Order Code IB10138
CRS Issue Brief for Congress
Received through the CRS Web
Surface Transportation:
Reauthorization of TEA-21
Updated January 3, 2005
John W. Fischer
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Surface Transportation Finance
The Legislative Backdrop
Equity Issues: the Donor - Donee Question
Traffic Safety and Research
Conformity of Transportation Plans and State Implementation Plans (SIPs)
Environmental Issues
Transit Reauthorization Issues
FOR ADDITIONAL READING

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Surface Transportation: Reauthorization of TEA-21
SUMMARY
On May 31, 2005 the extension legisla-
spending on congressional high priority pro-
tion that is currently providing for authoriza-
jects (earmarks).
tion of federal highway, highway safety, and
transit programs will expire. Most observers
It is likely that many, if not most, of the
thought that the reauthorization process, that
legislative provisions considered in the 108th
was supposed to have been completed by
Congress will be reintroduced early in the
October 1, 2003, would have long since been
109th Congress. This Issue Brief does not
accomplished. Reauthorization, however, has
discuss these provisions in detail. Rather, a
become captive to two interrelated issues,
detailed description of the legislation under
money and how that money will be distributed
consideration at the end of the last congressio-
among the states.
nal session can be found in: CRS Report
RL3226. Highway and Transit Program
The 108th Congress was completed with
Reauthorization Legislation in the 2nd Session,
a Conference Committee in place, but confer-
108th Congress.
ees were unable to reach agreement either
among themselves or with the Bush Adminis-
The Administration has publically stated
tration as to how large the six-year
its intent to hold highway and transit spending
reauthorization package would be in dollar
to levels consistent with those it supported in
terms. Simply put, many Members of Con-
the last Congress. The Administration has
gress were asking for more in total program
also suggested of late that it would like to
spending then the Administration, worried
revisit some sections of the proposed legisla-
about the deficit, was willing to support. The
tion, especially as regards so-called “innova-
Conference was also unable to agree on a
tive finance.” It is not clear whether these
solution to the long standing donor-donee
provisions will be part of introduced legisla-
state funding distribution question, with donor
tion or whether they will receive consideration
states continuing to insist on a 95% return on
later in the debate.
fuel tax revenues and donee states insisting
that increased funding for donor states not
Several Members of Congress are contin-
come at their expense.
uing to support higher levels of spending then
those that seem to be contemplated by the
In addition to money issues, Congress is
Administration. As a result, it remains unclear
also expected to address a number of other
whether, or how, a compromise on
potentially difficult questions as part of the
reauthorizing legislation can be reached before
reauthorization debate. These include the
May 31, 2005, or whether instead Congress
creation of a new consolidated safety program,
might proceed to consider legislation without
enhanced environmental streamlining regula-
Administration support.
tions, changes in clean air conformity regula-
tions, funding for transit new starts, expanded
reliance on innovative financing and tolls, and
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
All federal surface transportation programs continue to operate as a result of legislation
that extends provisions of the Transportation Equity Act for the 21st Century (TEA-21, P.L.
105-178 and P.L. 105-206) until May 31, 2005. The 108th Congress was unable to complete
a conference on competing House and Senate reauthorization proposals prior to adjournment.
The introduction of new reauthorization legislation is expected early in the 109th Congress.
BACKGROUND AND ANALYSIS
Federal surface transportation programs are a major component of national spending on
transportation capital infrastructure. According to a recent Government Accountability
Office (GAO) report, for example, 46% of all U.S. highway capital spending in FY2002 was
attributable to federal funding. Likewise, it is the availability of federal transit funding that
has provided the possibility of bus and rail transit projects in many communities during the
last few decades.
Structurally, surface transportation legislation normally consists of at least five separate
titles which can be viewed as the principal programs and their funding mechanism;
highways, highway safety, transit, research, and funding. Additional titles are sometimes
included in reauthorization legislation. It should be pointed out that the term program has
multiple meanings in a discussion of federal surface transportation policy. The larger federal
highway program, for example, consists of a number of separate programs such as the
surface transportation program (STP). Funds in the various programs are distributed on the
basis of formulas (known as apportioned programs in highway parlance) and on a
discretionary basis (also referred to as the allocated programs in the highway program).
