through their own fuel and vehicle taxes. The average State gasoline tax was 19.3 cents per gallon in 1995. State and local governments also are accelerating their infrastructure projects by using debt financing, such as bonds and revolving loan funds. Under the new State Infrastructure Banks program, the Federal Government is providing funds to States to help underwrite debt issuance for highway and transit projects. In addition, the new Transportation Infrastructure Credit Program promises to provide similar financing innovations for nationally significant projects.

The Interstate highway system is virtually complete, with 45,481 of the 45,500-mile system open to the public. Its completion marks the end of America's largest-ever public works project, begun during the Eisenhower Administration as a "grand plan" to meet the transportation needs of a rapidly growing Nation.

Transit: As with highways, the Federal Government plays a partnership role with State and local governments on mass transit. Two cents a gallon of the Federal gas tax goes to fund transit grants to municipalities and States. Federal capital grants comprise about half of the total spent each year to maintain and expand the Nation's 6,000 bus, rail, trolley, van, and ferry systems. Together, States and localities invest over $3 billion a year on transit infrastructure and equipment, including funds to “match” Federal grants.

In 1998, the Federal Government plans to spend $4 billion on transit capital. The Federal role is especially important to finance capital-intensive urban rail systems and lowvolume rural bus and van networks. About 80 million Americans depend on public transportation due to age, disability, or income. Furthermore, transit use by commuters eases roadway congestion and reduces polluting emissions.

Passenger Rail: The Federal Government will invest about $424 million in 1998 to support the passenger rail system's infrastructure and equipment needs. The extension of the Northeast Corridor high-speed rail to Boston highlights the partnership between the Federal Government and private sector to improve passenger rail. The Federal Government funds

the electrification of the rail line, while the private sector helps to finance the high-speed trainsets that will begin operating in late 1999, introducing three-hour service between New York City and Boston.

Airports: The Airport Improvement Program (AIP) provides grants to States, localities, and airport authorities to maintain and enhance airport safety, preserve airport infrastructure, and expand capacity and efficiency throughout the system. The AIP typically funds a fourth to a third of all capital development at public use airports, while airport revenues (e.g., concession revenues, landing fees, passenger facility charges) finance the rest.

Other Transportation: With regard to commercial shipping infrastructure, Federal loan guarantees facilitate the construction of new vessels and the renovation of existing vessels. Port development is left largely to State and local authorities, which have invested over $14 billion in infrastructure improvements over the past 50 years. Of America's 541 private freight railroads, the largest 11 moved over one trillion ton-miles of freight in 1994about a third of the total ton-miles shipped. Freight railroads finance their own infrastructure, spending over $7 billion a year to upgrade and maintain track and structures.

Safe Operations

The Federal Government works with State and local governments and private groups to mitigate the safety risks inherent in the transportation system. It regulates motor vehicle design and operation, inspects commercial vehicles, educates the public about safe behavior, directs air and waterway traffic, and rescues boaters in danger.

A broad range of Federal activities are designed to cut the number of deaths and injuries from highway crashes, which number about 41,000 and five million a year, respectively. Due to Federal, State, local, and private efforts, safety belt usage reached an all-time high of 68 percent in December 1995. Federal programs reach out to State and local partners, including health care professionals, to identify the causes of crashes in each community and develop new strategies to reduce deaths, injuries, and the resulting medical costs. These programs will be increas

ingly important as the number of young drivers grows. In addition to coordinating national traffic safety campaigns, the National Highway Traffic Safety Administration

(NHTSA) regulates the design of automobiles and light trucks, investigates reported safety defects, and distributes traffic safety grants to States. The budget proposes $333 million for NHTSA, a 10-percent increase over 1997.

The Federal Government's most visible safety function is operating the air traffic control and air navigational systems. The Federal Aviation Administration (FAA) handles about two flights a second, moving 1.5 million passengers to where they want to go each day. The FAA also uses its regulatory and certification power to ensure that every aspect of aviation is safe from aircraft design and maintenance to the flight crew. In 1996, the FAA performed over 300,000 inspections to ensure compliance with safety regulations. To meet safety needs in 1998, the Administration plans to spend $7.2 billion on FAA operations and capital, five percent more than in 1997.

