The Infrastructure Investment and Jobs Act (IIJA) – the federal mechanism for funding the building and rebuilding of our roads and bridges – is now heading into its fourth year of funding. IIJA will provide $62 billion in funding for Fiscal Year 2025, an increase of $18.8 billion in formula programs compared to Fiscal Year 2021, the last fiscal year before the law was implemented. This funding is distributed annually by the Federal Highway Administration based on Congressionally mandated formulas.
Talk about reauthorization has already started, but don’t be surprised if you hear coming from the Trump administration a plan to eliminate federal construction spending, allowing the states to create their own plans and spend their own dollars.
It’s not a good idea, but it has its supporters. The Cato Institute opines that, “Many policymakers assume that federal funding of state and local infrastructure is crucial and irreplaceable, but that is not the case. The states can fund their own infrastructure through taxes and user charges. Highways, for example, are funded by gas taxes, vehicle fees, and electronic tolling, which are forms of user charges. More than half of the states have raised these charges since 2015. The federal gas tax helps to fund state highways, but it should be converted to 50 state gas taxes, and the revenues should be routed directly to state treasuries rather than through Washington.”
In 2019, the House Committee on the Budget stated, “Federal support is especially important for larger-scale projects that affect multiple jurisdictions, require a broader source of revenues than is available to local communities, or create or sustain public goods that should be widely available to all.”
Supporting that, the Economic Policy Institute offers that:
- The federal government can help mitigate infrastructure funding challenges at the state level during economic downturns.
- Because most infrastructure is connected to regional or national infrastructure networks, a federal role in infrastructure investment has greater benefits for economic efficiency than is often assumed.
- The federal government can play an important role in pricing externalities.
- A federal role can help ensure equitable access to infrastructure for all citizens.
A strong federal plan accentuated by individual state plans makes the most sense. Let’s keep it that way.