The Transportation Equity Act for the 21st Century (TEA-21) and the Federal Budget

The Transportation Equity Act for the 21st Century (TEA-21) and the Federal Budget

98-749 E
CRS Report for Congress
Received through the CRS Web
The Transportation Equity Act for the 21st
Century (TEA21) and the Federal Budget
September 4, 1998
(name redacted)
Specialist in Transportation
Economics Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
TEA21 creates a new and complex environment for federal transportation policy. This
report discusses the dynamics of the new relationship between federal spending for surface
transportation, the highway trust fund, and the budget. The report also focuses on the
possible effects of revised budget procedures for all transportation programs, not just
programs reauthorized by TEA21. This report will be updated as legislative activity
warrants.

The Transportation Equity Act for the 21st Century (TEA21)
and the Federal Budget
Summary
The Transportation Equity Act for the 21st Century (P.L. 105-178)(TEA21)
changes the relationship between the highway trust fund and the federal budget
process. Spending for highway programs is now linked directly to annual revenue
collections for the highway trust fund. Core highway and mass transit program
funding has been given special status in the discretionary portion of the federal
budget by virtue of the creation of two new budget categories. As a result, highway
and transit programs become similar to entitlement programs during the period
FY2000 through FY2003.
From the perspective of the authors of TEA21 the Act creates a virtual
“firewall” around highway and mass transportation spending programs. That is, the
levels of funding enunciated in the Act are described as a “transportation
discretionary spending guarantee.” The funding guarantees are set up in a way that
makes it difficult for funding levels to be altered as part of the annual
budget/appropriations process.
The budget system initiated by TEA21 could be viewed as an experiment in
federal budgeting. The outcome of the experiment will obviously play an important
role in determining how federal transportation programs will operate in the future.
The change in budget treatment of the highway trust fund has implications for
spending not only on highways and mass transit, but may have an effect on the
availability of annual funding for other transportation and discretionary budget
programs. TEA21's budget provisions expire at the end of FY2003. As a result,
Congress will be dealing with transportation budget issues again in the not too distant
future.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Highway Trust Fund Origins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Transportation Budget Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TEA21 Budget Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Discretionary Spending Guarantees (Firewalls) and Limitations
on Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Revenue Aligned Budget Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Enforcement Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Highway Trust Fund Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Highway Trust Fund Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
TEA21 Funding Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Core Highway Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Minimum Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Highway Safety and Other Highway Category Programs . . . . . . . . . . . . . . 10
Transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transportation Budget Process Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FY1999 and Future Appropriations for Highway and Transit Programs . . . 10
Future Appropriations for non-TEA21 Transportation Programs . . . . . . . . 12
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Balances of the Highway Account of the Highway Trust Fund,
FY1988-FY1997 (in millions of dollars) . . . . . . . . . . . . . . . . . . . . . . . 14
Balances of the Transit Account of the Highway Trust Fund,
FY1988-FY1997 (in millions of dollars) . . . . . . . . . . . . . . . . . . . . . . . 15
List of Tables
Table 1: TEA21 Authorizations: FY1998 - FY2003 . . . . . . . . . . . . . . . . . . . . . . . 8

The Transportation Equity Act for the 21st
Century (TEA21) and the Federal Budget
The Transportation Equity Act for the 21st Century (P.L. 105-178)(TEA21) is
the provisional end point of a decade long congressional debate about the relationship
between the highway trust fund and federal spending for highway, highway safety,
and transit programs.1 The Act adopts the perspective of those who believe that the
existence of the highway trust fund should give federal highway and transit program
spending special status within the federal budget. TEA21 does not take the trust fund
off-budget as many of the supporters of this position had sought during the last few
years.2 Rather, the Act creates two new categories within the federal discretionary
budget. A new highway category provides spending for core highway programs at
a level dictated by revenue accruing to the highway account of the fund. The authors
of TEA21 assert that this arrangement creates a so-called “firewall” around the core
highway program. A new transit category also provides a firewall for core transit
programs, but, unlike core highway programs, these funds are not subject to annual
adjustment based on revenue accruing to the mass transit account of the fund. While
firewalls are the term of art used in the discussion of the TEA21 budget provisions
it is important to recognize that this is not a budget term per se.
A net effect of linking trust fund revenues to spending for the highway, highway
safety, and transit programs is a dramatic increase in spending for these programs.
TEA21 authorizes funding at a level of almost $218.0 billion for the period FY1998
through FY2003. Of this total $177 billion is provided for a broad range of highway
and highway safety programs and just under $41.0 billion is provided for transit
programs.3 The total TEA21 authorization is about 40% more than what had been
provided in the previous 6-year program authorization, ISTEA (Intermodal Surface
Transportation Efficiency Act of 1991, P.L. 102-240). Of the total TEA21
authorization, $198.0 billion is guaranteed, that is, these funds are not subject to
reduction as part of the annual budget/appropriations process (the mechanics of the
guarantee will be explained later in this report).
1This report discusses TEA21 as amended by the Technical Corrections to Transportation
Equity Act for the 21st Century (Title IX, P.L. 105-206)
2For a historical discussion of congressional attempts to change the budget treatment of trust
funds see: U.S. Library of Congress. Congressional Research Service. Transportation Trust
Funds and the Budget. by (name redacted). CRS Report 98-63.
3For the purposes of this report, the highway program refers to spending for all activities
funded through the highway account of the highway trust fund. This includes monies for
highways, highway safety and a wide range of other activities. Transit refers to federal mass
transportation programs, which includes aid to bus systems, subway systems, etcetera.

