McDowell - Federalism and America's Public Works

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Federalism and America's Public Works Author(s): Bruce D. McDowell Source: Publius, Vol. 18, No. 3, The State of American Federalism, 1987 (Summer, 1988), pp.

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Federalism and America's Public Works Bruce D. McDowell

U.S. Advisory Commission on Intergovernmental Relations

On 24 February 1988, the National Council on Public Works Improvement submitted its final report on the nation 's public works to the president and the Congress. The report concluded that America's infrastructure is not in ruins, as charged by the landmark book entitled America in Ruins. The report did say, however, that the nation 's infrastructure is only barely adequate and getting worse. The council urged the nation to reverse course and give greater attention to infrastructure renewal and expansion. In the council's view, federalism will be a major fac- tor in the success of the needed turnaround. Such change will require shared responsibilities involving the federal, state, and local governments plus the private sector. Significant changes in the relationships among these actors have made the 1980s a decade of transition, diminishing federal influence on infrastructure issues.

The National Council on Public Works Improvement (NCPWI) was established by Congress in the fall of 19841 in response to charges that America's physical infrastructure was not being maintained properly. That charge, made in a landmark book entitled America in Ruins,2 was followed by a catastrophic bridge collapse on the Connecticut Turnpike, by some highly visible watermain and subway breakdowns in New York City, and by substantial media attention to infrastructure problems. A number of bills had been introduced in the Congress by 1984, with most of them proposing to increase federal spending on the nation's infrastructure.

Congress asked the council to evaluate the present condition of the nation's public works and their ability to support America's continued growth and economic vitality. Congress also requested guidelines for taking inven- tory and monitoring the condition of the infrastructure.

The NCPWI consisted of five members-three appointed by the president, one by the Senate, and one by the House of Representatives. It was assisted by a twelve-member advisory group-divided equally between federal cabinet members and the elected heads of the major national associations of state and local government-plus a small staff and a large stable of consultants.

The council produced three reports. The first identified a wide range of public works issues and set the study agenda.3 The second took a detailed look at nine separate categories of public works in the transportation, water,

'Public Law 98-501, "The Public Works Improvement Act of 1984." 2Pat Choate and Susan Walter, America in Ruins: Beyond the Public Works Pork Barrel

(Washington, D.C.: Council of State Planning Agencies, 1981). 3National Council on Public Works Improvement, The Nation's Public Works: Defining the

Issues (Washington, D.C.: National Council on Public Works Improvement, September 1986).

Publius: The Journal of Federalism 18 (Summer 1988) 97


98 Publius/Summer 1988

and waste management fields.4 The final report suggested to Congress and the president an extensive agenda for improving the nation's public works.5 The council recommended not only spending more, but billing the beneficiaries, and getting greater value for every public works dollar spent.

OVERVIEW OF THE COUNCIL'S FINAL REPORT

Although the NCPWI did not find America's infrastructure to be in ruins, it identified serious and increasing maintenance problems as well as a growing lag in capital investment. The council's report card on eight major categories of public works produced only a "C" average.6 In general, the council concluded that the nation is getting by only by living off of its past investments.

Performance of the Nation's Infrastructure Looking ahead, all the categories of public works studied by the council

were found to face uncertain futures. Eight of these nine categories were given grades on a report card. The ninth-intermodal transportation-had significant problems also, but was not given a grade. Here are the grades awarded by the council.

Water resources received the highest grade, a "B," from the council. This very broad category includes dams, flood control, irrigation, and water transportation, plus shoreline and stream-bank protection. Although water resources facilities generally are adequate, most of the major development opportunities already have been exploited. Additional smaller opportunities do exist, and maintenance needs are growing, but focusing on these tasks attracts less enthusiasm and less political support than major new development projects. New federal trust funds have been legislated for water transportation purposes, and cost-sharing requirements have been instituted by Con- gress that may provide needed incentives for the design and selection of more economically efficient projects. However, the new cost-sharing arrangements also may make it difficult to finance needed projects in poorer communities. In addition, implementation of water resources projects has become slower and more cumbersome as environmental sensitivities have risen and cost- sharing negotiations between the federal and nonfederal sponsors have

4National Council on Public Works Improvement, The Nation's Public Works: Categories of Public Works Series (Washington, D.C.: National Council on Public Works Improvement, May 1987), published in ten volumes as follows: (1) Executive Summaries of Nine Studies, (2) Highways, Streets, Roads, and Bridges, (3) Mass Transit, (4) Airports and Airways, (5) Inter- modal Transportation, (6) Water Resources, (7) Water Supply, (8) Wastewater Management, (9) Solid Waste, and (10) Hazardous Waste Management.

