Affordability pressures, shifting federal priorities, and uncertainty around long-term funding have reshaped the transportation policy landscape in the U.S. For a discussion of how evolving federal-state-local relationships are redefining infrastructure investment, funding stability, and project delivery across the country, Penn IUR and the Volcker Alliance convened a panel of leading transportation, finance, and policy experts for “Special Briefing on Transportation Opportunities & Challenges in the New Federalism” on March 26, 2026.
William Glasgall, Penn IUR Fellow and Public Finance Adviser at the Volcker Alliance, and Leslie Richards, Professor of Practice, City & Regional Planning, Weitzman School of Design and former CEO of the Southeastern Pennsylvania Transportation Authority (SEPTA), co-hosted the Special Briefing. The panel included Eryn Hurley, Chief Government Affairs Officer, National Association of Counties; Baye Larsen, Vice President and Senior Credit Officer, Moody's; Robert Poole, Director of Transportation Policy and Searle Freedom Trust Transportation Fellow, Reason Foundation; Naomi Renek, former Senior Advisor on Federal Policy, Metropolitan Transportation Authority; and Lauren Schapker, Vice President of Legislative Affairs, American Road and Transportation Builders Association (ARTBA).
Renek opened with a broad framing of how “new federalism” is reshaping transportation governance: “The discussion of federalism and new federalism is focused on which level of government makes decisions related to public goods,” she said. “Traditionally, there was a common understanding that improved mobility is a public good. Anything that goes into transportation, operational safety, infrastructure, reduced pollution… Federal funding has been provided based on this very basic concept that these things are good for society.” However, she highlighted growing tensions between federal and local roles, pointing to congestion pricing in New York as “an innovative, locally driven approach to providing a traditional public good” that nonetheless drew “tremendous federal involvement and interest despite adherence to existing federal laws.” Renek underscored shifting priorities, observing that “federal funding is being diverted from bike/ped, EV, and other clean transportation projects toward the administration's more road-centric priorities,” while stressing the continued importance of land use policy and affordability initiatives at the local level: “Policies and funding programs that encourage transit, active transportation and denser land use are impactful to affordability.” This “revamped version of federalism,” she concluded, “is now a factor in decision-making regarding the policies and projects that states and localities prioritize.”
Larsen delivered a financial and credit market perspective, noting that “our outlooks for most of our infrastructure sectors in 2026 are all stable,” reflecting resilience despite uncertainty. “Even in the midst of turmoil and the changing federal, state, local funding relationships, our transportation issuers do have tremendous flexibility and independence that stabilizes their credit profiles.” Still, she warned that issuers will face difficult decisions as funding shifts, particularly if federal priorities change. She highlighted risks tied to funding volatility: “A rapid change in access to federal funds has caught folks by surprise, and that less predictable funding freeze is typically harder to respond to than the more gradual transitions.” Looking ahead to reauthorization of the federal surface transportation law, which expires on September 30, Larsen stressed both timing and scale challenges: “History suggests that there will be multiple short-term extensions… This probably won't be quick.” She also noted a structural funding gap: “If the federal government is going to consider a reduction in highway and transit grants, they'd need to cut those by about 40% and 72%, respectively.” She said that without innovation, the likely outcomes include “more borrowing by states and local governments, or risks arise in deferred maintenance.”
Hurley highlighted the central but often underappreciated role of counties, which are “the single largest owner and operator of local infrastructure in the country.” She detailed the scale of county responsibilities: “Counties actually own and maintain 44% of the nation's roads…[and] 38% of the nation's bridges,” while investing $60 billion in transportation annually. Nevertheless, she pointed to structural inequities in federal funding flows: “Counties and other local governments received, on average, 14% of federal formula transportation dollars… The counties that sometimes have the greatest infrastructure needs…have the least institutional support to access federal dollars,” she said, emphasizing disparities for rural areas. Hurley also highlighted fiscal constraints: “There are actually 42 states that impose property tax limitations on counties… Counties have a very limited ability to actually raise [their] own revenue.” He concluded by outlining reform priorities, including increasing local access to funding and addressing rural planning gaps to “provide the tools needed for rural counties to be on a level playing field.”
Schapker focused on industry performance and legislative outlook, emphasizing the scale of recent progress under federal investment: “There have been nearly 120,000 highway and transit projects in every US county that have received support from this law.” She noted measurable gains, including that “highway, bridge, and street contractor employment is up 41,000 since the Infrastructure Investment and Jobs Act (IIJA) was signed into law,” countering concerns about capacity constraints. Schapker also noted infrastructure improvements, such as “when the IIJA was signed into law, there were about 43,000 structurally deficient bridges. That number is down to 41,000.” Looking ahead, she stressed the importance of continuity: “We are laser-focused on finding a way to get another service transportation reauthorization bill done on time that continues this robust trajectory of investment.” While acknowledging political headwinds, she expressed cautious optimism: “The House and Senate are working in a real bipartisan way,” she said. “Any proposed transit cuts…are not going to make it across the finish line.”
Poole offered a more cautionary long-term perspective, arguing that structural funding challenges could force a fundamental shift in federal policy. “The Highway Trust Fund is on its last legs,” he warned. “Congress cannot continue indefinitely bailing out the highway trust fund with borrowed money.” He highlighted the looming fiscal constraint: “This will absolutely cease by 2032, which is when Social Security is expected to be declared insolvent.” Poole outlined the limited feasibility of traditional policy responses, with taxes and spending cuts both posing a challenge. Instead, he suggested an alternative: “We really should look at the alternative of devolution—devolve the revenue and spending authority to the states and localities.”
In the open discussion, panelists explored funding uncertainty, project delivery, and emerging trends. On public-private partnerships (P3s), Poole argued that “P3s would play a much bigger role if the federal government liberalized tolling,” suggesting tolling could become “a more reliable future revenue source than fuel taxes.” Larsen cautioned that P3s often do not solve funding gaps, noting they are “more of a project delivery opportunity rather than a funding opportunity.” Richards noted challenges for transit agencies, particularly for large capital projects and accessibility upgrades.
On emerging technologies, Renek said that autonomous vehicles “are still taking up road space—this doesn't help congestion.” Schapker pointed to ongoing federal debates around EV infrastructure and equity requirements, while also noting potential revenue solutions: “There will likely be another push for electric vehicles to pay an annual registration fee that goes into the Highway Trust Fund.” The panel also discussed workforce reductions and institutional capacity, with Schapker observing that staffing changes could create “an opportunity to embrace new technologies that might make some of these processes go more quickly.” In closing reflections, panelists highlighted their primary concerns, including Poole’s warning that highway tolls remain “unpopular and hard to implement;” Larsen’s concern that uncertainty could lead to “increases in deferred maintenance;” and Hurley’s emphasis on “what's really going to happen with the surface transportation package” amid competing federal priorities.
This Special Briefing was the latest in a series of 60-minute online discussions featuring distinguished guests from PennIUR and Volcker Alliance’s national research networks, along with other leading academics, economists, and federal, state, and local leaders. These convenings are made possible by funding from The Travelers Institute, members of the Penn IUR Advisory Board, and the Volcker Alliance.
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