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Updated August 11, 2015
Surface Transportation Funding and Infrastructure Challenges
Surface transportation reauthorization acts fund federal
diesel), and do not adjust for inflation or change with fuel
highway and public transportation programs. The Moving
prices. The rates were last raised in 1993. Increases in
Ahead for Progress in the 21st Century Act (MAP-21; P.L.
gasoline and diesel consumption kept revenues growing
112-141), which originally expired September 31, 2014, has
until the recession of 2007. Since that time, improving fuel
been extended through October 29, 2015, by the Surface
efficiency and slow growth in vehicle mileage have led to a
Transportation and Veterans Health Care Choice
leveling of revenue growth. Spending from the HTF
Improvement Act (P.L. 114-41). The most salient issue
consistently outruns highway user revenues. Unable to
remains funding and the solvency of the Highway Trust
agree on revenue increases or program reductions, Congress
Fund (HTF). The extension bill transferred $8.07 billion
began providing a series of transfers to the HTF to prevent
into the HTF to prevent a funding shortfall. More money
its insolvency. Since September 2008, Congress has
will be needed if Congress wishes to continue the highway
provided over $73 billion to the HTF, mainly from the
and public transportation programs at their current levels.
Treasury general fund.
The Federal-Aid Highway Program
Short-term issues. Unless Congress authorizes additional
MAP-21 and two subsequent extensions provided $41
funds before then, the balance in the HTF is expected to fall
billion annually for highways. Of these funds, 92.5% are
so low by late 2015 that the Department of Transportation
provided to the states via formula. The states have nearly
may have to delay reimbursement to states and transit
complete control over the decisionmaking in regard to these
agencies for completed projects.
funds, within the limits of federal planning, eligibility, and
oversight rules. Money is not provided up front. A state is
Long-term issues. The Congressional Budget Office
reimbursed after work is started, costs are incurred, and the
projects an annual gap of almost $15 billion between the
state submits a voucher to the Federal Highway
anticipated flow of revenue into the HTF and the cost of
Administration. The highway programs are focused on
maintaining current highway and public transportation
highway construction and planning, and do not support
programs (see Figure 1).
operations or routine maintenance. Federal share of project
costs is generally 80%, but 90% for Interstate System
Figure 1. HTF Revenues and Outlays: FY2008-FY2021
projects. In general, projects are limited to a designated
system of roads that make up roughly 25% of all U.S.
public roads.
The Federal Public Transportation Program
MAP-21and the extension bills authorized $10.6 billion for
the federal public transportation program in FY2013, $10.7
billion in FY2014, and $10.7 billion in FY2015. Most of
this funding is distributed by formula to local transit
agencies. The largest discretionary program is the New
Starts Program, which supports construction of new local
rail, bus rapid transit, and ferry systems, and the expansion
of existing systems. Intercity rail programs are not part of
the federal public transportation program, and historically
have not been authorized through surface transportation
legislation. However, a surface transportation bill passed by
the Senate in July 2015, H.R. 22, includes many intercity
rail provisions.
Source: Congressional Budget Office.
Funding Issues
Highway Trust Fund. Historically, all of the federal
What Are the Options?
highway program and 80% of the public transportation
Continue transferring general funds. Congress could
program have been funded with revenues from the HTF.
choose to appropriate sufficient general fund transfers
Revenues supporting the HTF come from a combination of
annually to the HTF to address the shortfall. In recent years
fuel, truck, and tire taxes, but the fuel taxes provide about
Congress has required offsets so the transfers do not
90% of the money.
increase the budget deficit, meaning that spending on other
programs must be reduced or tax receipts increased in
The excise taxes on gasoline and diesel are fixed in terms of
amounts equal to the amounts of the transfers.
cents per gallon (18.3 cents for gasoline and 24.3 cents for
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Surface Transportation Funding and Infrastructure Challenges
Cut spending. Congress could reduce federal highway and
be evaded by motorists. Many roads may not have enough
public transportation spending to match the currently
traffic to make tolling worthwhile.
projected revenues. This would require spending cuts
approaching 30%. Cuts could be made across the board or
Private investment. Public-private partnerships and
by eliminating programs. Cuts could be accompanied by
privatization of existing government-owned roads and
requiring states and municipalities to pay a greater share of
bridges may reduce federal costs in some cases. However,
the cost of highway and public transportation programs.
relatively few transportation projects are suitable for large-
Another option would be to devolve responsibility for
scale private investment, and investors are increasingly
highways to the states, leaving only a small federal program
insisting that the public sector retain the risk that traffic
to build and maintain roads on federal land.
volumes will be below expectations.
