Surface Transportation Reauthorization: Selected Highway and Transit Issues in Brief

Surface Transportation Reauthorization: Selected Highway and Transit Issues in Brief

Order Code RL34675
Surface Transportation Reauthorization:
Selected Highway and Transit Issues in Brief
September 18, 2008
Robert S. Kirk
Specialist in Transportation Policy
Resources, Science, and Industry Division

Surface Transportation Reauthorization:
Selected Highway and Transit Issues in Brief
Summary
SAFETEA-LU, the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: a Legacy for Users (P.L. 109-59; 119 Stat 1144) authorization of federal
highway and transit programs expires at the close of FY2009. Consequently, the
111th Congress is expected to take up surface transportation legislation during the
first session of the new Congress.
Both highway (Title 23 U.S.C.) and mass transportation (Title 49 U.S.C.
Chapter 53) programs are financed by revenues drawn from the Highway Trust Fund
(HTF). Roughly 20% of the transit program is also funded from the U.S. Treasury’s
general fund. The authorization of expenditures from the HTF also ends on
September 30, 2009. The Highway Account of the HTF, however, was rapidly
approaching insolvency in September 2008, more than a year before the end of the
SAFETEA-LU authorization. Congress responded quickly and passed P.L. 110-318,
providing an $8.017 billion transfer from the Treasury’s general fund to the Highway
Account to continue federal highway programs and activities.
This infusion of funds highlights the seriousness of the problems of the trust
fund financing mechanism, which has supported much of the nation’s surface
transportation spending for more than five decades. The sufficiency problem has
called into question the assumption of ever-growing spending in surface
transportation authorization bills, as well as the reliability of fuel tax-dependent
funding. Given this, finding an answer to the funding dilemma is a central issue that
Congress faces. Suggestions for treating the HTF shortfall include increasing existing
taxes, implementing a new vehicle miles traveled (VMT) tax, reducing the highway
program’s size, emphasizing private sector initiatives, and devolving most of the
federal-aid highway program’s responsibilities to the states. The outcome of many
other authorization issues will be influenced by how the long-term trust fund
sufficiency issue is dealt with.
Within the context of the federal highway program there are a number of issues
likely to be addressed by Congress, including the recurring debate on the appropriate
state rate-of-return on each state’s highway users transportation tax payments to the
HTF (commonly referred to as the donor-donee state issue); proposed changes in
highway programs, their funding formulas, and project eligibility requirements; the
degree of flexibility to be given states to move federal funds among programs;
proposed increases in highway bridge funding and inspection; the role of project
earmarking; and the consideration of some new programs, such as for freight
corridors.
Issues of federal aid to mass transit include the appropriate overall level of
funding both within the context of needs and in comparison with federal spending on
highways; the degree of support for transit from Treasury general fund revenues;
private participation in transit; the use of federal funds for operating costs; and the
issue of modifying existing programs or creating new programs to serve currently
unserved or under-served areas or populations.

