The nation’s  infrastructure is vast and affects the daily lives of virtually all Americans. Collectively, this  infrastructure connects communities, facilitates trade, provides clean  drinking water, and protects public health, among other things. Funding for the nation’s infrastructure comes from a variety of federal,  state, local, and private sources. Increasing congestion has strained the capacity of our  nation’s surface transportation and aviation systems, decreasing their  overall performance in meeting the nation’s mobility needs. Aging and Deteriorating Water Infrastructure Presents Challenges

Water utilities nationwide are under increasing pressure to make  significant investments to upgrade aging and deteriorating infrastructures,  improve security, serve a growing population, and meet new regulatory  requirements.Water infrastructure needs across the country are  estimated to range from $485 billion to nearly $1.2 trillion over the next 20  years. GAO Principles Could Guide Efforts to Reexamine Federal Programs in Light of Challenges

Given the nation’s infrastructure challenges and the federal government’s  fiscal outlook, we have called for a fundamental reexamination of  government programs. These principles  include    creating well-defined goals based on identified areas of national interest,  which involves examining the relevance and relative priority of existing  programs in light of 21st century challenges and identifying emerging areas  of national importance;   establishing and clearly defining the federal role in achieving each goal in  relation to the roles of state and local governments, regional entities, and  the private sector; incorporating performance and accountability into funding decisions to  ensure resources are targeted to programs that best achieve intended  outcomes and national priorities;   employing the best tools, such as benefit-cost analysis, and approaches to  emphasize return on investment at a time of constrained federal resources;  and   ensuring fiscal sustainability through targeted investments of federal,  state, local, and private resources. Various Options Are Available or Have Been Proposed to Fund Investments in the Nation’s Infrastructure

Various options exist or have been proposed to fund investments in the  nation’s infrastructure. These options include altering existing or  introducing new funding approaches and employing various financing  mechanisms. In addition, some have suggested including an infrastructure  component in a future economic stimulus bill, which could provide a one- time infusion of funds for infrastructure. Each of these options has  different merits and challenges, and the selection of any of them will likely  involve trade-offs among different policy goals. Furthermore, the  suitability of any of these options depends on the level of federal  involvement or control that policymakers desire for a given area of policy. However, as we have reported, when infrastructure investment decisions  are made based on sound evaluations, these options can lead to an  appropriate blend of public and private funds to match public and private  costs and benefits. To help policymakers make explicit decisions about  how much overall federal spending should be devoted to infrastructure  investment, we have previously proposed establishing an investment  component within the unified budget. Aviation user fees. Tolling. The federal government  currently offers several programs to provide state and local governments  with incentives such as bonds, loans, and credit assistance to help finance  infrastructure. A number of available mechanisms can be used to help finance  infrastructure projects. To date,  $5.3 billion has been allocated for six projects. For example, although the federal government invests in  surface transportation, aviation, water, and dam infrastructure, a  significant portion of this infrastructure is owned by state and local  governments. Performance and Accountability: Transportation Challenges Facing  Congress and the Department of Transportation. Highway Trust Fund: Overview of Highway Trust Fund Estimates.
Why GAO Did This Study

Physical infrastructure is critical to the nation's economy and affects the daily life of virtually all Americans--from facilitating the movement of goods and people within and beyond U.S. borders to providing clean drinking water. However, this infrastructure--including aviation, highway, transit, rail, water, and dam infrastructure--is under strain. Estimates to repair, replace, or upgrade aging infrastructure as well as expand capacity to meet increased demand top hundreds of billions of dollars. Calls for increased investment in infrastructure come at a time when traditional funding for infrastructure projects is increasingly strained, and the federal government's fiscal outlook is worse than many may understand. This testimony discusses (1) challenges associated with the nation's surface transportation, aviation, water, and dam infrastructure, and the principles GAO has identified to help guide efforts to address these challenges and (2) existing and proposed options to fund investments in the nation's infrastructure. This statement is primarily based on a body of work GAO has completed for the Congress over the last several years. To supplement this existing work, GAO also interviewed Department of Transportation officials to obtain up-to-date information on the status of the Highway Trust Fund and various funding and financing options and reviewed published literature to obtain information on dam infrastructure issues.

What GAO Found

The nation faces a host of serious infrastructure challenges. Demand has outpaced the capacity of our nation's surface transportation and aviation systems, resulting in decreased performance and reliability. In addition, water utilities are facing pressure to upgrade the nation's aging and deteriorating water infrastructure to improve security, serve growing demands, and meet new regulatory requirements. Given these types of challenges and the federal government's fiscal outlook, it is clear that the federal government cannot continue with business as usual. Rather, a fundamental reexamination of government programs, policies, and activities is needed. Through prior analyses of existing programs, GAO identified a number of principles that could guide a reexamination of federal infrastructure programs. These principles include: (1) creating well-defined goals based on identified areas of national interest, (2) establishing and clearly defining the federal role in achieving each goal, (3) incorporating performance and accountability into funding decisions, (4) employing the best tools and approaches to emphasize return on investment, and (5) ensuring fiscal sustainability. Various options are available to fund infrastructure investments. These options include altering existing or introducing new funding approaches and employing various financing mechanisms, such as bonds and loans. For example, a variety of taxes and user fees, such as tolling, can be used to help fund infrastructure projects. In addition, some have suggested including an infrastructure component in a future economic stimulus bill, which could provide a one-time infusion of funds for infrastructure projects. Each of these options has different merits and challenges, and choosing among them will likely involve trade-offs among different policy goals. Furthermore, the suitability of the various options depends on the level of federal involvement or control that policymakers desire. However, as GAO has reported, when infrastructure investment decisions are made based on sound evaluations, these options can lead to an appropriate blend of public and private funds to match public and private costs and benefits. To help policymakers make explicit decisions about how much overall federal spending should be devoted to investment, GAO has previously proposed establishing an investment component within the unified budget.