Highway and Transit Program Reauthorization
Congressional research reportDec 11, 2002
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Highway and Transit
Program Reauthorization
December 11, 2002
John W. Fischer
Coordinator
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Highway and Transit Program Reauthorization
Summary
Authorizing legislation for the existing federal highway, highway safety, and
transit programs will expire at the end of FY2003. Reauthorization of these
programs will be considered in the 1st Session of the 108th Congress. The Bush
Administration is expected to send its version of a reauthorization bill to Congress
along with the FY2004 budget request in early February 2003. This will start a cycle
of congressional action that should conclude before October 1, 2003. The last two
reauthorization bills, however, were passed well after the authorization contained in
the previous Act had expired.
The current 6-year authorization, the Transportation Equity Act for the 21st
Century (TEA21) (P.L. 105-178 and P.L. 105-206), was significantly different than
its predecessors in several respects. Most notably it provided for a dramatic increase
in funding for federal surface transportation programs. This was in large part the
result of a successful effort to link the revenue stream for the highway trust fund to
significant increases in spending for the highway, highway safety, and transit
programs. TEA21 provided 40% more funding than the previous 6-year program
authorization. Furthermore a mechanism created by TEA21, revenue aligned budget
authority (RABA), has provided the federal highway program with an additional $9.1
billion in funding over TEA21's six-year authorization period, although difficulties
with this mechanism in the last session of Congress will make RABA a
reauthorization issue in the coming debate.
From the public’s perspective the surface transportation reauthorization is taking
place against the backdrop of growing concern about congestion and sprawl in
urbanized areas, and increased concern about maintaining access to the national
system in rural areas. The congressional debate that will take place as part of the
highway and transit program reauthorization process in the 108th Congress is shaping
up primarily as a debate about money. Given the large increase in funding made
available by TEA21, there appears to be an expectation in some quarters that the
reauthorization under discussion should also provide for a large increase in funding.
The economy, the return of the deficit, and other policy concerns, however, make
such a large increase problematic.
The money question aside, there appears to be very little interest in making
major changes to the overall structure of the highway, highway safety, and transit
programs. Rather, the interest appears to be in tweaking these programs to allow
spending for some additional activities and perhaps adding some new stand alone
programs or consolidating several traffic safety programs into a single program.
Among the issues likely to be considered are: allowing states greater flexibility in
how they use their transportation funds; retention of the existing highway trust fund
funding framework established by TEA21; financial assistance for physical
infrastructure security; streamlining of environmental evaluations required by the
project approval process; a new categorical grant program for highway safety; and
an increased focus on reducing drunk driving and increasing seat belt use. This report
is intended as a resource document for the reauthorization debate. It will not be
updated.
CRS Highway, Highway Safety, and Transit Reauthorization Policy Staff
Area of Expertise
Name
CRS
Telephone
Division
John Fischer
Bob Kirk
RSI
RSI
7-7766
7-7769
Trust Fund Issues
John Fischer
RSI
7-7766
Donor/Donee & Formula Issues
Bob Kirk
John Fischer
RSI
RSI
7-7769
7-7766
Highway, Railroad, & Truck Safety
Paul Rothberg
RSI
7-7012
Intelligent Transportation Systems (ITS)
Paul Rothberg
RSI
7-7012
Automobile and Traffic Safety
Duane Thompson
RSI
7-7252
Transportation Enhancements & Planning
Glennon Harrison
RSI
7-7783
Transit Program Issues
Randy Peterman
RSI
7-3267
Intermodal/Freight Issues
John Frittelli
RSI
7-7033
CMAQ &
Environmental Streamlining
David Bearden
Linda Luther
RSI
RSI
7-2390
7-6852
Conformity with the Clean Air Act
Jim McCarthy
RSI
7-7225
Transportation Infrastructure Policy
John Fischer
RSI
7-7766
Transportation Security
John Frittelli
RSI
7-7033
Highway and Transit Program Data
Hussein Hassan
John Williamson
RSI
RSI
7-2119
7-7725
Highway Program Issues
Division abbreviations: RSI = Resources, Science, and Industry Division.
Contents
Highway Program Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Core (Apportioned) Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Allocated (Discretionary) Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TEA21 Funding Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Donor-Donee Issues, Formulas, and the Minimum Guarantee . . . . . . . . . . . . . . . 5
Minimum Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Donor-Donee Issues in the Reauthorization Debate . . . . . . . . . . . . . . . . . . . 7
Donor State Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Donee State Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reauthorization Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Raising the Minimum Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Changing the Base Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
More Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Highway and Transit Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Highway Trust Fund Origins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Fund Policy Changes Made by TEA21 . . . . . . . . . . . . . . . . . . . . . . . 10
Trust Fund Structural Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Maintaining the TEA21 Budget Structure . . . . . . . . . . . . . . . . . . . . . . 10
Reforming Revenue Aligned Budget Authority (RABA) . . . . . . . . . . 10
Revenue Raising Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Increasing the Federal Fuels Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Redirecting a Portion of the Gasohol Tax (2.5 cents) to the Trust Fund
and Increasing Trust Fund Receipts by an Amount Equivalent
to the existing Gasohol exemption (5.3 cents) . . . . . . . . . . . . . . 12
Paying Interest on Highway Account Unexpended Balances . . . . . . . 13
Indexing the Fuels Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Transportation Finance Corporation (TFC) . . . . . . . . . . . . . . . . . 14
Long Term Viability of the Trust Fund System . . . . . . . . . . . . . . . . . . 14
No New Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Highway Program Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
High Priority Projects (Earmarking) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Innovative Financing Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Transportation Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Congestion Mitigation and Air Quality Improvement Program . . . . . . . . . 21
Environmental Streamlining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Highway Safety Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Intelligent Transportation Systems (ITS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Research and Development and Technology Deployment . . . . . . . . . . . . . . . . . 27
Transit Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transit Program Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transit Reauthorization Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Reducing the Federal Share for New Starts . . . . . . . . . . . . . . . . . . . . . 28
Increased Funding for Transit as Part of Any Increase in the
Federal Fuels Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Maintaining the Guaranteed Obligation Limit . . . . . . . . . . . . . . . . . . . 30
Funding for Small Transit Intensive Cities . . . . . . . . . . . . . . . . . . . . . 30
Rural Transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Bus Transit Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Intermodal Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Intermodal Connectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Freight Rail Infrastructure Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appendix 1: Transportation Budget Terminology . . . . . . . . . . . . . . . . . . . . . . . . 35
Appendix 2: Reauthorization Hearings in the 107th Congress, 2nd Session . . . . . 37
List of Tables
Table 1: TEA21 Authorizations: FY1998 - FY2003 . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. TEA21 Appropriated Funding FY1998 - FY2003
(millions of dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Highway and Transit Program
Reauthorization
The Transportation Equity Act for the 21st Century (TEA21), which expires at
the end of FY2003, provided a dramatic increase in funding for federal surface
transportation programs. This was in large part the result of a successful effort to
link the revenue stream for the highway trust fund to significant increases in spending
for the highway, highway safety, and transit programs. TEA21 authorized funding at
a level of almost $218.0 billion for the period FY1998 through FY2003. Of this total
$177 billion was provided for a broad range of highway and highway safety
programs, and just under $41.0 billion was provided for transit programs.1 The total
TEA21 authorization was about 40% more than the amount that had been authorized
in the previous 6-year program authorization, ISTEA (Intermodal Surface
Transportation Efficiency Act of 1991, P.L. 102-240). Of the total TEA21
authorization, $198.0 billion was guaranteed by the fixed limitation on obligations
(to be described later); that is, these funds were not subject to reduction as part of the
annual budget/appropriations process. Further a mechanism created by TEA21,
revenue aligned budget authority (RABA), has provided the federal highway program
with an additional $9.1 billion over the authorization period.2
From the public’s perspective the surface transportation reauthorization is taking
place against the backdrop of growing concern about congestion and sprawl in
urbanized areas and increased concern about maintaining access to the national
transportation system in rural areas. The congressional debate that will take place as
part of the highway and transit program reauthorization process in the 108th Congress
is shaping up primarily as a debate about money. Given the large increase in funding
made available by TEA21 there appears to be an expectation in some quarters that
the reauthorization under discussion should also provide for a large increase in
funding. At the time TEA21 was passed, a confluence of circumstances had provided
for a considerable boost to highway trust fund revenues. Unfortunately, for those
seeking extensive new funding, no similar confluence of events appears likely during
the next year.