CRS Highway, Highway Safety, and Transit Policy Staff
CRS
Area of Expertise
Name
Division Telephone
John Fischer
RSI
7-7766
Highway Program Issues
Bob Kirk
RSI
7-7769
John Fischer
RSI
7-7766
Trust Fund Issues
Bob Kirk
RSI
7-7769
Bob Kirk
RSI
7-7769
Donor/Donee & Formula Issues
John Fischer
RSI
7-7766
Transit Program Issues
Will Mallett
RSI
7-2216
John Fischer
RSI
7-7766
Transportation Infrastructure Policy
Bob Kirk
RSI
7-7769
Will Mallett
RSI
7-2216
Highway, Railroad, & Truck Safety
Randy Peterman
RSI
7-3267
Auto and Traffic Safety (including
Randy Peterman
RSI
7-3267
NHTSA)
Intelligent Transportation Systems (ITS)
Randy Peterman
RSI
7-3267
Transportation Enhancements & Planning
Will Mallett
RSI
7-2216
(MPOs)
Intermodal/Freight Issues
John Frittelli
RSI
7-7033
CMAQ
Linda Luther
RSI
7-6852
Environmental Issues, including
Linda Luther
RSI
7-6852
streamlining, stormwater, and section 4f.
Conformity with the Clean Air Act
Jim McCarthy
RSI
7-7225
Recreational Trails
Sandy Johnson
RSI
7-7214
Surface Transportation Security
John Frittelli
RSI
7-7033
Vanessa Cieslak
KSG
7-8978
Highway and Transit Program Data
Carol Glover
KSG
7-7353
John Williamson
KSG
7-7725
Selected Legal Issues
Todd Tatelman
ALD
7-4697
Division abbreviations: RSI = Resources, Science, and Industry Division; KSG = Knowledge Services
Group; ALD = American Law Division.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Major Highway Reauthorization Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Treatment of the Highway Account Shortfall . . . . . . . . . . . . . . . . . . . . . . . . 2
Rate-of-Return Issues (the Donor-Donee State Debate) . . . . . . . . . . . . . . . . 4
State Maintenance of Effort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Devolution to the States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Programmatic Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Bridge Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trucking Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Earmarking Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Major Transit Reauthorization Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Transit Funding Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Program Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Surface Transportation Reauthorization:
Selected Highway and Transit Issues
in Brief
Introduction
The Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy
for Users (P.L. 109-59; 119 Stat 1144) authorization of federal highway and transit
programs ends at the close of FY2009. Both highway (Title 23 U.S.C.) and transit
(Title 49 U.S.C.) programs are financed by revenues drawn from the Highway Trust
Fund (HTF). Roughly 20% of the transit program is also funded from the U.S.
Treasury’s general fund. The authorization of expenditures from the HTF also ends
on September 30, 2009.1
This CRS report provides a brief overview of selected major issues that are
expected to be debated during the upcoming reauthorization of the federal
government’s highway and transit programs and activities.2 Following some
introductory remarks, the report is divided into two parts: a section on highway issues
followed by a section on transit issues.
Although the federal-aid highway program provides federal money for highways
and highway bridges, the money itself is normally under the control of the states.
The state departments of transportation (state DOTs), within the federal
1 In the House of Representatives, programmatic and funding distribution issues are under
the jurisdiction of the Committee on Transportation and Infrastructure, but tax and HTF
issues are under the jurisdiction of the Committee on Ways and Means. In the Senate, most
programmatic and funding distribution issues are under the jurisdiction of the Committee
on Environment and Public Works for highways and other aspects of Title 23, but are under
the Committee on Banking, Housing, and Urban Affairs for transit. Tax and HTF issues,
in the Senate, are under the jurisdiction of the Committee on Finance. In the Senate, most
safety issues are under the jurisdiction of either the Committee on Environment and Public
Works or the Committee on Commerce, Science, and Transportation.
2 Much of this discussion has been drawn from the following sources. Refocus. Reform.
Renew. A New Transportation Approach for America, Department of Transportation
(Washington, 2008), 73 p. Financing Transportation in the 21st Century: a Report of the
Intergovernmental Forum on Transportation Finance, the National Academy of Public
Administration (Washington, 2008), 95 p. Transportation for Tomorrow: Report of the
National Surface Transportation Policy and Revenue Study Commission, (Washington, the
Commission, 2008), 68p. The Transportation Challenge: Moving the U.S. Economy,
(Washington, National Chamber Foundation, 2008), 116 p. ARTBA Recommendations for
SAFETEA-LU Reauthorization (Washington, American Road & Transportation Builders
Association, 2007), 72 p.

