link to page 1 
Updated February 14, 2020
Highway and Public Transit Funding Issues
Federal highway and public transportation programs and
Funding Issues
activities are funded in surface transportation authorization
Historically, all of the federal highway program and 80% of
acts. The most recent is the Fixing America’s Surface
the public transportation program have been funded with
Transportation (FAST) Act (P.L. 114-94). Signed on
revenues from the HTF. These revenues are raised from a
December 4, 2015, the act funds federal highway and
combination of fuel, truck, and tire taxes, with the fuel
public transportation programs through September 30,
taxes providing 85% to 90% of the money in recent years.
2020.
The excise taxes on gasoline and diesel are fixed in terms of
The FAST Act provided a modest increase in annual
cents per gallon (18.3 cents for gasoline and 24.3 cents for
spending on surface transportation from the previous level.
diesel). They do not adjust for inflation or change with fuel
It funded this, in part, by transferring $70 billion from the
prices. The rates were last raised in 1993. Increases in
Treasury general fund to supplement other revenues that are
gasoline and diesel consumption generally kept revenue
dedicated to the Highway Trust Fund (HTF), from which
growing until the recession of 2007. Since that time,
federal funds are distributed to state governments and
improving fuel efficiency and modest growth in vehicle
public transportation operators. However, the FAST Act did
mileage have slowed the increase in revenue from the taxes
not address the widening gap between the dedicated
dedicated to the HTF. Spending from the HTF has
revenues flowing into the HTF and the costs of the highway
consistently exceeded that tax revenue. Unable to agree on
and public transportation programs authorized by Congress.
tax increases or program reductions, Congress in 2008
More money will be needed after FY2020 if Congress
began transferring funds mostly from the Treasury general
wishes to continue these programs at their current levels,
fund to the HTF to fund the authorized programs. The total
adjusted for inflation. Congress is expected to address the
nominal amount of these transfers, to provide for 12 years
persistent gap between projected HTF revenues and
of solvency, has reached nearly $144 billion.
program costs in surface transportation reauthorization.
The transfer of funds in the FAST Act provided short-term
The Federal-Aid Highway Program
stability for the HTF by filling the gap between revenues
The FAST Act provides an average of $45 billion annually
and outlays through the life of the bill. However, the
for highways. Of these funds, more than 90% are provided
underlying gap persists. It is projected to widen after the
to the states via formula. The states have nearly complete
FAST Act expires in 2020, as the impact of vehicle fuel
control over the decisionmaking in regard to these funds,
efficiency standards grows and electric vehicles come into
within the limits of federal planning, eligibility, and
wider use. The annual difference between revenues and
oversight rules. Money is not provided up front. A state is
outlays is expected to rise from $14 billion in FY2021 to
reimbursed after work is started, costs are incurred, and the
$22 billion in FY2026 (see Figure 1).
state submits a voucher to the Federal Highway
Administration. The highway programs are focused on
Figure 1. HTF Revenues and Outlays ($ Billions)
highway planning and construction, and do not support
operations or routine maintenance. The 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
The FAST Act authorized an annual average of $12 billion
for the federal public transportation program over the life of
the bill. About 80% of this funding is distributed by
formula to local transit agencies. Most of the remaining
20% goes to the discretionary Capital Investment Grants
Program (New Starts), which supports construction of new
local rail, bus rapid transit, and ferry systems, and the
Source: Congressional Budget Office. HTF Baseline—January 2020.
expansion of existing systems. Intercity rail programs are
not part of the federal public transportation program and
Trust fund shortfalls will likely become a problem by the
traditionally have not been authorized through surface
end of FY2021, once the transfer balances authorized in
transportation legislation. The FAST Act was the first
2015 are spent down. The HTF has two accounts, the
surface transportation law to include significant intercity
highway account and the mass transit account. Both
rail provisions, including authorization of Amtrak funding.
accounts are expected to be close to zero at some point in
https://crsreports.congress.gov
link to page 2 
Highway and Public Transit Funding Issues
FY2021 unless Congress provides additional funding. Low
increase of 10 to 15 cents per gallon would be required to
account balances would probably require the Department of
fully fund highway and public transit programs at their
Transportation to slow reimbursements to states and transit
current levels. Even if Congress were to approve such a
agencies, as the law specifies that the accounts cannot incur
change, likely improvements in vehicle fuel efficiency and
negative balances. Based on current law, a future five-year
more use of hybrid and electric vehicles threaten the long-
reauthorization bill would need to cover a $67.3 billion
term viability of fuel taxes as the main source of surface
shortfall, and a six-year bill would need to cover $89.3
transportation funds. Indexing fuel taxes to inflation and
billion (see Figure 2).
fuel efficiency could extend the viability of the fuel taxes.