5National Council on Public Works Improvement, Fragile Foundations: A Report on America's Public Works, Final Report to the President and the Congress (Washington, D.C.: U.S. Government Printing Office, February 1988).

6The "grades" were arrived at as a consensus among the council members after examining a wide body of evidence.


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intensified. Water supply and aviation both received the grade of "B-" from the coun-

cil. Local water supplies generally have been adequate. However, strict new federal standards for drinking water are expected to require dramatic increases in water rates over the next decade. Many public water systems price their services below cost; now they face an added $5 billion capital expenditure to meet the new standards. Deterioration of water systems in some older cities, serious groundwater drawdowns in some regions, and the need to reallocate available water supplies between agricultural and urban users in the West pose additional challenges.

The nation's airports and airways generally have handled rapid increases in demand safely and effectively. However, congestion is growing both in the air and on the ground, while sizable cash balances remain unspent in the federal airports and airways trust fund.

Highways earned a "C+ " from the council. Federal and state gas tax increases have supported increased maintenance and improved pavement conditions in the last five or six years. However, system expansion is falling short of need, and congestion is becoming a major problem in many urban and suburban areas. Imminent completion of the interstate highway system has left the federal highway program without clear goals, federal funding has become increasingly unreliable, and the states have begun to squabble over increasingly uncertain federal dollars.

Wastewater management earned a "C." As a result of massive federal grants for over a decade, 75 percent of the U.S. population is now served by secondary wastewater treatment plants. However, the federal government is spinning-off that aid program to the states by helping them capitalize revolving loan funds. These new state programs are designed to continue the treatment plant segment of the wastewater management effort. Nevertheless, several problems remain. Uncontrolled sources of pollution, such as urban and agricultural wastewater runoff and groundwater contamination, are not being addressed systematically. In addition, the productivity and operational effectiveness of secondary treatment facilities are declining, resulting in increased violations of water quality standards.

Solid waste management and mass transit both earned the grade of "C-" from the council. Although tougher environmental standards for landfills and new waste-to-energy technologies have made the disposal of solid wastes safer, costs are rising dramatically in urban areas, public opposition to siting even these environmentally safer facilities has become a major problem, and waste reduction, separation, and recycling efforts are receiving too little attention. Disposal needs are growing more rapidly than disposal capacity.

With respect to mass transit, federal funding has moved most service pro- viders from the private sector into the public sector, has improved the quality of service in many areas, and has reversed postwar declines in ridership. However, diverting people from their cars continues to be exceedingly difficult. Productivity is dropping and benefits are distributed unevenly. While



mass transit is overcapitalized in many smaller cities, needs in older larger cities go unmet.

Hazardous waste management brings up the rear with a grade of "D." Although federal funding for hazardous waste site cleanups has increased fivefold since 1986, only small fractions of the wastes produced each year are being treated safely. In addition, there is a massive backlog of poisons waiting for proper disposal. Little is being done to reduce hazardous wastes before they are produced or to provide incentives for recycling them. Although the public role continues to be minimal, most of the hazardous waste problem remains to be addressed in the future.

The NCPWI concentrated on these eight categories of public works because of the significant federal role in each of them. However, the council recog- nized that there are many other types of public works equally in need of attention by state and local governments. These include facilities such as schools, firehouses, hospitals, jails, government offices, public housing, and parks. The council believes that many of its recommendations for public works improvement are applicable to these types of facilities as well as to those that the council studied in detail.

Links to the Economy Research prepared for the NCPWI documented the extent to which physical

infrastructure plays a vital role in the nation's economy and in the economies of the various regions, states, and localities.7 The industrial sectors of the economy, alone, account for over 56 percent of the increase in infrastructure services used between 1977 and 1984. Projecting the needs of industry conservatively through 1995 suggests the need for expansion of infrastructure services by more than one-third over the ten-year period. If infrastructure does not keep up with economic growth, the lag could dampen the economy by forcing more private spending into higher costs of production. For example, poor roads increase the cost of truck maintenance, and detours add the costs of extra miles and extra time. To avoid such added costs, the council believes that the current performance and future prospects for public works need to be improved, beginning immediately.

