Appropriations.com

Highway and Transit Spending; Hwy Trust Fund

Overview:

  • Federal spending on highways and public transportation are funded by gasoline, diesel, and other Federal taxes dedicated to the Highway Trust Fund (“HTF”).  In recent years, taxes dedicated to the HTF have been insufficient to meet highway and transit needs and have been substantially supplemented by general tax revenues.
  • Every five or six years, Congress enacts a multiyear “Highway Bill” that sets funding levels for highway and transit programs and establishes allocation formulas to divide available resources among the States.  Based on the allocation formulas, the Federal Highway Administration (FHWA) annually apportions to States legal authority to enter into contracts (“contract authority”) obligating the Federal government to pay a share of project costs. When various phases of contract work are completed, a State notifies FHWA, which authorizes the U.S. Treasury to disburse funds to fulfill the Federal obligation.  These disbursements are scored as Federal “outlays.”
  • The budgetary treatment of highway and transit spending is unique because the authorizing committees (Transportation & Infrastructure in the House and Environment & Public Works in the Senate) set the levels of “contract authority,” but the Appropriations Committees place caps on outlays through “obligations limitations” in the annual Transportation-HUD Appropriations Bill.

The Highway Trust Fund:  Financing Highways and Public Transportation

  • 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 provided 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.  Background on HTF revenues.
    • Before 2008, excise tax revenues were sufficient to pay for outlays from the HTF, but since 2008, Congress has sustained highway spending by transferring large amounts from general revenues to the HTF — 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.
    • Significant shortfalls in the HTF will appear again in 2021.
  • Budgetary Treatment of Highway and Public Transportation Spending:
    • Background:  Federal spending consists of (1) budget authority and (2) outlays.
      • Outlays are disbursements by the Treasury.  When the Treasury issues a check in FY 2018, that is an FY 2018 outlay.
      • Budget Authority (BA), on the other hand, is authority provided by Congress 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,” which 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 spending (sometimes called “direct spending”) which occurs when Congress’ authorizing committees pass laws that directly entitle individuals to benefits, or states to formula grants, in advance of appropriations; or
      • Discretionary spending which is annually appropriated by the House and Senate Appropriations Committees.
    • Highway Trust Fund spending is unique. Typically, a program’s budget authority and outlays are 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 (“highway bills”) that entitles states to formula grant reimbursements and is therefore mandatory; however, the outlays that flow from the HTF budget authority are discretionary, that is, they are subject to annual “obligation limitations” set annually by the Appropriations Committees.
    • In addition to the authorizing committees with jurisdiction over highway bills, and the appropriations committees with jurisdiction over the annual Transportation-HUD Appropriations bills, highway and transit spending is also directly impacted by Congress’ tax writing committees (Ways & Means and Senate Finance) that determine the type and amount of revenues flowing into the HTF.
    • Finally, the House and Senate Budget Committees can also impact highway and transit spending levels by setting committee allocations (known as 302(a) allocations) in annual Budget Resolutions that may limit HTF contract authority levels as well as Appropriations Committee obligation limitations.
    • The end result is that this multi-layered process involves 14 committees and subcommittees, directly or indirectly, in setting funding levels for highways and transit.

Highway Bills

Highways – Key Congressional Links:

Highways – Key Administration Links:

Additional Resources on Highway Trust Fund:

Public Transportation

  • Public transportation (also known as public transit, mass transit, or mass transportation) is defined in federal law (49 U.S.C. §5302) as “regular, continuing shared-ride surface transportation services that are open to the general public or open to a segment of the general public defined by age, disability, or low income. “ (excerpted from CRS)
  • The main forms of public transportation are bus, heavy rail (subway and elevated), commuter rail, light rail, paratransit (also known as demand response), and ferryboat.
    • About 50% of public transportation trips are made by bus;
    • 36% by heavy rail;
    • 5% by commuter rail;
    • 5% by light rail (including streetcars);
    • 2% by paratransit; and
    • less than 1% by ferries.
  • Since the end of the Second World War providers of public transportation have struggled to maintain ridership due to a number of interrelated factors, particularly rising incomes, growing automobile availability and use, and residential and employment decentralization.
  • Despite the long-term trend, ridership has risen over the past two decades from a low in 1995 of 7.8 billion trips to 10.7 billion trips in 2013.Public transportation accounts for about 2% of all daily trips and about 5% of commute trips.
  • About 74% of all public transportation trips are made in 10 large urbanized areas: New York, Los Angeles, Chicago, Washington, San Francisco, Boston, Philadelphia, Seattle, Miami, and San Diego. The New York City urbanized area alone, an area that includes parts of New Jersey and Connecticut, accounts for about 4 of every 10 public transportation trips nationally.

Funding and Financing Public Transportation

  • For many years, federal surface transportation programs were funded almost entirely from taxes on motor fuels which have not been increased at the federal level since 1993.  (excerpted from CRS, Funding and Financing Public Transportation)
  • Prior to the Great Recession, annual increases in driving were sufficient in most years to keep revenue rising steadily, but this is no longer the case.
  • Although vehicle miles traveled have recently surpassed pre-Recession levels, future increases in fuel economy standards are expected to reduce motor fuel consumption and fuel tax revenues.
  • Since 2008 Congress has financed the federal surface transportation program by supplementing fuel tax revenues with general tax revenues.
  • The most recent reauthorization act, the Fixing America’s Surface Transportation Act (FAST Act; P.L. 114-94), was enacted on December 4, 2015, and authorized spending on federal highway and public transportation programs through September 30, 2020.
  • The act provided $70 billion in general fund transfers to the HTF to support the programs over the five-year life of the act.
  • Congressional Budget Office (CBO) projections indicate that the HTF revenue shortfalls will reemerge following expiration of the FAST Act.
  • Financing Options:
    • Raising motor fuel taxes could provide the HTF with sufficient revenue to fully fund the program in the near term, but may not be a viable long-term solution due to expected declines in fuel consumption. It would also not address the equity issue arising from the increasing number of personal and commercial vehicles that are powered electrically and therefore do not pay motor fuel taxes.
    • Replacing the fuels tax with a mileage-based road user charge or vehicle miles traveled (VMT) charge would need to overcome a variety of financial, administrative, and privacy barriers, but could be a solution in the longer term.
    • Treasury general fund transfers could continue to make up for the HTF’s projected shortfalls but could require budget offsets.

Federal Transit Administration Grant Programs Under FAST

Public Transportation:  Resources and Reports

Intercity and High-Speed Passenger Rail

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