Congress could impose other taxes and dedicate the revenue
Figure 2. Projected HTF Shortfalls ($ Billions)
to the HTF.
Tolling. Tolls could be used to pay for highway projects,
perhaps reducing the demands on the HTF. However, toll
systems can be expensive to administer and enforce, and
often can be evaded by motorists. Many roads may not have
enough traffic to make tolling worthwhile. Tolling is
unlikely to expand on a scale that would allow for major
reductions in federal grant spending in the near term.
Impose a Vehicle Miles Traveled (VMT) Charge. Also
called a mileage-based road user charge, a fee on each mile
traveled has been discussed for many years as an alternative
to the motor fuels tax. However, this revenue source has
privacy, implementation, and collection cost issues, and
Source: Congressional Budget Office. HTF Baseline—January 2020.
Congress would still need to set the per-mile rate and raise
it as necessary.
What Are the Options?
Electric Vehicles. Since electric vehicles do not burn taxed
Continue Transferring General Funds. By FY2020, the
motor fuels, their wider use could further weaken the HTF.
last year of the FAST Act, federal highway programs will
Congress could consider imposing fees on electric vehicles
have been funded for 12 years under a de facto policy of
so that owners pay into the HTF in amounts similar to
providing a Treasury general fund share. Congress could
owners of gasoline and diesel vehicles. As of late 2019, 28
make this permanent. However, in recent years Congress
states have imposed such fees.
has required offsets to assure that the transferred spending
will not increase the budget deficit, meaning that spending
Substitute Private Investment. Public-private partnerships
on other programs must be reduced or tax receipts increased
(P3s) to build new roads and bridges and long-term leasing
in amounts equal to the amounts of the transfers.
of existing government-owned facilities may reduce federal
costs in some cases. However, relatively few transportation
Cut Spending. Congress could reduce federal highway and
projects are suitable for large-scale private investment, and
public transportation spending to match the currently
investors often insist that the public sector retain the risk
projected revenues. This would require spending cuts
that traffic volumes will be below expectations.
approaching 25%. Cuts could be made across the board or
by eliminating programs. They could be accompanied by
Infrastructure Legislation
requirements that states and municipalities pay a greater
Congress may consider an increase in surface transportation
share of the cost of highway and public transportation
spending as part of a broader infrastructure package. This
programs. Congress could replace some grant funds with
money could be distributed to state and local governments
increased lending through mechanisms like the
by the formulas established in the FAST Act, or could be
Transportation Infrastructure Finance and Innovation Act
allocated in a different way. One challenge will be for
(TIFIA) program; under law, $1 made available to TIFIA
Congress to ensure that states and localities do not
can generate roughly $15 of lending for transportation
substitute any additional federal funds for their own
projects.
spending, as this could adversely affect the total amount of
Separate Public Transportation from the HTF. Under
highway and public transportation spending.
this scenario, federal support for public transportation
would be provided from the general fund. However, if all
More Information
HTF tax revenue were dedicated solely to maintaining the
CRS Report R45350, Funding and Financing Highways
current level of highway spending, a gap between annual
and Public Transportation, by Robert S. Kirk and William
receipts and outlays would remain. The annual gap would
J. Mallett.
be $3.3 billion in FY2021, rising to $9.7 billion in FY2026.
Robert S. Kirk, Specialist in Transportation Policy
Increase Tax Revenue. A 1-cent-per-gallon increase in
William J. Mallett, Specialist in Transportation Policy
federal motor fuel taxes would raise roughly $1.7-$1.8
billion a year for the HTF. Based on current fuel use, an
IF10495
https://crsreports.congress.gov
Highway and Public Transit Funding Issues
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10495 · VERSION 8 · UPDATED