Transit Program Reauthorization in the 108th Congress

Transit Program Reauthorization in the 108th Congress

Order Code RL31854
Report for Congress
Received through the CRS Web
Transit Program Reauthorization
in the 108th Congress
April 16, 2003
D. Randy Peterman
Analyst in Transportation
Resources, Science and Industry Division
Congressional Research Service ˜ The Library of Congress

Transit Reauthorization in the 108th Congress
Summary
Transit programs are authorized as part of surface transportation authorizing
legislation. The current transit authorizing legislation, the Transportation Equity Act
for the 21st Century (TEA-21; P.L. 105-178) expires at the end of FY2003. The 108th
Congress is considering surface transportation reauthorization, including
reauthorizing transit programs. Transit programs are overseen by the Federal Transit
Administration (FTA) of the Department of Transportation (DOT).
Among the issues which may be debated in the course of reauthorizing transit
programs are the FTA’s funding level. The Administration’s FY2004 budget
requests the same level of funding for FTA–$7.2 billion–as it received for FY2003,
and projects an average annual appropriation of $7.2 billion for FTA over FY2004-
FY2008, which represents no increase over FTA’s FY2003 appropriation (or a
potential reduction when inflation is considered). The DOT’s estimates of transit
needs would require an FTA appropriation of around $9 billion annually to maintain
the status quo and $12 billion annually to accommodate growth in transit demand;
industry groups have higher estimates of those needs.
Another issue with potentially far-reaching effects is the Administration’s
proposal to lower the maximum federal share for New Starts capital projects from
80% to 50%. This would enable federal funding to go to more projects; it would also
make highway projects relatively more attractive than transit projects in the eyes of
state and local agencies, as the federal share for highway projects will likely remain
80%.
A further issue likely to be debated is the preservation of TEA-21’s so-called
“firewalls” and guaranteed funding provisions. The guaranteed funding provisions
provide a minimum level of FTA funding for each year; the “firewalls” prevent
funds in the Mass Transit Account of the Highway Trust Fund from being used for
any purpose other than transit funding. These provisions made it more likely that
appropriators would fully fund FTA’s programs each year. Appropriators criticize
this arrangement for limiting their flexibility to balance all the competing demands
for funding.
Other issues which may be debated in the course of transit reauthorization
include funding levels for small transit-intensive cities, rural transit, and bus
purchases; earmarking of discretionary programs; and ways to improve program
delivery. This report will be updated as warranted by events.

Contents
Federal Transit Funding Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Urbanized Areas Formula Program (Section 5307) . . . . . . . . . . . . . . . . . . . . 1
Capital Investment Grants and Loans Program (Section 5309) . . . . . . . . . . . 2
New Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Fixed Guideway Modernization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bus and Bus Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reauthorization Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Funding Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Federal Share for New Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Guaranteed Obligation Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Funding for Small Transit-Intensive Urbanized Areas . . . . . . . . . . . . . . . . . 7
Funding for Rural Transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Funding for Buses and Bus Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Earmarking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Improving Program Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Appendix: Federal Transit Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1: Federal Transit Administration’s Annual Appropriations
under TEA-21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 2: Federal Share of Total Transit Spending, by Type of
Expenditure, FY2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 3: History of the Mass Transit Account’s Portion of the
Federal Motor Fuels Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Transit Program Reauthorization
in the 108th Congress
Transit programs are authorized as part of surface transportation authorizing
legislation. The current transit authorizing legislation, the Transportation Equity Act
for the 21st Century (TEA-21; P.L. 105-178), expires at the end of FY2003. The
108th Congress is considering surface transportation reauthorization, including
reauthorizing transit programs. Among the issues that may be debated in the course
of reauthorization are the overall level of federal transit funding; the federal share for
New Starts projects; the Federal Transit Administration’s (FTA) guaranteed funding
provisions; the funding levels for small transit-intensive cities, rural transit, and bus
purchases; the earmarking of discretionary program funding; and streamlining project
delivery.
Federal Transit Funding Structure
The vast majority of federal transit funding is provided through two programs:
the Urbanized Areas Formula Program and the Capital Investment Grants and Loans
Program (which has three component programs: New Starts, Fixed Guideway
Modernization, and Bus and Bus Facilities). There are also a number of smaller
transit programs in addition to these, but these major programs represent around 90%
of FTA’s annual funding.
Urbanized Areas Formula Program (Section 5307)
This program apportions $3.6 billion (FY2003) to urbanized areas according
to a formula that takes into account population size, population density, and transit
service data. Areas with populations over 1 million receive two-thirds of the
funding; those with populations between 50,000 and 1 million receive the remaining
one-third. These funds are to be used for capital expenses;1 areas under 200,000 in
population can use their funds for operating expenses as well. Areas over 200,000
in population are required to use at least 1% of their formula funds for transit
enhancements.2
1 Capital expenses are defined in 49 U.S.C. 5302(a)(1).
2 Transit enhancements are defined in 49 U.S.C. 5302(a)(15), and include such things as bus
shelters, landscaping, pedestrian walkways, and bike storage facilities.