As a result, much of the discussion in the coming months will turn on whether
significant additional funds can be found for federal surface transportation programs,
1
For the purposes of this report, the highway program refers to spending for all activities
funded through the highway account of the highway trust fund. This includes monies for
highways, highway safety and a wide range of other activities. Transit refers to federal mass
transportation programs, which includes aid to bus and subway systems, among others.
2
At the time of this writing, the second emergency supplemental appropriation for FY2002
had eliminated the RABA adjustment for FY2003. This situation may still be subject to
change as part of the incomplete FY2003 appropriations process.
CRS-2
or whether funding for these programs will be limited to the modest growth forecast
for the highway trust fund over the next 6 years. If new funds can be found, many of
the programmatic and policy issues discussed in this report are likely to be
considered in earnest. At the same time, additional new funding would likely lessen
potential disputes about fund allocations between states, and between rural, suburban,
and urban interests. Without significant new funding sources, a competition for the
existing pot of funds will almost surely ensue amongst the various state, regional, and
programmatic stakeholders.
The money question aside, there appears to be very little interest in making
major changes to the overall structure of the highway, highway safety, and transit
programs. Rather, the interest appears to be in tweaking these programs to allow
spending for some additional activities and perhaps adding some new stand alone
programs or consolidating several traffic safety programs into a single program.
Among the issues likely to be considered are: allowing states greater flexibility in
how they use their transportation funds; retention of the existing highway trust fund
funding framework established by TEA21, including modification of the annual
adjustment process provided for by RABA; financial assistance for physical
infrastructure security; streamlining of environmental evaluations required by the
project approval process; a new categorical grant program for highway safety; and
an increased focus on reducing drunk driving and increasing seat belt use.
Highway Program Structure3
The federal-aid highway program is fundamentally a state run program. Funds
are provided annually to each state Department of Transportation (or equivalent) to
construct and maintain a designated system of roads known as the federal-aid
highway system. The modern federal-aid highway program dates to the 1956
enactment of legislation that provided for the construction of the interstate highway
system and created the highway trust fund to finance its construction. The program
has been reauthorized and expanded on numerous occasions during the last four and
a half decades.
Core (Apportioned) Programs
Most highway funding is reserved for five major programs, which are usually
referred to as the core programs. They along with the minimum guarantee account
for the vast majority of highway spending, 86% of the FY2003 authorized amount.
These programs are: the national highway system program (NHS); the interstate
maintenance program (IM); the surface transportation program (STP); the bridge
replacement and rehabilitation program; and the congestion mitigation and air quality
improvement program (CMAQ). Each of these programs provides funding for
specific segments of the federal-aid highway system and/or other statutorily
enunciated activities, e.g. congestion relief projects using CMAQ funds.
3
This section provides a brief overview of the organization of the federal highway program.
For greater detail see: [http://www.fhwa.dot.gov/tea21/index.htm]
CRS-3
Although it does not itself provide direct spending for highways, the minimum
guarantee program, which will be discussed in greater detail in a moment, could also
be thought of as a core program because it provides additional funds for each of the
five core programs. The minium guarantee in fact is the largest highway program.
In the FY2003 authorization, for example, it provides fully 20% of all funding. NHS
and STP are the next two largest programs by far, accounting for 16.5% and 19.3%
of total funding respectively. Funds for these programs are apportioned to the states
on an annual basis using formulas found in TEA21. As a result they are sometimes
referred to as the “apportioned” programs.
In addition to the core programs there are a couple of additional and much
smaller apportioned programs; metropolitan planning and the recreational trails
program. TEA21 also sets some formulas within the formulas. This is most notably
the case for STP for which 10% must be set-aside for both transportation
enhancements and safety, and creates a separate sub-state distribution formula for the
remaining funds.
Allocated (Discretionary) Programs
All remaining highway programs are subject to allocations that are based on
criteria established in highway authorization and appropriation law and/or subject to
congressional earmarking. Although all of the programs in this category are smaller
than the core programs there are none-the-less some programs with significant
funding. The largest allocated program is for congressionally mandated high priority
projects. This program, which has an FY2003 authorization of almost $1.78 billion,
is reserved for projects specifically designated in TEA21. Other relatively good sized
programs in the allocated category are the federal lands program, the national
corridor planning and development and coordinated border infrastructure program
(CORBOR), the interstate maintenance discretionary program, the bridge
discretionary program, and the transportation and community and system pilot
preservation program (TCSP). (CRS contacts: John Fischer and Bob Kirk)
TEA21 Funding Levels4
TEA21 created the largest surface transportation program in U.S. history. For
the most part, however, it did not create new programs. Rather, it continued most of
the highway and transit programs that originated in its immediate predecessor
legislation, ISTEA. Programmatically, TEA21 can be viewed as a refinement and
update of the ISTEA process. There are a few new funding initiatives in the Act,
such as the border infrastructure program, but the vast majority of funding is reserved
for continuing programs.
