There is a poorly understood criminal justice metric that might just be a key component of fixing a faltering system that has gotten more expensive and, arguably, less effective at protecting public safety over decades. Clearance rates are the closest metric we have to evaluating how well the criminal justice system does at catching people who commit crimes. Clearance rates measure the percentage of reported crimes that result in a suspect being arrested, in an attempt to approximate the effectiveness of police agencies at that critical job. This brief is particularly interested in how effective the police are at solving violent crimes, a top concern of the public.

The effectiveness of the U.S. criminal enforcement system in solving violent crimes—as reflected by clearance rates—has been flat with a slightly downward trend over time. When focusing just on homicides, those rates have suffered a decades-long slide since the mid-1960s, with an even more pronounced decline in the years since 2019. Even as crime rates have trended down fairly consistently since 1993, and even though police spending has dramatically increased, not declined, since 1982, the percentage of violent crimes reported that get “cleared” (solved) has been stagnant at best since about the mid-1960s.

To put a finer point on the increased spending on police, the Urban Institute concluded from analyzing census data that “[f]rom 1977 to 2021, in 2021 inflation-adjusted dollars, state and local government spending on police increased from $47 billion to $135 billion, an increase of 189%.” In addition, a study by ABC-owned television stations examining budgets of more than 100 cities and counties determined that 83% spent at least 2% more on police in 2022 than they spent in 2019.

Early indications suggest that some of the steeper declines in clearance rates that were experienced after 2019 bounced back somewhat in 2023 and 2024, but there is no conclusive data yet, and the long-term trend since the 1980s remains in place. The chaos of the pandemic years likely plays an outsize role in the data for those years so, looking back in hindsight, the accelerated decline in rates may prove those years to be outliers. Even so, the long-term trends demonstrate that vast improvement can be had in clearance rates across the criminal system.

In the mid-1960s, more than 90% of murders were solved nationally (Figure 1). By 1990, that percentage had dropped into the 60s. In 2022, only 37% of violent crimes were cleared, and just over half of murders, according to FBI data. These are historic lows for a statistic that has been collected using the same methodology since at least 1960. Meanwhile, peer nations in Western Europe and Asia reportedly performed as well as the U.S. did in the 1960s, and their numbers have remained much higher than the figures for the U.S. Note that though clearance rates for property crimes and lower-level offenses are typically much worse than those for violent crimes, they have also remained more stable over time (Figure 2). As an example, in 2022, 36.7% of violent crimes reported to police were cleared, compared with 12.1% of property crimes.

When violent crimes are not prosecuted, or perpetrators don’t face punishment, it harms public safety and causes fear in the community; if left unchecked, this can lead to rampant disrespect for the law and eventually produce chaos. The perpetrator remains unidentified and loose in the community, able to commit further crimes.

Allowing cases to languish unsolved has additional implications for deterrence. According to the U.S. Department of Justice, “Research shows clearly that the chance of being caught is a vastly more effective deterrent than even draconian punishment.” So even as our prisons and jails are bursting with people being confined for ever-longer time periods, there is evidence that our policy choices are not yielding effective deterrence, let alone crafted to achieve optimal results. Indeed, the evidence is well-established that long sentences are not the only or even best way to address crime. When roughly half of murderers can expect to get away with it, the deterrent effect of amping penalties without increasing the likelihood of being caught will be limited. With property crime, those incentives are even worse since those are less likely to be cleared.

Failing to solve cases is also a severe disservice to victims, who are rarely healed or compensated by our present system. In fact, surveys show that victims of violent crime prefer prevention strategies to long prison sentences.

So why aren’t clearance rates the most important criminal justice metric we have? Why have many members of the public not even heard of them? This brief will discuss clearance rates, their merits, and their decades-long downward trajectory. Why do clearance rates matter? How can the abysmal rates seen today be improved? Can public awareness of this crisis lead to action? What are the solutions?

Download the full policy brief below:

The post Could clearance rates be key to addressing criminal justice failures? appeared first on Reason Foundation.

Despite $2.7 trillion in public spending to address the drug overdose crisis, the United States continues to experience alarmingly high death rates, strained emergency systems, and ineffective intervention pathways. Current strategies that are largely centered on enforcement and abstinence-only treatment are not meeting the scale or complexity of the drug problem. Public systems remain reactive rather than preventative, leaving taxpayers to fund a revolving door of crisis care that fails to produce meaningful or lasting outcomes.

This policy brief presents a case for integrating harm reduction into the federal response, not as a replacement for drug treatment, but as a pragmatic complement. Harm reduction includes proven tools like naloxone distribution, syringe service programs, fentanyl test strip access, and supervised consumption sites. These interventions reduce healthcare costs, lower disease transmission, and improve individual and community outcomes without requiring drug abstinence. They represent low-cost, high-impact strategies that support public health and public safety alike.

To assess the current drug policy landscape, the brief includes a 50-state matrix evaluating implementation of five core harm reduction policies, including: syringe service programs (SSPs), naloxone access, legality of fentanyl test strips, Good Samaritan laws, and supervised consumption sites (SCSs). While two states meet all five benchmarks, others fall short due to outdated paraphernalia laws, inconsistent naloxone access, and surveillance practices that discourage participation. These gaps reduce effectiveness, create preventable costs, and deter early intervention by eroding trust in care systems.

Key policy recommendations in this paper include decriminalizing essential health tools, strengthening “Good Samaritan” protection laws, limiting surveillance in service delivery, and funding flexible, community-led initiatives. These policy reforms do not expand federal authority or create new regulatory structures. They promote local autonomy and make room for innovation by empowering the organizations best positioned to serve people on the ground.

Harm reduction is a public health approach that prioritizes safety, dignity, and evidence-based care, aiming to build trust in healthcare systems and ensure public resources are used effectively. It’s a practical path forward that aligns with the core principles of reducing government waste, investing in what works, and protecting individual liberty.

Based on the existing evidence, Reason Foundation concludes that expanding access to harm reduction services may be one of the most cost-effective, community-driven uses of funds designated to reduce the harms of the opioid crisis.

Introduction

The United States is confronting a multifaceted drug crisis that carries not only a significant economic burden but a devastating human toll as well. Opioid overdoses alone are projected to claim between 543,000 and 842,000 lives between 2020 and 2032. Beyond the personal loss, these deaths strain emergency response systems, drive up healthcare costs, and contribute to lost productivity and long-term societal expense.

Although treatment options exist, access remains uneven, and relapse rates continue to hover between 40% and 60%. Despite these challenges, many policies continue to prioritize a one-size-fits-all rehabilitation model—often centered around abstinence—which is not sufficient to meet the diverse needs of individuals struggling with substance use disorders.

Traditional treatments for substance use disorders include psychological therapies such as cognitive behavioral therapy, motivational interviewing, contingency management, and family therapy. Medication-assisted treatments (MAT) like methadone, buprenorphine, and naltrexone also offer effective options, as do mutual support groups. However, psychological therapies have an average dropout rate of 30%, and medication-assisted treatments often suffer from limited accessibility and a lack of coordination with psychological or peer-based support systems.

