Online Extra: Infrastructure: Priorities Hit a Pothole

In the wake of the Minneapolis bridge disaster, Transportation Secretary Mary Peters talks about who's to blame for our neglected roadways

While the nation is spending more money than ever on our highways, Transportation Secretary Mary Peters questions whether those funds are being put to the best use. She lays a lot of the blame for our neglected roadways on the congressional budget process. It gives federal politicians the to power to "earmark" money for pet projects that sometimes have nothing to do with transportation and often usurp state priorities.

Lawmakers diverted nearly 9% of the $285 billion highway bill passed in 2005 away from state transportation agencies to pet projects in their home districts, including $2.8 million to renovate the National Packard Museum in Warren, Ohio, and nearly $3 million to complete a documentary film on infrastructure planning in Alaska—home to former House Transportation Committee Chairman Don Young, a Republican. (To see the earmark database for the 2005 highway bill kept by Taxpayers for Common Sense, go to

Often it's the routine repairs and maintenance that suffer, according to a recent study of federal, state, and local transit spending by the Transportation Dept., or DOT. The report found that the rate of federal, state, and local spending on new roads or transit projects has historically outpaced funding to maintain existing systems. "Members (of Congress) want new projects. They want something they can have their name attached to, where they can cut a ribbon," says Steve Ellis of Taxpayers for Common Sense. "You don't get to cut a ribbon on a maintenance project to fill potholes."

Peters agrees. In her 20-plus years in transit service at the state and federal level as well as in the private sector, she says she has never seen a politician "get misty-eyed over cutting a ribbon on a maintenance project." Congressional earmarks and niche programs, she says, have siphoned money away from the states' abilities to "take care of the system we already have." Peters spoke with BusinessWeek Washington correspondent Dawn Kopecki and Economics Editor Peter Coy about earmarks and the need to prioritize funding decisions. Below are edited excerpts.

How do you think the congressional budget process has distorted U.S. transportation spending?

We need a performance-based asset management approach to our nation's infrastructure, where we are making decisions based on economics, not on political decisions. We have had a proliferation of programs and a proliferation of earmarks that have turned what should have been an infrastructure program into, in my opinion, nothing but a big public works program based more on who is in positions of power in committees, than on where we really should be spending this money.

Do you think earmarks are diverting money away from core projects such as routine repairs and maintenance?

They certainly are diverting money. The proliferation of earmarks, just to give you a feel for how they were, in the 1987 act, there were 152 earmarked projects valued at $1.4 billion. In the last bill that was signed into law in 2005, there were [more than] 6,400 earmarks valued in excess of $24 billion. That money comes right off the top of these [state] programs.

The dirty little secret of earmarks is that they're not the true cost of the projects. In many, many cases it only partially funds a project. In most cases, and I certainly experienced this as a state administrator, we had to take more money out of the rest of our programs to supplement the earmark in order to build that project because the earmark was rarely, if ever, the total cost of the project.

What that did was usurp the other priorities, the priorities that were set by state departments of transportation and local governments that went out in the public process and established priorities based on trying to take care of the systems they had. And, instead, that whole process begins to get usurped by these earmarks. I would hazard to guess that maybe earmarks, at most, would give you about a third of the project costs, and that's on the high side. The fact is that the cost of earmarks is really understated in terms of what it really takes out of the program.

Is it fair to say that, because they take money off the top, the earmark system ends up encouraging spending on new construction vs. routine maintenance?

Yes. I'd like to say that it's just new construction. But some of these earmark projects aren't just for the bridge in Alaska and things like that. They're for museums…to study something that may or may not be the highest research priority we have.

But yes, to answer your question, it does divert money away from the core programs. It also uses the money in ways that isn't even really for new construction. It's for a variety of things.

Do you feel that we're not spending enough on repairs and maintenance?

I think it's not adequate. What we need to do is take a performance-based, asset management approach to our nation's infrastructure and prioritize where we are spending the money.

[As a state transit official,] it was very important to me to try to maintain [high-volume roadways] in the best possible operating conditions so I didn't have to go in and substantially reinvest. But there was a little road to Holly Lake that wasn't in as good condition and I frankly wasn't that worried about that because that road didn't carry as much traffic. So I was willing to sacrifice that road and let it get into fair condition as long as I was taking care of the higher classification of roads and bridges that carry most of the traffic. That's where I think the state DOTs need to have the flexibility to determine where they need to spend the money.

And earmarks interfere with the flexibility that state transportation officials have to set their own priorities?

The proliferation of earmarks and additional programs has siphoned off money that could more adequately or more appropriately go toward these core issues of maintaining and keeping in good condition the infrastructure.

We are going to have to add infrastructure. Our population is growing, particularly in the Sun Belt states, and they need to have the ability to bring new infrastructure online. I'm not saying we should fund maintenance and operation to the exclusion of new infrastructure, because we certainly have to be responsive to the need for new transportation services because our economy is so dependent on that.

You said that more should be spent on maintenance to get a long and useful life out of the asset. Does that imply that we should be tipping the balance from new projects to maintenance and repairs?

Not necessarily. You have to have the appropriate balance in the two of those so that you're meeting new transportation needs as well as maintaining and operating. But by prioritization on your higher classifications, heavier-volume roads, you really need to make sure that you're taking care of those first.

Let me just leave you with this thought: It's the time to start talking about not just how much money is spent, but how and where that money is being spent. Before someone makes the argument that there isn't enough money, we need to say, "How are we spending the money today? Are we getting the best return on investment for the decisions we're making and where are we spending money today?" And I think one could argue that some of the places that money is going, whether it's because of earmarks or the proliferation of new programs, is not necessarily the highest and best use of that money.

    Before it's here, it's on the Bloomberg Terminal.