4
This section provides a brief overview of the distribution of TEA21 funding amongst
eligible transportation programs. Additional details about individual programs can be found
at http:www.dot.gov/tea21/
CRS-4
The funding system for highways and transit is complex and will be discussed
in greater detail later in this report (terminology is defined in Appendix 1). Table 1
shows the actual amounts authorized by TEA21 at time of passage. This was
accomplished by providing for specific levels of funding in the Act, these limitations
on obligations (also known as the obligation limitation or ob limit) were attributed
to specific programs. In the parlance of the Act, these are the so called spending
guarantees. Additional funds outside of the guarantee were also authorized, but these
required specific action through the appropriations process before they could be
spent. Table 2 shows actual appropriations during the life of TEA21. As can be
seen, the limitations on obligations have been spent and/or exceeded by virtue of the
addition of revenue aligned budget authority funds (RABA). Additional authorized
funds subject to appropriation, however, have been spent sparingly. Appropriations
for FY2003 are not yet complete.
Table 1: TEA21 Authorizations: FY1998 - FY2003
(Millions of dollars)
a
FY1999
FY2000
FY2001
FY2002
FY2003
Total
Highway
(oblimit)
21,841a
25,883
26,629
27,158
27,767
28,233
157,511
Highway
Exempt
(outside
oblimit)
(mandatory)
739a
739
739
739
739
739
4,434
Additional
Highway
Authorization b
2,045
2,553
2,564
2,654
2,504
2,634
14,945
Highway
Total
24,625
29,175
29,932
30,551
31,010
31,606
176,890
Transit
guarantee
4,844a
5,365
5,797
6,271
6,747
7,226
36,250
Additional
Transit
Authorization
——
976
1,013
1,003
990
968
4,950
Transit Total
4,844
6,341
6,810
7,274
7,737
8,194
41,000
FY1998
29,469
35,516
36,742
37,816
38,747
39,800
217,890
TEA21 Total
a
Spending guarantees (Firewalls) did not apply in FY1998
b
Additional Highway Authorizations contain numerous programs outside the core highway programs,
including items such as Maglev and light density rail
Source: P.L. 105-178, P.L. 105-206, and www.fhwa.dot.gov/tea21/
CRS-5
Table 2. TEA21 Appropriated Funding FY1998 - FY2003
(millions of dollars)
FY1998
FY1999
FY2000
FY2001b
FY2002
FY2003c
Highway (ob limit)
(includes RABA
adjustment)
21,500
25,611
27,701
29,597
31,799
NA
Highway Exempt
(mandatory)
1,390
1,212
1,207
1,069
955
NA
Highway additional
authorizations
NA
NA
NA
2,759a
200
(general
fund)
NA
Highway Total
NA
26,823
28,908
33,425
32,954
NA
Transit Total
4,844
5,390
6,321
6,253
6,747
NA
TEA21 Total
27,734
32,213
35,229
39,678
39,701
NA
.
a
Includes $599 in general funds.
Includes government-wide recisions and additional appropriations
c
Appropriations action incomplete, government operating on continuing resolution
Source: House Committee on Appropriations and/or Conference Report for specific year
b
Donor-Donee Issues, Formulas, and the Minimum
Guarantee
Since the 1980s few issues have raised such heated debate as the persistent
arguments over how closely federal-aid highway program payments to the individual
states should match the amount of federal highway taxes each state pays into the
highway account of the Highway Trust Fund. The issue is commonly referred to as
the donor-donee issue. The overall issue for Congress is how to structure and
maintain a federal-aid highway program that meets federal highway policy objectives
and still provide for as equitable as possible a return to the states on each tax dollar
the states’ highway users pay into the highway account of the trust fund. Donordonee issues have generally surfaced in the context of the broader debate over the
periodic reauthorization of federal surface transportation programs–as was the case
for TEA21. This legislative context is important because it means that any “equity
adjustment” provisions must fit with the overall compromises that create a
reauthorization bill that can pass both houses of Congress.
TEA21 (P.L. 105-178) included a number of equity provisions which emerged
from the reauthorization debate. Historically, a significant characteristic of the
debate has been the importance of regional interests. Typically this pitted growing
southern, mid-western, and south-western donor states against northeastern, Pacific
coast, and sparsely populated western donee states. Also in play were different
philosophies of the appropriate role of the federal government vis-a-vis the states,
e.g. is the intent of the federal highway program creation of a national system of
roads or a revenue sharing program operated for the states?
CRS-6
Minimum Guarantee5
TEA21 included a state minimum guarantee (MG) program with three major
components: 1) Guaranteed Base Share–TEA21 guarantees each state a percentage
share of the total program, defined as all the apportioned programs: Interstate
Maintenance Program (IM), National Highway System Program (NHS), Surface
Transportation Program (STP), Highway Bridge Replacement and Rehabilitation
Program, Congestion Mitigation and Air Quality Program (CMAQ), Metropolitan
Planning, Recreational Trails Program, Appalachian Development Highway System
Program and Minimum Guarantee, as well as High Priority Projects; 2) 90.5%
guaranteed return on payments–TEA21 guaranteed each state a minimum share
return of 90.5% of its payments to the trust fund. If a state’s base share is less than
90.5%, then the share is adjusted upward until the 90.5% share is reached. The
money to raise shares to 90.5% is provided by “squeezing” down the percentages, but
not the dollar amounts, of those states that are above the minimum; 3) $1 million MG
minimum–each state is guaranteed that it will receive at least $1 million in MG
funds.
In practice this 90.5% return is not absolute on a year-to-year basis. There are
several reasons for this. First, there are significant concerns about the Internal
Revenue Service data, mostly extrapolated from state fuel tax data, that are used to
determine the annual state revenue contribution. These data were not previously
envisioned as a basis for the formula distribution of federal funds. Some states have
already indicated that they believe the data undercounts their contribution to the
highway account. Second, there are administrative take downs for certain items, such
as FHWA operating costs, that are part of the total limitation on obligations that will
be unavailable during the state apportionment process. Finally, the Act requires the
use of the most recent data in its annual program formula distributions. The most
recent data normally lags two years behind the year for which the minimum
guarantee calculation is being made. Also many of the variables used in the
calculation have changed during the life of the Act, especially as a result of the 2000
census. As program distribution changed, the role of the minimum allocation process
has grown in relative importance.
Formulas
During the past two reauthorization cycles there has been considerable
discussion about the structure of the formulas associated with the core highway
programs. Formulas clearly influence how federal highway dollars will be
distributed to the states. TEA21 made changes to some program formulas that at the
time were perceived as benefitting donor states. For example, the Act provided new
formula categories that were based on a state’s percent share of annual payments to
the trust fund for both the IM and STP programs.