This current system is inefficient, as it fails to reach or retain many of the individuals most in need at great financial cost. For example, among those who inject drugs, preventable infections like HIV and hepatitis C are common due to unsafe injection practices like sharing needles. The average lifetime medical cost of one HIV infection is over $261,000, while hepatitis C treatment can exceed $38,000 per case. Preventable hospitalizations due to abscesses, infections, or overdoses also drive up costs, with each non-fatal overdose costing thousands in emergency department use alone.

In addition to their limitations in efficacy and accessibility, these approaches can unintentionally reinforce harmful stereotypes about people who use drugs. Abstinence-centered rehabilitation often assumes complete sobriety as the only path to recovery. This misconception perpetuates the false notion that one-size-fits-all treatment is effective for everyone. It shapes public opinion of substance use disorder as a moral failing instead of a health issue. It also drives policy and healthcare decisions that discriminate against people who use drugs and restrict access to harm reduction and treatment programs. The persistent ethical condemnation of drug use exacerbates the challenges of treating substance use disorder and prevents people from receiving or even seeking the assistance they need.

Substance use exists on a spectrum. Research shows that most drug use is occasional, short-term, and not associated with addiction. A clinical diagnosis of substance use disorder requires meeting specific criteria outlined in the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5), which classifies most drug use as “transient.” Unfortunately, treatment protocols often fail to reflect this definition, sidelining evidence-based approaches that could better align with actual patterns of use in communities.

Current research also supports the idea that addiction is not solely the result of individual behavior, but a complex condition influenced by biological, psychological, social, and environmental factors—including physical dependence. For many people with opioid use disorder, quitting abruptly can be dangerous. Unlike illnesses such as diabetes or cancer, which manifest with relatively uniform effects, the effects of addiction vary significantly from person to person. This complexity undermines the effectiveness of uniform treatment strategies. It also reinforces the importance of broadening public health responses to include harm reduction—a practical, compassionate approach that prioritizes health, safety, and human dignity without imposing immediate or total abstinence.

Harm reduction offers a pragmatic complement to existing treatment approaches. It prioritizes reducing the negative health consequences of drug use, particularly among individuals who are not yet ready or able to pursue abstinence. These programs include syringe service initiatives, naloxone distribution, and access to medication-assisted therapy—all of which have been shown to reduce emergency room visits, lower disease transmission, and improve long-term outcomes.

One illustrative example is Taiwan’s 2005 needle exchange program, launched during a surge in HIV among intravenous drug users. Despite the country’s strict anti-drug policies, the program reduced new HIV infections by 90% within four years—demonstrating the public health and fiscal power of targeted harm reduction policies. Similar evidence from cities like Vancouver and Lisbon supports this trend, showing how such approaches can relieve public health systems while improving the quality of life for individuals and families.

Despite the extensive data supporting harm reduction in mitigating drug-related harm, ongoing misinformation about drugs and those who use them continues to hinder widespread acceptance of these strategies in the United States.

However, other nations such as Portugal, Uruguay, the Netherlands, Canada, and Mexico have shifted towards more effective policies for mitigating the potential dangers of drug use. An international trend is emerging, with more nations adopting harm reduction approaches that uphold individual freedom and recognize the right of people to make informed decisions about drug use and treatment.

American policymakers should similarly refocus drug policies from the supply to the demand side and work primarily to reduce the harmful effects of drug use.

Full Policy Brief: Harm Reduction: An Evidence-Based Approach to the Drug War

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The series offers recommendations to help states design effective retirement systems that meet the needs of both employees and taxpayers.

The Gold Standard in Public Retirement System Design Series includes:

• Best practices in the design and utilization of defined contribution plans 
• Best practices in incorporating risk sharing into defined benefit pension plans
• Best practices for cost-of-living adjustment designs in public pension systems
• Best practices in hybrid retirement plan design
• Best practices for pension debt amortization
• Best practices in optional defined contribution plans for public workers
• Best practices in cash balance plan design
• Designing an optimized retirement plan for today’s state and local government employees

If you have any questions or would like more information, please email the Reason Pension Reform Help Desk at pensionhelpdesk@reason.org.

The post The Gold Standard In Public Retirement System Design Series appeared first on Reason Foundation.

The rapid advancement of artificial intelligence (AI) has led to a recent rise of “deepfakes,” in which AI is used to manipulate or fabricate audio, video, or images with realistic accuracy. The highly realistic depiction of deepfakes technology has led to fears of potential misuse, such as harming others’ reputations through deliberate misrepresentation or spreading misinformation online.

Thirty-nine states have passed laws regulating the spread of intimate or erotic deepfakes, including bans on the creation and distribution fabricated images or videos depicting child sexual abuse material (CSAM) and revenge porn. Revenge porn, or nonconsensual pornography, is sexual or pornographic images of individuals distributed without their consent. These laws are expansions of currently existing laws and reiterate that these activities are still illegal when done with this new technology.

In addition, over 30 states have also proposed laws to try and regulate political deepfakes, which would restrict certain fabricated depictions of political candidates or office holders. These proposals have different goals than restrictions on sexual deepfake regulation; they are meant to prevent the creation and spread of images that may deceive voters, spread misinformation, and potentially influence elections.

Most of these state laws allow for political deepfakes so long as they include clear disclosures or watermarks identifying them as synthetic media. Deepfakes of candidates lacking these disclosures created or distributed before an election are outlawed. The watermark approach reflects a growing consensus that these disclosure requirements are a key tool in combating malicious political deepfakes.

While these proposals may have good intentions, restricting political deepfakes risks limiting political speech that is protected by the First Amendment. Many state laws are intended to combat political deepfakes that attempt to deceive voters. However, regulations may lead to the targeting of deepfakes meant to be parody or satire. Not all deepfakes are created with the intent to deceive. Parody and satire often use exaggerated or fabricated imagery to critique public figures or highlight social issues, and the line between humor and deception can be highly subjective. States may attempt to ban satirical political deepfakes that are realistic enough to potentially mislead some viewers, regardless of the creator’s actual purpose. The ambiguity of which political deepfakes a law regulates can create a chilling effect, deterring artists, comedians, and political commentators from engaging in creative expression out of fear that their work could be mischaracterized as deceptive and subject to legal action.

It is crucial that policymakers approach this issue with caution. Deepfakes can be used as a form of self-expression, parody, and satire, all of which are protected speech under the First Amendment. Regulatory responses must not inadvertently infringe on free speech. Rather than rushing to impose restrictions, policymakers should focus on an approach that recognizes the protections already provided by libel and slander laws and encourages transparency and accountability without undermining fundamental rights.

This policy brief explores the potential dangers of deepfakes while advocating for solutions that prioritize technological advancement, self-regulation, and public education over government intervention. A nuanced response will allow society to address the challenges of deepfakes while preserving the benefits of creative and expressive digital technologies.

Read the full report here:

The post Deepfakes, AI, and existing laws appeared first on Reason Foundation.

