Funding and Financing Highways and Public Transportation

Funding and Financing Highways and Public Transportation. Congressional Research Service, Library of Congress. Robert S. Kirk, William J. Mallett. November 1, 2016

For many years, federal surface transportation programs were funded almost entirely from taxes on motor fuels deposited in the Highway Trust Fund (HTF). Although there has been some modification to the tax system, the tax rates, which are fixed in terms of cents per gallon, have not been increased at the federal level since 1993. Prior to the recession that began in 2007, annual increases in driving, with a concomitant increase in fuel use, were sufficient in most years to keep revenue rising steadily. This is no longer the case. Although vehicle miles traveled have recently surpassed prerecession levels, future increases in fuel economy standards are expected to reduce motor fuel consumption and therefore fuel tax revenue in the years ahead.
Congress has yet to address the surface transportation program’s fundamental revenue issues, and has given limited legislative consideration to raising fuel taxes in recent years. Instead, since 2008 Congress has financed the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.S. Treasury general fund. 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. This use of general fund transfers to supplement the HTF will have been the de facto funding policy for 12 years when the FAST Act expires at the end of FY2020. The FAST Act did not address funding of surface transportation programs over the longer term. Congressional Budget Office (CBO) projections indicate that the HTF revenue shortfalls relative to spending will reemerge following expiration of the FAST Act.

[PDF format, 26 pages, 825.72 KB].

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