The majority of funding in the overall surface transportation bill, and the vast majority
of highway funding, goes to the so-called “core” highway programs. These five programs:
interstate maintenance (IM), national highway system (NHS), surface transportation system
(STP), bridge and bridge maintenance, and congestion, mitigation, and air quality (CMAQ)
are all apportioned programs. A sixth program, the minimum guarantee, is sometimes
referred to as a core program and has become the largest single highway program in dollar
terms. Most remaining highway funding goes to the allocated programs, such as federal
lands highways, which are ostensibly under the control of the Federal Highway
Administration (FHWA), but in recent practice have been largely earmarked.
The structures of the highway safety, research, and transit programs also include a mix
of formula and discretionary programs. In the transit program, for example, about half of all
funding is distributed directly to transit operators by the urbanized area formula program and
the non-urbanized area formula program. Each of the major programs also includes planning,
environmental, and other elements that can be major subjects of discussion during
reauthorization debates.
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Surface Transportation Finance
Federal funding for surface transportation is closely linked to the revenue stream
provided by the highway trust fund. The trust fund is in fact two separate accounts -
highways and mass transit. The primary revenue sources for these accounts are the 18.4 cent
per gallon tax on gasoline and a 24.4 cent per gallon tax on diesel fuel. Although there are
other sources of revenue for the trust fund, these fuel taxes provide about 90% of the income
to the funds. Of these amounts, the transit account receives 2.86 cents per gallon and 0.1
cent per gallon is reserved for an unrelated leaking underground storage tank (LUST) fund.
Over the almost 50 year life of the trust fund there have been several increases in the level
of taxation. The last increase in the fuel tax occurred in 1993 (these funds were not actually
deposited into the trust fund initially, but were deposited in the Treasury general funds for
deficit reduction purposes until 1996).
For almost 50 years the trust fund has been a reliable source of funding for surface
transportation. In FY2004, for example, the highway account received tax revenues of $31
billion, while the mass transit account received $5 billion. For most of its history the trust
funds have collected more then has been expended. This situation has been changing in the
last few years. The FY2004 limitation on obligations was set at $33.6 billion and the
FHWA total appropriation was $34.5 billion, both amounts of which are higher then the
revenues collected for the fiscal year. For a number of reasons, however, the trust fund’s
unexpended balance remains substantial, but is declining. There is some uncertainty at the
moment about the long term outlook for the financial health of the trust fund. This is in spite
of the fact that the American Jobs Creation Act of 2004 (P.L. 108-357), passed in the closing
days of the 108th Congress, provided the trust fund with additional future income by changing
elements of federal gasohol taxation. These changes could provide the trust fund with an
additional $4 billion per year starting in FY2005. A clearer picture of the future of the trust
fund is expected to emerge when both Treasury and the Congressional Budget Office (CBO)
release their projections in late January/early February 2005.
Both the House and Senate passed reauthorization legislation in the 2nd Session of the
108th Congress and a Conference Committee was formed. The Conference Committee,
Congressional Leadership, especially in the House, and the Administration were unable to
reach agreement about total program funding for the next reauthorization period. This was
largely because some Members of Congress backed a level of project funding larger then the
Bush Administration was willing to support. Part of the Administration’s objection related
to the above debate about the future health of the trust funds vis-a-vis the Administration’s
adamant objection to raising fuel taxes either now or in the future. Some Members of
Congress, on the other hand, had identified a number of mechanisms, including the now
adopted gasohol changes, other tax changes, and rescissions that they felt would support a
larger program. The gasohol changes by themselves, however, would not have been
sufficient to fund the program size desired by many Members. Congress must now begin the
process of considering reauthorization anew, with all of these financing issues still largely
unresolved.
The Legislative Backdrop
Federal highway, highway safety, and transit programs are subject to periodic
reauthorization. The most recent authorization, TEA-21, provided funds for the period
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FY1998 - FY2003. Since October 1, 2003 all federal surface transportation programs have
continued to operate on the basis of short term extension legislation. The most recent of six
extensions to date (P.L. 108-310) keeps the programs in operation until May 31, 2005.
Although there have been numerous short term reauthorizations in the history of these
programs, there is a consensus in the surface transportation community that long-term
reauthorizations, such as that afforded by TEA-21, better accommodates the long term
planning needs and construction horizons associated with the provision of highway and
transit infrastructure. The current situation, reauthorization by extension, has created a great
deal of uncertainty about the likelihood of future funding in the highway and transit
community. Highway and transit interests at the state and local level, and in the private
sector, can be expected to exert considerable pressure on Congress to adopt reauthorization
legislation early in the 109th Congress.
Funding issues aside, there are a number of additional issues that could serve to make
an early resolution of the reauthorization debate difficult. After funding the most important
issue is the distribution of that funding among the states and localities. The most
controversial part of this debate is the so-called donor/donee problem which is addressed in
more detail in the following section.
