Federal Capital Investment Outlays to Rise Sharply Under FY21 Budget

Buried in the annual Analytical Perspectives volume of the federal budget is a chapter called “Federal Investment” that pulls out federal spending across all departments and agencies in three key areas: research and development, education and training, and “major public physical capital investment.” Anything that you or I might consider under the broad term “infrastructure” is, presumably, covered as a subset of major public physical capital investment.

The fiscal 2021 budget projects that, once you exclude the Pentagon, total spending on non-defense public physical capital in 2021 will increase by almost 7 percent over the ongoing fiscal 2020 level – and 2020 is shaping up to be a 15 percent increase over 2019.

The budget estimates that outlays (cash leaving the Treasury to go to non-federal entities) for non-defense public physical capital will be $143.1 billion in 2021 under the policies outlined in the budget. This would be $9.2 billion over 2020, which looks like it in turn will be $17.7 billion over 2019.

Two-thirds of that $143.1 billion comes in the form of grants to state and local governments, primarily transportation grants (though HUD community development grants and EPA pollution control grants are also substantial). The remainder is for money that the federal government spends directly (which, in the transportation field, includes spending on the facilities and equipment for the air traffic control system and the ships, aircraft and bases of the Coast Guard).

The direct spending is actually down slightly – $45.8 billion in projected 2021 outlays vs. $46.6 billion in estimated 2020 outlays. All the growth is in the grants department.

The budget estimates that the grants for transportation programs will increase by $2.2 billion, or 3.3 percent, over the ongoing 2020 levels. But the real growth is a $7.3 billion (+40%) growth in other construction and rehabilitation grants. The Federal Investment chapter does not make this clear, but elsewhere, Table 14-2 in the online version of AP breaks down all federal grants and reveals that $4.75 billion of this supposed non-transportation increase is the estimated first-year spending from the $190 billion in one-time general fund budget authority to be provided in 2021 under the President’s infrastructure initiative.

(Most of that $190 billion would be spent on transportation programs, but because some of it won’t be, and they don’t yet know how much, the budget presents the $190 billion in functional category 920, “Allowances,” which is where they put miscellaneous things, instead of functional category 400, “transportation.”)

But even if you strike the $190 billion and its first-year outlays from the equation, total grants under the budget would still be $97.5 billion in 2021, which would be a $5.2 billion (+6%) increase over 2020, and 2020 is still a sizable jump over 2019.

Major Public Physical Capital Investment (Non-Defense)

Millions of dollars of outlays.
FY 2019 FY 2020 FY 2021
Actual Estimate Request
Construction & Rehabilitation 18,272 24,303 24,498
Acquisition of Major Equipment
Air Traffic Control 3,529 4,123 4,107
Coast Guard 1,485 2,352 2,231
Other 11,748 15,486 14,758
   Subtotal, AoME 16,762 21,961 21,096
Purchase/Sale of Land/Structures 370 286 212
Total, Direct  35,404 46,550 45,806
Grants to State/Local Governments
Construction & Rehabilitation
Highways 45,235 46,207 48,363
Mass Transportation 13,109 14,078 14,950
Rail Transportation 1,996 2,136 1,257
Air/Other Transportation 4,154 4,551 4,638
   Subtotal, Transportation 64,494 66,972 69,208
Other Construction & Rehab. 14,352 18,128 25,426
Other Physical Assets 1,944 2,225 2,643
Total, Grants 80,790 87,325 97,277
(NON-DEFENSE) 116,194 133,875 143,083
+17,681 +9,208
+15.2% +6.9%

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