Actual formula components, however, remain somewhat mysterious even to
those familiar with the highway program. By way of example, NHS funds are
5
For information on state distribution see Highway Statistics annual for the appropriate
year: www.fhwa.dot.gov/ohim/hs00/fe221.htm
CRS-7
distributed on the basis of four factors: 25% based on lane miles on principal arterial
routes (excluding the interstate system); 35% based on vehicle miles traveled on
principal arterial routes (excluding the interstate system); 30% based on diesel fuel
used on highways; and 10% based on total lane miles on principal arterial highways
divided by the state’s total population. In addition, before the formula distribution
for NHS is determined, 0.5% of total combined NHS and IM funds is reserved for
each state as a minimum apportionment.
As can be seen easily from the discussion above, the formulas in play during
reauthorization are complicated. The data in the formulas is publically available, but
in practice it is not practicable for congressional committees and agencies to run
endless “what if” permutations of possible formula models. As a result, the FHWA
is regarded as the sole arbiter of how changes to formulas affect distribution of funds
and typically only its computer runs are viewed as accurate during reauthorization
discussions.
Although much focus has been placed on formulas, especially as part of the
donor-donee debate, the reality is that formulas are less critical as a part of the
funding distribution debate than they might appear. There are a couple of reasons
for this. First and foremost, the formulas have to correspond to any minimum
guarantee level found in the bill. If the minimum funding guarantee for states is set
at 90.5% for example, as it is in TEA21, this has the effect of reserving at least this
amount for core programs. Second, in order for each state to reach the minimum
guarantee level there must be a separate pot of money available to FHWA to make
up annual differences in how the formulas are applied. As a result, the
reauthorization process more or less dictates that the minimum guarantee sets the
amount of total funding available for apportionment by formula. Hence, the
minimum guarantee influences the formula factors and/or the minimum guarantee
program set-aside, not the other way around.
During the TEA21 authorization debate, what many observers had predicted
would be a major battle between donor and donee states, was resolved relatively
amicably. The Taxpayer Relief Act of 1997 shifted revenues generated by the 4.3
cent deficit reduction gas tax to the trust fund. Congress, therefore, was able to
provide for large increases in highway funding for all states. The extra money made
the donor-donee debate less urgent to the donor states. As the TEA21 authorization
entered its final year (FY2003), however, the donor-donee state issue has resurfaced.
Donor-Donee Issues in the Reauthorization Debate
Donor State Arguments. The basic argument is a relatively straightforward
call for equity or fairness. Donor state advocates generally contend that for too many
years they have been subsidizing the repair and improvement of donee state
infrastructure, especially the older highway infrastructure in the northeast. The
southern donor states have been fast-growth areas relative to many of the donee states
and argue that their needs are just as great or greater. A secondary argument for
some of these states is that they are generally more dependent on roads and do not
benefit from federal transit spending to the degree that some donee states, in
particular New York, do. Finally, some of the donor state advocates argue that with
CRS-8
the completion of the Interstate Highway System the rationale for the donor-donee
disparity in federal highway funding is so weakened that the federal-aid highway
programs should be streamlined or eliminated and the FHWA should be little more
than a conduit for block grants to the states.
Donee State Arguments. Donee state advocates generally argue that
fairness should not be separated from needs. Donee states argue that their position
as donees is justifiable because of the age of their infrastructure, especially in the
northeast, the high cost of improving already heavily congested urban roads, and the
limited financial resources in large sparsely populated western states. Donee state
advocates have also argued that when all federal programs are considered, not just
the federal-aid highway program, northeastern states are often donors while southern
states are often donee states. Donee state supporters also argued that southern and
midwestern states spend less of their state and locally derived resources on highways
than the donee states and chide the donor states for pleading for federal funds when
they are not willing to ante up their own resources. Finally, donee states argue that
it is unreasonable to expect FHWA to become little more than a tax collector for the
states. They argue that there are needs that are federal rather than state and that a
national highway network cannot be based on state or regional boundaries.
Reauthorization Options
Raising the Minimum Guarantee.
Some state departments of
transportation and road building interests have suggested increasing the minimum
state share from 90.5% to 95%. To achieve this level, authorizers would probably
have to make the 95% return on payments to the trust fund their starting point and
reexamine the federal-aid highway programs with an eye toward adjusting or
eliminating programs or program features to meet this goal. Some proponents argue
that bringing the discretionary highway programs under the minimum guarantee
umbrella would make achieving a higher minimum guarantee percentage easier.
Some of these programs, however, were designed to meet inherently national needs
and might not be easily divided among all the states and still meet the programs’
goals.
Changing the Base Shares.
Perhaps the most straightforward option
would be to adjust up the donor state base shares and adjust down the shares of the
donee states. However, donee states will almost certainly resist any attempt to
eliminate or significantly reduce either their base shares or funding totals. Ironically,
assuming the money were available, donor states might actually get more money in
absolute terms by leaving the base shares as they are, and accept, as they did in
TEA21, the benefits of larger minimum guarantee apportionments.
More Money. A large increase in revenues to the trust fund would probably
defuse the donor-donee issue, as happened in the last reauthorization, by providing
more money to all the states. Given the current economic and budget environment,
this would probably require significant tax increases or redirection of existing tax
revenues to the trust fund. As the next segment of this report will discuss, finding
these funds will probably be a difficult task. (CRS contacts: Bob Kirk and John
Fischer)
CRS-9
Highway and Transit Finance
Highway Trust Fund Origins
The highway trust fund consists of two separate accounts — highway and transit
— which are sometimes mistakenly referred to as separate trust funds. In practice, the
highway account and the transit account are discussed as though they were separate
entities, with the highway trust fund being synonymous with the highway account.
The highway trust fund is the oldest and largest of the transportation trust funds.
The fund was created by a separate revenue title in the Federal-Aid Highway Act of
1956 (1956 Act) (P.L. 84-627). The 1956 Act provided funding for construction of
the now virtually complete Dwight D. Eisenhower System of Interstate and Defense
Highways. In addition, the 1956 Act provided some funding for other federal highway
programs.
Over the last 40 plus years, the highway trust fund and the federal programs it
supports have been changed numerous times.6 In almost every instance, Congress has
chosen to expand the scope of the federal highway program. At various times over
the same period Congress has also chosen concomitantly to increase the revenue
stream into the trust fund by raising federal excise taxes on motor fuels. The most
recent change in the structure of the federal highway program occurred as part of
TEA21, which reauthorized the trust fund revenue system through FY2005.
The transit account was created by the Surface Transportation Assistance Act of
1982 (P.L. 97-424). The transit account gave the transit industry a consistent federal
funding source for capital spending on new and rehabilitated infrastructure and for
other purposes, such as operating assistance funding.