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Background
Highway Trust Fund Origins
The highway trust fund consists of two separate accounts — highway and transit
— which are sometimes mistakenly referred to as separate trust funds. In practice,
the highway account and the transit account are discussed as though they were
separate entities, with the highway trust fund being synonymous with the highway
account.
The highway trust fund is the oldest and largest of the transportation trust funds.
The fund was created by a separate revenue title in the Federal-Aid Highway Act of
1956 (1956 Act) (P.L. 84-627). The 1956 Act provided funding for construction of
the now virtually complete Dwight D. Eisenhower System of Interstate and Defense
Highways. In addition, the 1956 Act provided some funding for other federal
highway programs.
Over the last 40 plus years, the highway trust fund and the federal programs it
supports have been changed numerous times.4 In almost every instance, Congress
has chosen to expand the scope of the federal highway program. At various times
over the same period Congress has also chosen concomitantly to increase the revenue
stream into the trust fund by raising federal excise taxes on motor fuels. The most
recent change in the structure of the federal highway program is TEA21. TEA21 also
reauthorizes the trust fund revenue system through FY2005.
The transit account was created by the Surface Transportation Assistance Act
of 1982 (P.L. 97-424). The transit account gave the transit industry a consistent
federal funding source for capital spending on new and rehabilitated infrastructure
and for other purposes, such as operating assistance funding. TEA21, in line with
recent year appropriations legislation, eliminates operating assistance for all urban
areas with populations of 200,000 or more and refocuses these funds on capital
related activities.
The highway trust fund is financed by sales taxes on tires, trucks, buses, and
trailers as well as truck usage taxes, but approximately 90% of trust fund revenue
comes from excise taxes on motor fuels.5 The majority of the motor fuel revenue
dedicated to the trust fund is derived from an 18.4 cents per gallon tax on gasoline
of which 18.3 cents is dedicated directly to the highway trust fund. The highway
account receives an allocation equivalent to 15.44 cents of the tax and the transit
account receives the revenue generated by 2.86 cents of the tax. The remaining 0.1
cents goes into the leaking underground storage tank (LUST) trust fund.
4For a more detailed history of the trust fund see: U.S. Library of Congress. Congressional
Research Service. Federal Excise Taxes on Gasoline and the Highway Trust Fund: A Short
History. CRS Report 97-853E. by Louis Alan Talley.
5For a discussion of federal transportation fuel taxes see: U.S. Library of Congress.
Congressional Research Service. Transportation Fuel Taxes, Legislative Issues, and the
Transportation Equity Act. CRS Report 98-555E. by (name redacted).

