The latest on fiscal federalism. Spending money ain't as easy as you might think
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State and local governments are ramping up efforts to deploy historic levels of federal funding and make significant investments in communities across the country. But efficiently delivering projects of this magnitude will involve overcoming a number of challenges.
Thanks to recent federal legislation — the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act — government leaders are making important strides toward strengthening America’s infrastructure, spurring economic growth and addressing the climate crisis.
But funding alone won’t guarantee success. The challenges state and local leaders will face involve scale, complexity and accountability, as we explore in a new study co-authored with Kevin Pollari:
• Scale: Although there are some systems in place to process and manage logistics for these sorts of complicated and multifaceted implementation efforts, investments on this scale — totaling more than $2 trillion combined — will ultimately pose several difficulties.
• Complexity: The IIJA, the IRA and the CHIPS Act all establish new programs that consist of numerous initiatives with detailed legislative language that require input from multiple agencies. Under the IIJA alone, more than 45 federal bureaus and 16 federal agencies and commissions will grant funding for 369 new and existing programs.
• Accountability: With so many cooks in the kitchen, it’s hard not to wonder: Who is accountable for seeing projects through, driving them forward and measuring impact?
State and local governments can take several actions to mitigate these implementation challenges and realize the benefits of this historic investment opportunity:
• Establish results management offices: RMOs can centralize operations, increase coordination, track spending and monitor project milestones. They can also help increase focus across different agencies and stakeholders on mission-oriented results for each project. For example, an electric vehicle charging station project with IIJA funding can deploy a state-level RMO to oversee multiple goals, including EV adoption, charging station coverage across different regional areas and compliance with federal spending requirements. It could also track other meaningful outcomes, such as job creation, workforce development and equity advancement.
• Maintain a holistic view of related initiatives: To maximize the impact of federal funding in their communities, state and local agencies must identify links between different investment opportunities and funding streams. Consider, again, the EV market. The IIJA provides $5 billion for EV charging infrastructure, while the IRA offers tax credits for consumers to purchase EVs. If EV chargers aren’t built where EV purchasing demand and adoption is high, or if EV owners lack access to EV chargers in their communities, the combined IIJA and IRA investments may fail to create their intended maximum impact.
• Invest in the workforce, both public and private: Successfully implementing these federal funding streams will require skilled professionals. State and local agencies should continue to invest in their workforces, adopt a skills-based mindset and collaborate with academic institutions and job training organizations to help ensure that staff have the necessary tools and competencies to succeed. Governments also should identify skills gaps in the private sector and explore innovative partnerships with industry, nonprofits and higher education institutions to close those gaps. Arizona, Indiana, Texas and Washington are among states that have been leading the way in emphasizing the benefits of construction jobs — including their potential to pay entry-level professionals higher wages than an entry-level professional with a liberal arts degree.
• Adopt a startup mindset: Many programs and projects supported by the IIJA, the IRA and the CHIPS Act aim to be implemented expeditiously. To achieve ambitious goals and navigate complex challenges, state and local agencies should embrace a startup mindset — focused on altering market conditions and changing deep-seated behaviors — to think creatively and get things done. Cutting-edge technologies like artificial intelligence and digital twinning can help simulate situations and determine the best approaches for each project.
The new federal initiatives represent massive investments in America’s competitiveness for generations to come. But their immense execution challenges will call for thoughtful coordination and management. With the right strategies in place, state and local agencies can help modernize America’s infrastructure, strengthen our economy and increase resiliency in their local communities.
- Executing on the $2 trillion investment to boost American competitiveness.