The highway trust fund is financed by sales taxes on tires, trucks, buses, and
trailers, as well as truck usage taxes, but approximately 90% of trust fund revenue
comes from excise taxes on motor fuels.7 The majority of the motor fuel revenue
dedicated to the trust fund is derived from an 18.4 cents per gallon tax on gasoline of
which 18.3 cents is dedicated directly to the highway trust fund. The highway account
receives an allocation equivalent to 15.44 cents of the tax and the transit account
receives the revenue generated by 2.86 cents of the tax. The remaining 0.1 cents goes
into the leaking underground storage tank (LUST) trust fund.
6
For a more detailed history of the trust fund see: U.S. Library of Congress. Congressional
Research Service. The Federal Excise Tax on Gasoline and the Highway Trust Fund: A
Short History. CRS ReportRL30304. by Louis Alan Talley.
7
For a discussion of federal transportation fuel taxes see: U.S. Library of Congress.
Congressional Research Service. Transportation Fuel Taxes and Legislative Issues. CRS
Report RS20281. by Bernard A. Gelb.
CRS-10
Trust Fund Policy Changes Made by TEA21
TEA21 changed the way the highway trust fund relates to the Federal
Unified Budget in two ways: First by creating new budget categories and second by
setting statutory limitations on obligations. The Act amended the Balanced Budget
and Emergency Deficit Control Act of 1985 to create two new budget categories:
highway and mass transit. The Act further amended the budget process by creating
a statutory level for the limitation on obligations in each fiscal year from FY1999 to
FY2003. In addition, TEA21 provided a mechanism, RABA, to adjust these amounts
in the highway account, but not the transit account, so as to correspond with increased
or decreased receipts in highway generated revenues. RABA issues will be discussed
in greater detail later in this report.
The net effect of the changes was to set a predetermined level of funding for core
highway and transit programs, referred to in TEA21 as a discretionary spending
guarantee. These categories are separated from the rest of the discretionary budget in
a way that prevents the use of funds assigned to these categories for any other purpose.
These so called “firewalls” were viewed, in the TEA21 context, as guaranteed and/or
minimum levels of funding for highway and transit programs. Additional funds above
the firewall level could be made available for highway and transit programs through
the annual appropriations process, but for the most part this has not occurred.
Trust Fund Structural Issues
Maintaining the TEA21 Budget Structure. The current trust fund regime
was created over the objections of many Members of the Budget and Appropriations
Committees in both the House and the Senate. Although some Members of these
same committees have indicated support for the existing highway/transit trust fund
budget accounts, there remain Members unhappy with the restrictions that they believe
TEA21 places on what they view as the historical discretion of the appropriations
process.
The transportation community believes that continuation of the link between
revenues and spending created by TEA21 is essential. They view the system created
as a step forward in guaranteeing a continued substantive federal role in the provision
of surface transportation infrastructure.
From the perspective of supporters of the current trust fund budgetary system, the
system might need a little tweaking, especially as regards RABA. Otherwise it is their
hope that the structural issues that dominated the TEA21 debate will be absent during
the upcoming reauthorization debate.
Reforming Revenue Aligned Budget Authority (RABA).8 As already has
been noted, TEA21 provides a link between the highway generated revenues that flow
8
For more information see: U.S. Library of Congress. Congressional Research Service.
Highway Finance: RABA’s Double-edged Sword. CRS Report RS21164. by John W.
Fischer.
CRS-11
into the highway account of the trust fund and highway spending. When RABA was
created it was done with the understanding that highway funds would be reduced if
there was a reduction in trust fund revenue. This situation was viewed as unlikely,
however, as revenue growth into the trust fund has increased continuously during the
life of the trust fund.
The first RABA adjustment occurred in FY2000. Between FY2000 and FY2002,
RABA provided almost $9 billion in additional funding for designated highway
programs. The RABA adjustment in the FY2003 budget, however, a negative $4.3
billion, surprised even those who expected a small decline in RABA as a result of the
recession that began in 2001. The $4.3 billion negative RABA would have resulted
in an actual year over year decline of $8.6 billion in federal highway assistance
provided to the states.
In simple terms this year-over-year drop in the program was more than Congress
was willing to allow. As part of the FY2002 second emergency supplemental bill
(P.L. 107-206), the RABA adjustment for FY2003 was eliminated. This means that
FHWA spending for FY2003 is now set at $27.7 billion, which is still considerably
below the $31.8 billion provided in FY2002. Efforts to raise the amount to the
FY2002 level continue, pending congressional completion of consideration of FY2003
appropriations legislation.
The events of the last year have created interest in amending the RABA
mechanism during the reauthorization debate to reduce very large annual swings in
RABA adjustments. There are also some who would like to see the possibility of
negative RABA adjustments eliminated entirely. A number of mechanisms that
would “smooth out” RABA are under discussion. These involve primarily technical
changes such as changing the data used in the RABA calculation.
Revenue Raising Proposals
Much of the debate about the need for new revenues focuses on the concept of
unmet highway and transit system needs.9 According to a soon to be released biannual
study by the FHWA and the Federal Transit Administration (FTA) the amount of
unmet needs of the surface transportation system continues to grow, even as the
physical condition of the system has improved during the life of TEA21. The report,
according to FHWA, will indicate that costs required to improve the surface
9
There is general acceptance of the idea that there are significant unmet surface
transportation capital infrastructure needs. There are, however, numerous questions about
its measurement. The FHWA and the Federal Transit Administration (FTA) needs studies
of the last few years are viewed as much improved in this regard over the studies done a
decade ago. Questions still arise as to how needs are determined, how the costs associated
with these needs are derived, and how state “wants” are separated from actual state “needs”.
As a result, the issue of highway and transit system conditions and needs is complex and
beyond the scope of this paper. Additional information can be found at:
http://www.fhwa.dot.gov/pressroom/test020926.htm and
http://www.transportation.org/bottomline/
CRS-12
transportation system far exceed the projected ability of federal, state, and local
governments to pay for them.
Transportation organizations while not advocating major structural changes in
the federal highway and transit programs are advocating an increase in funding
comparable to that in TEA21 (which was 40% plus larger then its predecessor,
ISTEA). They do not, however, have a ready source of funds to accommodate this
increase. Many, but not all, in the transportation community are reluctant to seek fuel
tax increases at this time. They are concerned that the Bush Administration will be
reluctant to support tax increases and they are concerned that the same sentiment
exists in Congress. As a result, there are a number of possible revenue raising ideas
under discussion that are discussed below.
Increasing the Federal Fuels Tax. The American Road and Transportation
Builders Association (ARTBA) is the one organization actively promoting an increase
in the federal fuels tax.10 Its proposal “two cents makes sense” would raise the federal
fuels tax two cents per year during the life of the next reauthorization. According to
ARTBA raising the tax by 8 cents would raise an additional $ 17 billion for highways
and transit. This, in ARTBA’s view, would go a long way to meeting the unmet needs
of the system.