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Capital Investment Grants and Loans Program (Section 5309)
This program provides $3.0 billion (FY2003) for capital projects, divided 40%-
40%-20% among three component programs: New Starts, Fixed Guideway
Modernization, and Bus and Bus Facilities.
New Starts. This program provides $1.2 billion (FY2003) to metropolitan
areas that are building new fixed guideway3 systems or extensions to existing
systems. Projects are evaluated by the Federal Transit Administration (FTA) at
several stages. Near the beginning of each appropriations cycle, FTA issues a report
to Congress in which they recommend projects for funding.4 Funding has to be
appropriated annually by Congress.
Fixed Guideway Modernization. This program apportions $1.2 billion
(FY2003) to metropolitan areas that have fixed guideway systems (light rail, heavy
rail, commuter rail, bus rapid transit, etc.) that are at least 7 years old, according to
a formula that takes into account the size of the system.
Bus and Bus Facilities. This program provides $657 million (FY2003) to
communities for purchase of buses and bus-related facilities. This is a discretionary
grant program; virtually all of the funding is earmarked by Congress each year.
Reauthorization Issues
Capital Funding Level
From 1997 to 2000, transit ridership (passenger miles) increased by 12%; for
rail systems, the increase was 16%.5 Faced with growing use of transit systems and
growing traffic congestion, many communities with transit systems want to expand
them and many communities without transit systems want to provide them.
The FTA, as well as several transportation organizations, provide estimates of
the level of transit capital spending needs. These capital spending needs cover the
replacement of aging vehicles, maintenance of infrastructure, and other system
capital costs, as well as purchase of new vehicles and construction of new
infrastructure where new systems are being built or existing systems expanded. In
FTA’s analysis, the cost for maintaining the status quo is based on estimates of
spending required to maintain vehicle fleets and facilities in a condition rated as good
or excellent (compared with ratings of fair, marginal or poor), assuming some level
3 A fixed guideway system can be heavy rail, light rail, or a bus rapid transit system.
4 Federal Transit Administration, Annual Report on New Starts. Available in hard copy and
at [http://www.fta.dot.gov/library/policy/ns/annreports.htm].
5 United States Department of Transportation, Federal Highway Administration and Federal
Transit Administration, 2002 Status of the Nation’s Highways, Bridges and Transit:
Conditions and Performance Report, Chapter 2, Exhibit 2-19, “Urban Transit Passenger
Miles” [http://www.fhwa.dot.gov/policy/2002cpr/].