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programmatic framework, determine, for the most part, which projects and activities
are funded with the federal funds. Most of the federal-aid highway program money
provided to the state DOTs is apportioned to them through several large “core”
formula-driven programs. There are also a number of much smaller discretionary
programs, but their funding has often been earmarked in recent years. Unlike the
federal-aid highway programs, Federal Transit Administration (FTA) funding for
major transit systems does not pass through the states, but is apportioned to the local
transit authority or other controlling local entity. Reauthorization bills generally
build off the existing programmatic structure. There is a point of view that sees the
division of federal transportation efforts into programs that pursue national goals or
are mode specific as creating a programmatic structure that constrains the ability of
states and metropolitan areas to adopt innovative policies to solve transportation
problems such as traffic congestion.
Major Highway Reauthorization Issues
The Department of Transportation has estimated that the average annual
investment on bridges and highways by all levels of government, needs to increase
12.2% or more annually over 2004-2024, to maintain existing highways and bridges
at their current condition and level of performance.3 Under current revenue sources,
the Highway Account of the HTF is projected to have insufficient resources to fund
even the current authorized levels, let alone an expanded highway program.4 Because
of an unexpected decline in gas tax revenues and an increase in outlays during the
summer of 2008, the Highway Account was expected to approach insolvency in
September 2008. The Secretary of Transportation on September 5, 2008 announced
a mechanism to restrict Highway Account outlays to prevent the near-term
insolvency and also called on Congress to pass pending legislation to transfer roughly
$8 billion from the Treasury general fund to the Highway Account. Congress quickly
passed P.L. 110-318 to provide the requested funds. This transfer is intended to keep
the Highway Account solvent through the end of FY2009, when the current
authorization expires. The outcome of virtually all of the reauthorization issues,
discussed below, will depend on how the long-term trust fund sufficiency issue is
dealt with.
Treatment of the Highway Account Shortfall
There are a variety of approaches that may be considered during the
reauthorization debate to assure the sustainability of the Highway Account.
3 U.S. Dept. of Transportation, 2006 Status of the Nation’s Highways, Bridges, and Transit:
Conditions and Performance, Report to Congress, (Washington, Dept. of Transportation),
2006. See highlights at [http://wwwcf.fhwa.dot.gov/policy/2006cpr/hilights.htm].
4 The HTF is composed of two accounts, the Highway Account, which funds the programs
and activities of the Federal Highway Administration and the Mass Transit Account, which
funds most of the programs and activities of the Federal Transit Administration.

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! Raise the rates of existing taxes that support the trust fund (fuel
taxes provide about 90% of the revenues and were last raised in
1993). Raising the gas tax is seen as difficult and probably unlikely
in the current economic and political environment.
! Increase the use of tolling and public-private partnerships (PPPs) to
decrease reliance on the Highway Account for the funding of
highway projects. Most observers in the transportation community,
however, think that tolling and PPPs can only provide from 5% to
10% of estimated system needs. Also, most PPP proposals rely, in
part, on federal funds and tax-exempt financing, both of which
impose a cost on the federal budget. Allowing widespread tolling of
the heretofore mostly “free” federal Interstate Highway System
could also become a major issue.
! Replace or supplement the existing federal highway tax and fee
structure with a more direct user fee such as a vehicle miles traveled
tax (VMT). This tax would, through the use of global positioning
system technology, charge road users for each mile they drive. Most
see this as not being a near-term solution due to organizational,
privacy, and fee evasion issues. VMT may also be viewed by some
citizens as a national toll on any vehicle movement on any road.
! Establish freight related taxes or fees such as a freight waybill tax,
container fee, or terminal facility charge. These revenues could be
used to address freight bottlenecks.
! Reduce the highway program’s size, restricting it to programs that
fulfill clear national needs, such as the Interstate Maintenance
program or the Federal Lands Highways program, and devolve any
other highway program responsibilities to the states.
! Increase the funding that supports innovative financing such as State
Infrastructure Bank (SIB) programs or establish a national
infrastructure bank program to leverage federal grant funds. Some
have also proposed the use of tax credit bonds to fund infrastructure
projects. However, others argue that such mechanisms are
ultimately more expensive than direct spending.
! Authorize an annual general fund contribution for highway
programs, thereby reducing their dependence on the Highway
Account. Some express concern that this would weaken the historic
link between the revenue derived from taxes and fees paid by
highway users and spending on the nation’s highways and bridges.
! Some argue that Customs duties, which are deposited in the general
fund, should be made available for port-of-entry infrastructure.