Few other transportation organizations have come out in active support of
ARTBA’s plan. Most other groups are concerned that the political climate might not
be right for a tax increase at this time. At least one Member, Senator Voinovich, has
taken a public position in favor of a federal fuels tax increase.
Redirecting a Portion of the Gasohol Tax (2.5 cents) to the Trust
Fund and Increasing Trust Fund Receipts by an Amount Equivalent to
the existing Gasohol exemption (5.3 cents). As part of federal policy to
promote the use of gasohol as a substitute for gasoline, gasohol has been exempt from
a portion of the federal fuels tax, usually 5.3 cents per gallon. In addition, 2.5 cents
of the tax levied on gasohol based fuels has been deposited directly into the U.S.
Treasury’s general funds. From the perspective of the transportation community these
factors are depriving the trust fund of income that it deserves. Gasohol users, after all,
use the highway system, and in this view, are not paying their fair share for its upkeep
and improvement.
According to some estimates, transferring the 2.5 cents to the trust fund would
net the fund $700 million per year. Crediting the trust fund with the equivalent of the
5.3 cent exemption would result in an additional $1.5 billion.11 This $2.2 billion
would obviously make a significant potential contribution to the highway program.
10
11
http://www.artba.org/government/tea-21/tea_21.htm
Rothman, Heather. New Bill Seeks to Adjust Method of How Revenues are Credited to
Highway Trust Fund. Daily Report for Executives. BNA Inc. Washington. July 3, 2002. p
A-4.
CRS-13
Legislation that would provide for these changes was introduced in the 107th
Congress.12
The problem for those supporting changes in gasohol taxation is the unified
congressional budget. With the budget back in a deficit situation any action that will
potentially increase the overall deficit will be greeted with a certain amount of caution
and potential opposition. Diverting the 2.5 cents is a straightforward decision about
the appropriate destination for these funds in the budget. Crediting the trust fund with
funds equivalent to the 5.3 cent exemption is more problematic. The $1.5 billion
would likely have to be derived from funds already deposited in the Treasury from
non-transportation sources. Those who perceive that a redirection of an annual $1.5
billion might come at the expense of other government programs important to them
can be expected to object to such a move.
Paying Interest on Highway Account Unexpended Balances. All U.S.
Treasury managed trust funds, with the exception of the highway trust fund, receive
interest payments on their unexpended balances. One of the changes made as a result
of TEA21 was to stop paying interest on the unexpended balance in the highway trust
fund. The rationale behind this decision was the creation of RABA, which is supposed
to reduce growth in the unexpended balance by making funds more immediately
available for highway projects.
For a number of reasons that are beyond the scope of this report, the unexpended
balance in the highway trust fund has continued to grow, albeit at a much slower rate
than it did in the years prior to TEA21. Interest payments could be lucrative for the
trust fund. According to the Congressional Budget Office (CBO) interest payments
to the fund for FY2004 alone could stand at $550 million (this assumes that the
gasohol taxes described above have been redirected as discussed).13
The whole issue of paying interest on trust funds is a controversial subject.
Interest payments are essentially intergovernmental fund transfers. The federal funds
needed to pay interest do not represent new revenues for the federal treasury.
Proponents of paying interest on the highway trust fund believe it is only fair for the
Treasury to pay for the use of money derived by special purpose revenues, in the same
way a bank pays interest on savings accounts. Opponents of this practice, however,
believe that such payments only raise the cost of government in general and that all
federal revenues should be treated the same, regardless of how they are collected.
Indexing the Fuels Tax. Depending on the source of the estimate, a one cent
increase in the fuel tax will add between $1.3 billion and $1.5 billion to the trust fund
on an annual basis. Supporters of this idea believe that the trust fund should be
indexed to the consumer price index (CPI) or some other measure of national
economic growth to allow revenues to the trust fund to keep pace with inflation. Over
the last decade indexing would likely have added a few cents to the fuel tax with a
12
S. 2678, Maximum Economic Growth for America through the Highway Trust Fund: The
MEGA Trust Act. Senator Baucus.
13
U.S. Congressional Budget Office. Status of the Highway Trust Fund. CBO Testimony,
by Kim P. Cawley. May 9, 2002.
CRS-14
concomitant increase in revenues. More recently, however, inflation has been under
control and there are in fact some economists who are more concerned about
deflation. As a result, indexing as a long term strategy could add significant funds to
the trust fund. In the short term it is unlikely to provide significant new funding to the
trust fund relative to the estimated needs of the system.
The Transportation Finance Corporation (TFC). The American
Association of State Highway and Transportation Officials (AASHTO) is proposing
the creation of a new $59.5 billion bond program as an alternative vehicle for
financing surface transportation projects. A new private, non-profit organization to
be know as the Transportation Finance Corporation (TFC) would be established by
Congress to issue bonds. The TFC would issue tax credit bonds for sale in the open
market. AASHTO hopes that, after establishment of an escrow/sinking fund, the
program would net $34.1 billion for highways and $8.5 billion for transit during the
2004 - 2009 period. Most funds would be made available to the states in a manner
similar or identical to those employed by existing FHWA and FTA apportioned
programs.
The tax credit bonds to be issued are somewhat unique in the federal scheme of
things. Bond holders would not receive interest on their bonds. Rather, they would
receive tax credits that could be applied against a bond holder’s tax liability. Only one
other federally created program run within the Department of Education uses a similar
type of bonding.
The proposed TFC reflects AASHTO’s concern that a significant increase in the
federal fuels tax may be unlikely in the current economic and political climate.
AASHTO believes this program could leverage a large portion of the predicted unmet
need for federal highway and transit construction funds.
The proposal is not entirely without a federal component, as it suggests that the
budgetary costs of the program (arising from the provision of tax credits) be derived
from a source such as indexing of the federal fuels tax or any of the other revenue
raising initiatives discussed above. The cost to the federal government is a concern
to those who might object to this proposal. Other objections are likely to mimic those
already associated with existing innovative finance programs, which are discussed in
the next section of this report.
Long Term Viability of the Trust Fund System. Many observers are
concerned that the funding uncertainties created by last year’s RABA debate and
increasing interest in identifying alternative power sources in the auto industry, e.g.
fuel cells and hybrid power, should alert Congress and the transportation industry to
the fact that its long-standing trust fund revenue sources should be reviewed. This is
especially true in terms of gasohol if none of the gasohol provisions described above
are adopted. If as expected, gasohol use increases, the lower tax levels on this fuel
will cause trust fund revenues to decline on a relative basis even if overall fuel use
increases.