Although public works spending continues to increase, greater shares of it are going into operations and maintenance. Capital spending by all units

7U.S. Department of Commerce, Office of Economic Affairs, "Effects of Structural Change in the U.S. Economy on the Use of Public Works Services," prepared for the National Council on Public Works Improvement (Washington, D.C., July 1987). See also, Randall W. Eberts, "Estimating the Contribution of Urban Public Infrastructure to Regional Growth," Working Paper 8610 (Cleveland, Ohio: Federal Reserve Bank of Cleveland, December 1986); Teresa Garcia- Mila and Therese McGuire, "The Contribution of Publicly Provided Inputs to States' Economies," Woodrow Wilson School Discussion Series (Princeton University, July 1987); and Urbanomics, "The Role of Public Works in Supporting Regional and Industrial Growth," prepared for the National Council on Public Works Improvement (Washington, D.C., September 1987); and David Alan Aschauer, "Is the Public Capital Stock Too Low?" Chicago Fed Letter (Chicago, Ill.: The Federal Reserve Bank of Chicago, October 1987).


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of government peaked in the late 1960s and has been declining since then, along with (1) the share of all government spending that goes for public works, (2) the percent of gross national product (GNP) devoted to public works, and (3) public works capital spending as a percent of private capital spending.8

General Strategies for Public Works Improvement To reverse this downward slide, the council prescribes a comprehensive

set of actions. These include: * increased spending by all units of government and the private sector; * a clearer link between benefits provided and taxes or fees levied for

the support of public works; * a new style of more effective performance-based management; * clearer responsibilities and authority for achieving results; * accelerated innovation through stronger research, development,

demonstration, and innovation transfer programs; and * an adequate supply of better qualified personnel in all parts of the

process. Two of these elements are at the heart of infrastructure federalism: the

public works spending by all governments, and the call for clarification of federal-state-local roles and responsibilities. All governments are involved now. However, some significant role changes already have occurred, and many others are being proposed. The council report catalogues these issues and sets forth a framework for evaluating them. The remainder of this article focuses on the federalism aspects of the council's report.

A FOCUS ON FEDERALISM

The NCPWI determined that many public works, though largely local, have more than local significance. Intergovernmental regulation and shared financing have become important, even though direct state and federal roles in owning, operating, and maintaining public works are relatively limited. For example, although federal and state governments play an important role in highway programs, there is no federal ownership of roads except on federal lands; moreover, states own only about 24 percent of all road mileage in the nation.

Examining public works roles means looking at many actors and a wide range of tasks. The actors include the federal, state, and local governments, special- and general-purpose units of government, and private firms. The principal tasks include the following:

8Apogee Research, Inc., "Are We Spending Enough on Public Works?" A Public Works Issue Paper prepared for the National Council on Public Works Improvement (Washington, D.C., 14 October 1987).



* Establishing general program goals, policies, and strategic plans. * Regulating facilities and services. * Planning, building, owning, operating, and maintaining specific

facilities (projects). * Financing capital improvements, operations, and maintenance. * Researching and demonstrating new technologies and techniques. * Providing technical assistance and promoting innovation.

Figure 1 shows the relative roles of the federal, state, and local governments in financing operations, maintenance, and capital expenditures for seven types of public works (for which consistent data are available). The striking patterns are the heavy concentration of federal financing in the capital sector, the general dominance of local financing for operations and maintenance, and the relatively small state financing role. (The state is important in highways and in some aspects of water projects.)

Of course, there is much more to public works than financial relationships. Figure 2 summarizes the lead roles currently exercised by the three levels of government with respect to (1) policy and standard setting, (2) capital financing, and (3) ownership, operations, and non-capital financing. The reference to "lead" roles recognizes that there are very few exclusive roles, but there often are senior partners for taking care of certain responsibilities. Because of the complexity of these interrelationships, accountability for programs is often difficult to trace. The council believes that clarifying the lead responsibilities and matching them with commensurate authority marks the path to greater effectiveness.

Current Lead Roles9 As Figure 2 shows, the federal government currently plays the dominant

role in planning, setting standards for, and providing capital financing for the interstate highway system; in operating and maintaining the nation's airways, harbors, and major dams; and in cleaning up major hazardous waste sites. It also takes the lead in the capital financing of mass transit and many smaller airports; in standard-setting for urban water supply, wastewater treatment, and hazardous waste; and in capital financing for wastewater treatment. The last role is changing; state revolving loan funds will be capitalized under current legislation, thus phasing out federal funding for wastewater treatment facilities. Federal construction grants are scheduled to cease in 1990, although federal capitalization of state loan funds is authorized through 1994.

States now play dominant roles only in noninterstate federal-aid highways and nonfederal dam safety programs. Although the states own, operate, and

9For a more detailed discussion of issues raised in this section, see William G. Colman, "Pro- vision for the Major Categories of Physical Infrastructure: The Question of Proper Roles," prepared for the National Council on Public Works Improvement (Washington, D.C., 6 August 1987).