Environmental issues were viewed as a potential stumbling block when
reauthorization consideration began. This is largely due to the Administration’s strong
support for environmental streamlining which seeks to reduce the time that any particular
infrastructure project must spend in review prior to construction. This issue is also discussed
in more detail in a later section of this issue brief.
Another issue likely to receive attention is the number and distribution of earmarks,
known as high priority projects, in highway legislation. These congressionally earmarked
projects have risen in number and in dollar value in each of the last three reauthorization
cycles. There were almost 3,000 designated high priority projects in the House bill passed
last year, with Senate requests for these projects still unknown in number and in cost (the
Senate normally adds its projects during Conference). The House Transportation and
Infrastructure Committee has sent a dear colleague letter to all House Members of the 109th
Congress asking that they make their project request known to the Committee early in the
session.
The Administration has suggested that it would like to revisit the issue of innovative
financing and tolls as part of the legislative debate in this session. Although the
Administration has not released any detailed proposals, it has stated its interest in seeing
greater use of these methodologies in the future provision of infrastructure. The
Administration has stated that it will release a major report stating the case for these changes
early in 2005.
Equity Issues: the Donor - Donee Question
Historically, transportation policy battle lines have often formed along regional rather
than partisan alignments. The regional character of transportation policy is evident in the
debate over the equity of distribution of federal highway aid among the states. Since 1982
Congress has included legislative provisions in every surface transportation reauthorization
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act to remedy these perceived funding distribution concerns through a variety of minimum
guarantee provisions. For many years, some states (mostly Southern as well as some Mid-
Western and Western States) have complained that they receive significantly less federal
highway aid than their highway users pay in federal highway taxes to the highway trust fund
(HTF). These states, referred to as donor states, have pressed for legislative remedies that
would assure them a higher share rate-of-return, most recently 95%, on their tax payments
to the Treasury. Donee states, states that receive more federal highway aid than they pay in
federal highway taxes, have not opposed equity provisions per se but have opposed any
reduction in their existing shares.
The basic donor state argument is a relatively straightforward call for equity or fairness.
Donor state advocates generally contend that for too many years they have been subsidizing
the repair and improvement of donee state infrastructure, especially the older highway
infrastructure in the Northeast. Most also argue that they are more road dependent and do
not benefit from federal transit spending to the same degree as some donee states. Southern
and western donor states also argue that they are fast growth areas, relative to most donee
states, and that, consequently, their needs are as great or greater. Finally, they argue that with
the completion of the Interstate Highway System there is no valid rationale for the donor-
donee disparity. Donee state advocates argue that fairness should not be separated from
needs. They assert that the age of their highway infrastructure, especially in the Northeast,
the high cost of working on heavily congested urban roads, and the limited financial
resources in large sparsely populated western states justify their donee status. They also
argue that there are needs that are inherently federal rather than state and that a national
highway network cannot be based solely on state or regional boundaries. Donee states also
argue that mid-western and southern states spend less local and state money on highways
than donee states, and chide them for pleading for federal funds when they are unwilling to
ante up their own resources.
The 109th Congress faces a difficult policy problem in resolving the seemingly
contradictory goals of meeting donor state demands for a higher rate-of-return and donee
state demands to be held harmless at a time when the HTF revenue base is insufficient to
easily fund both goals. Part of the problem is that a bill that simply reduces the shares of
donee states to increase the shares of donor states may have difficulty overcoming a filibuster
by donee states in the Senate. To construct a minimum guarantee (MG) mechanism that can
overcome this obstacle, previous reauthorization bills included “hold harmless” provisions
that maintained certain base shares for all states. This meant that part of the process of
bringing donor state shares up to the MG percentage required increasing the overall federal
highway program size, usually by a significant amount (since donee state funding could not
be reduced). In other words, providing equity remedies that keep both donor and donee
states reasonably content has been accomplished by giving more money to all states but
giving even more to donor states to bring their shares up to a designated per cent share,
currently 90.5%. Providing equity in this way is very expensive in dollar terms, the
minimum guarantee program under TEA21, in fact, became the largest highway program.
In a broader sense, the debate over equity remedies has implications for a number of
overarching issues. An equity guarantee of a 95% rate of return could, in the minds of some,
leave little room for addressing other or additional transportation needs that are uniquely
federal, such as the Federal Lands Highway program or the Interstate Maintenance program.