This model legislation is intended to provide a policy-driven framework for state and local governments to create a new (or improve an existing) defined contribution (DC) retirement system for public employees. The legislation uses Retirement Benefit Policy Statements to establish the purpose and objectives of the plan sponsor and as directives to the fiduciary and other entities charged with the ongoing administration of the program. This approach is consistent with modern trust law practices to clearly define the plan sponsor’s objectives for the plan and trust as necessary guidance to plan fiduciaries and administrators in their duties. This cutting-edge, next-generation DC system framework is an emerging policy-based plan design that synthesizes the best aspects of the defined benefit (DB) pension and DC retirement models.

This model legislation sets the major elements for the retirement plan, including provisions regarding employee eligibility and participation, vesting, contribution amounts, investment structures, benefit forms, recordkeeper structures, and plan governance and administration. The model legislation also requires communicating with and educating plan participants on the plan and the shared responsibility of employers and employees in creating a successful retirement program. It requires participants to be checked periodically to assess whether each participant is on track to meet their retirement needs and objectives, and to recommend corrective actions.

Key features include:

• A core IRC Section 401(a) defined contribution platform forms the primary vehicle for the mandatory features of the plan. One or a combination of additional voluntary savings plans (IRC Section 401(k), 403(b), and eligible 457(b) DC plans) can be used to create an integrated system of plans as needed.
• Mandatory participation to eliminate the inherent weaknesses of voluntary-only savings approaches.
• A defined retirement income target:
  • The DC plan starts with a specified retirement income replacement objective defined by the employer (similar to a DB plan, except that there are no employer guarantees of reaching the targeted income level so there is no chance to accrue unfunded pension liabilities of any kind).
• A defined contribution rate:
  • Total employer and employee contributions are defined based on what is determined to be necessary to provide that retirement income objective and are paid into a personal individual retirement account that belongs to the employee.
  • [Note: Matching employer contributions may also be considered but are not a best practice for a core plan intended to provide substantial accruals for a broad class of employees.]
• Short or immediate vesting rules to reduce the risk of benefit forfeiture.
• A professionally managed set of investment offerings:
  • The individual accounts’ assets are default invested in professionally managed funds that are designed to create high probabilities of meeting the retirement income objective based on available demographic and financial information for each participant and do not require decisions from the employee.
  • An alternative investment menu of diversified funds allows participants to personally direct their plan investments with plan-provided investment advice and counseling.
• A mobile benefit:
  • Ultimately, the assets in the account are owned by the employee and can be taken with them if they leave employment before completing a full career.

• A default benefit payment structure provides lifetime income benefits through group in-plan annuity products with additional options (lump-sum, periodic payments, etc.) that can be customized by each participant to meet their own individual needs and circumstances.

Part 2 provides model language for enacting this legislation.

Full Template: A legislative template for a modernized public sector defined contribution plan

The post A legislative template for a modernized public sector defined contribution plan appeared first on Reason Foundation.

In an era where personal data is both a critical economic asset and a sensitive aspect of individual autonomy, privacy laws worldwide increasingly rely on user consent as the primary mechanism for governing data collection, processing, and sharing. However, despite its central role, the effectiveness of current digital consent frameworks remains highly contested.

This paper critically reviews how consent currently operates within major regulatory frameworks, particularly contrasting the European Union’s stringent, opt-in-based General Data Protection Regulation (GDPR) against the predominantly opt-out approach of the United States, exemplified by California’s Consumer Privacy Act (CCPA).

Part 2 outlines key legal frameworks and definitions.

Part 3 examines how consent mechanisms shape user behavior, finding that repeated prompts often lead to disengagement rather than meaningful choice.

Part 4 analyzes the broader economic effects, showing that consent requirements tend to favor large firms, raise compliance costs for smaller players, and constrain innovation.

In the final section, we synthesize leading policy and academic proposals to outline a set of potential reforms. These reforms include risk-based consent frameworks, universal privacy management tools, and co-regulatory accountability models.

The GDPR, adopted in 2016 and enacted in 2018, is built around the more stringent opt-in approach and aspires to consent that is “freely given, specific, informed, and unambiguous.”

The CCPA, adopted in 2018 and enacted in 2020, in effect for U.S. firms doing business in California, follows an opt-out approach, where consent is presumed unless actively withdrawn. As the U.S. and other countries debate national approaches to data privacy, the debates remain unresolved.

Drawing on empirical studies, this review highlights persistent shortcomings in current consent models—from interface design flaws to the disproportionate compliance burden on smaller entities. It concludes by identifying potential reforms aimed at balancing user autonomy, regulatory flexibility, and market competitiveness.

Full Policy Brief: Consent requirements in comprehensive data privacy laws

The post Consent requirements in comprehensive data privacy laws: Current practices and the path forward appeared first on Reason Foundation.

For the past 100 years, most arterial highways throughout the United States, including the Interstate Highway System and most state highways, have been funded by the motor fuel tax. However, over the last 20 years, due to the combination of a growing number of electric vehicles, a growing number of hybrid vehicles, and the greater fuel efficiency of vehicles powered by internal combustion engines, fuel tax revenue has declined significantly. Given these trends, the motor fuel tax will not be a sustainable revenue source for roads and highways over the next 100 years.

The motor fuel tax can be compared to a rock star on his farewell tour. It is still producing revenue, but it is not as effective a mechanism as when it was at its peak. Further, most transportation analysts know that it is time for something more sustainable.

Over the past 20 years, researchers have examined a number of different alternative transportation funding sources, such as a freight charge per ton, tire fees, registration fees, and sales taxes. About 10 years ago, officials with the American Association of State Highway and Transportation Officials (AASHTO) created a comprehensive funding matrix. The impetus for the chart was the decline in revenue from the motor fuel tax. AASHTO was examining how fuel tax revenue could be replaced. The organization looked at more than 35 funding sources based on the users-pay/users-benefit principle (in which people who use roadways more pay more, those who use roadways less pay less, and those who do not use them pay nothing at all) and using general funds, the most significant of which are detailed below in Table 1.

After looking at all of the options, researchers determined that the mileage-based user fee (otherwise known as a road usage charge, road charge, or vehicle-miles traveled fee) was the most promising of all of the revenue sources that they studied. A mileage-based user fee (MBUF) charges drivers based on the number of miles driven, compared with the fuel tax, which charges drivers based on the number of gallons of fuel consumed, or a sales tax, which charges consumers based on the value of goods purchased. The mileage fee ranked extremely high in economic efficiency and equity, and medium-high in implementation and administrative efficiency.

From a fiscal perspective, mileage-based user fees would generate $246 billion over an estimated six-year period, dwarfing every other revenue source, including a 10% increase in the motor fuel tax rate ($120 billion) and implementation of a gasoline sales tax ($156 billion).

Further, MBUFs were the only option that could generate enough revenue to replace the motor fuel tax (more than $200 billion for automobiles and trucks combined), more than any other option in the AASHTO matrix.

