States contribute to the majority of infrastructure spending.

Properly addressing the nation’s aging infrastructure requires action not only at the federal level, but also at the state and local levels, where most infrastructure spending is carried out. This document examines the key role that state and local governments play in providing and maintaining the nation’s transportation and water infrastructure.

FEDERAL VERSUS STATE AND LOCAL INFRASTRUCTURE SPENDING

State and local governments are responsible for the majority of transportation and water infrastructure spending in the United States. Transportation infrastructure includes highways, mass transit, aviation, water transportation, and rail. Water infrastructure includes dams, levees, water distribution systems, and wastewater treatment facilities. According to the Congressional Budget Office (CBO), state and local governments contributed over three-quarters, or $342 billion, of the total $441 billion in public spending for transportation and water infrastructure in 2017. On average, that proportion remained constant between 1956 and 2017, with state and local governments funding about three-quarters ($15 trillion) of the total $20.4 trillion spent during that period on infrastructure construction and maintenance, while the federal government covered the remaining $5.4 trillion.

Public spending on infrastructure applies to both capital investment as well as operation and maintenance:

Capital investment refers to spending for new projects and the modernization of existing assets.

Spending for operation and maintenance includes outlays for the upkeep of infrastructure assets to ensure structural viability, as well as costs associated with administering public infrastructure, such as wages for toll operators.

In 2017, total public spending for the operation and maintenance of transportation and water infrastructure was $266 billion, with state and local governments covering $240 billion, or 90 percent. Capital investment totaled $174 billion, of which state and local governments contributed $102 billion, or 59 percent. In short, the federal government focused a majority of its infrastructure funding on capital investment, while state and local governments shouldered most of the costs to operate and maintain the assets.

Federal, state, and local governments distribute their capital investment and spending for operation and maintenance across a variety of infrastructure categories; the precise amount of funding for each category differs between the levels of government. In 2017, state and local governments outspent the federal government across every major category of infrastructure, in some cases by substantial amounts. For example, although the federal government typically allocates a majority of its total infrastructure investment towards highway support ($46 billion in 2017), state and local governments contributed nearly triple the amount ($131 billion). In the same year, water utilities saw the largest difference in federal versus state and local funding, with 96 percent of total investment coming from state and local governments.