Infrastructure Investment: Federal Programs and the Bipartisan Infrastructure Law

Federal infrastructure investment has historically been delivered through categorical grant programs, with the Highway Trust Fund serving as the primary financing mechanism for surface transportation since 1956. The Trust Fund is financed by the federal excise tax on motor fuels (18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel), which has not been increased since 1993 and has lost substantial purchasing power to inflation. Transit, rail, water, and other infrastructure programs are financed through general fund appropriations.

The IIJA, enacted in November 2021, provided historic levels of investment across transportation, water, energy, broadband, and environmental remediation categories. For surface transportation, it reauthorized federal-aid highway, transit, rail, and highway safety programs for five years at significantly increased funding levels. It also included new programs and substantial funding for bridges, electric vehicle charging infrastructure, reconnecting communities divided by transportation infrastructure, and climate resilience improvements.

Federal-aid highway programs distribute funds to states through formulas based on factors including lane miles, vehicle miles traveled, and number of bridges. States must provide a 20% non-federal match for most highway projects. The IIJA established a $12.5 billion Bridge Investment Program, a $7.5 billion National Electric Vehicle Infrastructure program, and a $1 billion Reconnecting Communities program. Federal transit programs include Urbanized Area Formula Grants, Fixed Guideway Capital Investment Grants (New Starts), and rural transit assistance.

Water infrastructure programs include the Drinking Water State Revolving Fund and Clean Water State Revolving Fund, which received $55 billion in new IIJA funding, including dedicated funding for lead service line replacement and emerging contaminant treatment. The BEAD program requires states to prioritize unserved locations (below 25/3 Mbps) and underserved locations (below 100/20 Mbps) in their deployment plans, with a focus on fiber-optic technology.

As the IIJA's five-year authorization period approaches its conclusion, Congress faces decisions about the next surface transportation reauthorization, the long-term solvency of the Highway Trust Fund, and continued investment in water, broadband, and other infrastructure categories. Highway Trust Fund options include increasing fuel taxes, transitioning to a vehicle-miles-traveled fee, dedicating other revenue sources, or continuing general fund transfers. Permitting reform proposals seek to reduce project delivery timelines by streamlining NEPA reviews, coordinating agency consultations, and setting deadlines for environmental approvals.

Other policy options include increasing federal investment in passenger rail, expanding public transit funding, accelerating deployment of electric vehicle charging infrastructure, investing in port and waterway improvements, and modernizing the electricity grid. Buy America requirements, which mandate the use of domestically produced materials in federally funded infrastructure projects, continue to be debated regarding their scope, implementation, and impact on project costs and timelines.

IIJA program implementation has progressed with the announcement of over $400 billion in specific project funding awards. The BEAD program has moved into the deployment phase, with states developing subgrantee selection processes. Major bridge, transit, and rail projects have received funding, including significant investments in the Northeast Corridor. Congressional oversight has focused on the pace of spending, the effectiveness of new programs, and the need for permitting reform to ensure that authorized projects can be built efficiently. The Highway Trust Fund's structural deficit remains unaddressed, with the next surface transportation reauthorization expected to be a major legislative priority.