MBUFs also more closely adhere to the users-pay/users-benefit principle. In addition to being an economic advantage, it is also a political one. Transportation must compete with other policy priorities such as health care, education, and defense. And transportation usually loses out to those other priorities in a fight for general revenue sources, such as sales taxes and income taxes. Therefore, any revenue sources that do not rely on the users-pay principle are unlikely to lead to sustainable transportation revenue.

Even though MBUFs scored well in implementation and administrative efficiency, there is room for improvement. Parts 3 and 4 of this policy brief examine some of these challenges and how they can be addressed.

Equity implications are mentioned multiple times in the 2015 and 2019 versions of the AASHTO matrix. Specifically, the report examined geographic equity and equity among drivers of different propulsion methods. While many drivers would assume that rural residents would pay more, many rural drivers would pay less in MBUFs than in fuel taxes because they tend to drive older, less fuel-efficient vehicles. With fuel taxes, drivers pay varying amounts depending on their vehicle’s powertrain, despite the fact that all light-duty vehicles wear out pavement at about the same rate. Drivers of electric vehicles pay no fuel tax at all, while drivers of hybrid vehicles pay approximately half of what drivers of conventional fuel vehicles pay. With MBUFs, all light-duty vehicles that travel the same distance pay the same amount, regardless of powertrain.

The AASHTO matrix did not seek to explain MBUFs, but in some ways, they are most similar to what Reason Foundation calls 21st-century per-mile tolling. Both mileage-based user fees and tolling charge drivers a per-mile rate. The biggest difference is in the geography. Tolls are charged for a specific stretch of highway, while MBUFs are charged for the entire system. For this reason, both are better user fees than the fuel tax, which charges drivers a per-gallon rate regardless of where they drive.

However, both MBUFs and 21st-century tolling would be different from today’s toll roads, which often employ double taxation. Currently, motorists on most toll roads pay both a fuel tax and a toll, with only two states offering a rebate on fuel taxes. Motorists may also pay a variable toll on express toll lanes, although that toll is designed to manage congestion, not to raise revenue. In mileage-based user fee pilot and permanent programs where money is exchanged, drivers receive a rebate for any fuel tax that they pay. It is crucial that any potential MBUF pilot refunds fuel taxes and tolls to prevent any double taxation.

Regarding implementation, because they charge for the exact amount of roadway that a vehicle uses and can be varied based on the type of highway, many transportation researchers consider GPS-enabled and location-based MBUFs to be the ideal solution. Currently, pilot and permanent MBUF systems are divided into high-tech and low-tech MBUFs. The following section of this brief provides a brief overview of how a high-tech MBUF functions.

Full Policy Brief: Low tech mileage-based user fee options

The post Low tech mileage-based user fee options appeared first on Reason Foundation.

U.S. seaports are vital to global trade, serving as gateways for international commerce. Ensuring their efficient operation and maintenance is crucial for economic stability and growth. However, the challenge of how to fund this essential infrastructure has been a contentious issue, leading to various policy debates and reforms.

This policy brief delves into the history, current challenges, and potential reforms for the Harbor Maintenance Trust Fund (HMTF), offering insights into how sustainable and equitable funding solutions can be achieved.

The Harbor Maintenance Trust Fund was established to finance the maintenance and operation of U.S. ports. Over the years, the fund has undergone significant changes, evolving from the Port Infrastructure Development and Improvement Trust Fund in the 1980s to its current form. But the HMTF faces persistent challenges, particularly regarding its funding mechanism, the Harbor Maintenance Fee (HMF)—a fee exacted on eligible shipments that feeds into the HMTF. The funds are used to pay for port improvements, required dredging, and other routine maintenance.

The HMF was initially levied on both imports and exports but was significantly altered by a Supreme Court ruling in 1998 that exempted exports from the fee. This exemption has led to inequities and strained international trade relations.

This brief explores three main policy solutions to reform the Harbor Maintenance Trust Fund and ensure its sustainability: implementing a user fee, abolishing the Harbor Maintenance Fee in favor of general fund appropriations, and increasing diesel fuel tax rates.

These potential reforms are crucial because seaport efficiency directly affects the economy. By addressing the existing inequities and compliance challenges, the U.S. can move toward a more equitable and effective funding mechanism for seaports. The following sections of this brief analyze these topics, offering a comprehensive view of the past, present, and future of seaport funding policy, focusing on regulatory and legal aspects of different funding and financing approaches.

Read the full Policy Brief:

The post Navigating port funding: Alternatives for reforming the Harbor Maintenance Trust Fund appeared first on Reason Foundation.

Over the past three decades, governments worldwide have increasingly turned to the private sector to design, build, finance, operate, and maintain infrastructure, including electric, gas, and water utilities; airports, seaports, and toll roads; and pipelines and telecommunications facilities.

Existing infrastructure entities needing reconstruction or modernization have been “privatized” via either outright sale or long-term leases. (These are referred to as “brownfield” transactions.)

For new infrastructure, governments award long-term design-build-finance-operate-maintain (DBFOM) concessions via a competitive process. These long-term public-private partnerships (P3s) have terms typically between 30 and 50 years. These transactions for new projects are referred to as “greenfield” projects.

While the United States still lags behind many countries in Europe, Asia/Pacific, and Latin America/Caribbean in using these kinds of P3s, this difference arises in part because much non-transportation infrastructure that was state-owned and operated in Europe and other regions was historically investor-owned in the U.S.—such as telecommunications, electric and gas utilities, pipelines, and a fraction of water and wastewater utilities.

On the other hand, major transportation infrastructure such as airports, seaports, and toll roads that have been widely privatized in Europe, Asia/Pacific, and Latin America/Caribbean countries are still mostly government-owned and operated in the United States.

Both brownfield and greenfield infrastructure projects require long-term financing. Facilities owned and operated by governments are often financed 100% by government revenue bonds or general-obligation bonds, which in the United States are exempt from federal taxation. When the private sector invests in infrastructure, it typically invests equity to cover part of the cost and finances the rest via long-term revenue bonds.

To level the financial playing field for U.S. public-private partnerships, Congress has provided for tax-exempt private activity bonds (PABs), which are now widely used for such projects.

The large financing needs for privately financed infrastructure have led to the development and growth of infrastructure investment funds, which raise equity to be invested in privately owned or P3 infrastructure.

Public-sector pension funds, seeking to increase the overall return on their investments, are also making significant equity investments in revenue-generating infrastructure, generally via infrastructure investment funds.

Likewise, insurance companies and sovereign wealth funds are now making long-term investments in this kind of revenue-generating infrastructure.

This report reviews 2024 developments in private/P3 infrastructure investment, focusing on transportation infrastructure.

While the report’s scope is global, it pays particular attention to U.S. developments in P3 infrastructure and the continued growth in pension fund investment in this field.

Part 2 reviews the ongoing role of infrastructure investment funds worldwide.

Part 3 provides an update on the largest companies and major P3 projects under way globally and in the United States.

Part 4 then reviews pension funds’ increasing investment in revenue-generating infrastructure.