Separate public transportation from the HTF. Under this
Issues in Reauthorization
scenario, federal support for public transportation would be
The federal-state relationship is central to the federal
provided from the general fund as Congress sees fit. If the
highway program and underlies most reauthorization issues.
HTF were to be dedicated solely to highway spending at the
Recent reauthorizations have increased the states’ discretion
current level, adjusted only for inflation, annual receipts are
in the use of federal highway funds. However, greater state
projected to remain $4 billion to $5 billion less than annual
discretion may conflict with other congressional priorities
expenditures.
such as improving the condition of highway bridges; there
are approximately 61,000 structurally deficient bridges, but
Revenue Options
it is up to the states to determine how much of their federal
A wide variety of revenue sources have been suggested to
highway funds will be spent on bridges and how much on
help address the HTF shortfall. Among the most commonly
roads. Other issues include federal rules and regulations on
suggested are the following:
environmental protection and performance management.
Increase the fuels tax. The motor fuels tax could be raised
The distribution of available highway funds among states
enough to make up for its loss of purchasing power and
has historically been one of the most difficult issues for
then be adjusted annually for inflation and fuel efficiency.
Congress to resolve. States have been concerned about the
Based upon the current level of consumption, an increase of
amount of funding they receive relative both to other states
approximately 10 cents to 15 cents per gallon of gasoline
and to the contribution their drivers make to the HTF.
would be required to fully fund highway and public
transportation programs at their current levels.
In 2012, Congress created a national freight planning
program, and funding of a national freight program will
Impose a national motor fuel sales tax. A percentage tax
likely be considered in reauthorization. Potential sticking
on the retail price of motor fuels could be imposed that
points may be the use of highway tax funds for rail or
would rise with the price. Since gas prices can also fall, this
marine projects and the distribution of such targeted funds
might not be a reliable source of growing revenue.
among the states.
Impose a vehicle miles traveled (VMT) charge. Charging
Bus systems in smaller cities and rural areas have
vehicle owners for each mile of travel has been discussed
complained that provisions in MAP-21 have made it harder
for many years as an alternative to the motor fuels tax.
for them to purchase buses. Funding for bus-related
However, this revenue source has privacy, implementation,
investment needs may become an issue in reauthorization.
and collection cost issues, and Congress would still need to
set the per-mile rate and raise it as necessary.
On July 30, 2015, the Senate passed a six-year
reauthorization bill. The bill, called the Developing a
Dedicate tax reform revenues to the HTF. Various tax
Reliable and Innovative Vision for the Economy Act
reform proposals would lead to short-term increases in
(DRIVE Act; H.R. 22), would provide $274 billion for
federal revenue, which could be dedicated to transportation.
Federal-Aid highways from the HTF and $75 billion for
Many of these proposals would generate increased revenues
public transportation from both the HTF and the Treasury
only for a limited period, leaving the long-term imbalance
general fund. This would be average annual spending of
between HTF revenue and outlays unresolved.
$45.7 billion for highways and $12.5 billion for public
transportation.
Tax oil at the refinery level. This tax would be a tax on
petroleum and petroleum products based on a percentage of
More Information
the value of a barrel of oil. One attraction of this tax is that
CRS Report R43420, Surface Transportation Program
it would have to be collected at a limited number of
Reauthorization Issues for Congress, and CRS Report
locations, making it relatively easy to administer. But if all
R42877, Funding and Financing Highways and Public
crude were taxed, oil used for nontransportation purposes,
Transportation.
such as home heating or manufacturing, would be taxed to
support highways and public transportation.
Robert S. Kirk, Specialist in Transportation Policy
William J. Mallett, Specialist in Transportation Policy
Tolling. Tolls could be used to pay for highway projects,
reducing the demands on the HTF. However, toll systems
IF10025
can be expensive to administer and enforce, and often can
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Surface Transportation Funding and Infrastructure Challenges
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