There is a growing recognition of this problem, but specific suggestions as to
how the long term health of the trust fund could be ensured are few in number. Some
observers now support a provision in the reauthorization act that would create a
CRS-15
commission to study this issue so that its recommendations might be acted upon
during the next reauthorization cycle. At least one piece of legislation introduced in
the 107th Congress calls for such a commission.14
No New Funding
Much of the lobbying in preparation for reauthorization is, as shown above,
predicated on the belief that some significant level of new funding can be identified
for the highway, highway safety, and transit programs. Given the existing state of the
economy and concerns about the costs associated with the war on terrorism and a
possible war with Iraq, such a conclusion, however, is far from foregone.
If none of the revenue raising proposals discussed above are adopted, income to
the trust funds is still predicted to increase. According to one estimate the additional
income available for the trust fund during the 6-year reauthorization could be between
$10 billion and $17.6 billion. This increase, however, is modest by comparison with
the program growth experience during TEA21. In addition, this increase is subject to
revision and is closely related to the fate of the national economy during the expected
6-year reauthorization period.15 This modest increase will not provide the funds that
many highway program advocates view as essential to improving highway and transit
infrastructure. This is especially true in the current environment with states facing
their own budget crises.
The most significant potential problem resultant from a no new funding scenario
is the likelihood of an enhanced donor/donee struggle that might very well spill over
from the highway program into the transit program.. There also would likely be
enhanced competition between programmatically focused interest groups, e.g.
highway safety interests could seek a growth in safety related set asides within
existing programs (STP). This competition for scarce resources could, in the extreme,
divert attention from any of the many new programmatic initiatives under discussion
and change the whole tenor of the reauthorization debate. (CRS contact: John
Fischer)
Highway Program Issues
Flexibility
Flexibility as used in the context of the highway and transit programs refers to
the ability of states to transfer funds apportioned in one program, e.g. STP, and use
these monies to finance activities funded primarily by other federal programs, e.g.
14
S. 2678, Maximum Economic Growth for America through the Highway Trust Fund: The
MEGA Trust Act. Senator Baucus.
15
www.transportation.org/publications/HTMLJournal.nsf/ViewItems/Volume+102,+...
CRS-16
transit.16 These conditions are also known as transferability provisions. Increased
funding flexibility has been an important part of the last two highway reauthorizations,
TEA21 and ISTEA, and has been seen as an essential element of the planning
provisions included in each Act.
There are statutory limits on how much funding in any given program can be
transferred to another activity. There are also additional rules preventing certain types
of program transfers. In some cases these limitations are the result of set-asides or
other features of particular programs.
States and localities have usually sought the widest possible latitude for
transferability. The authors of highway and transit legislation, however, have believed
that a national purpose is served by requiring that each state spend at least a portion
its federal funding for programs which they view as having national importance.
There is considerable support within the transportation community for an
expansion of flexibility as part of the upcoming reauthorization. This is justified on
the basis of improved intermodal planning. It also reflects many states growing
familiarity with the process used to transfer funds between programs and their
respective satisfaction with this option. At the moment, no interest group seems to be
opposing increased flexibility, although there is considerable discussion as to how
broadly any increase in transferability should be applied.
High Priority Projects (Earmarking)
In the view of some observers the most controversial feature of TEA21 is found
in Section 1601 which establishes the “high priority projects program”. This section
lists 1,850 specifically identified projects throughout the United States and provides
a specific dollar authorization for each project. In total almost $9.4 billion in
authorizations are provided for this program. This compares with 538 congressionally
designated projects in ISTEA that were provided with $6.2 billion in funding.
Earmarking was not a major feature of surface transportation reauthorization bills
until the 1990s. Since then, as the above paragraph shows, the growth has been rapid.
The growth in earmarking here, however, is not isolated. Earmarking in transportation
appropriations legislation has also grown dramatically in the last decade. In fact,
certain programs, such as CORBOR and TCSP that were established as competitive
discretionary funding programs in TEA21 are now entirely earmarked in
appropriations legislation.
There are numerous philosophical arguments both for and against earmarking at
the congressional level. In the surface transportation context the argument has always
been between Members meeting what they see as their representational requirements
and meeting the overall planning and other national goals embedded in the rationale
16
The highway programs have limitations on how funds can be transferred among programs.
Further information on the TEA21 structure can be found at:
www.fhwa.dot.gov/tea21/factsheets/transfer.htm
CRS-17
behind federal formula and discretionary program goals. To the extent that earmarks
can be structured to meet overall program goals, the tension between these two
perceptions is somewhat mitigated.
Earmarks do have some significant effects on policy questions that will arise
during the reauthorization debate. Earmarking does affect the donor/donee
computation. Within the context of a state’s total program spending, if the state
receives a significant number of earmarks, the state will see its discretion over total
program spending somewhat reduced. This will have an effect on state and local
planning during the life of the next Act and can tie up state/local matching funds that
could have been used for other projects.
Growth in earmarks in TEA21 mimicked the growth in overall program
spending. If significant new funds are not part of the reauthorization process,
increased earmarking might reduce the availability of formula funds for state and local
projects. Because states and localities tend to have much greater interest in formula
and discretionary funds that they direct, as opposed to those that are earmarked, this
could be a growing source of tension between legislators and their otherwise
supportive state and local constituencies.
Innovative Financing Mechanisms
Created by highway legislation primarily in the 1990s, innovative financing
mechanisms attempt to use the guarantee of future highway funds as a way to speed
project completion and to leverage additional funds for highway projects. There are
three mechanisms currently in use: grant anticipation revenue vehicles (GARVEEs);
and credit assistance available as a result of the Transportation Infrastructure Finance
and Innovation Act (TIFIA) and state infrastructure banks (SIBs). Each of these
mechanisms have specific strengths and weaknesses that have been studied and
described by GAO, CBO, and FHWA.17
Interest in innovative finance during reauthorization is driven by the same search
for finding new sources of project finance as those described in the previous highway
finance section of this report. In fact, interest in innovative finance is heightened if
the highway community is unable to find significant new funds by these other means.
The belief among proponents of innovative financing mechanisms is that they are not
currently used to their maximum potential because of a number of factors that limit
their application and/or attractiveness. As part of the reauthorization debate
supporters of innovative financing mechanisms hope to address some of these factors
thereby making this type of project finance more attractive. Opposition to innovative
17
U.S. GAO. Transportation Infrastructure: Alternative Financing Mechanisms for Surface
Transportation. Testimony before the Committee on Finance and Committee on
Environment and Public Works.
September 25, 2002.