Read the full Policy Brief:

The post Annual Transportation Finance Report 2025 appeared first on Reason Foundation.

Governments have used long-term public-private partnerships for surface transportation projects for the past 60 years.

As documented by José A. Gómez-Ibáñez and John Meyer, the phenomenon began in the 1950s and 1960s, as France and Spain emulated the model pioneered by Italy prior to World War II. Italy’s national motorway systems were developed largely by investor-owned or state-owned companies operating under long-term franchises (called concessions in Europe).

In exchange for the right to build, operate, and maintain the highway for a period ranging from 30 to 70 years, the company could raise the capital needed to build it (typically a mix of debt and equity).

The model spread to Australia and parts of Asia in the 1980s and 1990s, and to Latin America in the 1990s and 2000s. Nearly all the projects in those regions from the 1950s to 1980s were financed based on the projected toll revenues to be generated once the highway was in operation.

Some projects went bankrupt as a consequence of reduced traffic and revenues during severe economic downturns (e.g., the oil price shock of 1974), leading to the nationalization of some companies.

However, in the late 1990s and early 2000s, the governments of France, Italy, Portugal, and Spain all privatized their state-owned toll road companies and formalized the toll concession P3 model.

Australia has allowed several concession company entities to go through liquidation, with the assets (in each case major highway tunnels) being acquired by new operators at a large discount from the initial construction cost.

Other governments in Europe adopted a different form of highway concession. Generally, not favoring the use of tolls, they created the concept of availability payments as a means of financing long-term concession projects.

In this structure, the company or consortium selected via a competitive process negotiates a stream of annual payments from the government sufficient (the company expects) to cover the capital and operating costs of the project and make a reasonable profit. The capital markets generally find such a concession agreement compatible with financing the project via a mix of debt and equity. Since no toll revenues are involved, this model applies to a much broader array of transport and facility projects, including rail transit. In the highway sector, nearly all long-term concession P3 projects in Canada, Germany, the United Kingdom, and a number of Central and Eastern European countries have been procured and financed as availability payment (AP) concessions.

In a small but growing number of cases—major bridges, as well as highway reconstruction that includes added express toll lanes, for example—governments collect the toll revenues and use the money to help meet their availability payment obligations. These cases are called “hybrid concessions” in this report.

Of the top 10 worldwide surface transportation P3s that reached financial close in 2024, four used availability payments, bucking what had been a growing trend over the last seven years. In 2023, seven of the top 10 P3s used availability payments.

The growing use of AP concessions has enabled P3s for projects that do not generate their own revenues, as well as hybrid concessions in which toll revenues help the government cover the costs of its AP obligations.

For the past seven years, almost three-quarters of the largest P3 projects, by financial value, have used availability payment public-private partnerships.

See the full Report here:

The post Annual Surface Transportation Infrastructure Report 2025 appeared first on Reason Foundation.

In the second half of the 20th century, the world’s airports and air traffic control systems were essentially all departments of governments. Two events in 1987 launched an ongoing wave of organizational and government reforms: the privatization of the British Airports Authority (BAA) and the corporatization of the New Zealand government’s air traffic control functions as Airways New Zealand.

BAA was privatized as a single entity comprising the three major London airports plus several other airports in the United Kingdom. Later, government policy decisions led to selling Gatwick, Stansted, and two Scottish airports to new private owners.

The improved performance of the privatized airports inspired a global wave of airport privatization and long-term public-private partnerships (P3s) that has resulted in over 100 large and medium-sized airports being either sold to investors or long-term leased as revenue-based P3s—in Europe, Asia, Latin America, and elsewhere.

The outlier has been the United States, which has only three P3-leased airports (San Juan International, Tweed New Haven, and Avon Park Executive in Florida) and a small number of P3 arrangements for airport terminals and other individual facilities.

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their air traffic control systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government.

Within the first decade of this trend, the leading air traffic control providers organized a trade association called the Civil Air Navigation Services Organization (CANSO).

Today, CANSO has 93 full members (providers of ATC services) and 91 associate members (mostly supplier companies). CANSO is the ATC counterpart of the global organizations for airlines (IATA) and airports (ACI).

This brief reviews developments in the United States and worldwide regarding private-sector participation in airports and air traffic control.

While the United States remains an outlier when it comes to airport and air traffic control organization and governance, interest in airport privatization via long-term P3 leases continues.

Read the full Report here:

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Remote air traffic control towers, sometimes referred to as virtual towers or digital towers, are being deployed in increasing numbers around the world. Rather than building a tall concrete structure with a control cab on top to house the controllers for visual views of aircraft movements, a steel tower (or several towers) is mounted with an array of video cameras and communications equipment. Those cameras and sensors feed information securely to controllers in a ground-level building housing the control room, often in a location remote from the airfield. Instead of the traditional out-the-window view, controllers have panoramic video displays of the airfield and its environs, including identifying individual aircraft with tags displayed on-screen. This allows them to continuously monitor traffic without turning their head or standing, which is critical for safe and efficient air traffic management.

Remote towers provide the ability to serve low-activity airports from locations where controllers live or desire to live, rather than requiring staff relocations. Management of multiple remote towers can be conducted from a single facility known as a remote tower center.

Regardless of how these technologies are deployed, traffic procedures are unchanged from those used in traditional tower operations. While controllers working in a remote tower center can be certified to handle traffic at multiple airports, they only control traffic at one airport at a time. This allows for control of a particular airport to be easily transferred to a second controller as the need arises. As a result, remote tower technology has the potential to maximize utilization of the limited national pool of certified controllers.

The United States is not alone in facing difficulties in attracting and retaining staff to operate control towers, especially those located far from population centers. But many air navigation service providers have begun adopting remote towers, and they have found that the digital working environments supporting multiple airports are attractive to younger prospective recruits. And by increasing controller situational awareness, this technology also reduces workload and stress, helping to retain these highly trained and specialized employees.

Significant cost savings can also be realized. Construction costs for remote towers are a fraction of those for conventional brick-and-mortar towers. When several low-activity airports are controlled from a single remote tower center, air navigation service providers can realize significant staff and operating cost savings. Importantly, this does not reduce the demand for controllers nationwide, but it does mean that existing and new controllers can be employed more productively.

New airspace entrants, such as electric vertical takeoff-and-landing (eVTOL) aircraft operating advanced air mobility (AAM) services, already plan to make use of remote/digital tower technology for vertiport infrastructure. The AAM service model is expected to leverage smaller airports, so implementing remote towers at those airports can support development of technology and procedures for more robust utilization of this proven technology.

The challenge in the United States is that the Federal Aviation Administration (FAA) in recent years has been unenthusiastic and inconsistent about remote/digital tower technology. Congress has attempted to spur the agency to act, although progress to date has been minimal.

This brief makes the case for embracing remote/digital towers in the United States.

Part 2 discusses FAA’s original research into remote tower technology.

Part 3 surveys the global success of remote/digital towers.

Part 4 discusses remote tower development in the United States.