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Transportation Budget Terminology
Transportation budgeting uses a confusing lexicon (for those unfamiliar with the
process) of budget authority and contract authority — the latter, a form of budget
authority. Contract authority, provides obligational authority for the funding of trust
fund financed programs, such as the federal-aid highway program. Prior to TEA21,
changes in spending in the annual transportation budget component had been
achieved in the appropriations process by combining changes in budget/contract
authority and placing limitations on obligations. The principal function of the
limitation on obligations is to control outlays in a manner that corresponds to
congressional budget agreements.
Contract authority is tantamount to, but does not actually involve, entering into
a contract to pay for a project at some future date. Under this arrangement, specified
in Title 23 U.S.C., which TEA21 amends, authorized funds are automatically made
available to the states at the beginning of each fiscal year and may be obligated
without appropriations legislation. Appropriations are required to make outlays at
some future date to cover these obligations. As will be discussed, TEA21 greatly
limits the role of the appropriations process in core highway and transit programs
because the Act sets the limitation on obligations level for the period FY1999
through FY2003.
Highway and transit grant programs work on a reimbursable basis: states pay for
projects up front and federal payments are made to them only when work is
completed and vouchers are presented, perhaps months or even years after the project
has begun. Work in progress is represented in the trust fund as obligated funds and
although they are considered “used” and remain as commitments against the trust
fund balances, they are not subtracted from balances. Trust fund balances, therefore,
appear high in part because funds sufficient to cover actual and expected future
commitments must remain available.
Both the highway and transit accounts have substantial short- and long-term
commitments. These include payments that will be made in the current fiscal year
as projects are completed and, to a much greater extent, outstanding obligations to
be made at some unspecified future date. Additionally, there are unobligated
amounts that are still dedicated to highway and transit projects, but have not been
committed to specific projects.
Two terms are associated with the distribution of contract authority funds to the
states and to particular programs. The first of these, apportionments, refers to funds
distributed to the states for formula driven programs. For example, all national
highway system (NHS) funds are apportioned to the states. Allocated funds, are
funds distributed on an administrative basis, typically to programs under direct
federal control. For example, federal lands highway program monies are allocated;
the allocation can be to another federal agency, to a state, to an Indian tribe, or to
some other governmental entity. These terms do not refer to the federal budget
process, but often provide a frame of reference for highway program recipients, who
may assume, albeit incorrectly, that a state apportionment is part of the federal budget
per se.

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TEA21 Budget Provisions
Discretionary Spending Guarantees (Firewalls) and Limitations on
Obligations
Transportation is Function 400 in the annual unified congressional budget. It
is also considered part of the discretionary budget. Highway and transit funding are
the largest components of this budget category, and can account for 60% - 70% of
total federal transportation spending in any given year. As mentioned previously,
most highway, and the majority of transit, programs are funded with contract
authority. This is very significant from a budgeting standpoint. Contract authority
can be thought of as preexisting budget authority. Where most federal programs
require new budget authority as part of the annual appropriations process,
transportation appropriators are faced with the opposite situation. That is, the
authority to spend already exists and the mechanism to obligate is also in place.
Transportation appropriations provide a mechanism to expend these funds. What this
has meant in the past for transportation appropriations subcommittees is that budget
goals set in congressional budget resolutions could only be met by limiting actual
outlays. The mechanism used to accomplish this is the limitation on obligations.
Authority to set a limitation on obligations for contract authority programs gave
appropriators considerable leeway in allocating funds between the various federal
transportation activities in function 400, which includes agencies such as the Coast
Guard and the Federal Aviation Administration. In addition, the inclusion of the
highway and transit programs and their trust fund generated revenue streams in the
discretionary budget and provided appropriators with some additional flexibility as
part of the annual process by which available funds were allocated amongst the 13
standing appropriations subcommittees in the House and the Senate.6
TEA21 changes this procedure in two ways. First by creating new budget
categories and second by setting statutory limitations on obligations. The Act
amends the Balanced Budget and Emergency Deficit Control Act of 1985 to create
two new budget categories: highway and mass transit. The Act further amends the
budget process by creating a statutory level for the limitation on obligations in each
fiscal year from FY1999 to FY2003. In addition, TEA21 provides a mechanism to
adjust these amounts in the highway account, but not the transit account, to
correspond with increased or decreased receipts in highway generated revenues.
The net effect of the creation of these budget categories is a predetermined level
of funding for core highway and transit programs, referred to in TEA21 as a
discretionary spending guarantee. These categories are separated from the rest of the
discretionary budget in a way that prevents the use of funds assigned to these
categories for any other purpose. These so called “firewalls” are viewed, in the
TEA21 context, as guaranteed and/or minimum levels of funding for highway and
6For a detailed discussion of the appropriations process see: U.S. Library of Congress.
Congressional Research Service. The Congressional Appropriations Process: An
Introduction. CRS Report 97-684 GOV. By (name redacted).