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Rate-of-Return Issues (the Donor-Donee State Debate)
States seek a high rate-of-return on their highway users’ tax and fee
contributions to the Highway Account.5 Since the 1980s, guaranteeing a minimum
rate-of-return has been a major point of debate during each reauthorization cycle.
The current program is the Equity Bonus program (EB), and is designed to even out
the rate-of-return on program spending across all states to more equitably reflect each
state’s highway users’ transportation tax contributions to the Highway Account. For
FY2009, all states are guaranteed a 92% return on payments to the Highway Account
for programs listed in the EB program. The provisions also included a guaranteed
overall increase for all states over the previous reauthorization bill and a number of
“hold-harmless” provisions that were intended to mitigate the impact on certain
donee states of the shift in funding to the donor states under the bill. Fulfilling all of
these requirements is done by providing a spending overlay across all of the programs
listed in the EB program in a way that gives spending increases to all states but larger
increases to the donor states. This is very expensive. The EB program is the largest
formula program in SAFETEA-LU ($41 billion over five years). A number of policy
issues are expected to surface.
! Although the Equity Bonus mechanism could be retained, other
means of assuring an equitable distribution could be considered and
devised.
! An increase in the guaranteed rate-of-return percentage above the
92% level could be considered.
! Expanding the scope of the equity provisions to include all federal-
aid highway programs could be proposed.
! The “hold harmless” provisions that protect certain donee states
from losing share could be retained, modified, or eliminated.
! To reduce the cost of the Equity Bonus apportionments needed to
bring all donor states up to the minimum rate-of-return, the core
program formulas could be modified to be more heavily weighted by
a state’s share of the total tax and fee contributions to the Highway
Account.
! The reauthorization bill could forgo an equity provision altogether
and allow the program formulas to determine the distribution of
highway funds to the states.
State Maintenance of Effort
Historically, federal funding was provided to supplement state spending on
highways, not to substitute for it. A Government Accountability Office (GAO) study
5 States that receive more than they contribute to the Highway Account are referred to as
donee states. States that receive less than they contribute are referred to as donor states.

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found evidence that since the mid-1990s, states, as a whole, have failed to maintain
a financial level of effort proportional to federal spending increases.6 Some in the
transportation community believe that reauthorization should include a provision that
would make any authorized increase in a state’s federal highway spending contingent
on the state demonstrating that it is maintaining its capital investment spending on
highways and is not substituting federal for state funding.

Devolution to the States
As far back as the 1980s, there have been some that have argued that the federal
program could be greatly reduced in size, and most of the current federal
responsibilities could be “returned” to the states. In tandem with this reduction of the
federal program would be a reduction in the federal gas tax. The states would
accordingly be free to raise their state gas taxes or find some other means to make up
for the federal reduction.
The combination of the current constrained budget environment, the pervasive
use of funding flexibility among highway programs, and the demands for a higher
minimum guarantee under the Equity Bonus program, in the view of some observers,
makes the federal-aid highway program little more than a passthrough of funding
from highway users through the federal treasury to the states. In the view of these
observers, this significantly weakens the argument for a federal highway program and
strengthens the arguments for devolution.
Programmatic Structure
The federal-aid highway program has always been a partnership with the State
DOTs. States have a great deal of control over the selection, planning, construction,
and oversight of federally funded highway projects. Within this context, a number
of programmatic issues could arise.
! Program scope and intent, as well as the make-up of program
funding formulas, may be reexamined. Some programs could be
consolidated, modified, or eliminated.
! Historically, the states have argued for increased flexibility for using
federal funds by transferring funds across the federal highway
programs. However, some in the transportation community argue
that there is too much flexibility and the spending of federal funds
is often on projects that have no evident national purpose. In
addition, some highway supporters advocate the elimination of
6 Government Accountability Office, Federal-Aid Highways: Trends, Effect on State
Spending, and Options for Future Program Design (August 2004), available at
[http://www.gao.gov/new.items/d04802.pdf]. Looking farther back, the report found that
“states used roughly half of the increases in federal highway grants since 1982 to substitute
for state and local highway funding, and that the rate of substitution increased during the
1990s.”