And Part 5, shown below, concludes with recommendations for policymakers.

Conclusion and recommendations

Remote tower technology has been proven and can provide air traffic control services to several small airports from a single facility. A controller would monitor and direct traffic at only one airport at a time, but would be certified for several aerodromes. This would make more productive use of available controllers, allow redundant staffing during low-traffic periods, and allow for consolidated facilities to be located in areas desirable to current controllers and new hires. Compared to new or replacement conventional air traffic control towers, there are significant capital and operating cost advantages.

A secondary but important benefit is that the successful implementation of remote tower centers would be an important step in providing additional digital technology and services for air traffic facilities throughout the National Airspace System, NAS. Digitalization is key to continuing improvements in system efficiency and communication with NAS users.

Internationally, air navigation service providers are developing additional uses for this technology, including at very large airports.

FAA is sensitive to ongoing criticism about the technological advances and deployments made by other air navigation service providers and often emphasizes the higher complexity of the U.S. NAS. While it is true that the United States has some of the most congested and complex activity near major metropolitan areas, dozens of small U.S. airports have relatively simple, low-volume operations that can benefit from this technology.

Many advancements that the FAA needs to make are complex and must be done carefully and step by step. Deploying remote/digital tower technology, initially at small U.S. airports, is a logical starting place. The technology is proven, and successful procedures have been published and deployed for nearly a decade.

As with the prior FAA tests using virtual tower equipment, once anyone (especially controllers, but even laypeople) sees an installation, they realize that this technology can provide significant support to air traffic controllers and to the National Airspace System writ large.

FAA senior management should have a technology plan for remote/digital towers and remote tower centers that envisions the logical next steps in a rollout in the NAS. To facilitate a holistic view of the possibilities, FAA staff should conduct site visits to remote tower centers in Norway and Sweden. FAA staff should also review the simulations of the planned digital tower deployments at Singapore and Al Maktoum airports.

To advance near-term deployment in the United States, the FAA should consider:

• Developing a new remote tower center to manage multiple small airports;
• Testing and certification of multiple technology vendors;
• Conducting field pilots, including system design approval, at sponsor airports as contemplated in the FAA Reauthorization Act of 2024; and
• Reviewing European Union standards for (partial) applicability in the United States.

FAA is on a path to support the development of remote towers, and these efforts should be finalized and standards issued as soon as practicable. Congress should continue its encouragement and oversight to ensure FAA remains on this path to success. Ongoing attention on air traffic control modernization from the Office of the Secretary at the U.S. Department of Transportation should be sustained, with a particular focus on the near-term benefits that could be realized from proven remote tower technology.

Read the full report here:

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In the face of a national fentanyl crisis and continued skepticism toward the effectiveness of drug-criminalization policies, some U.S. states and municipalities have begun to explore alternatives. The most notable example was in 2021 when Oregon passed Measure 110, which decriminalized the possession of all illicit drugs and attempted to adopt a health-oriented approach to illicit drug policy. While drug decriminalization is more common in Europe, Oregon is the first exposure to the policy for many Americans. This brief is meant to provide a comprehensive review of decriminalization as a policy and research results from varying localities that have adopted a decriminalization model. Decriminalization data discussed include drug treatment, drug use rates and behaviors, criminal activity, and varying economic impacts on labor and housing.

These topics are also examined in the context of criminalization and total legalization. Legalization has yet to be implemented in any large-scale modern context, so our expected results are largely reliant on economic theory. One potential benefit of legalization over decriminalization to note is the elimination of illegal drug trafficking, lowering rates of organized crime, and reducing the presence of adulterants in drug production. Criminalization, however, has been found to be largely ineffective in curtailing the illegal market and actively contributes to negative stigmatization surrounding drug use, users, and treatment.

While research on decriminalization draws on different countries and localities with varying models, there are some consistent outcomes. Decriminalization is generally found to reduce overdose rates, to not lead to greater drug use rates, to improve health outcomes in relation to the spread of disease via intravenous drug use, and leads to more accessible drug and health treatment. However, these outcomes are largely dependent on the effectiveness of coinciding treatment service programs and structures; decriminalization on its own is unlikely to produce such positive results.

The potential impacts on crime and poverty are more inconclusive, as the bulk of research surrounding decriminalization focuses directly on drug use and drug treatment outcomes such as general usage rates, problematic use, treatment effectiveness, and treatment accessibility. The currently available literature and research suggests decriminalization could improve labor-market participation, drive down housing costs, mitigate public health expenditures, and reduce different forms of drug-use-driven crime following decriminalization. While these improvements are largely theoretical and follow-up research is necessary to determine the veracity of these expectations, available data from Oregon during the period of drug decriminalization do not refute these expectations.

Full Brief: Drug decriminalization in Oregon: Measure 110’s impacts compared to other countries’ systems

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This report is the third and final report of a research initiative that explores the evolution of travel in meeting urban mobility needs given rapidly changing technology and greater sensitivity to climate change.

The first report, “Transportation’s Role in Climate Change,” focuses on the role of transportation in greenhouse gas (GHG) emissions.

The second report, “Public Transit and Climate Change,” focuses specifically on the influence of public transportation.

This final report in the series explores the challenges and issues facing urban travel going forward as demographic, economic, technological, and cultural/political conditions evolve.

This report examines the current and forthcoming challenges with a specific focus on the potential influence of technological advancements and evolving travel behaviors on the trajectory ahead.

The analysis first delves into the core attributes of travel decision-making, followed by an overview of pivotal issues that will shape the course of urban transportation in the years ahead. It concludes with observations about planning and policy strategies to help address these challenges.

The context

Transportation is undergoing its most profound changes in over half a century. Significant technological changes coupled with the COVID-19 pandemic, growing concerns over climate change, and greater sensitivities to equity in mobility are affecting multiple aspects of every mode of travel. The COVID-19 pandemic served as an accelerant to the adoption of technologies and behaviors that fundamentally change the travel choices individuals make.

From the rapid embrace of telework to the more subtle shifts in activity and settlement patterns, to the movement to electrification of transportation, virtually every aspect of travel is changing.

Read the full Policy Brief:

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This report is the second of three from a research initiative addressing the role of urban travel currently and going forward in meeting urban mobility needs and in efforts to reduce the impacts of transportation on climate change.

The first report, “Transportation’s Role in Climate Change,” established the context by focusing on the contributions of different types of transportation on greenhouse gas (GHG) emissions.

This report, “Public Transit and Climate Change,” focuses more specifically on the influence of public transportation.

The final report in the series, “The Path Forward: Urban Mobility in a Climate Change Sensitive Post-COVID World,” explores the challenges and opportunities for urban travel going forward as demographic, economic, technological, and cultural/political conditions evolve.

There are two dominant goals for public transportation.

First, it serves to provide mobility for individuals who are unable to secure or do not choose alternative means of travel. The provision of public transportation is intended to enable economic and social opportunities for individuals who otherwise might be severely impeded.