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transit programs. Additional funds above the firewall level can be made available for
highway and transit programs through the annual appropriations process. TEA21,
in fact, provides additional authorizations of approximately $15 billion in highway
money and $5 billion in transit money above the firewall level.
Revenue Aligned Budget Authority
TEA21 provides a link between the highway generated revenues that flow into
the highway account and highway spending. This relationship has long been sought
by advocates of increased highway spending who have contended that highway user
fees should be available only for highway programs.
The Act requires that the Secretary of Transportation make an annual evaluation
of revenues into the highway account during the previous fiscal year vis-a-vis
spending authorized within the highway firewall for the new fiscal year. If revenues
go up, program spending is increased. Conversely, spending can go down if revenues
go down. The Act uses a formula to determine the direction and amount of highway
funding adjustment. This mechanism is employed beginning in FY2000 and an
annual computation is required on October 15th of each successive fiscal year through
the life of the Act.
If a funding adjustment is required, an apportionment is made to the core
highway programs in each state. In addition, apportionments are made to other
federal aid highway and highway safety programs. Finally, funds are reserved on a
proportional basis for programs allocated by the Federal Highway Administration
(FHWA), such as the federal lands highway program.
Both the Congressional Budget Office (CBO) and the Office of Management
and Budget (OMB) predict that revenues to the highway account will grow at a level
that exceeds the highway authorization provided within the highway firewall. The
OMB estimates are for somewhat more growth than those projected by CBO. By one
analysis, looking at a best case scenario (best case from the perspective of an analysis
that favors additional spending) the revenue alignment provisions of the bill could
provide as much as $3.5 billion in additional contract authority for core highway
programs during the life of the legislation.7
Enforcement Guarantee
The authors of TEA21 were concerned that some Members of Congress might,
at some future time, try to reduce highway and transit spending. TEA21, therefore,
includes a provision in section 8101 that amends Rule XXI of the House of
Representatives to allow a point of order challenge to any legislation, of any type,
that might seek to reduce the limitation on obligations for highways and transit
during the life of the Act. As will be discussed later in this report, point of order
language also seems to extend to individual programs and projects, based on House
7The Transportation Equity Act for the 21st Century: An Analysis by the American Road &
Transportation Builders Association. American Road & Transportation Builders
Association. July 1998. p. 2.

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consideration of FY1999 transportation appropriations legislation. The existence of
the point of order will make it very difficult for any Member to seek a reduction in
highway and transit spending in the House, regardless of reason. It should be pointed
out, however, that the House does waive its rules from time to time. There are no
provisions in the Act affecting Senate rules.
Offsets
The House version of what became TEA21, H.R. 2400, included a provision
that required that the final act identify specific spending offsets to comply with the
Balanced Budget Act of 1997. The Act adopts this provision and after considerable
debate Congress settled on two basic sources for budget offsets. The primary source
of these is a provision that eliminates veterans’ benefits for smoking related illness.
This source provides approximately $15.4 billion in offsetting budget authority.
There was considerable controversy associated with this offset, because it was
opposed by veterans’ groups and because the dollar amount of the offset is an
estimate based on the unknown cost of a benefit that had not yet been adjudicated.8
The second significant offset is a reduction in title XX, Social Services Block
Grants (42 USC 1397b(c)). This offset provides approximately $2.6 billion by
reducing authorizations for this program in FY2001, FY2002, and FY2003. This
offset is also controversial and was opposed by supporters of the block grant
program.9
The offset provisions in TEA21 provide the necessary funds to meet the budget
agreement for highway and transit programs within the firewalls. TEA21, as
mentioned earlier, provides $15 billion in authorizations for highways and $5 billion
for transit that are above the firewall limits. Any spending of these funds
accomplished in the annual appropriations process must be accompanied by an
additional offset in the discretionary budget category. During final consideration of
TEA21 it was suggested in many quarters that this need for further offsets will make
appropriation of these funds difficult.
Highway Trust Fund Operations
TEA21 made basic changes in the operation of the trust fund. Primary among
these is a provision that precludes the payment of interest on any unexpended balance
in the trust fund effective September 30, 1998. The payment of interest was always
a controversial element of the trust fund process. Since the interest payments were
made by the Treasury on funds held by the Treasury, they were viewed by many as
nothing more than an intergovernmental fund transfer. Interest has for many years
been a significant source of income for the trust fund and according to some
8The Act also includes provisions that increase certain other veterans benefits. For more
information see: U.S. Library of Congress. Congressional Research Service. Veterans and
Smoking-Related Illnesses: Congress Enacts Limits to Compensation. By Dennis W. Snook.
CRS Report 98-373 EPW.
9For a discussion of the Title XX program see: U.S. Library of Congress. Congressional
Research Service. Social Services Block Grants. by (name redacted). CRS Report 94-953 EPW.

