Transportation, water infrastructure funding, finance in U.S. not as dire as some believe

RAND researchers also offer other policy options for Congress that could be used to help the federal government—working with state and local governments and the private sector—to renew and modernize the nation’s infrastructure.

Among these options, RAND researchers list major investments in the renewal of the nation’s most-critical aging and new infrastructure, incorporating advanced technologies to support newer construction methods, more-durable and sustainable materials and sensor technologies that might benefit infrastructure maintenance.

In addition, federal capital funding could include requirements to make projects resilient to natural disasters and climate change in order to reduce future spending on disaster assistance.

Key findings
The spending picture is not dire, but serious problems exist

  • The data do not support a picture of precipitous decline in national spending on the physical condition of transportation and water infrastructure.
  • Where the local and regional economies are thriving, good governance is the rule, and revenue streams for sustainable operations and maintenance (O&M) are in place, infrastructure tends to be well maintained and modernized.
  • Elsewhere, problems persist that defy easy solutions. For example, the federal Highway Trust Fund and many of the state funds for drinking water and wastewater treatment plants have not been operating on a sustainable basis for some time now, and communities with declining tax bases struggle to maintain their roads, bridges, and water systems and repay their debts to bond holders.

The federal government’s role

  • State and local governments account for most expenditures on transportation and water infrastructure. The federal government could do a better job intervening in the gaps where state and local actions are less effective or beyond their capacities.
  • The federal government’s strengths are in setting performance standards and requiring consistent evaluations of life-cycle costs and benefits; supporting states in their compliance and enforcement of environmental, health, and safety rules; incentivizing and encouraging multijurisdictional regional infrastructure plans; funding research on innovative technologies that could benefit all states; and targeting capital investment in projects with national benefits.
  • The federal government does not have an explicit set of priorities for direct investment in infrastructure projects of national significance.
  • National and regional infrastructure needs differ markedly from the decades past, when Congress first enacted many of the programs that still dominate the policy landscape.
  • An across-the-board ramp-up of federal spending is unlikely to solve the infrastructure problems that need fixing. Lasting changes will require thoughtful consideration of targeted spending priorities, policy constraints, and regional differences.

The role of private capital is still at the margins

  • Private investment in transportation and water infrastructure currently is less than 1 percent of total funding across all sources.
  • The federal government in recent years has taken a number of steps to lower transaction costs imposed by federal rules and sequential review processes, and to actively promote public-private partnerships on projects receiving some share of federal funding, but direct private investment in transportation and water infrastructure is likely for only a limited class of profitable projects.


  • Preserve the federal tax exemption on interest earned from municipal bonds for at least the next decade.
  • Reinstate Build America Bonds (BABs) with taxable interest for a ten-year period and experiment with other financing alternatives.
  • Target longer-term projects likely to produce significant national benefits.
  • Focus on capital investment, including major investments in renewal of aging infrastructure and new infrastructure incorporating advanced technologies.
  • Prioritize maintenance of federal assets, such as mission-critical military bases, dams, levees, locks, national parks, and other vital federal infrastructure.
  • Make resilience to natural disasters and adaptation to rising seas, increasing flood frequency, and other changing climate impacts a condition for spending.
  • Streamline the regulatory review process among multiple federal agencies.
  • Consolidate the U.S. Army Corps of Engineers and the U.S. Bureau of Reclamation into an integrated national water resource agency.
  • Fund competitive grants for research, development, and deployment of new technologies.

— Read more in Debra Knopman et al., Not Everything Is Broken: The Future of U.S. Transportation and Water Infrastructure Funding and Finance (RAND Corporation, November 2017)