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of future ridership. FTA’s cost for accommodating growth is an estimate of costs
required to attain a national average condition of good or excellent for vehicles and
facilities, and a certain national average level of performance,6 by the year 2020,
assuming a level of future ridership. The cost estimates for accommodating growth
in the non-governmental studies include the costs of proposed new fixed guideway
systems and expansions to existing systems in the list of authorized New Starts
projects (or, as the American Public Transportation Association [APTA]’s report puts
it, “all potential investments in transit in an unconstrained environment”). There is
no way to evaluate the accuracy of the numbers in these reports, because there are no
comprehensive studies of transit needs by independent sources (that is, entities not
dependent on transit funding). This report uses numbers from these studies, because
they are the best information available, but the numbers should be viewed with
caution.
To maintain the status quo level of transit service, the American Association of
State Highway and Transportation Officials (AASHTO) estimated it would cost $19
billion annually over the next six years,7 while the FTA estimated it would cost $15
billion8; APTA did not provide an estimate for maintaining the status quo. To
accommodate forecast growth based on recent ridership trends, AASHTO estimated
a need for $44 billion annually; APTA estimated a need for $42 billion annually;9 and
the FTA estimated a need for $20 billion annually. Note that these figures are for
capital spending only; capital spending represents only about one-third of all transit
spending, with the rest going to operating costs. But capital costs are the focus of
federal transit spending; about 81% of federal transit spending is for capital costs.
To put these numbers in perspective, total transit capital spending in FY2000
(the most recent year for which data are available), across all levels of government,
was $9.1 billion; of that amount, $4.3 billion (47%) came from federal sources.10
Assuming the ratio of federal transit funding going to capital costs remains at 81%,
and the federal proportion of all transit capital spending remains at 47%, then the $15
billion FTA estimates is needed for maintaining the status quo would require an FTA
6 The estimate of the cost for attaining the performance level is partially based on shifting
from bus to rail (in urbanized areas with populations over 500,000 and average operating
speeds below a certain threshold) until the national average vehicle speed reaches a
specified level by 2020.
7 American Association of State Highway and Transportation Officials, Transportation:
Invest in America–The Bottom Line, “Transit Capital Investment Scenarios,”2002,
[http://www.transportation.org/bottomline/].
8 United States Department of Transportation, Federal Highway Administration and Federal
Transit Administration, op. cit., Chapter 7: “Capital Investment Requirements.”
[http://www.fhwa.dot.gov/policy/2002cpr/es7.htm].
9 American Public Transportation Association (APTA), Transit Needs Synthesis Report,
preliminary version, February 25, 2002, available on the APTA Web site at
[http://www.apta.com/govt/record/aptatest/needs.htm].
10 United States Department of Transportation, Federal Highway Administration and Federal
Transit Administration, op. cit, Chapter 6: “Finance,” Exhibit 6-27.
[http://www.fhwa.dot.gov/policy/2002cpr/ch6.htm].

