10.2 Infrastructure Planning and Funding at the State Level
3 min read•july 22, 2024
States face complex challenges in planning and funding infrastructure projects. From roads to water systems, they must balance urgent needs with limited resources. Agencies identify priorities, develop plans, and seek funding from various sources like taxes and bonds.
Maintaining aging infrastructure while accommodating growth and climate change strains state budgets. However, investing in infrastructure creates jobs, attracts businesses, and improves quality of life. States must navigate these issues to build sustainable, resilient communities for the future.
Infrastructure Planning and Funding at the State Level
Process of state infrastructure planning
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- State agencies and departments identify infrastructure needs
- Transportation departments assess road, bridge, and public transit requirements (highways, light rail systems)
- Environmental agencies evaluate water and wastewater systems (treatment plants, pipelines)
- Energy departments assess power generation and transmission needs (power plants, electric grids)
- State legislatures and executive branches set infrastructure priorities
- Align with long-term economic development goals (attracting businesses, creating jobs)
- Consider public safety and quality of life improvements (reducing traffic accidents, enhancing access to clean water)
- State agencies develop comprehensive infrastructure plans
- Incorporate input from local governments and stakeholders (city councils, community organizations)
- Prioritize projects based on urgency, feasibility, and available funding (bridge repairs, water system upgrades)
- Plans are reviewed and approved by state legislatures or designated committees
- Ensure alignment with state budgets and policy objectives (fiscal responsibility, environmental sustainability)
- Make necessary adjustments based on public feedback and changing circumstances (population growth, technological advancements)
Funding sources for state projects
- State general funds
- Allocated from state budgets based on priorities and available resources
- and loans
- for transportation projects
- Clean Water and Drinking Water State Revolving Funds for water infrastructure
- for disaster recovery (hurricanes, floods)
- State-issued bonds
- backed by state tax revenues
- repaid through project-generated income (tolls, user fees)
- (P3s)
- Private sector investment in exchange for long-term operating contracts or lease agreements (toll roads, water treatment facilities)
- User fees and taxes
- Gasoline taxes, vehicle registration fees, and tolls for transportation projects
- Water and sewer rates for water infrastructure
- Utility fees for energy projects (electricity rates, natural gas surcharges)
Challenges in state infrastructure maintenance
- Aging infrastructure
- Many roads, bridges, and water systems are reaching the end of their designed lifespans (50+ year old highways, century-old water mains)
- Deferred maintenance due to budget constraints exacerbates deterioration (potholes, leaking pipes)
- Insufficient funding
- Gap between available funds and the cost of necessary infrastructure improvements (trillion-dollar nationwide funding shortfall)
- Competing priorities for limited state resources (education, healthcare, public safety)
- Population growth and urbanization
- Increased demand for infrastructure services in growing cities and suburbs (traffic congestion, water shortages)
- Need to expand capacity and modernize systems to accommodate growth (new roads, upgraded water treatment plants)
- Climate change and extreme weather events
- More frequent and severe floods, hurricanes, and wildfires strain infrastructure (washed-out bridges, damaged power lines)
- Adaptation and resilience measures require additional investment (flood barriers, underground power lines)
- Regulatory and environmental challenges
- Compliance with federal and state regulations can increase project costs and timelines (Americans with Disabilities Act, Clean Water Act)
- Environmental impact assessments and permitting processes add complexity (wetland mitigation, endangered species protection)
Impact of infrastructure on development
- Job creation and economic stimulus
- Infrastructure projects create direct construction jobs and indirect supply chain jobs (engineers, equipment manufacturers)
- Improved infrastructure attracts businesses and spurs private investment (new factories, office parks)
- Enhanced mobility and connectivity
- Reduced traffic congestion and shorter commute times (express lanes, public transit)
- Improved access to jobs, education, and healthcare services (rural broadband, telemedicine)
- Public health and safety benefits
- Clean water and sanitation systems prevent waterborne diseases (cholera, dysentery)
- Upgraded roads and bridges reduce accidents and fatalities (guardrails, improved lighting)
- Environmental sustainability
- Investments in public transit, renewable energy, and green infrastructure (electric buses, solar power, green roofs)
- Reduced greenhouse gas emissions and improved air and water quality (less traffic pollution, stormwater management)
- Improved quality of life
- Modern, reliable infrastructure enhances daily convenience and comfort (smooth roads, uninterrupted utility services)
- Parks, libraries, and community centers contribute to social well-being and cohesion (public gathering spaces, recreational opportunities)
Key Terms to Review (32)
American Society of Civil Engineers: The American Society of Civil Engineers (ASCE) is a professional organization representing civil engineers in the United States, dedicated to advancing the profession and improving infrastructure. Through advocacy, education, and technical resources, ASCE plays a significant role in shaping infrastructure planning and funding at the state level, ensuring that civil engineering practices meet public needs and sustainability goals.
