January 2, 2015
Surface Transportation Funding and Infrastructure Challenges
Surface transportation reauthorization acts fund federal
The excise taxes on gasoline and diesel are fixed in terms of
highway and public transportation programs. The Moving
cents per gallon (18.3 cents for gasoline and 24.3 cents for
Ahead for Progress in the 21st Century Act (MAP-21; P.L.
diesel), and do not adjust for inflation or change with fuel
112-141), which originally expired September 31, 2014, has
prices. The rates were last raised in 1993. Increases in
been extended through May 31, 2015, by the Highway and
gasoline and diesel consumption kept revenues growing
Transportation Funding Act of 2014 (P.L. 113-159). The
until the recession of 2007. Since that time, improving fuel
most salient issue for the 114th Congress will be funding
efficiency and slow growth in vehicle mileage have led to a
and the solvency of the highway trust fund (HTF). The
decline in revenues. Spending from the HTF consistently
extension bill transferred $10.8 billion into the HTF to
outruns highway user revenues. Unable to agree on revenue
prevent a funding shortfall. More money will be needed if
increases or program reductions, Congress began providing
Congress wishes to continue the highway and public
a series of transfers to the HTF to prevent its insolvency.
transportation programs at their current levels. MAP-21
Since September 2008, Congress has provided over $65
made major changes in these programs, many of which
billion to the HTF, mainly from the Treasury general fund.
have yet to be fully implemented. This may limit
Congress’s desire to make further major changes at this
Short-term issues. Unless Congress authorizes additional
time.
funds before then, the balance in the HTF is expected to fall
so low by early summer of 2015 that the Department of
The Federal-Aid Highway Program
Transportation will have to delay reimbursement to states
and transit agencies for completed projects. Sustaining the
MAP-21 provided $41 billion annually for highways. Of
HTF through the end of FY2015 is likely to require $6
these funds, 92% are provided to the states via formula. The
billion to $7 billion in transfers or additional revenue.
states have nearly complete control over the decision
making in regard to these funds, within the limits of federal
Long-term issues. The Congressional Budget Office
planning, eligibility, and oversight rules. Money is not
(CBO) projects an annual gap of around $15 billion
provided up front. A state is reimbursed after work is
between the anticipated flow of revenue into the highway
started, costs are incurred, and the state submits a voucher
trust fund and the cost of maintaining current highway and
to the Federal Highway Administration (FHWA). The
public transportation programs (see Figure 1).
highway programs are focused on highway construction
and planning, and do not support operations or routine
Figure 1.HTF Revenues and Outlays: FY2008-FY2018
maintenance. Federal share of project costs is generally
80%, but 90% for Interstate System 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-21 authorized $10.6 billion for the federal public
transportation program in FY2013 and $10.7 billion in
FY2014. 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
are not typically authorized through surface transportation
legislation.
Funding Issues

Source: Congressional Budget Office.
Highway trust fund. Historically, all of the federal
highway program and 80% of the public transportation
What Are the Options?
program have been funded with revenues from the HTF.
Revenues supporting the HTF come from a combination of
Continue transferring general funds. Congress could
fuel, truck, and tire taxes, but the fuel taxes provide about
choose to appropriate sufficient general fund transfers
90% of the money.
annually to the HTF to address the shortfall. In recent years
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Surface Transportation Funding and Infrastructure Challenges
Congress has required offsets so the transfers do not
crude were taxed, oil used for nontransportation purposes,
increase the budget deficit, meaning that spending on other
such as home heating or manufacturing, would be taxed to
programs must be reduced or tax receipts increased in
support highways and public transportation.
amounts equal to the amounts of the transfers.
Tolling. Tolls could be used to pay for highway projects,
Cut spending. Congress could reduce federal highway and
reducing the demands on the HTF. However, toll systems
public transportation spending to match the currently
can be expensive to administer and enforce, and often can
projected revenues. This would require spending cuts
be evaded by motorists. Many roads may not have enough
approaching 30%. Cuts could be made across the board or
traffic to make tolling worthwhile.
by eliminating programs. Cuts could be accompanied by
requiring states and municipalities to pay a greater share of
Private investment. Public-private partnerships and
the cost of highway and public transportation programs.
privatization of existing government-owned roads and
Another option would be to devolve responsibility for
bridges may reduce federal costs in some cases. However,
highways to the states, leaving only a small federal program
relatively few transportation projects are suitable for large-
to build and maintain roads on federal land.
scale private investment, and investors are increasingly
insisting that the public sector retain the risk that traffic
Separate public transportation from the HTF. Under this
volumes will be below expectations.
scenario, federal support for public transportation would be
provided from the general fund as Congress sees fit. If the
Issues in Reauthorization
HTF were to be dedicated solely to highway spending at the
current level, adjusted only for inflation, annual receipts are
The federal-state relationship is central to the federal
projected to remain $4 billion to $5 billion less than annual
highway program and underlies most reauthorization issues.
expenditures.
Recent reauthorizations have increased the states’ discretion
in the use of federal highway funds. However, greater state
Revenue Options
discretion may conflict with other congressional priorities
such as improving the condition of highway bridges; there
A wide variety of revenue sources have been suggested to
are approximately 64,000 structurally deficient bridges, but
help address the HTF shortfall. Among the most commonly
it is up to the states to determine how much of their federal
suggested are the following:
highway funds will be spent on bridges and how much on
roads. Other issues include federal rules and regulations on
Increase the fuels tax. The motor fuels tax could be raised
environmental protection and performance management.
enough to make up for its loss of purchasing power and
then be adjusted annually for inflation and fuel efficiency.
The distribution of available highway funds among states
Based upon the current level of consumption, an increase of
has historically been one of the most difficult issues for
approximately 10 cents to 15 cents per gallon of gasoline
Congress to resolve. States have been concerned about the
would be required to fully fund highway and public
amount of funding they receive relative both to other states
transportation programs at their current levels.
and to the contribution their drivers make to the HTF.
Impose a national motor fuel sales tax. A percentage tax
In 2012, Congress created a national freight planning
on the retail price of motor fuels could be imposed that
program, and funding of a national freight program will
would rise with the price. Since gas prices can also fall, this
likely be considered in reauthorization. Potential sticking
might not be a reliable source of growing revenue.
points may be the use of highway tax funds for rail or
marine projects and the distribution of such targeted funds
Impose a vehicle miles traveled (VMT) charge. Charging
among the states.
vehicle owners for each mile of travel has been discussed
for many years as an alternative to the motor fuels tax.
Bus systems in smaller cities and rural areas have
However, this revenue source has privacy, implementation,
complained that provisions in MAP-21 have made it harder
and collection cost issues, and Congress would still need to
for them to purchase buses. Funding for bus-related
set the per-mile rate and raise it as necessary.
investment needs may become an issue in reauthorization.
Dedicate tax reform revenues to the HTF. Various tax
More Information
reform proposals would lead to short-term increases in
federal revenue, which could be dedicated to transportation.
CRS Report R43420, Surface Transportation Program
Many of these proposals would generate increased revenues
Reauthorization Issues for Congress, and CRS Report
only for a limited period, leaving the long-term imbalance
R42877, Funding and Financing Highways and Public
between HTF revenue and outlays unresolved.
Transportation.
Tax oil at the refinery level. This tax would be a tax on
Robert S. Kirk, rkirk@crs.loc.gov, 7-7769
petroleum and petroleum products based on a percentage of
William J. Mallett, wmallett@crs.loc.gov, 7-2216
the value of a barrel of oil. One attraction of this tax is that

it would have to be collected at a limited number of
locations, making it relatively easy to administer. But if all
IF10025
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