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annual appropriation of around $9 billion (compared to $7.2 billion in FY2003); the
$20 billion FTA estimates is needed to accommodate growth would require an annual
appropriation of around $12 billion, and the $42-$44 billion APTA and AASHTO
estimate is required to accommodate growth would require an annual FTA
appropriation of around $25 billion.
TEA-21 produced a significant increase in FTA’s annual appropriation. From
a peak of $4.7 billion in FY1981 to the passage of TEA21 in FY1998, FTA’s annual
appropriation ranged between $3.2 and $4.6 billion. Since passage of TEA-21,
FTA’s annual appropriation has grown from $4.8 billion in FY1998 to $7.2 billion
in FY2003 (see Table 1 in the Appendix).
The Bush Administration has not yet released a proposal for surface
transportation reauthorization. However, the budget projections in their FY2004
budget show an average annual appropriation of $7.2 billion for FTA over FY2004-
FY2008,11 which represents no increase over FTA’s FY2003 appropriation (or a
potential reduction when inflation is considered).
The Leadership of the House Committee on Transportation and Infrastructure
has proposed a 72% increase in authorized funding for the next six years;12 the
allocation of the proposed increase among highway, transit and highway safety
programs has not been determined. Interest groups have also supported increases in
transit funding for the next authorization period; for example, AASHTO recommends
increasing transit funding to at least $11 billion by FY2009,13 and APTA
recommends increasing transit funding to $14 billion by FY2009.14
The transit account currently receives 2.86¢ of the 18.4¢ federal motor fuels tax
(15.5% of the tax); in FY2001, the Mass Transit Account received $4.6 billion from
this tax. The Administration and some Members of Congress oppose an increase in
the federal motor fuels tax, and Congress is operating in a constrained budget
environment. It is not clear, therefore, where the funds for a significant increase in
the size of the transit program would come from. Representative Don Young,
Chairman of the House Committee on Transportation and Infrastructure, has
mentioned a number of possible sources for increased surface transportation funding,
including crediting the Highway Trust Fund with interest, spending down the Fund’s
balance, directing all gasohol revenues to the Fund, reimbursing the Fund for
11 White House, Office of Management and Budget, Analytical Perspectives, Budget of the
United States government, FY2004, Table 25-2: Outlays.
12 House Committee on Transportation and Infrastructure, “$375 Billion Investment for
Highway & Transit Programs Proposal Outlined by U.S. House Transportation Committee
L e a d e r s h i p , ” P r e s s R e l e a s e , M a r c h 1 2 , 2 0 0 3 . A v a i l a b l e a t
[http://www.house.gov/transportation].
13 American Association of State Highway and Transportation Officials (AASHTO),
AASHTO Journal, 103:8 (February 21, 2003), 7.
14 American Public Transportation Association, Testimony before the Highways and Transit
Subcommittee of the House Transportation and Infrastructure Committee, September 19,
2002. Available at [http://www.apta.com/govt/record/aptatest/020919.htm].

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gasohol’s 5.3¢ exemption, and indexing the motor fuels tax for inflation (retroactive
to 1993, the date of the last increase in the tax).15
There is support from transportation groups, such as AASHTO16 and the
American Road & Transportation Builders Association (ARTBA),17 for increasing
the federal motor fuels tax to provide more money for highway and transit projects.
Transit interests, such as APTA, also support increases in the fuels tax. A
longstanding informal arrangement provides that 20% of any increase in the federal
motor fuels tax be provided to the Mass Transit Account of the Highway Trust Fund.
The Federal Share for New Starts
One response to the alleged gap between transit capital funding needs (or
desires) and the level of federal funding has been a proposal to reduce the federal
matching share for FTA New Starts projects.
The Administration has proposed reducing the federal share from the current
level of (up to) 80% (the same level as most highway programs) to 50% starting in
FY2004. In 2001, Congress directed FTA not to sign any New Starts project full-
funding grant agreements18 that provide a federal share of more than 60% after
FY2002.19
FTA reports that the federal share for New Starts projects with full funding grant
agreements has averaged around 50% over the past 10 years (56% for agreements
signed between 1992-1997, and 46% for agreements signed between October 1999-
November 2001). The federal share in the individual agreements making up this
average ranged from a low of 19% to a high of 80%.20
Critics of the Administration’s proposal to formally cap the federal share at a
lower level point to the success of FTA’s efforts to reduce the average federal share
as evidence that a lower cap is unnecessary. They argue that a lower cap would
15 Statement of U.S. Rep. Don Young, Highway & Transit Reauthorization, Press
Conference, March 12, 2003. Available at [http://www.house.gov/transportation].
16 American Association of State Highway and Transportation Officials, Transit: An
Essential Part of a Balanced Transportation System (2003 Issue Paper), available at
[http://www.transportation.org/aashto/issues.nsf/allpages/issues2003?opendocument].
17 American Road and Transportation Builders Association, Testimony before the Highways
and Transit Subcommittee, House Committee on Transportation and Infrastructure,
September 19, 2002, available at [http://www.artba.org/government/tea-21/tea_21.htm].
18 Full-funding grant agreements are used to finance New Starts projects after they have been
approved for final design and construction. These agreements define the project, including
its cost and schedule, and commit to a maximum level of federal financial assistance
(subject to appropriations).
19 H.Rept. 107-308, to accompany H.R. 2299 (the FY2002 Department of Transportation and
Related Agencies Appropriations Bill), p. 114.
20 General Accounting Office, FTA’s New Starts Commitments for Fiscal Year 2003, GAO-
02-603, 24.