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estimates was a principal reason for the continued large unexpended balance in the
fund. As can be seen in the appendix, the highway and transit accounts received
interest of $1.44 billion in FY1997 alone.
Another major change is the elimination of much of the unexpended balance in
the highway account (referred to by some inaccurately as the “surplus”). Effective
September 30, 1998 the balance in the account is reduced to $8.0 billion. The
unexpended balance above this amount reverts to the Treasury’s general fund
account. The $8 billion amount is the sum that allows the trust fund to meet its Byrd
Amendment mandated level of fiduciary responsibility10 and provide a small
additional cushion for future, as yet unknown, emergencies that might otherwise
drain the fund.
Highway Trust Fund Balances
The changes made by TEA21 do not eliminate the potential for growth in the
unexpended balances. The previously stated core principal of TEA21 is the concept
that trust fund revenues should drive spending. For a couple of reasons this link is
likely to lead to new growth in the unexpended balance.
Highway and transit programs are slow spending programs. What this means
is that actual outlays for a project may not occur until some time after the contract
authority for the project was made available. This lag can be a period of years for
some complex projects. This lag, by itself, will cause a growth in the unexpended
balance exclusive of the annual adjustments required by the revenue aligned budget
authority provisions. In addition, the authors of TEA21 sought to reduce the need for
offsets by spreading outlays for some programs like the high priority projects over
the life of the bill. This built in lag will also contribute to a growth in the
unexpended balance.
The unexpended balance in the transit account is not subject to any immediate
reduction. The existing unexpended balance in the fund is crucial to the higher
spending levels for transit found in the Act. In most years, TEA21 authorizes more
transit spending than the transit account annual revenue stream could accommodate.
This increased spending, therefore, is accommodated by the existing unexpended
balance and by funding a significant portion of the transit program from Treasury
general funds.
10The Byrd Amendment to the Federal-Aid Highway Act of 1956, as amended, restricts the
growth of new funding commitments to a level which is not to exceed the current year’s
unexpended balance, plus projected income to the highway account for the following two
fiscal years. The Byrd Amendment is an automatic device that requires no additional
congressional action to implement. As a result of TEA21 the transit account is now subject
to the same process.

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TEA21 Funding Levels11
TEA21 creates the largest surface transportation program in U.S. history. For
the most part, however, it does not create new programs. Rather, it continues most
of the highway and transit programs that originated in its immediate predecessor
legislation, ISTEA. Programmatically, TEA21 can be viewed as a refinement and
update of the ISTEA process. There are a few new funding initiatives in the Act,
such as the border infrastructure program, but the vast majority of funding is reserved
for continuing programs.
Table 1: TEA21 Authorizations: FY1998 - FY2003
(thousands of dollars)
FY1998a
FY1999
FY2000
FY2001
FY2002
FY2003
Total
Highway
21,841a
25,883
26,629
27,158
27,767
28,233
157,511
Firewall
Highway
739a
739
739
739
739
739
4,434
Exempt
(Firewall)
Highway
NA
26,622
27,368
27,897
28,506
28,972
161,945
Firewall Total
Additional
2,045b
2,553
2,564
2,654
2,504
2,634
14,945
Highway
Authorizationb
Highway
24,625
29,175
29,932
30,542
31,010
31,606
176,890
Total
Transit
4,644a
5,365
5,797
6,271
6,747
7,226
36,250
Firewall
Additional
——
976
1,013
1,003
990
968
4,950
Transit
Authorization
Transit Total
4,644
6,341
6,810
7,274
7,737
8,194
41,000
TEA21
NA
31,987
33,165
34,168
35,253
36,198
198,195
Firewall Total
TEA21 Total
29,269
35,516
36,742
37,816
38,747
39,800
217,890
a Firewalls do not apply in FY1998
b Additional Highway Authorizations contain numerous programs outside the core highway programs,
including items such as Maglev and light density rail
Source: P.L. 105-178, P.L. 105-206, and www.fhwa.dot.gov/tea21/
Core Highway Programs
There are several groupings of highway programs within the highway firewall.
Most of the funding is reserved for the major federal aid highway programs, which
can be thought of as the core programs. These programs are: national highway system
11This section provides a brief overview of the distribution of TEA21 funding amongst
eligible transportation programs. Additional details about individual programs can be found
at http:www.dot.gov/tea21/

