STATEMENT BEFORE THE
SENATE SUBCOMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE TRANSPORTATION TRENDS, INFRASTRUCTURE FUNDING REQUIREMENTS, AND TRANSPORTATION'S BENEFITS TO THE ECONOMY
February 13, 1997
By Darrel Rensink President,
American Association of State Highway and Transportation Officials\1\ and Director, Iowa Department of Transportation

/1/Founded in 1914, AASHTO represents the departments concerned with highways and transportation in the fifty States, the District of Columbia and Puerto Rico. Its mission is a transportation system for the nation that balances mobility, economic prosperity, safety and the environment. AASHTO is the only national public sector association that represents all transportation modes - air, highways, public transportation, rail and water - and it works to foster the development, operation and maintenance of an integrated national transportation system. The active members of AASHTO are the duly constituted heads and other chief directing officials of the member transportation and highway agencies.

Mr. Chairman, my name is Darrel Rensink, I am President of the American Association of State Highway and Transportation Officials and Director of the Iowa Department of Transportation. On behalf of AASHTO, I am pleased to accept your invitation to testify on issues related to the reauthorization of the surface transportation programs, and to provide the views of the Association.

As members of the Environment and Public Works Committee you are well aware of both the benefits and needs of transportation into the 21st century, so what I am about to say will come as no surprise. However, the importance of transportation for a competitive America and for the nation's future requires that we continue to focus our attention on transportation.

America's transportation network has played a major role in our nation's economic success. Just as in the past, the future of American will depend to a great extent on how we support our transportation system. The legislation you will be considering is therefore of great importance to the people of America as we approach the 21st century.

Perhaps no other federal investment has such far-reaching implications on every aspect of our quality of life. Transportation serves all of our citizens daily in traveling to their jobs, day care centers and markets; in providing goods to wholesale and retail outlets; in traveling to recreational activities; and in a variety of other activities in which we all participate. Welfare reform will only succeed when wage-earners have access to places of employment. Quality health care depends upon the ability of the patient and the care-giver to come together.

Most important, transportation is the backbone for our State, national and international economies. Transportation is our nation's economic engine which is built on an efficient transportation system, a key component to our global competitiveness. Industry, much of which now relies on "just in time" delivery of raw materials, must have an effective and efficient transportation system.

Mr. Chairman, we commend you and the Subcommittee for undertaking the reauthorization of our surface transportation program. We have provided to the Subcommittee copies of the documents that AASHTO has prepared outlining our policy on many of the issues that we will be addressing. In my comments today I will summarize the Association's views and respond directly to the themes you have stated for this hearing.

AASHTO's Reauthorization Views

The enacted Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) was important legislation, and it improved our ability to provide better transportation in many ways. Some additional funding was provided, although not all that was authorized has been made available. The planning and decision-making processes for surface transportation were changed by the ISTEA, to move more decision making to States and localities, to encourage looking intermodally at the whole system, and to allow for trade-offs. Greater flexibility in utilizing Federal funding was provided under the ISTEA, allowing States and localities to better target transportation facilities they and their citizens believe are important. And very importantly, the National Highway System sought by AASHTO's member departments was authorized in the ISTEA, and has been established by Congress with the enactment of the National Highway System Designation Act of 1995.

These concepts and features have increased our ability to address the nation's transportation needs, and AASHTO believes that the reauthorization legislation should continue to support them. At the same time, AASHTO believes there are a number of areas that can be improved as you reauthorize ISTEA. These areas are described in the policy documents we have provided to you, and were discussed by AASHTO President William G. Burnett in his September 11, 1996 testimony to this Subcommittee. For the convenience of the Subcommittee, a copy of that September 11, 1996 testimony, which outlines our views on the role of Federal, State and local governments in surface transportation, is attached.

With respect to our recommendations for reauthorization, I want to refer you to our Transportation for a Competitive America report, copies of which have been provided to the Subcommittee. This report details our recommendations, which are summarized in four key recommendations:

- The maintenance needs of the nations's highways and transit systems outstrip the funds currently available. The 4.3 cents per gallon in user taxes collected from motorists should be deposited in the Highway Trust Fund and be spent on system maintenance, rather than diverted to the General Fund.

- State and local governments should be given more flexibility in determining how, when, and where transportation resources are spent, to maximize the benefit to mobility, safety, and the environment.

- Many of the key concepts of ISTEA, such as State and local cooperation, intermodal planning, and public participation, should be retained.

- Burdensome and unnecessary provisions imposed by ISTEA and earlier laws should be eliminated or reduced. The National Highway System Designation Act was a first, and major, step in this direction.

