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Updated March 1, 2021
Highway and Public Transit Funding Issues
Federal highway and public transportation programs are
Funding Issues
funded in surface transportation authorization acts. The
Historically, all of the federal highway program and 80% of
five-year Fixing America’s Surface Transportation (FAST)
the public transportation program have been funded with
Act (P.L. 114-94) was enacted on December 4, 2015. The
revenues from the HTF. These revenues are raised from a
act was extended by the Continuing Appropriations Act,
combination of fuel, truck, and tire taxes, with the fuel
2021, and other Extensions Act (P.L. 116-159) for an
taxes providing 85% to 90% of the money in recent years.
additional year, through September 30, 2021.
The excise taxes on gasoline and diesel are fixed in terms of
The FAST Act, as extended, has provided a modest
cents per gallon (18.3 cents for gasoline and 24.3 cents for
increase in annual spending on surface transportation from
diesel). They do not adjust for inflation or change with fuel
the previous level. It funded this, in part, by transferring
prices. The rates were last raised in 1993. Increases in
$86.3 billion from the Treasury general fund to supplement
gasoline and diesel consumption generally kept revenue
other revenues that are dedicated to the Highway Trust
growing until the recession of 2007. Since that time,
Fund (HTF), from which federal funds are distributed to
improving fuel efficiency and modest growth in vehicle
state governments and public transportation operators.
mileage have slowed the increase in revenue from the taxes
However, the FAST Act did not address the widening gap
dedicated to the HTF. Spending from the HTF has
between the dedicated revenues flowing into the HTF and
consistently exceeded that tax revenue. Unable to agree on
the costs of the highway and public transportation programs
tax increases or program reductions, Congress in 2008
authorized by Congress. More money will be needed after
began transferring funds mostly from the Treasury general
FY2021 if Congress wishes to continue these programs at
fund to the HTF to fund the authorized programs. The total
their current levels, adjusted for inflation. Congress is
nominal amount of these transfers, to provide for 13 years
expected to address the persistent gap between projected
of solvency, has reached $157 billion.
HTF revenues and program costs in surface transportation
The transfer of funds in the FAST Act provided short-term
reauthorization.
stability for the HTF by filling the gap between revenues
The Federal-Aid Highway Program
and outlays through the life of the bill. However, the
underlying gap persists. It is projected to widen after the
The FAST Act provides an average of $45 billion annually
FAST Act expires in 2021, as the impact of vehicle fuel
for highways. Of these funds, more than 90% are provided
efficiency standards grows and electric vehicles come into
to the states via formula. The states have nearly complete
wider use. The annual difference between revenues and
control over the decisionmaking in regard to these funds,
outlays is expected to rise from $13 billion in FY2022 to
within the limits of federal planning, eligibility, and
$22 billion in FY2026 (see Figure 1).
oversight rules. Money is not provided up front. A state is
reimbursed after work is started, costs are incurred, and the
Figure 1. HTF Revenues and Outlays ($ Billions)
state submits a voucher to the Federal Highway
Administration. The highway programs are focused on
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
Source: Congressional Budget Office. HTF Baseline—February 2021.
Program (New Starts), which supports construction of new
local rail, bus rapid transit, and ferry systems, and the
Trust fund shortfalls will likely become a problem by the
expansion of existing systems. Intercity rail programs are
summer of 2022, once the transferred balances are spent
not part of the federal public transportation program and
down. The HTF has two accounts, the highway account and
traditionally have not been authorized through surface
the mass transit account. Both accounts are expected to be
transportation legislation. The FAST Act was the first
close to zero at some point in in the last quarter of FY2022
surface transportation law to include significant intercity
unless Congress provides additional funding. Low account
rail provisions, including authorization of Amtrak funding.
balances would require the Department of Transportation to
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Highway and Public Transit Funding Issues
slow reimbursements to states and transit agencies, as the
Congress could impose other taxes and dedicate the revenue
law specifies that the accounts cannot incur negative
to the HTF.
balances. Based on current law, a future five-year
Tolling. Tolls could be used to pay for highway projects,
reauthorization bill would need to cover a $69.8 billion
perhaps reducing the demands on the HTF. However, toll
shortfall, and a six-year bill would need to cover $92.2
systems can be expensive to administer and enforce, and
billion (see Figure 2).
often can be evaded by motorists. Many roads may not have
enough traffic to make tolling worthwhile. Tolling is
Figure 2. Projected HTF Shortfalls ($ Billions)
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 usage 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 Congress would still need to set the per-mile
rate and raise it as necessary.