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(NHS), interstate maintenance (IM), surface transportation program (STP), bridge
replacement and rehabilitation, congestion mitigation and air quality improvement
(CMAQ), federal lands, high priority projects (former demonstration project
category), Appalachian roads (formerly ineligible for contract authority), minimum
guarantee (most of the funding for this activity), and national corridor planning and
border infrastructure (new program). All of these programs are subject to
apportionment on an annual basis.
There is a second category of core highway funding within the firewalls. This
so called “exempt” category consists of two elements; an additional annual
authorization of minimum guarantee funding ($639 million per fiscal year) and
emergency relief ($100 million per fiscal year). These funds are not subject to the
annual limitation on obligations.
Minimum Guarantee. During the reauthorization debate leading to enactment
of TEA21 a major issue of contention was the so-called equity debate. The debate
focused on the fact that some states, known as donor states, contributed far more in
taxes to the trust fund than they received back in federal aid highway assistance.
TEA21, like ISTEA before it, takes a compromise position on this issue. State
revenue returns are increased from ISTEA levels. TEA21 includes a minimum
guarantee of 90.5% of a state’s revenue contribution to the highway account of the
highway trust fund. For some donor states this guarantee will result in percentage
funding increases well above those that would be provided alone by the overall 40%
increase in spending realized by TEA21 over ISTEA.
In reality this 90.5% return is unlikely to be an absolute on a year-to-year basis.
There are several reasons for this. First, there are significant concerns about the
Internal Revenue Service data that is used to determine the annual state revenue
contribution. These data were not previously envisioned as a basis for the formula
distribution of federal funds. Some states have already indicated that they believe the
data undercounts their contribution to the highway account. Second, there are
administrative take downs for certain items such as FHWA operating costs, that are
part of the total limitation on obligations that will be unavailable during the state
apportionment process. Third, many observers are likely to note the relative total
surface transportation funding disparities between states that will exist because of the
distribution of mass transit funds, some of which may be transferred to highway
activities. This will occur regardless of the fact that trust fund revenues directed to
the mass transit account are not part of the minimum guarantee. Finally, the Act
requires the use of the most recent data in its annual program formula distributions.
Many of these variables will change during the life of the Act, especially after the
year 2000 census. The 90.5% process set up in the Act uses current data. As
program distribution changes, the role of the minimum allocation process is likely
to grow in relative importance.
The minimum guarantee computation is obviously complicated and likely to
engender some criticism. Any criticism is likely to be directed at the FHWA which
is the only organization that has access to all the data required for the formula and
minimum allocation distributions. The TEA21 funding calculation is made first for
apportioned programs using all the formula variables associated with each program.

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The state shares derived from this process are then adjusted up or down to reach the
90.5% guarantee level, which equates, at this point in the calculation, to a
comparable percentage guarantee of apportionments rather then of actual dollar
revenue contributions to the highway account.
Highway Safety and Other Highway Category Programs
The highway firewalls also include a number of highway and highway safety
contract authority programs that are normally viewed as being separate from the core
federal aid highway program. Included in this category are highway safety programs
administered by the National Highway Traffic Safety Administration (NHTSA),
motor carrier programs administered by FHWA, intelligent transportation systems
(ITS) programs, and several different research activities. While each of these
programs receives only a small amount of funding vis-a-vis federal aid highway
programs such as the national highway system, they are nonetheless significant.
Highway safety activities will, for example, receive $1.7 billion over the life of
TEA21.
Transit
The total authorization for transit in the Act is $41 billion. The firewall,
however, only guarantees $36.2 billion. In addition, the transit firewall does not
guarantee entire programs as is the case in the highway firewall. For example, the
two largest transit programs — urbanized area formula grants and transit capital
investment grants — have significant levels of authorization that are outside the
firewall.
Another distinction between the highway and transit firewalls is the source of
program funding. A significant portion of the transit guarantee, $6.65 billion is
provided not by the mass transit account, but by U.S. Treasury general funds. This
distribution appears to respond first to the historical role general funds have played
in financing this program, and second to a realization that revenues to the mass
transit account would be insufficient to fund the enlarged TEA21 transit program.
Transportation Budget Process Issues
FY1999 and Future Appropriations for Highway and Transit
Programs
TEA21 changes the role of the House and Senate Appropriations and Budget
Committees in determining annual spending levels for highway and transit programs.
As mentioned earlier, the Appropriations Committees are precluded from their
former role of setting an annual level of obligations. In addition, it appears that the
Appropriations Committee, at least in the House, are precluded, at least in part, from
exercising what some Members view as their traditional option of changing spending
levels for any program or project within the firewalls.