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flexibility that allows funds transfers between the highway and mass
transit programs.
! Project eligibility changes may be considered. For example, some
construction interests are arguing for a broadening of project
eligibility, under the Congestion Mitigation and Air Quality
Improvement Act (CMAQ), that would allow more projects
designed to increase road capacity to improve traffic flow in
congested areas.
! Much of the federal program could be replaced by a block grant
program providing block grants to the states. Some argue that if
given increased flexibility, states and metropolitan areas, could be
allowed to spend transportation funds as they wish and simply be
held to certain performance standards.
! Congress is likely to consider some new programs or realignment of
existing programs. Some, for example, have pressed for programs
to improve major freight corridors and address bottlenecks. To what
extent freight-specific programs might include rail facilities, which
are mostly privately financed, could be an issue.
Bridge Policy
In 2007, roughly 72,000 bridges were designated by FHWA as “structurally
deficient.” Although there were discussions of major infrastructure spending
increases following the collapse of the I-35W bridge7 in Minneapolis, with the
exception of Emergency Relief funding, no legislation has made it through both
houses of Congress, other than an extra $1 billion appropriation, from the Treasury’s
general fund, for the federal Highway Bridge Program (HBP) that was included in
the FY2008 THUD appropriations bill.8 Issues that may arise include the following:
! Programmatic changes to the HBP as well as proposals increasing
bridge spending could be incorporated in reauthorization legislation.
! The rate of repair and replacement of deficient bridges and the
funding needed to support any proposed acceleration of the rate
could be an issue.
! Changes in bridge inspection and inventory are likely to be
proposed.
! The flexing of HBP funds to other highway programs for non bridge
uses may be an issue.
7 The National Transportation Safety Board has yet to complete its final report on the cause
of the bridge collapse.
8 See CRS Report RL34127, Highway Bridges: Conditions and the Federal/State Role, by
Robert S. Kirk and William J. Mallett.