Also, the role of the federal government vis-a-vis the states comes into question as the
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minimum guarantee approaches 100%. At what point does the federal role become so
limited that converting the Federal aid highway program to a revenue sharing or a block grant
program make sense? Another controversial issue is whether the MG should be broadened,
as some states have proposed, to include Federal Transit Administration programs. (CRS
contacts: Robert Kirk and John Fischer)
Traffic Safety and Research
A part of the debate over surface transportation program reauthorization is
reauthorization of federal funding for various programs affecting traffic or highway safety.
The debate will consider the amount of funding, program purposes, the structure of, and
eligibility needed for these activities. Relevant programs are administered by the FHWA,
the National Highway Traffic Safety Administration (NHTSA), and the Federal Motor
Carrier Safety Administration (FMCSA). Various interest groups and many Members of
Congress seek additional funding to improve highway infrastructure and operations affecting
safety. They also seek funding to increase seat-belt use rates, reduce alcohol- and drug-
impaired driving, strengthen commercial driver licensing, and improve the federal/state
partnership affecting truck and bus safety. Competition for funds is intense among various
safety programs. Key challenges will be finding additional funds to increase federal support
for safety-oriented activities, and evaluating the costs and benefits of changes in federal
policy. Decisionmakers also face the difficult challenge of balancing funds used to achieve
safety objectives against funds needed to meet other surface transportation objectives, such
as reducing congestion and repairing aging infrastructure.
More specifically, Congress is considering how to allocate billions of dollars each year
of federal-highway categorical grants to improve the design, throughput, and overall
performance and safety of the highway infrastructure. At issue are the amount (if any) of
set-asides for different safety-oriented programs and whether a separate categorical grant for
safety is needed. Based on the legislation considered during the 108th Congress, it appears
likely that a new separate grant for safety may be authorized, with particular emphasis on
funds to enhance safety at grade crossings and reduce road hazards. The set aside for
highway safety infrastructure projects now specified as part of the Surface Transportation
Program (STP) may be eliminated and a new Safe Routes to School program is likely to be
established. Congress is also considering the nature and purposes of a strategic plan that
may be mandated to help guide safety investments.
Congress is likely to consider legislation that would strengthen the enforcement powers
of the FMCSA, authorize a dedicated grant program to improve state commercial driver
licensing (CDL) efforts, establish a Medical Review Board to provide advice on driver
physical qualification standards, and continue funding for various state and federal
commercial vehicle information systems and networks. The issues that are likely to be
debated include the amount of funding for core FMCSA activities and for the Motor Carrier
Safety Assistance Program (the federal/state enforcement partnership consisting primarily
of roadside inspections and various audits); the scope, nature, and funding amount for a
"share the road" education and enforcement program; and whether to establish a working
group to help guide the CDL program. Also, Congress is likely to consider the pros and cons
of requiring NHTSA to issue a variety of new regulations to improve vehicle safety.
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As part of the reauthorization process, Congress is addressing how much money should
be authorized for the core research, development, and technology deployment activities
conducted or supported by the FHWA, and which objectives should receive emphasis or
dedicated funding. Also, the reauthorization statute is likely to include a specific funding
amount for the Local Technical Assistance Program, the National Highway Institute, and the
University Transportation Research (or Centers) Program, as well as the Intelligent
Transportation Systems program. (CRS contact: Paul Rothberg)
Conformity of Transportation Plans and State Implementation
Plans (SIPs)
Under the Clean Air Act, areas that have not attained one or more of the six National
Ambient Air Quality Standards must develop State Implementation Plans (SIPs)
demonstrating how they will reach attainment. As of April 2004, at least 124 areas with a
combined population of 159 million people were subject to the SIP requirements. Section
176 of the Clean Air Act prohibits federal agencies from funding projects in these areas
unless they "conform" to the SIPs. An area's Transportation Improvement Program (TIP),
which identifies major highway and transit projects an area will undertake, must demonstrate
conformity each time it is revised (i.e., at least every two years). To do so, it must show that
the projects to be undertaken will not lead to an increase in emissions that would delay
attainment of air quality standards. Highway and transit projects cannot receive federal funds
unless they can make this demonstration.