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penalize projects already partly through the New Starts process whose plans are
premised on receiving a higher federal share, and that the change could
disproportionately hurt poorer communities which might not have the fiscal resources
to provide a higher local match. State and local officials have testified that lowering
the cap on the federal share could bias transportation planning decisions away from
transit projects toward highway projects, where the federal match is likely to remain
80%. They have also said that a lower cap might lead to redirecting funds from
highway or other transit projects to make up the difference, or force the scaling back,
postponement or cancellation of individual proposed New Start projects.21
The Administration and other supporters of lowering the federal share argue that
the change would formalize the current FTA policy of promoting a lower level of
federal cost-sharing in New Starts projects. They also argue that requiring a higher
local match would promote a more rigorous review of a project’s merits at the local
level. They note that the varying levels of federal cost-sharing in New Starts projects
does not seem to be related to the relative fiscal ability of a community to raise
revenue, but rather to the relative willingness of a community to ask for a higher
federal match;22 thus, the variance in federal match levels seems to penalize
communities that have provided a higher local match. Even though FTA policy has
produced a lower average federal share recently, lowering the cap on the federal share
would still make a significant amount of additional money available for projects.23
The Guaranteed Obligation Limit
A major component of the TEA-21 authorizing legislation was the creation of
guaranteed funding provisions for the highway and transit programs. TEA-21
provided obligation limits for highway and transit programs for each fiscal year, and
made it out of order to reduce those levels.24 In addition, TEA-21 created budgetary
“firewalls” that provide that the money in the Mass Transit Account and Highway
Account of the Highway Trust Fund cannot be used for any other program. This has
the effect of encouraging appropriators to appropriate the full obligation limit for
highway and transit programs. This change removed these programs from the normal
appropriations process; it also gave these programs an advantage relative to those
transportation programs that do have to compete for the limited supply of funding
that is available to appropriators each year.
21 General Accounting Office, FTA’s New Starts Commitments for FY2003, April 2002.
GAO-02-603, pps. 25-26.
22 The Honorable Martin Olav Sabo, Ranking Member, House Committee on Appropriations
Subcommittee on Transportation, Hearings on Department of Transportation and Related
Agencies Appropriations for 2002, March 29, 2001, pps. 16-17.
23 Of the 49 projects currently in final design or preliminary engineering that GAO reviewed
for the report cited in footnotes #9 and #19, a 60% cap on the federal share would save
about $500 million of the proposed $20.59 billion; a 50% cap would save about $1 billion.
GAO-02-603, p. 24. The report does not predict the impact of a lower cap on the viability
of those projects.
24 P.L. 105-178, as amended by Title IX of P.L. 105-206, Section 8101(d).