To further explain AASHTO's position on issues in reauthorization of the Federal highway and transit programs, we refer you to the attached one-page document "Summary of AASHTO Recommendations on the Reauthorization of the Federal-aid Highway and Transit Programs," which was included in a brochure we recently sent to all members of the Congress.

Mr. Chairman, you have focused this hearing on three topics, transportation trends, transportation's benefits to the economy, and infrastructure funding requirements. Let me now address each of these.

Transportation Trends

Mr. Chairman, the most important transportation trend to note is that transportation continues to play a major role in the well-being of this nation. This role is demonstrated by the growth we have seen in the number of drivers, vehicles and passengers on our highway and transit systems and the reliance of industry and economic development on the availability of efficient transportation.

Vehicle miles of travel on our highways increased 40 percent in the 1980s. If the 1990 to 1994 trend continues, total miles traveled may increase by more than 20 percent in the 1990s. At the present time over 6 billion miles of vehicle travel are logged on the nation's highways every day. The number of passengers utilizing transit services has also increased with over 6.8 million Americans using mass transit each day, with over 30 million people depending on it.

Just-in-time production is one of the most significant trends in U.S. manufacturing in recent years. This trend has allowed many businesses to sharply reduce or eliminate inventories. In 1990 just-in-time manufacturing accounted for 18 percent of U.S. production; by 1995 this percentage had increased to 28 percent. Just-in-time production and reduced inventories require dependable and efficient transportation facilities, and are major sources of increased productivity in our economy.

These trends are expected to continue, placing an ever increasing demand on our transportation systems.

Our highway system is suffering from increased congestion in many areas of the nation. The urbanization of America is creating new challenges for urban areas while at the same time rural transportation needs are continuing to increase. New demands are being placed upon the highway system by shifts in both the volume and direction of world trade. For example, the focus of our major highways are essentially east-west, in keeping with the movement of goods between the east and west coasts. However, the North American Free Trade Agreement (NAFTA) has required us to evaluate and improve our systems to accommodate an increasing number of north-south transportation patterns.

Our nation's transit systems remain vital in most areas of the nation. Today, a variety of passenger mobility needs, and efforts to solve our air quality problems across America, require transit to do even more.

In short, Mr. Chairman, while our nation still has the best transportation system in the world, current trends demonstrate that it is aging and is not keeping up with the mobility needs of our citizens, our commerce, our industries and our economy.

Transportation's Benefits to the Economy

Mr. Chairman, throughout the history of our nation transportation has been assumed to be a key driving force in building and maintaining our economy, based on what Americans have seen and experienced. In recent years some have requested documentation of this assumption, and in particular have asked whether or not our nation is receiving a fair return on its investment in our highway system. In response, AASHTO, through our National Cooperative Highway Research Program (NCHRP), the Federal Highway Administration, and other transportation agencies have sponsored many efforts to determine the economic value of transportation, and investments in our highway system.

A copy of Chapters I and II of a report prepared under AASHTO's sponsorship by the NCHRP entitled The Economic Importance of Transportation: Talking Points and References is attached, without the voluminous materials of Chapters III and IV. The following are a few of the significant findings in this report, all of which demonstrate the benefits of transportation to our economy:

-Reliable transportation is essential for America's businesses to achieve their objectives of reduced inventories and improved distribution systems. It is estimated that logistics and transportation account for 20 to 25 percent of the value of a product on the shelf.

- Wal-Mart has become the largest retailer in the U.S. by demanding that manufactures deliver products reliably and ready for the selling floor. Wal-Mart has only about 10 percent of their square footage devoted to inventory compared to 25 percent for the average retailer.

- To remain competitive, American companies and businesses demand quick turnaround and are reducing the time it takes for products to reach their markets.

The NCHRP report refers to recent studies of the economic effects of highway investment conducted by Professor Ishaq Nadiri of New York University. Professor Nadiri's work indicates that investments in highways have a strong effect on productivity. He found that transportation improvements lower distribution costs, allow the shrinking of inventory that saves money, improves firms' access to labor, and lowers production costs. Overall, Professor Nadiri's studies show a 28 percent return per year between 1950-1989 for total highway capital.

In addition to the efficiency and production benefits for the manufacturing sector, investments in transportation are important for job creation. The Federal Highway Administration's most recent report on job generation for highway investment finds that every $1 billion of investment in the Federal highway program supports more than 42,000 full-time jobs.

Also, according to the U.S. Department of Transportation, every dollar invested in the highway system will return more than $2.60 in benefits to the economy.