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FIGURE 1 Government Outlays for Public Works in 1984, $97.7 Billion

Billions of FEDERAL STATE tI LOCAL 1984 dollars $25.9 billion $22.5 billion $49.2 billion

25 Operations

20- $28.5 billion 3.8 Federal

15- 5.7 State 19.0 Local

10- 81 6.7 5- 3.6 2.9 2.12

Highways Airports Mass Water Wastewater Water Solid Transit Resources Supply Waste

Maintenance 20- $28.4 billion

1.7 Federal 15- 12.2 7.5 State V19.2 Local 10-

6.3

5-0.9 2.9 1.9 2.1 2.12

Highways Airports Mass Water Wastewater Water Solid Transit Resources Supply Waste

25-

19.9Capital 20- $40.7 billion 15- 20.4 Federal

9.3 State

10- 11.0 Local

5- 3.7 1 5

3.7 9

2.1 0.6

0-

ri Highways Airports Mass Water Wastewater Water Solid

Transit Resources Supply Waste Bar Totals 40.1 6.6 13.3 6.9 11.9 14.0 4.8

SOURCE: Apogee Research, Inc., "Separating Operations from Maintenance," a paper prepared for the National Council on Public Works Improvement. Values updated 12/87 per communication with Apogee staff.

1Arbitrarily divided state and local total in half. 2Arbitrarily divided operations and maintenance total in half.

maintain most of the federal-aid highways (both interstate and noninterstate) as well as some other highways, that mileage accounts for less than one-



FIGURE 2 Usual Lead Roles in Public Works Categoriesa

Program tasks

Policy & Capital Ownership, operations Categories of public works standard setting financing & O/M Financing

Highways interstate F F S noninterstate S/L S/L/PS S/L

Airports major commercial L L/PS L/PS general aviation and L F L/PS

smaller commercial Airways F F F Mass transit L F L/PS Water supply (urban) F/S L/PS L/PS Wastewater treatment F F/S L Water resources

ports (landslide) L L/PS L/PS dredging/navigation F F F major dams F F F urban stormwater L L L nonfederal dam safety S PS/L PS/L

Solid waste S/L L/PS L/PS Hazardous waste

currently generated F/S PS PS site cleanup F F PS

SOURCE: Council staff. Based on William G. Colman, "Provision for the Major Categories of Physical Infrastructure: The Question of Proper Roles," a working paper prepared for the National Council on Public Works Improvement, 6 August 1987; also based on the nine studies of individual public works categories prepared for the Council in May 1987. NOTE: F = Federal; S = State; L = Local; PS = Private Sector.

aBecause of the great variety in the American federal system, there are exceptions to these lead roles. For example, the Baltimore-Washington International Airport is owned and operated by the state of Maryland, and ports are owned and operated by the states of Alabama, Georgia, and Virginia.

quarter of all roads. The states' dominance in federally-aided noninterstate highways (supported significantly by the state gasoline tax) is eclipsed in most states by the much greater mileage of local road systems. The major exceptions are Alaska, West Virginia, Delaware, Virginia, and North Carolina, where state ownership accounts for 85 percent or more of the total road mileage in the state. On average, states spend approximately 80 percent of all their infrastructure monies on roads.

There is an increasing state role in mass transit. Some states, such as Maryland, Virginia, New Jersey, and New York, actually operate mass transit facilities, and most states make financial contributions to local programs. Overall, state contributions (capital and operating) to mass transit exceeded the federal government's contributions in 1987, and the gap will widen in fiscal year 1988 under the federal budget approved in December 1987.

The state role in water supply regulation is now shared with the federal government. This resulted from rising national environmental concerns, which


Public Works 105

led to new drinking water standards. Similarly, federal standards drive the states' regulatory role in managing currently generated hazardous wastes. Federal and state solid-waste regulatory roles are shared with localities. The now emerging strong state role in financing wastewater treatment plants results from a federal transfer of responsibility.

Local governments generally dominate the provision of local roads (ac- counting for 76 percent of all roads), mass transit, airports, certain landslide facilities at water ports, water supply, urban stormwater facilities, and solid-waste disposal. Exceptions include the use of special districts in many areas (as noted below), the provision of local roads by a few states, and federal dominance in the capital financing of transit. In addition, key local roles are often shared with the private sector. This includes an important private role in funding, operating, and in some cases owning streets, airports, water ports, water supply, solid-waste disposal facilities, and nonfederal dams.

