The Highway Trust Fund (HTF) finances most federal government spending for highways and mass transit:
The trust fund has separate accounts for highways and mass transit.
Most spending from the HTF for highway and mass transit programs is through federal grants to state and local governments.
Revenues for the trust fund come from transportation-related excise taxes, primarily federal taxes on gasoline and diesel fuel.
The Highway Revenue Act of 1956 provides for the transfer from the General Fund to the Highway Trust Fund of revenue from the motor fuel tax, and certain other taxes paid by highway users.
Before 2008, excise tax revenues were sufficient to pay for outlays from the HTF, but since 2008, Congress has sustained highway spending by transferring general revenues to the fund, including $70 billion in 2016 as required by the Fixing America’s Surface Transportation (FAST) Act in order to support highway and mass transit programs over the five-year life of the Act.
Important Note on Budgetary Treatment of Highway and Public Transportation Spending:
Background: Federal spending consists of two types of numbers — budget authority and outlays.
Outlays are disbursements by the Treasury. When the Treasury issues a check in FY 2019, that is an FY 2019 outlay.
Budget authority, on the other hand, is legal authority for an agency to enter into obligations that will result in outlays.
Highway and transit spending is a particular type of budget authority, known as “contract authority,” that allows states and cities to enter into contracts. When payments are made in fulfillment of those contracts, federal outlays are recorded.
In general, budget authority and outlays can be either “mandatory,” which means they are enacted into law by Congress’ authorizing committees; or “discretionary” which means the spending is annually appropriated by the House and Senate Appropriations Committees. (Explanation of mandatory vs. discretionary spending.)
HTF spending is unique. Typically, a program’s budget authority and outlays are either mandatory or discretionary — but transportation spending is both; the BA is mandatory and the outlays are discretionary.
Why? Because HTF contract authority is provided in multi-year authorizing legislation and is therefore “mandatory,” but the outlays that flow from the HTF budget authority are subject to annual “obligation limitations” set by the Appropriations Committees in annual discretionary appropriation acts.
An important consequence of this unusual funding arrangement is that:
Annual spending levels for highways and public transportation are set by three authorizing committees (listed below) and the Appropriations Committees.
In addition, the revenue levels for the HTF — which also constrain spending — are set by the Ways & Means and Finance Committees.
Finally, the Budget Committees set committee allocations that may periodically impact HTF contract authority levels.
Consequently, 14 committees and subcommittees are involved in setting funding levels for transportation.
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