The motivation is that this is both humane treatment and provides economic participation in society by facilitating self-sufficiency and potential for constructive contributions to society.

The second fundamental goal is to capture the economies of scale of “mass” transportation. The use of large vehicles accommodating group travel can provide resource efficiencies, including savings in energy use, space use, and physical infrastructure, resulting in reduced resource use and reduced transportation impacts, including GHG reduction goals.

This report explores that issue and, by documenting current conditions, provides guidance for the path forward addressed in the subsequent report.

Many media and literary references to public transportation are prefaced with words like “sustainable,” “green,” “environmentally friendly,” “energy efficient,” or other adjectives indicating to the reader that public transportation is a more environmentally benign means of travel. In prior decades, this translated into reduced energy use and reduced emissions contributing to ozone and smog.

More recently, sensitivity centers on the production of GHG emissions that contribute to climate change. Support for public transportation among the public and policymakers is influenced by this perception of transit being a more environmentally sustainable travel mode, and it is among the virtues cited as public subsidies are solicited.

This report looks more closely at that perception, exploring historical, current, and anticipated future conditions that influence GHG emissions as they are, in turn, influenced by public transportation.

Figure 1 characterizes ways to evaluate the energy intensiveness of various means of travel. For this graphic, energy intensiveness is a surrogate measure of GHG emissions. There are a multitude of ways to measure and define the energy consequences of various means of travel. Understanding the interrelationships between the mode and energy use, as well as data availability, are prerequisites to using each possible measure.

This report focuses primarily on operating energy intensiveness and transportation energy impacts as affected by public transportation’s influence on land use.

Full Policy Brief: Transportation and Climate Change: Public Transit

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One reason is ever-increasing vehicle fuel economy improvements. Today’s personal vehicles go more than twice as far on a gallon of gas as similar vehicles did when federal Corporate Average Fuel Economy (CAFE) standards began in 1975.

Real-world miles per gallon (mpg) was just above 12 miles per gallon in 1975 but had increased to 24.9 miles per gallon in 2023.

Another reason is the ongoing increase in electric propulsion, either full-time via batteries (and occasionally hydrogen) or part-time via hybrid propulsion.

In the early years of the 21st century, Congress asked the Transportation Research Board of the National Academies to conduct a study of the long-term viability of fuel taxes as a transportation funding source. The author of this policy brief was one of 14 members of the expert panel charged with this year-long study. That report concluded that the likelihood of fuel taxes having long-term sustainability was doubtful due to already-evident increases in vehicle fuel efficiency and the potential of non-petroleum propulsion sources.

The report recommended increased use of tolling in the near term and research into road use metering and per-mile charging. It favored retaining the users-pay/users-benefit principle and looking into alternative means of supporting urban transit.

Congress subsequently appointed a national commission to research the best means of eventually replacing per-gallon fuel taxes. After reviewing a wide array of alternatives, the commission concluded that charging vehicles per mile traveled (rather than gallons consumed) would be the fairest way to charge for roadway use.

Since then, the fuel tax replacement has been referred to as a mileage-based user fee (MBUF) in the eastern United States and as a road usage charge (RUC) in the western states.

Since the publication of those two major reports in the first decade of this century, the anticipated decline in fuel tax revenue has begun. Congress has continued to approve increased miles-per-gallon requirements for new motor vehicles (and, more recently, for trucks), and federal and state subsidies for hybrids and fully electric vehicles have spurred the sales of such vehicles.

In June 2024, the Congressional Budget Office released a 10-year forecast of federal gasoline tax receipts, projecting that they would decrease by between 1.3% and 1.5% per year going forward to Fisal Year 2034. From $25.3 billion in FY24, the total would decline to $16.2 billion in FY34.

Currently, diesel tax receipts do not show a corresponding decline since stringent miles-per-gallon regulations are only beginning to affect heavy trucks. Figure 1 and Table 1 in this policy brief show the projected decline in federal gas tax receipts.

Full Policy Brief — Interstates First: Why Road User Charges Should Begin With Limited Access Highways

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This report is the first of three from a research initiative addressing how urban transportation can reduce climate change. This report provides a baseline on how transportation impacts greenhouse gas (GHG) emissions.

The second report, “Public Transit and Climate Change,” focuses specifically on the extent to which urban public transportation can help reduce GHG emissions.

The final report in the series, “The Path Forward: Urban Mobility in a Climate-Sensitive Post-COVID World,” explores the challenges and opportunities going forward as demographic, economic, technological, cultural, and political conditions evolve to influence urban transportation. It lays out the role transportation can play in meeting mobility needs and reducing GHG emissions.

Thus, this report lays out foundational information that helps guide the observations and findings in the referenced subsequent reports. It also informs the broader understanding of the role of transportation in addressing climate challenges.

Policymakers are increasingly concerned about climate change. Increased scientific evidence, accumulating observations of weather and climate changes over time, changes in political leadership, and ever-increasing media attention to weather and climate phenomenon have engaged the public. Pew Research reports that the share of Americans believing climate change is a major threat increased from 44% in 2009 to 54% in 2022.

As the single largest domestic greenhouse gas emissions-producing sector, transportation is inevitably a focus of climate change mitigation initiatives. This attention is further enabled by the prospect of a path forward via focusing on a strategy based on the electrification of vehicles, a transition to sustainable electricity production, and reliance on alternatives to personal vehicles for travel.

As climate impact moves up the ranks of evaluation criteria for virtually every transportation investment and policy decision, it is important to base these discussions on transportation’s specific contribution to GHG emissions and the respective roles of person travel and freight across urban and rural geographies.

It is also important to realize that transportation trends are evolving at a rate far greater than in the past several decades as changes in technology, demographics, and public priorities influence the amount, type and means of travel.

Yet, today’s transportation decisions and their impact on tomorrow’s GHG emissions may not be well grounded in a rich understanding of travel behavior and transportation markets. Much uncertainty remains regarding the phenomena of climate change, technology’s effectiveness in mitigation, behavioral reactions to technology and policy initiatives, and unintended side effects. Both the magnitude of climate-protecting actions and the timeframe for their impacts to play out are critically relevant issues as transportation planners and policymakers weigh various policies and investment decisions going forward.

Most data in this report references pre-COVID-19 pandemic conditions as a baseline for the discussion and analysis. These data are available and are most representative of the respective historic roles of passenger and freight transportation modes. Many analysts anticipate that there may be changes in the magnitude and shares of both passenger and freight mode use in a post-COVID-19 era and that trends such as differential rates of electrification of vehicles are likely to alter the relative GHG intensiveness of transportation market segments going forward.

Read the full report here:

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Following the onset of the COVID-19 pandemic, public transit systems throughout the United States experienced an unprecedented ridership collapse as people stayed home and avoided crowded public spaces. While most disease mitigation measures have since been abandoned, the impact of the pandemic continues to be felt in a variety of ways, including persistent changes in travel behavior. One consequence has been a muted transit ridership recovery, which stands at approximately three-quarters of the pre-pandemic ridership level in the United States. Depressed transit ridership has been met with unprecedented public subsidies, especially from the federal government. These two trends resulted in a steep decline in transit productivity.