As indicated in the few examples shown above, investing in the nation's transportation facilities is important to ensuring long-term economic growth. Americans have longed believe this, and we are now finding through research work by several economists and other experts that what we intuitively believe is in fact true.

Infrastructure Funding Requirements

Mr. Chairman, you also requested testimony on infrastructure funding requirements. Simply described, our need for investments to adequately support the nation's surface transportation system far exceeds current investment levels.

AASHTO has comprehensively analyzed the investment requirements of our transportation systems, based on information received from the U.S. Department of Transportation. This analysis is detailed in our report The Bottom Line: Transportation Investment Needs 1998 - 2002, copies of which have also been provided to the Subcommittee.

To summarize the AASHTO report, over the next five years, total highway investment requirements just to maintain the current condition and performance of the system are $264 billion. An additional investment of $94 billion is required to improve the condition and performance of this essential system, for a total investment requirement of $358 billion over five years. Transit investment requirements to maintain and improve are identified as $39 billion and $33 billion, respectively, for a total of $72 billion over five years. Attached are three pages from the folder AASHTO recently sent to members of Congress, titled "Our Transportation Needs." They provide more details on our findings, with the third page displaying the summary information in graphic form.

While the estimated amounts to maintain and improve our highway and transit systems are daunting, the situation is made troublesome because significantly more funding is being collected by the Federal government from highway users than is being made available for transportation. If we could fully utilize the funds already going to the Highway Trust Fund, it would improve the situation. If we could also add to this the 4.3 cents per gallon now used to support general fund programs, as shown on the attached bar graph we would then just have enough funding to maintain current highway and transit conditions.

It is very difficult to explain to highway users who are paying fuel and other taxes into the Highway Trust Fund why we do not have access to all the funding that is being collected, when our transportation investment needs far exceed current funding levels. If we could simply have access to all the funding flowing into the Highway Trust Fund and the revenue from the 4.3 cent tax, we could at least maintain current conditions.

As stated earlier, it is AASHTO's position that:

"The 4.3 cents per gallon in user taxes collected from motorists should be deposited in the Highway Trust Fund and be spent on system maintenance, rather than diverted to the General Fund."

AASHTO commends Senators John Warner and Max Bacus and the 55 Senators who joined them in writing to Senator Pete Domenici, Chairman of the Senate Budget Committee, seeking a highway program level of $27 billion, which has been demonstrated to be sustainable by the Highway Trust Fund. We also commend Senators Alfonse D'Amato and Daniel Patrick Moynihan for their similar letter, which also urges a transit program of $5 billion.

AASHTO hopes that these funding levels will be approved, and that the revenue from the 4.3 cent fuel tax will be placed in the Highway Trust Fund and utilized to meet our highway and transit investment requirements.

When the nation's Governor's met in Washington last week, they addressed the transportation funding situation and adopted resolution EDC-21, "Surface Transportation Financing." It included the following paragraphs, and a full copy of EDC-21 is attached:

"Growing Highway Trust Fund revenues will permit significantly higher federal spending for transportation programs over the next five years. A much greater share of Highway Trust Fund revenues can and should be spent for transportation investments than is implied in recent Congressional and Administration budget proposals. Governors are aware of and support the movement in Congress for increased transportation spending."

"Governors are aware that Federal fiscal circumstances require prudence in setting spending priorities and continue to support efforts to balance the budget. However, reducing federal transportation investment and allowing our nation's transportation infrastructure to fall further into disrepair will result in lost profits, jobs, and productivity, and ultimately lower tax revenues to the federal government."

The NGA resolution then goes on to urge that the Federal government:

"Reinstate the nation's long-standing policy of dedicating federal transportation-related motor fuel taxes and excise taxes exclusively for transportation purposes. If the 4.3 cents per gallon of fuel tax that is currently being used for General Fund purposes continues to be assessed, it should be deposited in the Highway Trust Fund and used for transportation purposes.

"Restore the integrity of the dedicated trust fund. All dedicated user fees and the interest accrued on trust fund balances should be promptly distributed for their intended purposes."

Mr. Chairman, we share the view of the Governors.

Summary

In summary, AASHTO believes that there will be no more important legislation before this Congress for the future of America than the reauthorization of our surface transportation program.

We must either meet our investment needs, or face a decline in American mobility as we enter the 21st century.

We have provided you with AASHTO's recommendations for reauthorization and stand ready to provide any further information which would be of assistance as you move forward in the legislative process.

Mr. Chairman, this concludes my remarks. Again, thank you for the invitation to present our views and we will be pleased to respond to questions now or in writing.