Democrats and Republicans don’t see eye-to-eye on much, but they agree on this: America’s infrastructure is crumbling, and it needs to be addressed. In 2017, the nation’s infrastructure received an average grade of D+ from the American Society of Civil Engineers based on capacity, condition, funding, operation, safety and other factors.
Recognizing this, the White House released a 2018 infrastructure plan that outlined four goals:
- Generate $1.5 trillion for infrastructure proposals around the country;
- Cap the permit process at two years;
- Invest specifically in rural projects; and
- Support workforce development programs in order to help secure the skilled workers needed to continuously build and rebuild the United States.
The plan called for $200 billion in federal funding, while the remaining monies would have been generated via public-private partnerships with private sector companies and contributions from state and local governments.
Despite the 2018 midterm elections, which left Congress divided, there was revived bipartisan agreement in one of the few legislative initiatives politically palatable to both parties: improving America’s infrastructure. At the beginning of 2019, President Donald Trump and top congressional Democrats agreed to work together on a trillion infrastructure plan.
Regardless, this plan stalled due to renewed disagreements over funding. Democrats generally believed the funding should come from public financing and suggested money could be freed up by rolling back some of the corporate breaks in the 2017 Tax Cuts and Jobs Act. Republicans, on the other hand, argued that using incentives to get businesses involved through public-private partnerships, as was proposed in Trump’s original plan, was more economically viable.
While smaller federal proposals relating to infrastructure may ultimately pass during this Congressional session, the large-scale federal package that both sides were optimistic for at the beginning of the year appears unlikely to gain traction.
States Act for Infrastructure
Due to the inaction in Washington, red and blue states alike have taken it upon themselves to pass bills addressing the infrastructure goals laid out by the Trump administration in 2018. For example, Alabama and Illinois both received an average grade of C- for infrastructure from ASCE. Though Democrats have control of all three branches of state government in Illinois and Republicans have a trifecta in Alabama, these states both passed massive infrastructure packages in 2019 in a testament to the bipartisan appeal of such projects.
The Rebuild Alabama Act, signed into law this year, will invest $310 million per year in state infrastructure projects. These improvements will be financed through an increase in the gasoline tax and new annual registration fees for electric vehicles. While funds have not been finitely allocated in the state’s plan, all capital is designated toward improving roads and ports (which received D+ and B- ratings from ASCE, respectively).
The Rebuild Illinois Plan made history as the most robust capital plan in state history and the first comprehensive capital spending plan in the state since 2009. It allows for $45 billion of infrastructure spending through 2025, with $33.2 billion allocated for transportation improvements and maintenance, while the remainder will go toward projects ranging from educational buildings to state facilities improvements. The revenue for these projects will come from an increase in the state’s gasoline tax and transportation-related fees; expansion, legalization and taxation of casinos and gambling; and other various taxes, including a per-pack cigarette tax. Though not specifically in the bill, Gov. J.B. Pritzker noted “opportunities for us to do some public-private partnerships.”
States have also taken up President Trump’s recognition of the need to invest in rural projects in their infrastructure packages. The Rebuild Illinois Plan pledges $420 million for broadband deployment and $1.2 billion for community and economic development. In a separate bill, the legislature authorized a Rural Development Task Force to study the needs and issues of rural Illinois.
In Alabama, lawmakers improved the Broadband Accessibility Act to expand eligibility for funds and make it easier for broadband infrastructure to be installed. Access to broadband is an important component to determining the future success of business and innovation in America, which is why more than half of states have passed legislation aimed at the expansion of broadband internet services in rural or underserved areas.
These plans, along with smaller, more targeted infrastructure plans in other states, demonstrate American’s appetite for infrastructure improvements in the wake of inaction from the federal government.
Changes in State Procurement Policies
Some states have acted to guarantee that money allocated for state infrastructure projects is maximized and stretched as far as possible. Just this year, Kentucky and Texas lawmakers passed legislation ensuring government agencies cannot mandate project labor agreements that will apply to nearly every publicly financed construction project. Legislators in Indiana removed language from state law that allowed PLAs to be utilized on construction projects managed by the Capital Improvements Board, which oversees multibillion-dollar projects in the Indianapolis area.
Some states, however, have gone in the opposite direction and either repealed or passed procurement measures that will make the cost of publicly financed construction prohibitively more expensive. Earlier this year, Illinois Gov. Pritzker signed an executive order requiring all state agencies to comply with the state’s Project Labor Agreements Act, which could increase the cost of each construction project under the newly passed infrastructure package by 12%-18%, according to the Beacon Hill Institute. Maine lawmakers have taken similar steps, passing a bill that allows state agencies to utilize PLAs if they choose to do so. And in Nevada, lawmakers eliminated procurement laws that prohibited government-mandated PLAs, which annually protected more than $2 billion worth of publicly funded projects since the law was enacted in 2015.
Through both large-scale funding packages and incremental changes, states are making significant infrastructure investments that will be key to their future economic success. The most recent available data from the U.S. Census Bureau indicates that more than $250 billion was spent on infrastructure at the state and local level in 2017, funding that largely maintained the infrastructure status quo.
Unfortunately, the feat of improving America’s infrastructural standings cannot be fiscally accomplished by states alone. If this gap in infrastructure investment continues, the United States may risk $3.9 trillion in losses to the U.S. gross domestic product, $7 trillion in lost business sales and $2.5 million in lost American jobs by 2025, according to the ASCE, which could be avoided by an estimated investment of $4.59 trillion over just a 10-year period.
While some states are doing their part to close the infrastructure gap, large-scale investment is going to have to come from the federal government if America wants to maintain and improve its critical infrastructure network.