The Federal Government also plays an operational role on major waterways. The Coast Guard places and maintains waterborne aids-to-navigation, operates radio navigation and distress systems, guides vessels through busy ports, and regulates vessel design and operation. The Coast Guard helps ensure safety on minor waterways and inland lakes by providing boating safety grants to States, and by supporting a 35,000-member voluntary auxiliary that performs complimentary boat safety inspections and educates boaters about safety. In 1998, the Coast Guard will invest $3.1 billion in its operating and capital programs, which are mainly dedicated to safety.

The National Motor Carriers Program, for which the budget proposes $100 million in 1998, provides grants to States to enforce Federal and compatible State standards for commercial motor vehicle safety inspections, traffic enforcement, and compliance reviews. Uniform standards help coordinate law enforcement activities, and simplify the safety requirements of interstate trucking. Federal grants are designed to help States boost safety.

Research and Technology

The Federal Government has long led efforts to advance transportation technology. Federal transportation research has focused on building stronger roads and bridges, designing safer cars, and reducing human error in operating vehicles of all types. Today, the increasing congestion of roadways and airways is colliding with Federal budget constraints and with environmental and land-use concerns. Consequently, transportation planners believe that better management of the existing infrastructure is a cost-effective alternative to building more highways and airports. In 1998, the Federal Government will spend over $1 billion on transportation research and technology.

The Federal Highway Administration's Intelligent Transportation Systems (ITS) program is developing and deploying technologies that will help States and localities improve traffic flow and safety on their streets and highways. These technologies include intelligent cruise control, passive tolling and inspection, and automated highways. The private sector, which works closely with the ITS program, will initially deploy many of the technologies developed with ITS funding.

The FAA's research, engineering, and development programs help improve safety, security, capacity, and efficiency in the National Airspace System. For instance, the advanced traffic management system and the early introduction of satellite navigation capabilities will improve the aviation industry's competitiveness and the FAA's efficiency. In general, FAA research focuses on the causes of human error; aircraft safety and fire protection methods; aviation weather research; quieter engines and reduced aircraft emissions; and security and explosives detection systems.

The National Aeronautics and Space Administration's Aeronautical Research and Technology program funds partnerships with industry that may revolutionize the next generation of airplanes, making them faster, more efficient, and more compatible with the environment. These activities include programs to advance the capabilities of sub-sonic aircraft, to help develop large, high-speed civilian airplanes, and to enhance the performance

of aeronautics-related computing and communications facilities.

Regulation of Transportation

Federal rules greatly influence transportation. Over the past two decades, deregulation of the domestic railroad, airline, and interstate trucking industries has contributed to the Nation's economic growth. More recently, deregulation has continued. In 1993, for example, the Federal Government deregulated intrastate trucking, saving shippers and consumers an estimated $3 billion to $8 billion a year.

The Federal Government also issues regulations to spur safer, cleaner transportation. The regulations improve safety of cars, trucks, trains, and airplanes-leading to substantial reductions in transportation-related deaths and injuries. In addition, they help reduce the number of oil spills and provide a faster response when spills occur.

The Government has taken other regulatory steps to meet transportation-related environmental and safety goals in a cost-effective manner. For example, between now and 2015,

the costs of oil shipments to the United States will fall by hundreds of millions of dollars due to "lightering zone" regulations that permit older, single-hull vessels in the Gulf of Mexico to off-load oil. The Federal Government is also making its regulations parallel with those of other countries. An agreement on aviation safety rules-now under negotiation with the European Community-promises to save airlines at least $100 million, and possibly $1 billion, over 10

years.

Tax Expenditures

Employer-provided parking and transit passes are, for the most part, not subject to income taxes, costing the Government an estimated $6.9 billion from 1998-2002; the estimate does not include the value of employer-owned parking. To finance infrastructure, State and local governments issue tax-exempt bonds whose costs to the Federal Government, in lost revenues, are reflected in the General Government and Community and Regional Development functions.

20.

Federal support for community and regional development helps build the Nation's economy, and helps economically distressed urban and rural communities earn a larger share of America's prosperity. The Federal Government spends over $12 billion a year, and offers about $2.7 billion in tax incentives, to help States and localities create jobs and economic opportunity, and build infrastructure to support commercial and industrial development.