Transportation planners and highway builders in a number of areas have expressed
concern that conformity requirements could lead to the temporary suspension of funding for
major projects, as happened in the late 1990s in Atlanta. Many have argued that the
conformity requirements need to be made more flexible. As currently written, for example,
the Clean Air Act provides no authority for waivers of conformity, and only a limited set of
exempt projects (mostly safety-related or replacement and repair of existing transit facilities)
can be funded in areas where conformity has lapsed. In addition, many have raised concerns
about a mismatch between the SIP, TIP, and long range transportation planning cycles, and
have called for less frequent, but better coordinated demonstrations of conformity. (CRS
contact: Jim McCarthy)
Environmental Issues
During the reauthorization process, environmental issues garnered significant attention
from both Members of Congress and interested stakeholders (e.g., state transportation
agencies, transportation construction organizations, and environmental groups). This
attention was due to both the impact that surface transportation projects can have on the
environment and the impact that compliance with environmental requirements can have on
project delivery. As a result of this concern, both H.R. 3550 and S. 1072 included a variety
of environmental provisions. Generally, those provisions would have done one of the
following: authorize funding to eliminate, control, mitigate, or minimize regulated
environmental impacts associated with a surface transportation programs or projects; or
specify procedures required to be undertaken to comply with certain environmental
requirements. In particular, both bills included provisions that would have changed the
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procedures DOT would be required to follow to comply with the Clean Air Act and the
National Environmental Policy Act (NEPA).
It is anticipated that environmental provisions similar to those in H.R. 3550 and S. 1072
will be included in reauthorization legislation that will be reintroduced during the 109th
Congress. (CRS contact: Linda Luther)
Transit Reauthorization Issues
The key issue in transit reauthorization is overall funding. DOT has estimated that
federal assistance to transit would need to rise from its current level of $7 billion annually
to $9 billion annually to maintain the current level of service in the face of rising demand for
transit, and to $11 billion annually to improve on the current level of transit service. These
are higher levels of spending than can be supported by the current revenues to the Mass
Transit Account of the Highway Trust Fund.
The gap between available funding and requests for funding is perhaps greatest for the
federal program that funds new, primarily rail, transit infrastructure, the New Starts program.
The New Starts program is a discretionary program; eligible projects are evaluated by the
Federal Transit Administration (FTA), which then recommends projects to Congress for
funding. The New Starts program has been receiving around $1.2 billion annually. FTA notes
that there are 41 projects in the latter stages of the New Starts evaluation process, with some
$22 billion in federal funding requested; in other words, at current funding levels the next
20 years of New Starts funding would already be spoken for. Meanwhile, there are over 120
additional new transit projects that communities are actively considering. To extend the
available funding, the Congress has directed the FTA not to provide a federal share higher
than 60% for New Starts projects, and the Bush Administration has proposed reducing the
federal share to 50% (the federal share is currently 80% by statute, but the actual federal
share provided for current projects averages around 50%).
Most transit funding goes to large urban areas, where most of the population lives and
where road congestion and air pollution leads to calls to increase transit usage. There is also
a growing demand for transit service in rural areas, where population densities are low but
where trip distances may be long and transportation alternatives few. Both the House and
Senate reauthorization legislation in the 108th Congress proposed increasing the share of
transit funding that goes to rural areas.
Although not normally viewed as a reauthorization issue in the past, transit security
could be a component of the debate this session. The bombings of commuter trains in Madrid
and a subway station in Moscow early in 2004 heightened concerns about the security of
transit systems in America. U.S. transit systems carry nearly 10 billion passengers annually;
about 60% of that is bus ridership, with the rest divided between subway, commuter rail and
light rail modes. Transit systems are designed for easy access, making them vulnerable to
attack. The transit community has requested $5.2 billion for capital improvements and an
additional $800 million annually for operating costs to increase the security of transit
systems. Issues include who should pay for transit security, how funding should be allocated
among transit agencies and modes, and the allocation of federal spending between defending
potential targets and attacking potential threats. (CRS contact: Randy Peterman)
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FOR ADDITIONAL READING
CRS Report RL32454. Environmental Provisions in Surface Transportation
Reauthorization Legislation Proposed During the 108th Congress, by Linda Luther.
CRS Report RL31735. Federal-Aid Highway Program: “Donor-Donee” State Issues, by
Robert S. Kirk.
CRS Report RL31665. Highway and Transit Program Reauthorization, John W. Fischer,
Coordinator.
CRS Report RL32226. Highway and Transit Program Reauthorization Legislation in the
2nd Session, 108th Congress, John W. Fischer, Coordinator.
CRS Report RL32409. Highway Program Equity Guarantee Issues, by Robert S. Kirk.
CRS Report RL32032. Streamlining Environmental Reviews of Highway and Transit
Projects: Analysis of Legislative Proposals in the 108th Congress, by Linda Luther.
CRS Report RL32106
Transportation Conformity Under the Clean Air Act: In Need of
Reform? by James McCarthy.
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