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As a result of these changes, spending on transit has grown significantly since
passage of TEA-21 (see Appendix, Table 1). These changes, as suggested, also limit
the discretion of appropriators, especially transportation appropriators, who find that
most of the transportation budget is on “automatic” and is not under their control.
Appropriators have been unhappy with this situation and view the firewalls as having
reduced their traditional discretion in balancing competing demands in the
appropriations process.
Proponents of these changes note that they have produced a steady increase in
transit funding during the current authorization period. They maintain that these
changes enable recipients (states and local transit agencies) to better predict their
future funding level, which helps their long-term capital planning, and makes it easier
to implement innovations in project financing.25
Funding for Small Transit-Intensive Urbanized Areas
There are three tiers in the Urbanized Areas Formula Program: areas with
populations between 50,000-200,000, between 200,000-1,000,000, and areas over
1,000,000 in population. The formula for apportioning transit funding to areas in the
first tier uses only population and population density as factors, while that for other
two tiers includes factors reflecting the amount of transit service that each area
provides. One reason for this difference was to relieve transit providers in small
areas of the burden of having to collect and report to FTA the same amount of data
about their operations as agencies in the larger areas report. But one result of the
difference in treatment is that small areas that provide higher-than-average levels of
transit service do not receive a level of funding that recognizes their efforts,
compared to similar small areas that do not offer a comparable level of service.
Section 3033 of TEA-21 directed DOT to study the issue. DOT concluded that
sufficient issues existed to consider changes in the Urbanized Areas Formula
Program apportionment formulas to reward the extra effort of these transit-intensive
areas.26 Their study presented three possible alternatives:
1.
adding transit service factors to the small area tier formula, which would
have had the effect of doubling the funds available in FY2000 to 20 small
transit-intensive areas identified in the report, while reducing the funding
available to small areas that provided no transit service;
2.
applying the bus formula component of the Urbanized Areas Formula
Program apportionment formulas to all urbanized areas (it currently does
not apply to small areas), which would have increased the funding of 17
of the 20 transit-intensive small areas in FY2000, while reducing funding
to both small areas with little service and areas between 200,000 and
1,000,000 in population; and
3.
setting aside a portion of the bus funding component of Urbanized Areas
Formula Program formula apportionments, which would be reserved for
25 For example, the use of Grant Anticipation Revenue Vehicles (GARVEE Bonds), which
are secured by the issuer’s anticipated future federal transportation funding.
26 The study is available at [http://www.fta.dot.gov/library/policy/rtc/].

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small areas, and could be distributed to them either through formula or
grants to areas that met certain service criteria.
Each of these alternatives has costs: the first alternative would have cut the
funding available to small urbanized areas that do not provide transit service
(approximately 75 areas) by increasing the share going to the 20 more transit-
intensive areas; the second alternative would have cut funding available to other
areas in both tier 1 and tier 2; and the third alternative would have cut funding
available to other areas in both tier 1 and 2 while also increasing the reporting
requirements for small transit agencies.
Funding for Rural Transit
Rural areas (areas with populations less than 50,000 people) are estimated to
contain 36% of the United States population and 38% of the transit-dependent
population.27 40% of rural counties have no public transportation at all, and in the
60% that do provide public transportation, one-third of the riders are transit
dependent.28 In light of this, some advocate that rural areas, should receive a larger
share of transit funding than at present. In a related vein, some contend that states
should receive transit funding in some proportion to their contribution to the Mass
Transit Account of the Highway Trust Fund; this might have the effect of increasing
the amount of transit funding going to lightly populated rural states.
Others argue that directing a larger share of transit funding to rural areas would
reduce the funding available to larger urban areas, where the vast majority of transit
ridership takes place. Rural and small urban areas already receive a share of federal
transit funding that is higher than their share of transit ridership.29
27 Federal Highway Administration & Federal Transit Administration, 2002 Status of the
Nation’s Highways, Bridges and Transit: Conditions and Performance Report, Chapter 6:
“Finance,” 6-33. [http://www.fhwa.dot.gov/policy/2002cpr/ch6.htm]. “Transit dependent
population” is defined as persons in households whose household income was below the
poverty level, persons with a mobility impairment, or persons age 65 and older.
28 Jennifer L. Dorn, Federal Transit Administrator, Budget Briefing Remarks, February 3,
2003. Available at [http://www.fta.dot.gov/ftafy2004budget.html].
29 In FY2001 areas under 200,000 in population represented about 13% of federal transit
funding obligations, while in 2000 those areas represented around 9% of transit ridership.
For obligations, see Federal Transit Administration, 2001 Statistical Summaries, Grant
Assistance Programs, Table 5: FY2001 Obligations for Capital, Operating and Planning by
Program and by Population Group. For ridership, see American Public Transportation
Association, 2002 Public Transportation Fact Book, Table 27: Bus unlinked passenger trips
by population of Urbanized Area. That table shows areas under 250,000 in population with
15% of total bus ridership, but bus ridership represented only 61% of all unlinked passenger
trips in 2000; most of the other 39% of trips were taken in large urban areas on heavy rail,
light rail and commuter rail. Adjusting that 15% of total bus ridership for bus’s share of all
transit ridership gives a share of 9% (15% of 61%) of transit ridership for areas under
250,000 in population.