CRS-11
The new relationship is not of the appropriators’ making. As the FY1999
transportation appropriations bill works its way through Congress, there has been
criticism of the new process from appropriators, particularly in the House:12
The Committee has done the best it can considering the new firewalls. However,
the Committee is concerned that this new legislation skews transportation
priorities inappropriately, by providing a banquet of increases to highway and
transit spending while leaving safety-related agencies such as the Coast Guard
and FAA to scramble for remaining crumbs. ... The Committee has also been
unable to consider increases above guaranteed levels for highways and transit
programs, because it would have required even further reductions in critical FAA
and Coast Guard programs.13
Throughout the process that led to TEA21, similar sentiments were expressed
by individual Members of the Committees on Appropriations in both the House and
the Senate.14 This sentiment is also shared by individual Members of the Budget
Committees in both bodies, who view the new budget categories as a potential
balkanization of the unified budget process.15 It should be pointed out, however, that
other Members of the Appropriations/Budget Committees voted for and support the
TEA21 budget process.
Members of the authorizing Committees take a counter, and for the moment,
majority view. From their perspective, the new budget structure provides the
necessary discipline to insure that transportation fuel taxes are spent for their
intended purpose. As a result, highway and transit program funding levels have been
virtually removed from the overall debate about the discretionary budget and instead
tied to revenues.
The fact is that TEA21, made more funds available for remaining discretionary
programs. If certain non-firewall transportation programs remain underfunded,
the cause is not TEA21, but rather decisions by the appropriators to spend money
elsewhere.16
The appropriators can still appropriate TEA21 funds authorized outside the
firewalls. As can be seen in Table 1 these funds are a relatively small portion of the
total TEA21 authorization, however. Whether there is any incentive for the
appropriators to appropriate these funds is an open question in light of the overall
discussion of the restrictions placed on the budget/appropriations process by the
12For a discussion of FY1999 transportation appropriations legislation see: U.S. Library of
Congress. Congressional Research Service. Appropriations for FY1999: Department of
Transportation and Related Agencies. CRS Report 98-208 STM. by Duane Thompson.
13U.S. Congress. House. Committee on Appropriations. Department of Transportation and
Related Agencies Appropriations Bill, 1999. Report 105-648. July 24, 1998. p. 4.
14For example, see: Eilperin, Juliet. Highway Bill Lets Shuster Play His Trump Card. The
Washington Post. August 6, 1998. p. A17.
15Ognanovich, Nancy and Bolen, Cheryl. GOP Leadership to Meet on ISTEA; Funding Plan
Attacked by Budget Hawks. Daily Report for Executives. May 13, 1998. p. A-45.
16Congressional Record. House. July 29, 1998. p. H6738.

CRS-12
firewall system. It is instructive that FY1999 appropriations legislation under
consideration at this time contains no additional funding from these sources.
This point-counterpoint debate may constitute the opening salvo of a new
chapter in the long standing struggle between appropriators and authorizors over
control of federal transportation programs. Although appropriators apparently lost
much of their authority over spending within the firewalls, the situation could change
in the years ahead. The consideration of the FY1999 transportation appropriations
bill on the House floor raised a number of issues vis-a-vis what appropriations can,
or cannot, control.17 This debate was particularly telling in regards to use of the
point-of-order provisions to prevent deletion of a project listed in the Act.18 As a
result of the actions on the House floor, the House Committee on Rules is expected
to hold a meeting on these issues in September 1998.19 The outcome of these
discussions will likely have considerable influence on how the new TEA21 budget
environment operates in the years ahead.
The outcome of this debate is also of great concern to the business and industry
supporters of increased highway and transportation spending. These groups played
a major role in pushing for the changed budget treatment of the highway trust fund.
They are wary of possible attempts to breach the firewalls and are already warning
their memberships to be vigilant in lobbying for the firewall system.20
Other groups such as the Concord Coalition have long opposed giving the
highway trust fund special budget treatment.21 From the perspective of these groups
creating special categories within the federal budget distorts the overall view of how
and/or whether the budget is in surplus or deficit. While groups such as the Concord
Coalition have not yet taken a specific position on the repeal of the firewall system,
it is possible that some, as of yet, unforseen budget conditions (i.e., a return to a
deficit) could cause more activity on their part.
Future Appropriations for non-TEA21 Transportation Programs
Chairman Shuster and other Members of the House Transportation and
Infrastructure Committee have the stated position that all transportation trust fund
programs should be outside the discretionary budget.22 The other transportation trust
funds had been part of proposed off-budget legislation considered in the 105th
Congress. During consideration of the legislation that became TEA21 these trust
funds were removed from the bill, apparently because including them further
17Congressional Record. July 29, 1998. p. H6706 - H6739.
18Eilperin, Juliet. p. A17.
19Washington Letter on Transportation. Final Decisions on Year Ahead are Put on Hold.
August 15, 1998. p. 3.
20American Road & Transportation Builders Association. p. 4.
21http://www.concordcoalition.org/news/releases/980323_transport_letter.html
22Shuster, Bud. Putting Trust Back in Trust Funds. http://www.house.gov/
transportation/hotissue/tfobhill.htm

