Transportation finance nerds, rejoice! The nonpartisan Congressional Budget Office updated its presentation, Public Spending on Transportation and Water Infrastructure, 1956 to 2023, this week.
We are big fans of this slide deck, and the data spreadsheet behind it, for several reasons:
- The data is presented in both nominal dollars and in inflation-adjusted real dollars – but the dollars aren’t inflated using CPI, they are inflated using infrastructure-specific price indices, which are much better for purposes of divining lost buying power. Many of the numbers are also given in terms of percentage of GDP.
- The data is split between seven modes: highways, mass transit, aviation, intercity rail, water transportation (Coast Guard and maritime), water resources (Corps of Engineers, BuRec), and water utilities (wastewater and drinking water programs).
- The data is also split between federal spending and state/local spending.
- Even better, federal grants are separated from direct federal spending.
- The data is also split between capital spending and operations and maintenance (O&M) spending.
Having nominal/real, modal, federalism level, direct vs grants, and capital-O&M divisions in the same dataset means that you can use the data to highlight a wide variety of trends.
As with any dataset, this one isn’t perfect. The fact that the data is through fiscal 2023 means that COVID relief distorts the last few years, particularly on spending for things like mass transit operating assistance. As with earlier iterations of the dataset, spending on water utilities before the late 1980s cannot be compared with spending thereafter, because the federal government switched most of its support for water utilities from grants (which show up in the federal budget in the full amount of the federal financial support being provided) to support for revolving funds that make loans, where the federal outlays don’t give the full financial support picture.
And, even though using transportation-specific producer price indices instead of CPI is a much better way to look at things, those indices don’t fit all modes equally well. They fit highways the best, but are less apt to fit things like air traffic control capital spending (see below).
Federal spending peaked in 2002. Using infrastructure-specific price indices, the CBO data says that total federal outlays on these modes of infrastructure peaked in fiscal 2002 at $166.7 billion in 2023 dollars, compared with $131.6 billon in 2023 (a 21 percent drop from peak). On the chart below, one can see that after 2002 there was a slide, followed by a jump back with the ARRA stimulus in FY 2010, then another slide, followed by the peak with COVID emergency funding in FY 2020.
O&M Growth. The following chart shows, in real 2023 dollars, the growth of operational costs over capital spending, particularly at the state and local level. The four bands of funding from bottom to top, are federal capital, state/local capital, federal O&M, and state/local O&M.
Of those:
- For the last 50 or so years, federal capital outlays have fluctuated back and forth in a band of $90 to $110 billion per year. They got slightly above $110 billion in 2000-2005 and then once more in 2010, and dipped below $90 billion starting in 2018, interrupted by COVID aid, and then back to $83.7 billion in 2023.
- Since the late 1980s, state and local spending on these capital programs has stated at a level between 1.5 and 1.7 times higher than the federal level. In 2018, this jumped up to 2.0 to 1 and has gone north of there since then, standing at 2.2 to 1 in 2023 ($187.1 billion versus $83.7 billion).
- The federal role in operating these types of infrastructure has always been limited. Air traffic control, the Coast Guard, the Corps of Engineers, and Amtrak. Over the FY 2001-2019 period, these averaged $38 billion per year in constant 2023 dollars. During COVID, the aid for transit and other modes took that cost up to $55 billion in outlays in 2022 before dropping to $47.9 billion in 2023 as the COVID aid spent out.
- It was state and local spending on operations and maintenance that showed the most reliable growth. Crossing the $100 billion per year mark in 1969, this total crossed the $200 billion mark in 1990, then it crossed the $300 billion per year threshold in 2016 and, after a decline during COVID, stood at $307.1 billion in 2023.
Another way to look at this issue is just to isolate the state/local side of things. This is a slide from the CBO deck itself showing how the need for O&M spending has apparently crowded out capital spending, particularly in the 21st Century.
Air traffic control capital. Since ATC is much in the news lately, a long-term look at federal support is in order. By removing grants from the picture, we get rid of the Airport Improvement Program, so capital spending focuses almost exclusively on air traffic control capital needs. (Pre-1986 capital spending at DCA and IAD are still included in here because they were federal property.) The CBO data, shown in constant 2023 dollars, indicates that the ATC capital funding increases starting in the early 1980s peaked in fiscal 1995, with what would be the equivalent of almost $9.1 billion today. However, nominal funding has been stuck around $3 billion per year for over a decade, before a jump in 2023 as outlays from the IIJA began showing up.
However: the truth may not be quite so ugly. This may be an instance where the infrastructure-specific price index is not specific enough to this kind of infrastructure. Remember the Magellan NAV 1000? It was the first handheld GPS device, released in 1989, and it cost around $3,000. Today, you get much more GPS functionality from a chip in your cell phone, and the chip costs less than $20. Similarly, most things dealing with computers and telecommunications have gotten much cheaper, in absolute and relative terms, in recent decades. As such, to the extent that air traffic control capital spending goes towards digital devices, deflating the dollars using an infrastructure-specific index that is heavy on pavement, steel, aggregate, and diesel fuel may not be the best bet.