States Have Recently Increased Investments in Transportation and Infrastructure

By Brian Sigritz posted 01-27-2017 12:56 PM


While there recently has been much discussion on the possibility of a new infrastructure initiative at the federal level, states have taken a number of steps to help address infrastructure and transportation needs over the past several years. NASBO’s latest State Expenditure Report highlights the fact that states have recently increased transportation spending. In fact, transportation led the way in spending growth from state funds in both fiscal 2015 and fiscal 2016. In both years, transportation experienced larger gains in spending from states’ own fund sources (general funds and other state funds) than any other program area, increasing 8.8 percent in fiscal 2015 and 6.7 percent in fiscal 2016. Additionally, state funds for transportation grew 10.2 percent in fiscal 2014, while only increasing 1.7 percent in fiscal 2013.

State Funds Spending Growth by Program Area

The vast majority of state spending on transportation comes from state funds, representing over two-thirds of all state spending on transportation, according to the State Expenditure Report. In fiscal 2016, other state funds represented 58.4 percent of total state spending on transportation. Other state funds derive from revenue sources which are restricted by law for particular governmental functions or activities. In the area of transportation, the largest earmarked revenue source is states’ motor fuel excise taxes, or gas taxes. Other areas of state funding for transportation included bonds at 7.8 percent and general funds at 4.4 percent, while federal funds comprised 29.4 percent.

Transportation Expenditures by Funding Source est. FY16

Another indication of states recognizing the importance of transportation and infrastructure investments can be seen in that nineteen states and the District of Columbia have enacted legislation to increase overall state gas taxes since 2013, according to the National Conference of State Legislatures (NCSL). Furthermore, Moody’s Investors Services recently released a report showing that states have increasingly picked up the tab for spending on roads and bridges, and are likely to increase state spending on transportation in future years.

Federal Infrastructure Proposals
At the federal level, much uncertainty remains regarding the size, scope, and funding mechanisms for a new infrastructure initiative. President Trump has spoken of the need to rebuild highways, bridges, and buildings throughout the country. In December, members of his transition team sent a request to the National Governors Association (NGA) to begin collecting from governors lists of shovel ready projects throughout the states. According to NGA, to date 43 states and territories have submitted a response, totaling over 300 projects, and the Trump administration has reportedly begun examining potential projects. Additionally, this week, Senate Democrats released a proposal for a $1 trillion infrastructure plan that includes $210 billion for road and bridge repairs, $110 billion for drinking water and waste water, $100 billion for energy infrastructure, and $200 billion for projects of national significance.

Earlier in January, NGA released a list of recommendations to President Trump regarding infrastructure and transportation. The recommendations include:

  • Bringing existing infrastructure into a state of good repair, and in strategic places constructing new infrastructure that advances the ability of the U.S. to meet basic mobility and service needs
  • Committing to providing long-term and stable funding for America’s infrastructure needs, including the Highway Trust Fund
  • Continuing the cooperative federal-state partnership on surface transportation
  • Addressing the critical need to fix aging water infrastructure, strengthening energy infrastructure, and enhancing the deployment of broadband networks

Looking forward, even if the federal government approves a new infrastructure package, states are expected to continue to make increased investments in transportation and infrastructure as they contend with both the pent up demand for additional spending on deferred maintenance, and the need for new construction in targeted areas.