Electric Vehicles. Since electric vehicles do not burn taxed
motor fuels, their wider use could further weaken the HTF.
Congress could consider imposing fees on electric vehicles
so that owners pay into the HTF in amounts similar to
owners of gasoline and diesel vehicles. As of late 2019, 28
Source: Congressional Budget Office. HTF Baseline—February 2021.
states had imposed such fees.
What Are the Options?
Substitute Private Investment. Public-private partnerships
Continue Transferring General Funds. By FY2021, the
(P3s) to build new roads and bridges and long-term leasing
last year of the FAST Act, federal highway programs will
of existing government-owned facilities may reduce federal
have been funded for 13 years under a de facto policy of
costs in some cases. However, relatively few transportation
providing a Treasury general fund share. Congress could
projects are suitable for large-scale private investment, and
continue to make such transfers.
investors often insist that the public sector retain the risk
that traffic volumes will be below expectations.
Cut Spending. Congress could reduce federal highway and
public transportation spending to match the currently
Infrastructure Legislation
projected revenues. This would require spending cuts
Congress may consider an increase in surface transportation
approaching 25%. Cuts could be made across the board or
spending as part of a broader infrastructure package. This
by eliminating programs. They could be accompanied by
money could be distributed to state and local governments
requirements that states and municipalities pay a greater
by the formulas established in the FAST Act, or could be
share of the cost of highway and public transportation
allocated in a different way. One challenge will be for
programs. Congress could replace some grant funds with
Congress to ensure that states and localities do not
increased lending through mechanisms like the
substitute any additional federal funds for their own
Transportation Infrastructure Finance and Innovation Act
spending, as this could adversely affect the total amount of
(TIFIA) program; currently under the law, $1 made
highway and public transportation spending.
available to TIFIA can generate roughly $20 of lending for
transportation projects.
COVID-19 Pandemic
Separate Public Transportation from the HTF. Under
The pandemic has led to a decline in highway use and a
this scenario, federal support for public transportation
major decline in transit ridership from March 2020 to date.
would be provided from the general fund. However, if all
This has reduced HTF and state transportation revenues, as
HTF tax revenue were dedicated solely to maintaining the
well as public transportation agency fare box revenues. To
current level of highway spending, a gap between annual
date, pandemic relief legislation has provided $10 billion
receipts and outlays would remain. The annual gap would
for highways and state departments of transportation and
be $2.2 billion in FY2022, rising to $9.9 billion in FY2027.
$39 billion for public transportation.
Increase Tax Revenue. A 1-cent-per-gallon increase in
federal motor fuel taxes would raise roughly $1.7-$1.8
More Information
billion a year for the HTF. Based on current fuel use, an
CRS Report R45350, Funding and Financing Highways
increase of 10 to 15 cents per gallon would be required to
and Public Transportation, by Robert S. Kirk and William
fully fund highway and public transit programs at their
J. Mallett.
current levels. Even if Congress were to approve such a
change, likely improvements in vehicle fuel efficiency and
Robert S. Kirk, Specialist in Transportation Policy
more use of hybrid and electric vehicles threaten the long-
William J. Mallett, Specialist in Transportation Policy
term viability of fuel taxes as the main source of surface
transportation funds. Indexing fuel taxes to inflation and
IF10495
fuel efficiency could extend the viability of the fuel taxes.
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Highway and Public Transit Funding Issues
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https://crsreports.congress.gov | IF10495 · VERSION 9 · UPDATED