The needs of States and localities are varied and hard to measure. Still, Federal programs in this area have proved successful in creating stable and healthy communities that offer greater economic opportunity. The Government helps communities with basic infrastructure needs pay for constructing roads, improving water and sewage systems, and constructing affordable housing. For those affected by layoffs and rising job insecurity, Federal programs promote jobs skills through employment training and education, and promote access to jobs by helping businesses and rehabilitating commercial properties. Communities that are hard hit by natural disasters receive Federal assistance to rebuild infra

structure, businesses, and homes. States and localities also use these Federal funds to leverage private resources for their community revitalization strategies.

Department of Housing and Urban
Development (HUD)

HUD provides communities with flexible funds to promote commercial and industrial development; enhance infrastructure; clean up abandoned industrial sites, or "brownfields"; and develop strategies for providing affordable housing close to jobs. HUD estimates that projects for which it provided economic assistance from 1993 to 1996 created or saved 1.4 million jobs.

Community Development Block Grant (CDBG): The CDBG program, for which the budget proposes $4.6 billion, gives States and localities flexible funds for activities that meet one of three national objectives: (1) benefit lowand moderate-income persons, (2) help prevent or eliminate slums or blight, or (3) meet other urgent community needs that pose immediate threats to public health. Every Federal dollar spent for CDBG leverages an estimated $2.31

in private and other investment. Communities spend CDBG funds to improve housing, public works, public services, and economic development, and to acquire or clear land.

Seventy percent of CDBG funds go to over 900 designated central cities and urban counties, the remaining 30 percent to States to award to smaller localities. CDBG's Section 108 Loan Guarantee Program gives Federal guarantees to private investors who buy debt obligations issued by local governments, thus giving communities efficient financing for housing rehabilitation, economic development, and large-scale physical development projects. Indian CDBG programs provide services for Native Americans, primarily focusing on public infrastructure, community facilities, and economic development. In 1996, 84 Tribes received a total of $49 million in CDBG grants through competition.

HOME: The budget proposes $1.3 billion in flexible HOME grants to States and communities to address their most severe housing needs. This program (classified in the Income Security function) generates an an estimated $1.80 in private and other investment for every Federal dollar spent. Eligible activities include new construction, rehabilitation, acquisition of standard housing, assistance to home buyers, and tenant-based rental assistance. From the program's inception in 1992 to June 1996, recipients have committed or used HOME funds to build or rehabilitate 201,000 housing units and to help 26,500 families pay their rent.

Department of Agriculture

The Agriculture Department (USDA) gives financial assistance to rural communities and businesses to provide safe drinking water and adequate wastewater treatment facilities; boost employment; and further diversify the rural economy. The budget proposes $2.5 billion in such assistance. Grants, loans, and loan guarantees go for constructing rural community facilities, such as health clinics and day care centers; constructing water and wastewater systems; and creating or expanding rural businesses. USDA offers loan assistance for building community facilities and water and wastewater facilities at interest rates tied to the community's income-the

lowest-income communities receive significantly subsidized interest rates. These programs are designed to help rural communities with fewer than 10,000 residents. Since 1993, over 4,500 communities have received financial assistance to build or upgrade drinking water or wastewater systems, and the rural business and industry loan guarantee program has created or saved over 110,00 rural jobs. Department of the Treasury

Treasury's Community Development Financial Institutions (CDFI) Fund, for which the budget proposes $125 million, provides grants, loans, equity investments, and technical assistance to qualified CDFIs-including community development banks, low-income credit unions, microenterprise funds, and many multi-bank community development corporations. The assistance, which must be matched by comparable non-Federal money, is designed to promote economic revitalization and community development. Federal funds may be used for small business, low-income housing, community facilities, the provision of basic financial services, and other community development activities. In 1996, the CDFI Fund approved $37 million for 32 CDFIs, serving 46 states and the District of Columbia. The fund also awarded $13 million to 38 traditional banks and thrifts for increasing their activities in economically distressed communities and investing in CDFIs.

Department of the Interior

The Interior Department's Bureau of Indian Affairs (BIA), for which the budget proposes $1.7 billion in 1998, helps Tribes, Native American organizations, and individuals develop resources to improve their economies through financial assistance programs, various loans and grants, assistance in getting financing from other sources, and technical assistance in in using agricultural and rangeland resources. BIA's guaranteed business loans in 1996 generated about $40 million in total financing, creating or sustaining over 1,700 jobs.

Each year, BIA helps Tribes manage 16 million acres of forest land and conduct timber sales of $250 million that sustain over 10,000 forest and timber-related jobs, and helps Tribes manage mineral resources