This decline has alarmed policymakers. However, while conditions have substantially worsened in recent years, public transit productivity has trended downward since the end of World War II, largely due to increasing household incomes, growing private automobile ownership, and the dispersal of households and then workplaces into the suburbs.

Falling demand for transit led to a wave of transit company bankruptcies. Congress responded with the Urban Mass Transportation Act of 1964, which provided funding for states and cities to take over bankrupt private transit companies. Initially, the federal transit program only provided capital assistance to transit agencies, although this was soon expanded to direct operating support. Transit productivity worsened considerably during this period of increasing government assistance:

• In the 15 years prior to the Urban Mass Transportation Act of 1964, transit productivity fell an average of 1.4% per year (measured in bus hours/real dollars) across all transit systems and 1.3% for large systems.
• Between 1964 and 1972, productivity declines averaged 2.1% per year for all systems and 3.1% for large systems.
• Between 1975 and 1985, transit productivity declines averaged 3.1% per year for all systems and 3.8% for large systems.

These changes in the type and level of subsidy allowed transportation researchers to reach several conclusions on the interactions between government financial support and transit productivity, including:

• Federal subsidies had three times the negative effect on transit productivity as state and local subsidies;
• Nearly all operating subsidies were absorbed by rapidly growing operating expenses rather than stimulating demand for transit service; and
• Both public ownership of transit systems and increasing subsidies to these systems encouraged wasteful expenditures.

In 1998, Congress responded to these findings by limiting direct operating support to small transit systems in urbanized areas with fewer than 200,000 residents. Unfortunately, changes in subsidy policy did little to address the long-term decline in U.S. transit productivity. Between 1960 and 2019, the inflation-adjusted operating costs more than quintupled while ridership remained flat. In the years immediately preceding the COVID-19 pandemic, the Bureau of Labor Statistics began publishing measures of transit labor productivity. Between 2013 and 2019, transit labor productivity declined, mostly due to increasing transit agency employment.

Following the onset of the COVID-19 pandemic, public transit ridership collapsed. As of 2023, nationwide ridership had only recovered to approximately 71% of 2019 levels. Much of this ridership decline can be explained by changes in work travel. Transit systems were largely designed to facilitate journeys to and from work in central business districts, and working from home remains two to five times its pre-pandemic share of “commuting”—and four to eight times the share of mass transit commuting—depending on how it is measured.

Depressed ridership led Congress to authorize unprecedented federal subsidies for transit agencies. Supplemental COVID-19 appropriations during FYs 2020 and 2021 provided $69.5 billion in emergency support for transit agencies, equivalent to nearly five years of pre-pandemic federal transit funding. The Infrastructure Investment and Jobs Act enacted in FY 2022 increased federal transit funding by 67% over the levels previously authorized by the Fixing America’s Surface Transportation (FAST) Act of 2015 in nominal dollars.

This large increase in federal funding allowed transit agencies to continue to provide service close to pre-pandemic levels, with transit service provided between 2019 and 2023 falling by only 10.3% (in vehicle revenue-miles) despite ridership declines of 29.3%. These dynamics had predictable effects on transit labor productivity, with productivity declines almost entirely driven by decreased ridership.

As historical experience with transit subsidies has shown, advancing transit efficiency is not a simple question of additional funding. Making better use of existing resources must be prioritized to avoid counterproductive subsidy policies that merely deepen and prolong transit’s productivity crisis. Two strategies to advance transit productivity show particular promise:

• Competitive contracting: Under public-private partnerships, transit agencies can contract out transit service provision to private firms. The agency would serve as the coordinating and oversight entity, developing performance requirements and ensuring private partners adhere to those requirements embedded in their contracts. A 2017 study estimated that contracting out bus service in the United States could reduce operating costs by 30%.
• Transit vehicle automation: Urban rail transit is increasingly automated outside the United States. A 2023 study comparing rail lines in the United States and fully automated lines abroad estimated automation could potentially reduce U.S. operating costs by 46%. In addition to rail transit automation, numerous companies are developing automated road vehicles. One rubber-tire automated transit company that is developing two projects in California claims it can reduce operating costs by approximately 80% compared to average costs faced by conventional transit systems.

Unfortunately, both competitive contracting and automation face substantial deployment barriers in the United States. Section 13(c) of the Urban Mass Transportation Act of 1964 established transit worker labor protections. This provision was included to ensure collective bargaining agreements continued to be honored during the period when transit systems and their workforces were transitioning from heavily unionized private ownership to—at the time—sparsely unionized government ownership.

Section 13(c) requires transit agencies that receive federal funding to certify employee “protective arrangements” with the Department of Labor, including:

• The preservation of rights and benefits of employees under existing collective bargaining agreements;
• The continuation of collective bargaining rights;
• The protection of individual employees against a worsening of their positions in relation to their employment;
• Assurances of employment to employees of acquired transit systems;
• Assurances of priority of reemployment of employees whose employment is ended or who are laid off; and
• Paid training or retraining programs.

The result is that transit agencies are greatly constrained in enacting any operational change involving employees. Section 13(c) generally requires transit agencies to either incur substantial upfront costs to pay off affected employees or delay the realization of labor-saving benefits. Transit agencies largely dependent on annual government appropriations face a strong financial disincentive to adopt practices and technologies that would improve service and reduce growing operating subsidies.

Transit employee labor protections included as part of the Urban Mass Transportation Act of 1964 were designed to address the particular circumstances of the time, when just 2% of state and local government employees were authorized to collectively bargain. But this transition period has passed, and all affected employees have long since retired. Further, most states have authorized public-employee collective bargaining since the 1960s, with 63% of state and local employees being authorized to collectively bargain as of 2010.

Section 13(c) exists alongside federal, state, and local labor laws that apply to public-sector workers. Importantly, federal transit labor protections supplement rather than substitute for other general labor protections. As a result, Section 13(c) provides transit workers—and only transit workers—with special protections beyond those enjoyed by other government employees.

This has two important implications for policymakers. First, eliminating Section 13(c) special transit worker labor protections would merely level the playing field between transit workers and other government employees. All other federal, state, and local labor policies that apply to government employees would continue to apply. Second, repealing Section 13(c) would not automatically usher in transit public-private partnerships or automation. Rather, it would remove an impediment to transit agencies seeking to negotiate more-flexible labor contracts in the future.

This report finds that public transit ridership is unlikely to recover to pre-pandemic levels within the next decade. Depressed farebox revenue and rising operating costs will continue to manifest in transit agency fiscal instability, and policymakers will face growing pressure to authorize additional operating subsidies. This would be a mistake given that past experience shows increasing operating subsidies may simply hasten productivity declines, which would undermine the public benefit case for continued transit service. A wiser approach would be encouraging transit agencies to make better use of existing resources. The first step in this process would be Congress repealing Section 13(c), which presents a formidable barrier to transit agency efficiency reforms.

Read the full Policy Brief:

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