Independent special districts and authorities'o provide some public works in all states except Arkansas and Hawaii." Some of these units are agents of the states, while others are agents of individual localities or regional groups of jurisdictions. They provide airports, highways, mass transit, water transport, sanitation, sewerage, water supply, and natural resources facilities. More states were using special units in 1982 than in 1972 for all these categories of public works. However, fewer than half of the states use special units for highways, water transport, and sanitation. The most frequently used type of district is for natural resources (43 states).

Even among states that use independent special districts and authorities, such units spend an average of more than half of the capital used at the state and local levels on only two functions: transit and water transport. However, individual states vary greatly. The proportion of capital outlays spent in any given state by such units ranges from 0.1 to 100 percent of all the state and local capital spending for the designated functions.

These statistics understate the role of districts in providing public works because they do not count "subordinate" units classified by the U.S. Bureau of the Census as being under the control of general-purpose governments. According to one estimate, the bonded indebtedness of these subordinate districts equals 62 percent of that of the independent ones.'2

The private sector also plays several key roles in providing public works services. The most prominent is the lead role in owning, operating, and financing a majority of hazardous waste-management facilities and a substantial

loFor a more thorough discussion of special districts and authorities, see Institute of Public Administration, "The Role of Special Districts and Public Authorities in Public Works Provi- sion," prepared for the National Council on Public Works Improvement (Washington, D.C., August 1987) as well as Colman, "Provision for the Major Categories."

"A very large number of "dependent" special districts also play important public works roles, but they are classified by the U.S. Census Bureau as parts of their host governments (state or local) and are not included in the Census of Governments reports upon which this discussion is based.

12Institute of Public Administration, "The Role of Special Districts," p. 11-21. Even this estimate is an understatement because it is based on incomplete market information.



number of solid-waste facilities. In other fields of public works, the private role is usually supportive.

Winds of Change In the late 1970s, a reevaluation of the federal role arose as federal fiscal

strength began to falter in the face of rising deficits and defense and entitle- ment expenditures during a period of economic stagnation. At the same time, critics contended that federal rules and regulations stifled creativity and cost- effectiveness in meeting state and local needs.13

By the end of President Jimmy Carter's administration, the President's Commission for a National Agenda for the Eighties recommended shifting national policy away from place-oriented physical and economic development programs to people-oriented, place-neutral programs.14 A few years later, the Committee on Federalism and National Purpose (the Evans-Robb Committee) made a similar recommendation.'5

Since 1981, federal income tax rates have been reduced and federal spending priorities have shifted toward defense, the social safety net, and interest on the national debt. The unprecedented rise of the peacetime federal deficit in the 1980s added urgency to reconsideration and redesign of many federal- aid programs, including many for public works. This trend spurred searches for other sources of infrastructure funds.

Recent tax law changes have rescinded investment incentives enacted in 1981 to encourage greater private sector participation in providing public works. The municipal bond market is now sorting out the effects of these new provisions.

These trends have exerted a strong push to examine options for decen- tralizing public works responsibilities. The NCPWI found that this was not the first time such pressures had been felt. Earlier occurrences had led to formal consideration of criteria for evaluating the relative roles of governments within the American federal system. The council drew upon that earlier work and recent updates of it.

Criteria for Evaluating Public Works Roles Concern over the growth in federal domestic programs following World

War II spurred interest in sorting out the proper roles of the federal and state

13See, for example, U.S. Advisory Commission on Intergovernmental Relations, An Agen- da for American Federalism: Restoring Confidence and Competence (Washington, D.C.: U.S. Government Printing Office, 1981) and U.S. Advisory Commission on Intergovernmental Rela- tions, Regulatory Federalism: Policy, Process, Impact and Reform (Washington, D.C.: U.S. Government Printing Office, 1984). See also, U.S. Office of Management and Budget, Manag- ing Federal Assistance in the 1980s (Washington, D.C.: U.S. Government Printing Office, March 1980).

14The President's Commission for a National Agenda for the Eighties, A National Agenda for the Eighties (Washington, D.C.: U.S. Government Printing Office, 1980).

15The Committee on Federalism and National Purpose, To Form a More Perfect Union (Washington, D.C.: National Conference on Social Welfare, December 1985).


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governments. The council found many studies, prepared between then and now, that address the topics of defining appropriate federal roles, returning certain established federal roles to states and localities, meshing local and areawide responsibilities, and selecting appropriate tools for implementing intergovernmental policies.'6 The principles and criteria found in those studies were summarized by the council as a guide for reviewing proposals to modify current public works roles and responsibilities. They are presented briefly in Figure 3.