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Funding for Buses and Bus Facilities
The Bus and Bus Facilities Program receives around 20% of Capital Investment
Grants and Loans Program funds each year. Some argue that a greater share of those
funds should go to buses, since buses carry the majority of all transit riders, and the
vast majority of communities have no fixed guideway service and so are not eligible
for the fixed guideway programs that receive the remaining 80% of the Capital
Investment Grants and Loans Program funds.
However, when capital expenditures from all FTA programs, not just the Capital
Investment Grants and Loans Program, are considered, buses receive a large share
of federal transit funding: 45% of total capital obligations in FY2001 were for
buses.30 Also, the capital costs of bus service are much lower than for fixed
guideway systems because fixed guideway systems have to build and maintain their
infrastructure (the fixed guideway), while the infrastructure for bus systems (roads)
is largely built and maintained by highway programs.
In its Fiscal Year 2004 budget, the Administration proposes eliminating the Bus
and Bus Facilities Program component of the Capital Investment Grants and Loans
Program. The funding previously provided for the Bus component would be divided
among the Urbanized Areas and Non-Urbanized Areas Formula Programs and the
New Starts Program. This proposal is certain to be controversial, as it would
significantly change FTA’s program structure. It would also reduce the money
available annually for purchases of buses and bus facilities while providing more
flexibility to transit agencies in the use of that money (since it would no longer be
earmarked), and it would increase the amount of money available for new or enlarged
fixed guideway systems (including bus rapid transit systems).
Earmarking
As mentioned above, in its FY2004 budget request, the Administration proposed
eliminating the largest purely discretionary transit program, the Bus and Bus
Facilities Program component of the Capital Investment Grants and Loans Program,
and shifting its funding to other programs. It also proposed converting the Job
Access and Reverse Commute discretionary program to a formula program. These
changes would greatly reduce the opportunities for earmarking transit funding in the
annual appropriations process.
The level of earmarking of discretionary transit programs in annual
appropriations legislation has grown in recent years (as it has in other discretionary
transportation programs). Critics attack the practice of earmarking as defeating the
intent of the authorizing legislation which established the discretionary nature of
these programs. In principle, FTA would award funds for discretionary programs to
applicants on the basis of merit, as evaluated by some established criteria. Critics see
earmarking as a process that ignores the objective merits of projects in favor of the
30 Federal Transit Administration, Grant Administration Programs, 2001 Statistical
Summaries, Table 52: Summation of Obligations by Capital Categories, Planning and
Operating, Fiscal Years 1992-2001 (calculations by CRS).

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political power of legislators. The Administration argues that shifting these programs
to a formula basis will provide transit aid recipients with more funding stability,
predictability, and flexibility.
Defenders of earmarking see it as providing congressional appropriators with
some control over the allocation of federal funding. They note that earmarking may
be no more subjective than the process employed by FTA in selecting grant recipients
for their discretionary programs, that administrative decisions may also be influenced
by political considerations, and that only a relatively small portion of the FTA budget
is subject to earmarking.31
Improving Program Delivery
Advocates of changes to elements of FTA programs note that there are a number
of areas in which procedures appear unnecessarily cumbersome, and that there are
other areas where better coordination between transit providers and others could
improve service without increased spending.
One example is overlapping regulation of small local transit providers by FTA
and the Federal Motor Carrier Safety Administration (FMCSA). In addition to the
regulation of their transit services under FTA regulations, many small local transit
providers, because they are organized as private non-profit organizations rather than
as public agencies, are subject to general regulation under FMCSA. Thus, these
providers find themselves in the same regulatory environment as large trucking
companies and over-the-road bus companies, the organizations FMCSA was created
to oversee. This overlapping regulation leads to duplication of activity, as in the case
of DOT drug and alcohol testing programs: these local transit providers are subject
to the drug and alcohol regulation of both FTA and FMCSA. Also, many of these
local transit agencies are already subject to regulation from their state department of
transportation, from which much of their funding comes.
Other examples mentioned by advocates of improved program delivery include
coordinating and consolidating federal reviews and audits, extending the emergency
relief authority available in the highway program (that is, the authority of the
Secretary of Transportation to provide funds for repair of federal-aid highways
damaged by natural disasters or catastrophes caused by others) to transit,32 and
improving the coordination between transit providers and social service agencies
around transporting social service program clients.
31 Not counting the New Starts program, which has elements of earmarking but also a merit-
based qualification process, around 10% of FTA’s budget was earmarked in FY2003.
32 American Public Transportation Association, Testimony before the House Committee on
Transportation and Infrastructure Subcommittee on Highways and Transit, September 19,
2002. Available at [http://www.apta.com/govt/record/aptatest/020919.htm].