CRS-7
! The eligibility of HBP funds for spending on non federal-aid
highway system bridges could be an issue.
! A recent GAO report found that the HBP lacks focus, performance
measures and sustainability.9 These findings could be considered
during reauthorization.
Trucking Issues
Truck size and weight limits on the Interstate Highway System could be an
issue. Some trucking interests, in a time of higher fuel prices and increasing
congestion, argue that increasing allowable truck size and weight would increase
productivity and efficiency. Rail interests oppose increases in truck size and weight,
and argue that rail is the more efficient mode of transportation for heavy freight.
Safety advocates also have concerns about allowing bigger and heavier trucks on the
roads.
Earmarking Issues
Over the 50-year life of the HTF-supported federal-aid highway program, the
congressional designation of numerous specific projects in highway authorization
bills is a relatively recent phenomenon. Until the late 1980s, earmarks amounted to
only about 1% of authorized federal-aid highway spending.10 In SAFETEA-LU,
almost $22 billion or roughly 11% of the $199.5 billion total contract authority in
Title I (the highway construction title) of the bill was earmarked.
The debate over highway project earmarking at times reflects the broader pro
and con arguments that apply to the discussion of the appropriateness of
congressional earmarking in general. Supporters of earmarking often argue that the
framers of the constitution believed that Congress, not the President (i.e., the
Executive Branch), should allocate funding for the functions of the federal
government and ending congressional earmarking authority would be a major transfer
of power to the executive branch. Supporters also argue that Members of Congress
have a better sense of their constituents’ needs than Executive Branch bureaucrats.
Opponents of earmarking make a number of general arguments, including that
congressional earmarking undermines the intent of the programs and activities that
Congress itself has authorized; many earmarks are designated for political reasons
rather than for demonstrated needs; earmarking may foster corruption; many
earmarks are inherently local and short-change projects of national interest; and
9 Government Accountability Office, Highway Bridge Program: Clearer Goals and
Performance Measures Needed for a More Focused and Sustainable Program (Washington,
GAO) “GAO-08-1043.” Available at [http://www.gao.gov/new.items/d081043.pdf].
10 “In-Depth Analysis: Earmarked Highway Projects: Their History, Their Nature and Their
Role in Highway Legislation,” Transportation Weekly, April 10, 2002, 3. See also A Primer
on Lobbyists, Earmarks, and Congressional Reform, By Ronald D. Utt, (Washington:
Heritage Foundation), Backgrounder no. 1924, 2006, 21 p. For a discussion of spending
earmark definition see CRS Report RL34462, Earmark Reform: Comparison of New House
and Senate Procedural Rules, by Sandy Streeter.

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earmarks unduly enhance the role of lobbying firms in the spending process. Issues
more specific to the federal-aid highway program include the following.
! Earmarking distorts the operation of the federal-aid highway
program, according to a DOT report.11 Among the report’s findings
are the following: that the earmarking can reduce the states’ core
transportation programs; many low priority, earmarked projects are
being funded over higher priority, non-earmarked projects; and
projects that do not meet eligibility requirements are sometimes
funded.
! If a significant number of earmarks are allowed, one issue that will
be considered is how the earmarks will interact with the EB
distribution. The High Priority Project (HPP) earmarks in
SAFETEA-LU were within the scope of the Equity Bonus and,
because of this, these earmarks merely displaced formula program
funds. This meant that states receiving HPP earmarks not only
received no net increase in funding as a result of their HPP
earmarks, but also experienced a reduction in the formula program
funds that they rely on to implement their state transportation
improvement plans. The issue is whether earmarking should be
inside or outside the scope of the EB program. Keeping the
earmarks outside the EB program, however, would dilute the impact
of a rate-of-return guarantee.
! If Congress, chooses to include earmarks in the upcoming
reauthorization legislation, it could require that all earmarks meet the
federal-aid highway program eligibility requirements.
! Despite the growth in the number and amount of funding dedicated
to highway earmarks there is no certainty that the same levels of
earmarking will be allowed in the upcoming reauthorization bills.
Although local officials, businesses, and interest groups who benefit
directly from particular earmarks are pleased when a Member is
successful in obtaining a congressional designation, and sometime
even pursue such earmarks by hiring lobbyists, it does not
necessarily follow that the public in general supports earmarking.
The SAFETEA-LU earmarks for the so called “bridges to nowhere”
received a great deal of attention in the press and were widely
ridiculed.
11 Department of Transportation, Review of Congressional Earmarks Within Department of
Transportation Programs, “Report no. AV-2007-066,” 2007, 1-31.