The basic approach in all these federalism reports is to emphasize the benefits of decentralization, except where clear national purposes are to be served, and to protect the roles and responsibilities of state and local governments against unnecessary intrusions by the federal government. With this guideline in mind, the council examined governmental roles in the following nine major categories of public works: (1) highways, streets, roads, and bridges, (2) mass transit, (3) airports, (4) intermodal transportation, (5) water supply, (6) water resources, (7) wastewater treatment, (8) solid waste, and (9) hazardous waste.'7

Proposed Role Changes Research prepared for the council broached many proposals for altering

present public works roles. Following are some examples. Highway programs were found to be at a major turning point.'8 The in-

terstate highway system is almost complete, and there is no major new highway goal in sight. Remaining spending is very uneven among the states because unfinished links are few and far between. The federal budget process has worsened the situation by delaying payments and reducing anticipated funding amounts. Many states, squabbling over a fair return of the gas taxes

16Such studies include: The U.S. Commission on Intergovernmental Relations, A Report to the President for Transmittal to the Congress (Washington, D.C.: U.S. Government Printing Office, June 1955); the following five titles issued by the U.S. Advisory Commission on In- tergovernmental Relations (Washington, D.C.: U.S. Government Printing Office): Governmental Functions and Processes: Local and Areawide (Report A-45) February 1974; The Intergovern- mental Grant System: An Assessment and Proposed Policies-Summary and Concluding Obser- vations (Report A-62) June 1978; The Federal Role in the Federal System: The Dynamics of Growth. An Agenda for American Federalism: Restoring Confidence and Competence (Report A-86) June 1981; Devolving Federal Program Responsibilities and Revenue Sources to State and Local Governments (Report A-104) March 1986; Devolving Selected Federal-A id Highway Programs and Revenue Bases: A Critical Appraisal (Report A-108) September 1987. The following two titles issued by the Congressional Budget Office (Washington, D.C.): Public Works In- frastructure: Policy Considerations for the 1980s, April 1983; The Federal Government in a Federal System: Current Intergovernmental Programs and Options for Change, August 1983. See as well the Committee on Federalism and National Purpose, To Form a More Perfect Union; The White House, Working Group on Federalism of the Domestic Policy Council, The Status of Federalism in America (Washington, D.C., November 1986); and the President of the United States, "Executive Order 12612" (Washington, D.C., 26 October 1987).

'7See the council's second report to the president and the Congress published May 1987 in ten volumes-a summary volume and a separate volume on each of the nine categories.

'8See Alan Pisarski, Report on Highways, Streets, Roads, and Bridges (Washington, D.C.: National Council on Public Works Improvement, May 1987).



FIGURE 3 Summary of Criteria for Evaluating Intergovernmental Roles

Principles justifying federal Appropriate methods of involvement implementing Criteria for relinquishing implementing shared shared responsibilities federal responsibility responsibilities

Enumerated constitutional Federal purpose is unclear. If the purpose is to powers must be exercised. stimulate new and greater

Federal program is too activity emphasizing federal Fiscal magnitude requires small to have much impact leadership use: federal role. or to be worth the cost of

administration. * Categorical grants Multistate dimension can- * Cooperative agreements not be addressed otherwise. Federal role is minor * Direct federal loans

relative to state and local * Loan guarantees Uniform activity is needed roles. * Tax policy nationwide.

Nonfederal financing is If the purpose is simply to Negative spillovers among feasible, assured, and ade- help support common pur- states must be prevented or quate (perhaps including poses (emphasizing state or redressed. general federal support local leadership), use:

grants to states with low Efficiency or effectiveness fiscal capacities backed up * Block grants of programs can be by state responsibilities for * General Revenue Sharing significantly improved by a easing interlocal disparities). federal role. If the purpose is to require

Nonfederal responsibility certain activities (emphasiz- Redistribution of resources would mean greater fiscal ing federal leadership), use: across the nation is needed and programmatic for geographic or discipline. * Direct regulation demographic equity and * Conditional grants or program effectiveness (this Devolution mechanisms (in- loans (categorical grants includes emergency cluding transition measures) are best); makes "volun- responses). are feasible, equitable, and tary" regulations attached

simple. to financial assistance irresistible

SOURCE: National Council on Public Works Improvement, Fragile Foundations: A Report on America's Public Works, Final Report to the President and the Congress (Washington, D.C.: U.S. Government Printing Office, February 1988), p. 84.

collected within their borders, have become so frustrated as to propose that they collect these taxes themselves and junk the federal program. The Reagan administration has proposed highway block grants that would reduce federal responsibilities and funding.