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Appendix: Federal Transit Funding
Federal funding for transit has grown significantly under TEA-21. Table 1
shows the annual FTA funding level under TEA-21.
Table 1: Federal Transit Administration’s Annual Appropriations
under TEA-21
($ billions)
FY1998
FY1999
FY2000
FY2001
FY2002a
FY2003
FTA
$4.8
$5.4
$5.8
$6.3
$6.9
$7.2
Source: Federal Transit Administration, 2001 Statistical Summaries, Table 3: FTA Budget
Authorities for FY1961-2002; FY2003 figure from P.L. 108-7.
a Does not include a $1.8 billion supplemental appropriation for repair of New York City transit
facilities damaged by the World Trade Center attack.
The primary federal funding source for FTA is the Mass Transit Account of the
Highway Trust Fund. In FY2003, Congress appropriated $7.2 billion to FTA; of that
amount, approximately 80% ($5.8 billion) came from the Highway Trust Fund’s
transit account, the remainder came from the General Fund. Most federal transit
funding is for capital expenses, and represents a significant portion of total transit
capital spending.
Table 2: Federal Share of Total Transit Spending,
by Type of Expenditure, FY2000
($ billions)
Expenditures
Funded From Federal
Percent from Federal
Sources
Sources
Capital
$ 9.1
$4.3
47%
Operating $20.0
$1.0

5%
Total
$29.1
$5.3
18%
Source: Federal Highway Administration & Federal Transit Administration, 2002 Status of the
Nation’s Highways, Bridges and Transit: Conditions and Performance Report, Chapter 6: “Finance,”
Exhibits 6-16 & 6-27 [http://www.fhwa.dot.gov/policy/2002cpr/ch6.htm]. Calculations by CRS.
The Mass Transit Account was created in the Surface Transportation Act of
1982; the federal motor fuels tax was raised from 4¢ per gallon to 9¢, with 1¢ (20%
of the increase) going to the transit account. Since that time, each time the federal
motor fuels tax has been increased, the transit account has received 20% of the
portion of the increase dedicated to transportation.33 Currently the federal motor
33 Between 1990 and 1997, a portion of the federal gas tax went into general revenues to
(continued...)

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fuels tax is 18.4¢ per gallon of gasoline (other fuels have different rates), with 2.86¢
going to the mass transit account. Table 3 shows the history of transit’s portion of
the federal motor fuels tax.
Table 3: History of the Mass Transit Account’s Portion of the
Federal Motor Fuels Tax
Fiscal Year of
MTA Tax Rate
Tax Rate Change
(cents per gallon)
1983
1.00¢
1991
1.50¢
1996
2.00¢
1998
2.86¢
Source: William Buechner, American Road & Transportation Builders Association,
History of the Gasoline Tax. Available online at
[http://www.artba.org/economics_research/reports/gas_tax_history.htm].
33 (...continued)
reduce the deficit.