Reauthorizing Highway and Transit Funding Programs

Reauthorizing Highway and Transit Funding Programs

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Updated March 1, 2021
Reauthorizing Highway and Transit Funding Programs
Surface transportation reauthorization acts fund federal
diesel), and do not adjust for inflation or change with fuel
highway and public transportation programs, along with
prices. The rates were last raised in 1993. Increases in fuel
transportation research, intercity passenger rail, and other
consumption kept revenues growing until the recession that
programs. The five-year Fixing America’s Surface
began in 2007. Since that time, improving fuel efficiency
Transportation Act (FAST Act; P.L. 114-94) authorized
and slower growth in vehicle mileage have led revenue to
federal spending on highways and public transportation for
level off in most years, and spending from the HTF has
FY2016-FY2020. A one-year FAST Act extension, through
consistently outrun highway user revenues. Unable to agree
September 30, 2021, was enacted as part of the Continuing
on revenue increases or program reductions, Congress
Appropriations Act, 2021, and other Extensions Act (P.L.
began providing transfers to the HTF to prevent its
116-159). Infrastructure legislation could be considered in
insolvency. Since September 2008, Congress has provided
conjunction with FAST Act reauthorization.
$158 billion to the HTF, mainly from the Treasury general
fund. This includes $83.6 billion of transfers authorized in
The Federal-Aid Highway Program
the FAST Act as extended.
The FAST Act, as extended, provides an average of about
Short-term issues. The Congressional Budget Office
$45 billion annually for the 1,032,783-mile system of
(CBO) estimates that the HTF has sufficient balances to
federal-aid highways. Although there are exceptions,
cover expected outlays until summer 2022. Unless
federally funded projects are generally limited to this
Congress authorizes additional revenues or transfers by
system that includes roughly 25% of all U.S. public road
then, the balance in the HTF could fall so low that the
mileage. Of these funds, 92.5% are distributed to the states
Department of Transportation may have to delay payments
via formula. The states have nearly complete control over
to states and transit agencies for work completed. In
the use of these funds, within the limits of federal planning,
addition, highway tax revenues have declined due to the
eligibility, and oversight rules. Money is not provided up
COVID-19 pandemic, as Americans have driven less.
front. A state is reimbursed after work is started, costs are
incurred, and the state submits a voucher to the Federal
Long-term issues. More money will likely be needed if
Highway Administration (FHWA). The highway program
Congress wishes to continue the highway and public
focuses on highway construction and planning, and does
transportation programs at or above their current levels,
not support operations or routine maintenance. The federal
adjusted for inflation, in a future multiyear reauthorization.
share of project costs is generally 80%, but 90% for
CBO projects the annual difference between revenues and
Interstate System projects. As part of COVID relief, the
outlays to rise from $13 billion in FY2022 to $22 billion in
Consolidated Appropriations Act, 2021 (P.L. 116-260)
FY2027 (see Figure 1).
provided an additional $10 billion from the general fund for
highways and state transportation departments.
Figure 1. HTF Revenue and Outlays ($ Billions)
The Federal Public Transportation Program
The FAST Act, as extended, authorizes an average of $12.3
billion annually for the federal public transportation
program. Most of this funding is distributed by formula to
local transit agencies. The largest discretionary program is
the Capital Investment Grants Program, more widely
known as “New Starts,” which supports construction of
new local rail, bus rapid transit, and ferry systems, and the
expansion of existing systems. To date, during the COVID-
19 pandemic, the Federal Transit Administration (FTA) has
received $39 billion in pandemic related assistance.
Funding Issues

Highway Trust Fund. Historically, all of the federal
Source: CBO, Highway Trust Fund Baseline—February 2021.
highway program and 80% of the public transportation
program have been funded with revenues from the Highway
Based on current law, a future five-year reauthorization bill
Trust Fund (HTF). Revenues supporting the HTF come
would need to cover a projected $70 billion shortfall, and a
from a combination of fuel, truck, and tire taxes, but the
six-year bill would need to cover $92 billion.
fuel taxes provide about 85%-90% of the money.
What Are Some Options?
The excise taxes on gasoline and diesel are fixed in terms of
Continue reliance on general funds. Congress could
cents per gallon (18.3 cents for gasoline and 24.3 cents for
choose to transfer money from the general fund to the HTF
https://crsreports.congress.gov