Mass transit programs were also found to be in the midst of considerable controversy."9 Without a clear tie to a national urban policy or clear goals for economic development or urban mobility, the program has experienced significant budget cuts. It is being delivered increasingly by block grants, and is being pushed toward privatization. A controversial proposal presented to

19See The Urban Institute, The Nation's Public Works: Report on Mass Transit (Washington, D.C.: National Council on Public Works Improvement, May 1987).


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the NCPWI was to complete the transition to a block grant, and ultimately combine that program with a federal block grant for local highways as the means of shifting greater responsibility to state and local governments.

Federal airports and airways programs began informally in the 1930s and were formalized in the 1940s. These programs are funded now through the federal Airports and Airways Trust Fund. Perhaps the largest issue, presently, is the accumulation of unobligated balances in the trust fund while needs go unmet. In its recent reauthorization of the program, Congress provided for a reduction in the revenues going into the trust fund if these balances remain high. Other issues concern retargeting funds to those airport and noise abatement projects that are difficult or impossible to support through airport fees, giving self-financing airports freedom to establish head taxes, and expanding the state role in system planning, allocating federal-aid funds, and helping to resolve siting and noise issues.

Intermodal transportation was found to be crucial to efficient freight move- ment and international competitiveness. However, such considerations have been falling through the cracks since the deregulation of trucks, railroads, and airlines.20 Dramatically fewer data are collected now on freight movements, and there is no point of access to government where these issues can be raised and pursued effectively. The issues are national and international in scope. The proposal presented to the council was for federal government leadership in structuring an intergovernmental and public-private effort to address this issue.

Water supply systems have just come under a heavy new federal mandate to become much more pure.21 This mandate is unfunded. The assumption seems to be that water bills can compensate. The proposal presented to the council was to establish a federal role in mandating full-cost pricing.

Water resources22 and wastewater treatment23 programs recently have been set on new courses that may bear watching. The new cost-sharing requirements for water resources projects, along with increasing environmental delays, tend to dilute leadership and accountability. The remedial proposal suggested to the council was to establish an intergovernmental issue- monitoring and coordinating body.

The move to decentralize wastewater funding responsibility to the states through revolving loan funds will be interesting to watch for its financial adequacy as well as any lessons that might be learned for use in decentraliz- ing other programs.

20See Joseph S. Revis and Curtis Tarnoff, The Nation's Public Works: Report on Intermodal Transportation (Washington, D.C.: National Council on Public Works Improvement, May 1987).

21See Wade Miller Associates, The Nation's Public Works: Report on Water Supply (Washington, D.C.: National Council on Public Works Improvement, May 1987).

22See Kyle Schilling et al., The Nation's Public Works: Report on Water Resources (Washington, D.C.: National Council on Public Works Improvement, May 1987).

23See Apogee Research, Inc., The Nation's Public Works: Report on Wastewater Manage- ment (Washington, D.C.: National Council on Public Works Improvement, May 1987).



Solid and hazardous waste programs are relatively new and underdeveloped by the federal government.24 Environmental regulation with respect to water and air pollution are the triggers that have involved the federal government in these traditionally local and private activities. Finding adequate disposal sites (predominantly a state-local responsibility), cleaning up existing hazardous disposal sites (a new federal Superfund responsibility in cooperation with states and industry), and reducing the amount of waste that needs to be disposed (a largely ignored responsibility) are complementary approaches that need to be better coordinated. It was proposed to the NCPWI that the federal government take a leadership role in waste reduction because of the need to work with nationwide industries to modify the amounts and types of wastes produced and to ensure adequate markets for recycled materials.

Each of these issues is complex and important, deserving of a national study of its own. Consequently, the council could address them only in a general fashion.

THE COUNCIL'S FEDERALISM POSITIONS

The council's report clearly calls on all governments in the federal system to continue playing vital roles in the nine categories of public works it studied. However, the council urged that these roles be clarified to identify responsibility and accountability for performance more directly. The council went on to state or imply that:

* The federal government should continue and strengthen its lead roles in the fields of hazardous waste, air traffic control, inland waterways, deep-port dredging, highways of interstate significance, intermodal freight transportation, the establishment of minimum national performance standards for environmental protection, major capital investments in flood control and shoreline protection, and overall coor- dination of water resources programs.

* The federal role should be supportive of state and local goals in other categories of public works studied by the council.

* The federal government should remain a reliable partner in financing public works by avoiding unwarranted restraints on state, local, and private financing options; protecting state and local access to the private capital markets for public works purposes, especially for the nine categories studied by the council; spending the federal trust funds in a more timely and predictable fashion; and getting control of its deficit so that public works will not be shortchanged in the budget process.