Appropriation Bills: Appropriation bills are legislative proposals that authorize government spending for specific purposes, effectively allowing funds to be allocated from the treasury. These bills are critical in shaping state budgets, as they outline how resources will be distributed to various programs, projects, and services, including those related to infrastructure. In the context of state infrastructure planning and funding, appropriation bills play a vital role in ensuring that necessary financial resources are available for development and maintenance projects that serve public needs.
Bond financing: Bond financing is a method used by states and municipalities to raise funds for various projects, including infrastructure development, by issuing bonds to investors. This process allows governments to borrow money from the public, which they agree to pay back over time with interest, thereby providing a source of capital for long-term investments in public goods.
Budgetary constraints: Budgetary constraints refer to the limitations imposed on government spending and revenue, which affect how resources are allocated and prioritized within various programs and initiatives. These constraints can significantly impact the ability of states to fulfill obligations, especially in responding to unfunded mandates or planning and funding infrastructure projects. Understanding budgetary constraints is crucial for navigating the complex financial landscape of state governance and ensuring effective resource management.
Capital Budgets: Capital budgets are financial plans used by governments to allocate funds for long-term investments in infrastructure and major projects, such as roads, bridges, and public buildings. These budgets are crucial for planning and prioritizing significant expenditures that have lasting impacts on a state’s economy and public services. Effective capital budgeting allows states to maintain and improve their infrastructure, ensuring that resources are utilized efficiently and strategically.
Clean Water State Revolving Fund: The Clean Water State Revolving Fund (CWSRF) is a federal-state partnership program that provides financial assistance to states for water quality projects aimed at improving and protecting the nation's waterways. This fund allows states to offer low-interest loans to local governments, nonprofits, and other entities to support wastewater treatment, stormwater management, and other water infrastructure improvements. By financing these projects, the CWSRF plays a vital role in ensuring safe and clean water for communities across the country.
Community Development Block Grant: A Community Development Block Grant (CDBG) is a federal funding program designed to provide financial assistance to state and local governments for the purpose of developing viable urban communities, by providing decent housing, a suitable living environment, and expanding economic opportunities for low- and moderate-income persons. These grants are used for a variety of community development activities that benefit low-income residents, and they play a crucial role in infrastructure planning and funding at the state level.
Cost-benefit analysis: Cost-benefit analysis is a systematic process used to evaluate the strengths and weaknesses of alternatives in order to determine the best option based on their potential costs and benefits. This analytical tool helps decision-makers weigh the total expected costs against the total expected benefits of a project or policy, providing a clear framework for assessing economic efficiency and maximizing resource allocation. By quantifying both tangible and intangible factors, it supports strategic planning and prioritization in various sectors, including infrastructure and economic development.
Department of Transportation: The Department of Transportation (DOT) is a vital government agency responsible for overseeing and regulating transportation systems, including highways, railroads, air travel, and public transit. This agency plays a critical role in infrastructure planning and funding, ensuring safe and efficient movement of people and goods across the state and connecting them to the national transportation network.
Drinking Water State Revolving Fund: The Drinking Water State Revolving Fund (DWSRF) is a federal-state partnership program established to provide financial assistance to states for improving drinking water infrastructure. It aims to ensure safe and reliable drinking water through low-interest loans and grants, helping local communities upgrade their water systems while promoting public health and environmental protection.