CRS-13
complicated the already controversial budget provisions of the bill, and because they
funded activities not seen as germane to the programs authorized by TEA21.
It is widely believed that the budget treatment of the airport and airway trust
fund (aviation trust fund) will become an issue in the 106th Congress. The
congressional supporters of building firewalls around the aviation trust fund are often
essentially the same Members that actively supported the change for the highway
trust fund. There is also a possibility that Federal Aviation Administration
reauthorization legislation will be required in the 106th Congress, thereby providing
a legislative vehicle for a possible change.
In addition, the aviation trust fund is expected to have large unobligated
balances in the years ahead unless spending from the fund is increased. This
situation, combined with the belief in some quarters that FAA spending is
constrained by the TEA21 firewalls in the appropriations process, may heighten
interest in providing some sort of firewall protection for aviation.
Supporters of the Coast Guard are also concerned about the new transportation
appropriations environment. The Coast Guard is not funded by a trust fund, and
hence cannot claim a user fee base to support an argument for its own budget
firewalls. The Coast Guard has a unique status within the transportation budget
category because of its wartime role in national defense. It is not unusual for the
Coast Guard to receive some funds from military appropriations during the annual
appropriations process. It is possible that the Coast Guard will seek additional
funding from the military side of the budget in the years ahead if additional funds for
transportation do not become available.
Other DOT agencies funded within the transportation component of the budget
also operate without trust fund monies. As a result, they too will be affected by the
new TEA21 driven appropriations process and may see their respective budgets
constrained unless overall funding for the budget transportation component is
increased.
The firewall system initiated by TEA21 could be viewed as an experiment in
federal budgeting. The outcome of the experiment will obviously play an important
role in determining how federal transportation programs will operate in the future.
In addition, the firewall system could have implications for the funding of other
federal transportation and non-transportation programs. TEA21's budget provisions
expire at the end of FY2003. As a result, Congress will be dealing with
transportation budget issues again in the not too distant future.

CRS-14
Appendix
Balances of the Highway Account of the Highway Trust Fund,
FY1988-FY1997 (in millions of dollars)
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Tax Revenue During the Period
Total Tax
12,836
14,359
12,472
14,494
15,664
16,046
14,660*
20,420
22,034
20,689
Revenue
Cash Outlays During the Period
Total Annual
14,038
13,603
14,375
14,687
15,518
16,641
19,011
19,472
20,018
20,871
Outlays
Net Income
-1,201
756
-1,903
-193
146
-595
-4,351*
948
2,016
-182
Before
Interest
Interest on
809
776
981
810
909
818
754
547
658
802
Investments
Change in Cash
-392
1,532
-922
617
1,055
223
-3,597*
1,495
2,674
620
Trust Fund Balances
Unexpended
9,412
9,019
10,551
9,629
10,246
11,301
11,524
7,927
9,421
11,658
Balance, Start of
Year
Change in Cash
-392
1,532
-922
617
1,055
223
-3,598*
1,495
2,674
620
Unexpended
9,019
10,551
9,629
10,246
11,301
11,524
7,926*
9,421
12,095
12,278
Balance, End of
Year
* The U.S. Treasury failed to credit the trust fund with $1.6 billion in tax revenues collected in FY1994. These revenues
have been credited to the FY1995 beginning balance. This accounting situation distorts the FY1994 numbers.
Source: U.S. Government. Office of Management and Budget. Budget of the United States Government, various years.

CRS-15
Balances of the Transit Account of the Highway Trust Fund,
FY1988-FY1997 (in millions of dollars)
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Tax Revenue During the Period
Total Tax Revenue
1,277
1,269
1,395
2,485*
1,070*
1,949
2,008
2,192
2,617
3,198
Cash Outlays During the Period
Total Outlays
696
849
879
1,054
1,268
1,916
3,364
3,179
3,336
3,663
Net Income Before
582
420
516
1,431
-198
33
-1,355
-987
-719
-465
Interest
Interest on
384
469
581
664
746
710
684
621
665
638
Investments
Change in Cash
966
889
1,097
2,095
548
743
-672
-366
-54
173
Trust Fund Balances
Unexpended
4,202
5,168
6,057
7,154
9,249
9,797
10,617
9,945
9,579
9,525
Balance, Start of
Year
Change in Cash
966
889
1,097
2,095
548
743
-672
-366
-54
173
Unexpended
5,168
6,057
7,154
9,249
9,797
10,474
9,945
9,579
9,525
9,698
Balance, End of
Year
* The U.S. Treasury over credited FY1991 tax receipts and applied corrections in FY1992.
Source: U.S. Government. Office of Management and Budget. Budget of the United States Government, various years.

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