* Federal mandates in the public works field should be administered flexibly-allowing cost-effective means of compliance by state and

24See Jeffrey F. Clunie, R. W. Beck Associates, The Nation's Public Works: Report on Solid Waste (Washington, D.C.: National Council on Public Works Improvement, May 1987). See also Apogee Research, Inc., The Nation's Public Works: Report on Hazardous Waste Manage- ment (Washington, D.C.: National Council on Public Works Improvement, May 1987).


Public Works 111

local governments. These mandates also should be accompanied by federal assistance to the extent that they involve costs of enforcing federal regulations or costs that exceed the benefits to the jurisdictions that provide the service.

* The federal government should initiate a new national commitment to accelerate public works innovations. The continuing organization needed to coordinate implementation of this initiative, long-term funding, setting of the research and applications agenda, and pursuit of individual projects should be established and administered cooperatively by the many interests already involved in related efforts. These interests should include government, industry, and academia.

* Federal action is needed to support and stimulate the education and training of public works professionals from a variety of disciplines and specialties.

* States should have the lead responsibility for highways of statewide significance, nonfederal dam safety, major capital financing of wastewater treatment, airport system planning, and siting of waste disposal facilities.

* States have a special responsibility to ensure that local governments have the legal, financial, organizational, managerial, and personnel capacities to meet their own public works responsibilities. State options for enhancing these local capacities may include state aid, the authoriza- tion of regional approaches and interlocal cooperation, and greater degrees of local home rule in some cases.

* States should seek to smooth out public works relationships between state and local governments and among the various types of local governments-including municipalities, counties, and special districts. Where they have not already done so, states should create and use state ACIRs to help achieve this goal.

* Public works programs undertaken by both the state and federal governments should include special provisions for helping small local governments to meet their unique financial and managerial needs in the infrastructure field.

* Local governments (including special districts and regional organiza- tions in some cases) generally should have the lead responsibility for local streets and roads, public transit, individual airports, water supply systems, ports, urban stormwater, wastewater treatment facilities, and solid-waste disposal. Exceptions might include, for example, state ownership and operation of certain airports or water ports.

CONCLUSION: AN UNFINISHED AGENDA

What the NCPWI has supplied is a framework for thinking through the federalism implications of public works programs. In concluding that America is not in ruins, it has recommended a measured response to serious infrastructure deficiencies. Unlike what might have been expected from a major national



study of this sort a decade or two ago, there is no automatic call for massive new federal programs. The council has not recommended the turnback of any specific federal responsibilities or revenue sources but neither has it ruled out turnbacks. Likewise, there are no recommendations for or against additional block grants, and no recommendations about paying for specific federal mandates, or picking up the tab for much needed expansion of research and development programs, or professional development programs. However, the council has laid all these issues on the table for the public works com- munity to address.

As Woodrow Wilson wrote, each generation must seek its own definition of national purpose and proper balance among the governments in America's federal system.25 Clearly, this is a time when that is necessary in the field of public works. The council has sought to sensitize the nation to that need. Many groups both inside and outside of government have followed the council's work closely. Although public works have slipped from the top of the nation's political agenda, there is plenty of room for all governments and the private sector to work together to fulfill demonstrated needs for the infrastructure that will keep America's economy vital and its quality of life on the rise.

25Woodrow Wilson, Constitutional Government in the United States (New York: Columbia University Press, 1917), p. 173.


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Issue Table of ContentsPublius, Vol. 18, No. 3 (Summer, 1988) pp. i-iv+1-212Front Matter [pp. i-iv]The State of American Federalism: 1987 [pp. 1-15]The Blizzard of 1987: A Year of Tax Reform Activity in the States [pp. 17-35]Effects of Federal Tax Reform on Local Finances [pp. 37-50]Regulating Atomic Energy in the American Federal System [pp. 51-65]State Restrictions of Hostile Takeovers [pp. 67-79]Property Rights and Local Land-Use Regulation: The Implications of "First English" and "Nollan" [pp. 81-95]Federalism and America's Public Works [pp. 97-112]State Policy Responses to the AIDS Epidemic [pp. 113-130]The Governor as Innovator in the Federal System [pp. 131-152]Constitutional Reform and Continental Free Trade: A Review of Issues in Canadian Federalism in 1987 [pp. 153-174]Federalism and Ethnic Conflict in Sri Lanka [pp. 175-193]Book ReviewsReview: untitled [pp. 197-198]Review: untitled [pp. 198-200]Review: untitled [pp. 200-202]Review: untitled [pp. 202-203]Review: untitled [pp. 203-206]Review: untitled [pp. 206-208]Review: untitled [pp. 208-212]

Back Matter [pp. 195-196]

McDowell - Federalism and America's Public Works

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