long-term funding source. We must redouble our efforts to make sure that these issues are addressed when MAP-21 expires.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Eno Center for Transportation.

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