Economic impact assessments: Economic impact assessments are analytical processes used to evaluate the economic effects of a project, policy, or program on a local, regional, or national economy. These assessments measure various outcomes, including job creation, income generation, and overall economic growth, providing critical data for decision-making in infrastructure planning and funding.
Environmental Regulations: Environmental regulations are rules and laws designed to protect the natural environment from harm caused by human activities. They cover a wide range of issues including air and water quality, waste management, and the conservation of natural resources. These regulations aim to promote sustainable practices, minimize pollution, and ensure that natural resources are managed responsibly, influencing various aspects of governance and public policy.
Federal Emergency Management Agency (FEMA) Grants: FEMA grants are financial assistance programs provided by the Federal Emergency Management Agency to support state and local governments in preparing for, responding to, and recovering from disasters. These grants help fund critical infrastructure projects, emergency planning, and recovery efforts, ensuring communities can effectively manage emergencies and mitigate future risks. By providing financial resources, FEMA enables states to enhance their disaster preparedness and resilience.
Federal Grants: Federal grants are financial awards provided by the federal government to state and local governments, organizations, or individuals to support specific projects or programs. These grants help address various needs, such as infrastructure development, education, healthcare, and social services, while also promoting the federal government's policy priorities and objectives.
General Obligation Bonds: General obligation bonds are debt securities issued by state and local governments that are backed by the full faith and credit of the issuing authority. These bonds are typically used to finance public projects, such as infrastructure improvements, schools, and parks, and are repaid through tax revenues or other government funds. Since they are secured by the issuer's ability to levy taxes, they are considered low-risk investments.
Highway Trust Fund: The Highway Trust Fund is a federal funding mechanism established to finance the construction and maintenance of the United States' highways and transit systems. It primarily receives revenue from federal fuel taxes, which are collected on gasoline and diesel fuels, and is crucial for supporting infrastructure projects across states. This fund plays a vital role in ensuring that states can maintain and improve their transportation networks, which are essential for economic growth and mobility.
Infrastructure equity: Infrastructure equity refers to the fair distribution of infrastructure resources and services, ensuring that all communities, particularly marginalized and underserved populations, have equal access to essential facilities like transportation, utilities, and public spaces. This concept emphasizes the importance of addressing disparities in infrastructure planning and funding, promoting social justice by prioritizing the needs of disadvantaged groups and enhancing their quality of life.
Infrastructure Investment and Jobs Act: The Infrastructure Investment and Jobs Act is a landmark piece of legislation passed in 2021 aimed at addressing the urgent need for infrastructure improvements across the United States. It allocates significant federal funding for transportation, broadband, water systems, and other critical infrastructure projects, while also creating jobs and stimulating economic growth. This act emphasizes the importance of modernizing infrastructure to enhance public safety, support economic development, and improve environmental sustainability.
Infrastructure stimulus: Infrastructure stimulus refers to government spending aimed at improving and expanding a region's infrastructure, such as roads, bridges, public transit, and utilities, particularly during times of economic downturn. This type of stimulus not only boosts economic activity by creating jobs but also enhances the overall functionality and quality of life within communities. Infrastructure stimulus projects often receive bipartisan support as they address critical needs and can lead to long-term economic growth.
National Governors Association: The National Governors Association (NGA) is a bipartisan organization representing the governors of the 55 states, territories, and commonwealths of the United States. It serves as a forum for governors to discuss and collaborate on key issues such as infrastructure planning and funding, providing a platform for sharing best practices and advocating for state interests at the national level.
Project Feasibility: Project feasibility refers to the assessment of the practicality and viability of a proposed project, particularly in terms of its financial, technical, legal, and operational aspects. It plays a critical role in infrastructure planning and funding, as it helps stakeholders determine whether a project can be successfully executed and sustained over time. A thorough feasibility study not only evaluates the potential benefits and costs but also identifies risks and constraints that could affect the project's success.
