States have discretion on prioritizing the transportation safety and efficiency needs within their boundaries.
Funding for transportation projects through the bipartisan IIJA act is starting to flow at the state level. The amount of funding being doled depends on the state, its size and how much of a priority it puts on its infrastructure programs.
Tracking the flow of funds, ARTBA reported 19 states have approved 24 measures. That equates to $13.5 billion in new transportation revenue during the first five months of 2023.
Other states are considering upping their investment, according to the association's Transportation Investment Advocacy Center (TIAC).
Arizona approved a $9 billion program focusing on state highways I-10, I-17 and Route 260, to improve safety on these stretches.
"The I-10 expansion is about both today's traffic demands and what we anticipate in the decades ahead," ADOT's Garin Groff said. The state also will preserve 400 mi. of highway pavement rated in fair or poor condition, reported kold.com.
One of the most aggressive transportation packages was signed in Minnesota. It sets a new retail delivery fee, raises sales tax benefitting transit, increases the vehicle sales tax and indexes the gas tax to inflation. It is believed that the recently signed bills will produce $1.3 billion over the next two years, according to ARTBA's TIAC.
The center reported Florida loaded $4 billion into its project general fund, while Hawaii instituted a new usage fee for electric vehicles.
Missouri combined almost $3 million in general fund revenue and bonds to renovate and expand I-70 across the state.
Indiana's gas tax was extended for an additional three years, and new EV fees were instituted in Montana and Texas.
"This funding will … increase the quality of life for everyone in Arkansas," the state department of transportation told Yahoo Finance. "[It] will provide much-needed funding for improvement and support of our state highway system."
The agency said the funds will help take care of the existing system and will allow planning for future projects of economic benefit.
Where Money Is Coming From
In addition to IIJA earmarks, states are going through surplus general funds, COVID relief and bonds to get projects off the ground.
Electric vehicle fees are among the most popular categories being explored by state legislatures, noted TIAC.
It tracked 35 bills, or 16 percent of 2023 transportation funding legislation introduced in the first five months of year. That marks a notable increase when compared with the eight bills tracked in the previous year, said the organization.
"The expenditure is influenced by readiness of state governments to move quickly," Joseph Schofer, Northwestern University, told Yahoo. "Those that were better organized — had their priorities lined up and projects ready to go — will show larger expenditures early."
He said this large tranche of infrastructure money is making up for insufficient past investment especially in big and growing states.
Funding Floodgates Opened or Closed?
Many in Washington argue that a divided federal government will put a stop to big policy measures such as infrastructure funding.
"It's true that a divided Congress should mean a less productive and less ambitious legislative calendar," wrote the Brookings Institute. "But Washington has only begun to execute all the work created by the previous Congress — and nowhere is that more true than infrastructure policy."
Brookings Institute Fellows write that for infrastructure, "the era of big government isn't over — it's just getting started."
Most of the $1.25 trillion earmarked is still sitting in the federal government's bank account, said the fellows. The funds are just waiting to strengthen and modernize the country's economy and communities.
"Yet even at this early stage, governments and industry partners have little time to get their infrastructure plans in place," wrote the Brookings staffers. "And achieving their goals won't be easy — any one of multiple challenging economic conditions could limit the number of projects that get completed."
The organization observed that Pres. Biden has framed the next 10 years as America's "infrastructure decade."
"The chances of it being remembered that way may well be decided in the coming year, and there's no time to lose," according to Brookings.
The IIJA's one-year anniversary rolled around last fall, marking a low point in terms of expected annual spending, said Brookings. Funding recipients have had to update capital spending plans to higher levels and write rules for the many new federal programs.
"Still, the initial tranche of awards confirms just how much power Congress gave to the states and other major formula grant recipients."
Measured by total funding awarded by federal agencies, formula programs received 92 percent of the IIJA's first-year awards. Every state saw more than 80 percent of total awards distributed through formula programs. And state governments are the primary beneficiaries of these formula programs.
States directly receive these funds through Federal Highway Administration programs and the EPA. State-controlled funding will grow as the $42.5 billion Broadband Equity, Access and Deployment (BEAD) formula funding starts to move, noted Brookings.
The institute pointed out that that's not to say competitive grants aren't sizable or important.
"Major awards … are all significant projects that can influence economic activity and environmental performance for decades to come."
Competitive grants also are attractive for cities, counties and other local governments, said Brookings. These government entities prize direct access to federal funding, without the need for allocations from their states.
"And there's plenty more of the competitive money coming," wrote Brookings staff members.
By October 2022, only 7 percent of competitive funding had been awarded. Brookings advised that if local practitioners want to maximize their chances to receive federal funds, they should partner with states.
"State officials control larger pots of funding and may not require detailed applications to access that funding," the institute said. "By contrast, federal competitive programs are typically smaller and over-subscribed."
State funding received by federal formula also can serve as matching funds when localities need to qualify for federal funds.
"With state capital budgets still adjusting to IIJA's increased funding levels, now is the time for local leaders to build strong ties with their counterparts in state capitals."
Industry Helping Push Funds Along
The construction industry itself has a big part to play in the transition from numbers on paper to boots on the ground. Contractor organizations, such as ARTBA, are pulling a chair up to the funding table in praise of IIJA.
The association reported to Congress this past spring that more than 36,000 transportation improvement projects have moved forward. All this in the past 16 months as IIJA implementation continues, said Paula Hammond, ARTBA chair.
She acknowledged that inflation is a huge stumbling block for states trying to deliver on projects.
"Increased material costs and supply chain challenges have had a dilutive impact on the law's investments," Hammond said. "This situation would have been dramatically worse had Congress opted for another flat-funded extension of surface transportation programs. Our analysis shows there has been real market growth over the last year."
New and well-meaning IIJA requirements related to expansion of Buy America are creating challenges of their own, added Hammond.
"If Buy America provisions are not pursued with stakeholder input and articulated clearly, it could have the opposite outcome and result in unnecessary project delays."
She concluded that the initial data reveal IIJA's highway, bridge and public transportation investments are working as intended.
"Many more benefits for the American people are still to come," added Hammond.
Industry's biggest headache remains attracting and keeping the massive labor force numbers needed to make state projects a reality.
"Government, infrastructure companies and workforce development must work together to expand the talent pipeline," said Brookings.
The Biden administration has spent two years talking about the importance of workforce development within infrastructure industries.
"The reality is that Congress mostly left state and local infrastructure owners and operators to solve talent issues on their own."
Brookings added that the list of workforce-related issues is long and difficult. It's a two-fold challenge:
"First, they cannot find enough new talent — particularly younger workers, who may not know these careers exist."
This same pool of potential workers may lack flexible training pathways to enter the field. Workers under the age of 24 represent only 11 percent of the country's infrastructure workforce, the institute noted.
"Second, employers are struggling to hold onto existing talent," said the Brookings researchers.
It's projected that 1.7 million infrastructure workers will either retire or permanently leave the industry annually over the next decade. With 16.6 million infrastructure workers employed nationally, that means the entire workforce will essentially turn over in the next 10 years.
The result will be huge gaps in knowledge and retention — as well as potentially productivity.
"State and local leaders must shift from short-term, business-as-usual approaches," said Brookings.
These leaders should instead "focus on longer-term strategies to enhance opportunities for workers and meet employer demands."
That means planning and addressing workforce needs over time rather than throwing money at individual projects in the short term.
States must find ways to utilize the flexibility of federal funding and invest in worker training and retention.
Brookings believes these efforts also need to involve community outreach, support services and reskilling, to start. CEG
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