January 2, 2015
Surface Transportation Funding and Infrastructure Challenges
Surface transportation reauthorization acts fund federal
highway and public transportation programs. The Moving
Ahead for Progress in the 21st Century Act (MAP-21; P.L.
112-141), which originally expired September 31, 2014, has
been extended through May 31, 2015, by the Highway and
Transportation Funding Act of 2014 (P.L. 113-159). The
most salient issue for the 114th Congress will be funding
and the solvency of the highway trust fund (HTF). The
extension bill transferred $10.8 billion into the HTF to
prevent a funding shortfall. More money will be needed if
Congress wishes to continue the highway and public
transportation programs at their current levels. MAP-21
made major changes in these programs, many of which
have yet to be fully implemented. This may limit
Congress’s desire to make further major changes at this
The Federal-Aid Highway Program
MAP-21 provided $41 billion annually for highways. Of
these funds, 92% are provided to the states via formula. The
states have nearly complete control over the decision
making in regard to these funds, within the limits of federal
planning, eligibility, and oversight rules. Money is not
provided up front. A state is reimbursed after work is
started, costs are incurred, and the state submits a voucher
to the Federal Highway Administration (FHWA). The
highway programs are focused on highway construction
and planning, and do not support operations or routine
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 excise taxes on gasoline and diesel are fixed in terms of
cents per gallon (18.3 cents for gasoline and 24.3 cents for
diesel), and do not adjust for inflation or change with fuel
prices. The rates were last raised in 1993. Increases in
gasoline and diesel consumption kept revenues growing
until the recession of 2007. Since that time, improving fuel
efficiency and slow growth in vehicle mileage have led to a
decline in revenues. Spending from the HTF consistently
outruns highway user revenues. Unable to agree on revenue
increases or program reductions, Congress began providing
a series of transfers to the HTF to prevent its insolvency.
Since September 2008, Congress has provided over $65
billion to the HTF, mainly from the Treasury general fund.
Short-term issues. Unless Congress authorizes additional
funds before then, the balance in the HTF is expected to fall
so low by early summer of 2015 that the Department of
Transportation will have to delay reimbursement to states
and transit agencies for completed projects. Sustaining the
HTF through the end of FY2015 is likely to require $6
billion to $7 billion in transfers or additional revenue.
Long-term issues. The Congressional Budget Office
(CBO) projects an annual gap of around $15 billion
between the anticipated flow of revenue into the highway
trust fund and the cost of maintaining current highway and
public transportation programs (see Figure 1).
Figure 1.HTF Revenues and Outlays: FY2008-FY2018
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
Source: Congressional Budget Office.
Highway trust fund. Historically, all of the federal
highway program and 80% of the public transportation
program have been funded with revenues from the HTF.
Revenues supporting the HTF come from a combination of
fuel, truck, and tire taxes, but the fuel taxes provide about
90% of the money.
What Are the Options?
Continue transferring general funds. Congress could
choose to appropriate sufficient general fund transfers
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
increase the budget deficit, meaning that spending on other
programs must be reduced or tax receipts increased in
amounts equal to the amounts of the transfers.
Cut spending. Congress could reduce federal highway and
public transportation spending to match the currently
projected revenues. This would require spending cuts
approaching 30%. Cuts could be made across the board or
by eliminating programs. Cuts could be accompanied by
requiring states and municipalities to pay a greater share of
the cost of highway and public transportation programs.
Another option would be to devolve responsibility for
highways to the states, leaving only a small federal program
to build and maintain roads on federal land.
Separate public transportation from the HTF. Under this
scenario, federal support for public transportation would be
provided from the general fund as Congress sees fit. If the
HTF were to be dedicated solely to highway spending at the
current level, adjusted only for inflation, annual receipts are
projected to remain $4 billion to $5 billion less than annual
A wide variety of revenue sources have been suggested to
help address the HTF shortfall. Among the most commonly
suggested are the following:
Increase the fuels tax. The motor fuels tax could be raised
enough to make up for its loss of purchasing power and
then be adjusted annually for inflation and fuel efficiency.
Based upon the current level of consumption, an increase of
approximately 10 cents to 15 cents per gallon of gasoline
would be required to fully fund highway and public
transportation programs at their current levels.
Impose a national motor fuel sales tax. A percentage tax
on the retail price of motor fuels could be imposed that
would rise with the price. Since gas prices can also fall, this
might not be a reliable source of growing revenue.
Impose a vehicle miles traveled (VMT) charge. Charging
vehicle owners for each mile of travel 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.
crude were taxed, oil used for nontransportation purposes,
such as home heating or manufacturing, would be taxed to
support highways and public transportation.
Tolling. Tolls could be used to pay for highway projects,
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.
Private investment. Public-private partnerships and
privatization of existing government-owned roads and
bridges may reduce federal costs in some cases. However,
relatively few transportation projects are suitable for largescale private investment, and investors are increasingly
insisting that the public sector retain the risk that traffic
volumes will be below expectations.
Issues in Reauthorization
The federal-state relationship is central to the federal
highway program and underlies most reauthorization issues.
Recent reauthorizations have increased the states’ discretion
in the use of federal highway funds. However, greater state
discretion may conflict with other congressional priorities
such as improving the condition of highway bridges; there
are approximately 64,000 structurally deficient bridges, but
it is up to the states to determine how much of their federal
highway funds will be spent on bridges and how much on
roads. Other issues include federal rules and regulations on
environmental protection and performance management.
The distribution of available highway funds among states
has historically been one of the most difficult issues for
Congress to resolve. States have been concerned about the
amount of funding they receive relative both to other states
and to the contribution their drivers make to the HTF.
In 2012, Congress created a national freight planning
program, and funding of a national freight program will
likely be considered in reauthorization. Potential sticking
points may be the use of highway tax funds for rail or
marine projects and the distribution of such targeted funds
among the states.
Bus systems in smaller cities and rural areas have
complained that provisions in MAP-21 have made it harder
for them to purchase buses. Funding for bus-related
investment needs may become an issue in reauthorization.
Dedicate tax reform revenues to the HTF. Various tax
reform proposals would lead to short-term increases in
federal revenue, which could be dedicated to transportation.
Many of these proposals would generate increased revenues
only for a limited period, leaving the long-term imbalance
between HTF revenue and outlays unresolved.
Tax oil at the refinery level. This tax would be a tax on
petroleum and petroleum products based on a percentage of
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
Robert S. Kirk, email@example.com, 7-7769
William J. Mallett, firstname.lastname@example.org, 7-2216
CRS Report R43420, Surface Transportation Program
Reauthorization Issues for Congress, and CRS Report
R42877, Funding and Financing Highways and Public
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