November 13, 2013
OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023

Discretionary SpendingOption 19

400 - Transportation

Eliminate Capital Investment Grants for Transit Systems

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Spending                        
  Budget authority 0 -1.9 -2.0 -2.0 -2.0 -2.1 -2.1 -2.2 -2.2 -2.3 -7.9 -18.8
  Outlays 0 -0.3 -0.9 -1.3 -1.6 -1.8 -2.0 -2.0 -2.1 -2.1 -4.1 -14.1

Note: This option would take effect in October 2014.

The Capital Investment Grants program of the Department of Transportation’s Federal Transit Administration awards grants on a competitive basis for investments in public transit systems. Rail systems, bus systems that use exclusive or controlled rights-of-way, and ferries are eligible for grants; in practice, almost all of the funds go to rail projects. For 2013, the Congress appropriated $1.9 billion for the program, net of the reduction from sequestration.

This option would eliminate the Capital Investment Grants program. The Congressional Budget Office estimates that this option would save $14 billion from 2015 through 2023.

One rationale for ending that federal spending is that the benefits of public transit systems are primarily local and should be financed locally. If the people who benefit from a project bear its costs, it is less likely that too large a project (or too many projects) will be undertaken or that too many infrastructure services will be consumed relative to the resources needed to provide them. A second rationale is that federal support for capital investment in local transit may make new rail systems and other capital-intensive options more attractive to local decisionmakers than other options, such as bus systems, that are less capital-intensive and often more cost-effective overall.

Moreover, the federal government already supports local transit systems through formula grants (noncompetitive awards based on a formula). Those formula grants impose fewer restrictions on how funds can be spent; for example, urban transit systems that operate no more than 100 buses or that serve urban areas with populations below 200,000 can use some of their formula grant funds for operating expenses. Consequently, formula grants may be less likely to distort choices among local transit options. (In 2013, the federal government provided $4.8 billion in formula grants to urban areas and an additional $600 million to rural areas.)

One argument against this option is that, unlike the formula grants, the capital improvement grants fund transit projects that have been identified as most promising in a competitive selection process. By another argument, reducing federal support for transit could encourage increased construction of new roads, which can promote sprawling development and its associated problems, including increased emissions of local air pollutants and greenhouse gases. By contrast, transit systems, and new rail transit systems in particular, may help channel future commercial and residential development into corridors served by those systems, potentially increasing access to jobs by people who do not own cars and reducing transportation costs for society as a whole.