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Category: Transportation and Logistics

Supply Chain News: States Stepping Up Spending on Logistics Infrastructure. Awaiting New Federal Plan that Never Comes


 

New Report says Amount Needed Just to Catch Up on Deferred Maintenance is $1 Trillion

Jan. 15, 2020
SCDigest Editorial Staff


There seems to be genuine bi-partisan support for increased spending on US logistics infrastructure, yet for a number of reasons nothing ever gets done at a national level.

The American Society of Civil Engineers has said more than $2 trillion in additional funding for all US infrastructure is needed by 2025 alone, with no plans whatsoever as to where that kind of money would come from.

Supply Chain Digest Says...

Perhaps surprising to many, states and local governments overwhelmingly fund the majority of public logistics infrastructure spending.


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The World Economic Forum this year ranked the US 13th in terms of infrastructure in its global competitiveness report, which is probably higher than many would guessed given the hand wringing about state of infrastructure in the US. In fact, that score puts the US up 10 places since October 2011, when it ranked 23rd.

Nevertheless, there is some thinking that a deal of some sort will be reached in this presidential election year, as incumbents of all sorts look to show voters they are bringing home the bacon.

Maybe that will happen, maybe it won't. In the meantime, many states and local governments are tired of waiting for a nation plan - and funding.

According to the Wall Street Journal, the 50 US states collectively spent $113.2 billion on transportation in fiscal year 2019, a 9% jump from the previous year, according to the National Association of State Budget Officers. That is a substantial jump.

It was the largest year over year increase since 2015, and many expect high levels of infrastructure spending increases by state and local authorities in 2020, though maybe down a bit from that 9% growth last year.

The American Road & Transportation Builders Association State forecasts that transportation departments and local governments will spend $77.5 billion on highway and street construction in 2020, a healthy 6% increase over 2019.

As can be seen in the graphic below, state spending on roads and highway has risen strongly every year since just after the Great Recession, with (oddly) the exception of the last presidential election year of 2016.

 

 

Source: Wall Street Journal

In addition to reducing congestion and just keeping existing roads drivable, one of the catalysts for the growth in state spending on logistics infrastructure is the recognition of the impact of good roads, bridges and highways on the attractiveness of given state for companies to move operations there.



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"States also recognize how transportation impacts other areas, things like economic development, and potentially job growth," Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers (NASBRO), told the Journal.

Perhaps surprising to many, states and local governments overwhelmingly fund the majority of public logistics infrastructure spending, at about 80% of the total. That share is actually rising, as federal investment has decreased in recent years.

The federal government spent $46.3 billion on transportation in fiscal year 2019, a 7% increase, following two years of declines, according to NASBO.

A generally strong economic and tax collection environment has made it possible for states to up their spend on highest and bridges. A number of states, such as Ohio in 2019, have pushed up state taxes on gasoline and diesel fuels in recent, while federal fuel taxes haven't changed since 1994, even as fuel mileage for cars and trucks has risen substantially since then.

It's going to take a lot more money than even the state increases in infrastructure spending can come close to meeting.

A new report from the non-profit Volcker Alliance warns that repairs to the nation's aging infrastructure could cost more than $1 trillion, or 5% of the country's gross domestic product, a giant number that represents just the deferred maintenance costs – not anything for infrastructure expansion, for its roads, highways and other critical US public assets.

 

What do you think should be done relaltive to US logistics infrastructure? Let us know your thoughts at the Feedback section below.

 

 

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