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Major Transit Reauthorization Issues
The Department of Transportation estimates that spending from all sources on
mass transit needs to increase by about 25% annually over the next 20 years just to
maintain existing transit systems at their current condition and level of
performance.12 The Mass Transit Account of the HTF is in somewhat better financial
shape than the Highway Account but is also projected to go into deficit within a few
years. The Federal Transit Administration (FTA) is funded 80% from the Mass
Transit Account and 20% from the Treasury general fund. Historically, when the fuel
tax rates have been raised, 20% of the increase has been dedicated to the Mass
Transit Account of the HTF. The reauthorization outcome of the trust fund
sustainability debate, discussed in the prior section, is therefore also pertinent to FTA
programs and activities. Within this context, there are both funding and
programmatic issues that could arise during reauthorization.13
Transit Funding Issues
Some of the following issues are predicated on funding availability, and others
are predicated on expectation of a constrained budgetary environment.
! How much to spend overall on transit is the main issue in the
upcoming reauthorization. Transportation, construction, business,
and public transit interest groups argue that there needs to be a
significant increase in federal investment in transit infrastructure.
Others dispute this and argue that current spending trends, if
continued, are sufficient. Still others argue that the federal
government spends too much on transit relative to highways, given
that transit receives about 16% of federal funding but only 2% of
trips are made by this mode.
! The lowering of the maximum federal matching share below the
current 80% is seen by some as a means of spreading constrained
federal funds across more transit projects. They also contend that a
larger local match would help ensure that only the most important
projects are supported by state and local officials. Opponents of
lowering the federal maximum share dispute this contention.
! Encouraging private participation through private development or
public-private partnerships is seen by some as a way to support
transit improvements with less federal financial involvement while
still creating many indirect community benefits. Others, however,
12 DOT, 2006 Conditions and Performance Report.
13 See CRS Report RL34127, Public Transit Program Issues in Surface Transportation
Reauthorization, and CRS Report RL34171, Public Transit Program Issues in Surface
Transportation Reauthorization, both by William J. Mallett.

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see the private sector as able to finance only a relatively small
number of projects relative to total needs.14
! Encouraging more use of innovative financing is likely to be
considered. As with highways, innovative finance for transit
generally involves leveraging federal funds to provide for funding
through lending rather than grants. State infrastructure banks and
grant anticipation notes (GANs) are examples of innovative finance
mechanisms.
! Given that trust fund balances in the Mass Transit Account are
trending downward, some may suggest expanding the general fund
portion of the FTA budget above the historical 20% as a means of
increasing the available funds for transit. Another possibility is to
cut program funding to lower the demands on the Mass Transit
Account and thereby extend its sustainability.
! Broadening the eligibility of federal funds for transit operating costs
could become an issue.
Program Structure
The budgetary environment is expected to have an impact on the scope of
programmatic change. Should there be a major increase in funding, the existing
structure may remain essentially the same. A funding decline or even a no-growth
budget scenario could increase the likelihood of program modification. Under such
a scenario, a number of changes could be considered.
! Congress could consider an across-the-board cut of all FTA
programs and activities.
! Program restructuring could narrow the focus of the programs to
concentrate federal efforts on the rehabilitation and expansion of
transit service in densely populated areas and the most congested
cities (i.e., the areas that would most efficiently utilize transit).
! On the other hand, the restructuring could simply refocus
policymakers on maintaining and rehabilitating the existing systems
and services. This would mean possibly reducing the role of the
New Starts program.
! Congress could simply replace the program with a block grant
mechanism based on transit ridership or population.
14 General Accounting Office (now the Government Accountability Office), Highways and
Transit: Private Sector Sponsorship of and Investment in Major Projects Has Been Limited,
GAO-04-419, (Washington, DC, 2004), 52-53.

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! Congress could also add new programs to serve currently unserved
or under-served populations or areas. This would be more likely if
new revenue sources are found to support the Mass Transit Account.
! Congress could also consider proposals similar to the Metro
Mobility Program proposed by DOT Secretary, Mary Peters. The
program would provide “performance-based” transportation funding
directly to metropolitan areas. Recipients would be allowed broad
multi-modal flexibility in the choice of projects.15
15 U.S. Dept. of Transportation, Refocus. Reform. Renew, p. 24-28. Transportation for
Tomorrow, the report of the National Surface Transportation Policy and Revenue Study
Commission also argued for a more multi-modal approach coupled with performance
requirements.