Challenges and Opportunities for Innovation in the Public Works ...

of 1991 which will provide federal monies to individual state fund programs for use on a variety
of transportation projects.
The decline in federal funding of infrastructure has coincided with the promulgation of
massive federal mandates for environmental infrastructure improvements. The Clean Water
Act, Clean Air Act, Safe Drinking Water Act and laws concerning solid and toxic/hazardous
waste, which have forced state and local governments to spend (collectively) billions of own-
source dollars 5 .
State governments have continued their historical role in financing a large portion of
transportation-related infrastructure, but the decline in federal subsidies has had its effect. This
traditional transportation responsibility has been forced to compete for revenues with the new
requirements for environmental infrastructure financing. While the states have had to assume
a greater role in transportation and environmental financing, as a result of waning federal
funding and waxing federal mandates, local governments, especially the smaller or less
wealthy municipalities, have been forced to depend upon state assistance to meet many of their
increasing infrastructure responsibilities. State governments have responded with a variety of
funding mechanisms, including new intergovernmental grants and matching funds,
revolving loan funds, bond pools, and credit assistance programs. For example, the
Washington State Department of Ecology has been able to provide construction grant monies to
small or fiscally distressed communities that must comply with Clean Water Act standards, but
lack the financial capability of constructing the mandated facilities themselves. These
communities would once have been able to turn to the federal government for these grants, but
now the state must direct its own tax revenues to these communities.
Local governments have borne the brunt of the infrastructure funding shifts of the last
decade. Increasing responsibility for transportation improvements combined with expanded
environmental infrastructure responsibility have left local governments grasping for funding
alternatives. State governmer~ts have provided some relief for these conditions, but, the overall
burden has increased. State and local governments also face a powerful constraint on
infrastructure financing that the federal government does not share: the common requirement
of an annually balanced budget. In some states and localities this proscription is formal and
constitutional, while in others the requirement is informal or traditional. In either case, the
5 As evidenced by the increasc in average long-term bond issuance for utility issues from less than $5 billion
per year prior to 1985 and from S10 to 19 billion per year thereafter.
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