Reauthorizing Highway and Transit Funding Programs
to accommodate as large a surface transportation program
States have been concerned about the funding they receive
as desired. When the FAST Act, as extended, expires at the
relative both to other states and to the contribution their
end of FY2021, general fund transfers will have supported
drivers make to the HTF. Although the current distribution
outlays for 13 years.
formula is based on FY2015 apportionments, the state
shares have not changed since before FY2009. The formula
Cut spending. Congress could reduce federal highway and
does not directly consider factors such as states’ rates of
public transportation spending to match projected revenues.
population and highway travel growth, which might be
This would require spending cuts of roughly 25%.
relevant in assessing the need for new highway capacity.
Devolve highway programs. Congress could give
responsibility for highways to the states and reduce federal
Environmental justice—assuring fair treatment for all in
motor fuel and truck taxes accordingly. States could raise
regard to the negative impacts of transportation decisions,
their own highway revenues or reduce spending as they see
spending, or policies—has reemerged as an issue.
fit. The challenge of making these adjustments would vary
greatly from state to state. Devolution would have
State discretion may conflict with the desire of Congress to
significant federal front-end costs, because the federal
set priorities. For example, despite progress, there were still
government would still have to reimburse the states for
about 46,000 bridges in poor condition nationwide at the
highway projects committed to in previous years.
end of 2019. It would be difficult for Congress to make
bridge repair a priority without reducing states’ discretion.
Separate public transportation from the HTF. Federal
support for public transportation could be provided from the
Most federal surface transportation funding is distributed by
general fund as Congress sees fit. If the HTF were to be
formula. This can make it difficult to fund large projects of
dedicated solely to highway spending at the current level,
regional impact. Discretionary funding intended to fill this
adjusted only for inflation, annual receipts are projected to
gap is comparatively small. For example, while the FAST
remain $2.2 billion (FY2022) to $9.9 billion (FY2027) less
Act created a freight-focused discretionary program, the
than annual expenditures under a possible six-year bill.
program does not have the resources to fund extensive
widening or bridge construction on highways anticipated to
Revenue Options
have high growth in truck traffic. Historically, discretionary
A wide variety of revenue sources have been suggested to
funding has often been broken into many relatively small
help address the HTF shortfall, including the following:
grants. This was especially true prior to a 2011 ban on
Increase the fuel tax. The motor fuel tax could be raised
earmarks, when virtually all discretionary program funding
enough to make up for its loss of purchasing power and
was distributed by earmarking.
then be adjusted annually for inflation and fuel efficiency.
Based upon the current level of fuel consumption, an
Given both falling public transportation ridership and
increase of fuel taxes in the range of 10 cents to 15 cents
substantial preservation needs, Congress might consider
per gallon would be required to fund surface transportation
both the size and direction of the federal public
programs at their current levels, adjusted for inflation.
transportation program. One question is whether
discretionary funding for major capital projects, provided
Tax electric vehicles (EVs). Charging EV drivers for road
through the Capital Investment Grants Program, is being
use could provide some revenue. Vehicles that do not
spent effectively to build rail and bus rapid transit in
consume motor fuel do not contribute to the HTF. Finding
relatively low-density urban areas.
an equitable and efficient way for the federal government to
tax EVs presents a challenge.
Transportation is the largest source of U.S. greenhouse
Impose a vehicle miles traveled (VMT) charge. Charging
gases. Climate change mitigation programs or measures to
vehicle owners for each mile of travel has been discussed
accelerate the electrification of the U.S. vehicle fleet,
for many years as an alternative to the motor fuel tax.
increase fuel efficiency, or prioritize the consideration of
Congress could set the per-mile rate and raise it as
climate impacts in the project approval process could all
necessary. However, this revenue source has privacy,
emerge during the reauthorization debate. Disaster response
implementation, and collection cost issues.
and the resiliency of highway and public transportation
infrastructure are also likely to be important issues.
Tolling. Tolls could be used to pay for highway projects,
Concerns that climate change and more frequent natural
reducing demands on the HTF. Toll systems can be costly
disasters are damaging roads and transit lines could lead to
to administer and are subject to evasion. Many roads do not
consideration of requirements that states and transit
have enough traffic to make tolling worthwhile.
agencies devote more attention to resilience in
Private investment. Increased use of public-private
infrastructure design.
partnerships and privatization of roads and bridges may
More Information
reduce federal costs in some cases. However, relatively few
transportation projects are suitable for large-scale private
CRS Report R45350, Funding and Financing Highways
investment, and investors are sometimes unwilling to accept
and Public Transportation.
the risk that traffic volumes will be below expectations.
Robert S. Kirk, Specialist in Transportation Policy
Issues in Reauthorization
William J. Mallett, Specialist in Transportation Policy
The distribution of highway funding among states has
IF11125
historically been a difficult issue for Congress to resolve.
https://crsreports.congress.gov

Reauthorizing Highway and Transit Funding Programs

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https://crsreports.congress.gov | IF11125 · VERSION 5 · UPDATED