Public Utilities: Public utilities are organizations that provide essential services such as water, electricity, natural gas, and telecommunications to the public. These services are crucial for everyday living and are often regulated by government entities to ensure fair pricing, reliability, and accessibility, making them a key focus in infrastructure planning and funding efforts at the state level.
Public-private partnerships: Public-private partnerships (PPPs) are collaborative agreements between government entities and private sector companies aimed at funding, constructing, and operating public infrastructure or services. These partnerships leverage the strengths of both sectors, where the public sector provides oversight and policy direction while the private sector contributes efficiency, innovation, and capital investment. By combining resources and expertise, PPPs can enhance the delivery of essential services and infrastructure while potentially reducing the financial burden on the public sector.
Return on Investment (ROI): Return on Investment (ROI) is a financial metric used to evaluate the efficiency or profitability of an investment relative to its cost. It is calculated by dividing the net profit from the investment by the initial cost, providing a percentage that represents the gain or loss generated. In the context of infrastructure planning and funding at the state level, ROI becomes essential in assessing the effectiveness of public projects, ensuring that funds allocated yield significant benefits for communities and stakeholders.
Revenue Bonds: Revenue bonds are a type of municipal bond specifically issued to fund specific projects or purposes, where the repayment of the bond is secured by the revenue generated from those projects. Unlike general obligation bonds, which are backed by the issuing municipality's full faith and credit, revenue bonds are tied to income from sources such as tolls, lease payments, or fees generated by the project. This makes them particularly important in financing infrastructure development at the state level.
State Bonds: State bonds are debt securities issued by state governments to raise funds for various public projects and services, such as infrastructure development, education, and healthcare. By selling these bonds to investors, states can secure the necessary financing to improve or build facilities that benefit their residents without immediately impacting their budgets. The funds from state bonds often help support long-term investments that contribute to the state's economic growth and public welfare.
State Infrastructure Bank: A state infrastructure bank is a financial institution created by state governments to provide funding for public infrastructure projects, such as transportation, water, and energy facilities. These banks aim to support economic development and improve public services by offering loans and financial assistance to local governments, private entities, and nonprofit organizations for infrastructure improvements.
State Transportation Agencies: State transportation agencies are government bodies responsible for planning, developing, and maintaining transportation infrastructure within a specific state. These agencies play a crucial role in overseeing road networks, public transit systems, and various modes of transport to ensure safe, efficient, and sustainable mobility for residents and businesses. Their responsibilities often include project funding, policy development, and collaboration with local governments and federal entities to enhance the state's transportation framework.
Sustainability in Infrastructure: Sustainability in infrastructure refers to the design, construction, and operation of infrastructure systems that meet present needs without compromising the ability of future generations to meet their own needs. This concept emphasizes the importance of environmental stewardship, economic viability, and social equity in the development of roads, bridges, public transit, and utilities. By integrating sustainable practices into infrastructure planning and funding, states can enhance resilience, reduce resource consumption, and minimize environmental impact.
Transportation infrastructure: Transportation infrastructure refers to the fundamental systems and structures that facilitate the movement of people and goods from one location to another. This includes roads, bridges, railways, airports, and public transit systems, which are essential for economic growth and development. The efficiency and quality of transportation infrastructure directly impact a region's connectivity, accessibility, and overall economic vitality, making it a critical focus for planning, funding, and coordination among various levels of government.
Water Supply Systems: Water supply systems refer to the infrastructure and processes involved in sourcing, treating, storing, and distributing water to meet the needs of a population. These systems are critical for public health, sanitation, and overall quality of life, as they ensure that communities have reliable access to clean drinking water and proper wastewater management.
Zoning Laws: Zoning laws are regulations set by local governments that dictate how land can be used in specific areas, controlling factors like building types, lot sizes, and the activities allowed on properties. These laws are essential for managing urban growth, ensuring compatible land uses, and providing a framework for infrastructure development and community planning. Zoning laws help balance the needs of different stakeholders while protecting property values and maintaining public health and safety.