[http://www.gao.gov/new.items/d021126t.pdf]
And FHWA
[http://www.fhwa.dot.gov/innovativefinance/] and U.S. CBO. Innovative Financing of
Highways: An Analysis of Proposals. January 1998.
ftp://ftp.cbo.gov/3xx/doc320/finhways.pdf
CRS-18
finance, however, might arise if innovative finance was expanded primarily because
it would be likely to result in increased overall project costs and expose the U.S. and
or State treasuries to some modicum of risk. Another concern is that innovative
finance techniques mask who bears the cost. And it often simply shifts the cost from
current taxpayers to future taxpayers. (CRS contacts: John Fischer and Bob Kirk)
Transportation Enhancements
Transportation Enhancement (TE) activities were first authorized as part of
ISTEA in 1991 and reauthorized by TEA21 in 1998. The purpose of the TE program
is “to fund transportation-related activities that strengthen the cultural, aesthetic, and
environmental aspects of the Nation’s intermodal transportation system.”18 ISTEA
authorized 10 TE activities as part of the Federal-aid Highway Program and TEA 21
modified two activities and added another two activities.19
The TE program defines a broad range of activities, although there are
restrictions on how funds can be spent. TE activities can be broadly grouped into
three major categories:
1.
2.
3.
bicycle and pedestrian facilities, rail-trails, and safety and education for
bicyclists and pedestrians (55% of federal TE funds, or 8,105 projects20);
historic preservation and preservation of historic transportation buildings,
transportation museums, and provision of tourist and welcome centers (24%
of federal TE funds, or 3,203 projects);
Landscaping, beautification, and environmental mitigation (21% of federal
TE funds, or 3,601 projects).
The TE program is funded through a 10% set-aside from the Surface
Transportation Program (STP). As noted elsewhere, STP is a core (apportioned)
program that provides flexible funding to states according to formula. Since the TE
program was first authorized, $2.8 billion was made available under ISTEA and a
further $3.6 billion was authorized by TEA21. Between FY1992 and FY2001, $5.24
billion was apportioned to states for eligible TE projects, with $4.93 billion (94%) of
available funds reportedly programmed by state DOTs.21 Funds obligated by state
18
For a basic information on the TE prorgam, see: U.S. DOT. TEA21 Fact Sheet:
Transportation Enhancements. [http://www.fhwa.gov/tea21/factsheets/te.htm].
19
See [http://www.fhwa.dot.gov/environment/tequalif.htm] for a detailed list of the 12
activities that qualify under the TE program.
20
21
Projects obligated FY1992 - FY2001.
National Transportation Enhancement Clearinghouse (NTEC). Connections. “National
TE Obligation Rate Continues to Climb.” Summer 2002. Data on Available, Obligated,
Reimbursed, and Transferred fund amounts are derived from the Federal Highway
Administration (FHWA) Fiscal Management Information System (FMIS). Programmed
funds data is collected from State DOTs. Detailed funding information is available at
[http://www.enhancements.org/connections/vol5no3.pdf].
CRS-19
DOTs totaled $3.66 billion (70%), with obligation rates ranging from 100% for a few
states to a low of 38.6%.
Reauthorization Issues. The TE program is popular with local governments
and metropolitan planning organizations (MPOs), which may be designated for
suballocation of TE funds. The National League of Cities notes the positive effect on
the quality of life that the locally oriented TE program has on cities.22 The American
Public Works Association (APWA) also supports continuation of local programs,
citing “the Congestion Mitigation and Air Quality Improvement (CMAQ) Program...
and the Transportation Enhancements program set-aside of STP” as examples of such
programs. Hank Dittmar, on behalf of the Surface Transportation Policy Project
testified:
The Enhancements program symbolizes how transportation
investment, even relatively modest commitments, can reshape the public’s
view of transportation and the federal partnership... These projects both
improve transportation services and help to revitalize rural and urban
communities. With only a few pennies on a dollar, the Enhancements
program has been so successful that the public, including many local elected
officials, often think that this is what TEA-21 does. Enhancement projects
are also particularly important in showing the public that their dollars are
making steady, while modest, improvements through smaller projects in
their neighborhoods and communities.23
One issue that is occasionally mentioned is the broad categories of projects that
are allowed under the TE program. According to APWA, both the CMAQ and the TE
programs have allowed communities to consider a diversity of projects eligible for
federal funding.24 Some supporters of the program, such as APWA believe that the
TE program “should be strictly limited to only those projects that are related to surface
transportation.”25 Critics occasionally take aim at spending on transportation
museums, historic preservation, or other permitted activities that they believe have a
tenuous link to transportation. Nevertheless, Congress established a limited list of
activities for which TE funds could be spent in ISTEA and reaffirmed and expanded
the list in TEA 21. Historic preservation activities account for less than a quarter of
TE program spending.
22
National League of Cities. Priorities for TEA 21 Reauthorization.
[http://www.ampo.org/policy/partners/NLCTEA3Priorities-arial.doc].
23
Testimony of Hank Dittmar, on behalf of the Surface Transportation Policy Project.
House Subcommittee on Highways and Transit of the House Transportation and
Infrastructure Committee, U.S. House of Representatives, September 19, 2002.
[http://www.house.gov/transportation/highway/09-19-02/dittmar.html]. Also see the
testimony of Mayor John DeStefano of New Haven, CT on behalf of the National League
of Cities. [http://www.house.gov/transportation/highway/09-19-02/destefano.html]
24
American Public Works Association. “Policy on the 2003 Reauthorization of Federal
Surface Transportation Programs.”
25
Ibid.
CRS-20
Through a number of project categories, the TE program also supports improved
mobility, multimodal approaches to transportation, environmental mitigation, and
increased decisionmaking at the local level. Many local governments have gained
flexibility in the use of federal funds and, through their participation in TE and other
flexible programs, now have a better understanding of the way the federal
transportation program operates. Furthermore, support for multimodalism and
transportation alternatives appears to be especially high among those local
governments that have actively pursued projects.
Some TE program advocates would like to see the federal government provide
direct funding to localities to pursue enhancements without having to rely on states
for discretionary grants. For example, the National League of Cities (NLC) takes the
position that funding for this program should be distributed directly to cities, which,
it believes, will reduce local government dependence on discretionary grant programs
at the state level.26 Direct funding would potentially increase the burden on the U.S.
DOT. Instead of providing TE program grants to states to administer, the U.S. DOT
would be put in the position of administering thousands of grants in communities
across the country.
One issue recently highlighted in a report prepared for FHWA is the lower-thanexpected obligation rate for TE funds. The report found that some states with higher
obligation rates also had higher project completion rates and smaller apportionments.
In general, the report suggested that states with smaller apportionments appeared to
be better equipped to implement the smaller scale TE projects and that such projects
had greater significance in smaller states.27 It also identified some of the problems
that lead to lower obligation rates, including inexperience of project sponsors, rightof-way issues, and environmental compliance. The study, which contained suggestions
for improving overall obligation rates, primarily focused on administrative measures
that could be implemented by FWHA and state DOTs. One recommendation,
however, called for removing the TE program from the 90% obligation limitation
placed on STP funds. The report suggested that this would increase states’ abilities
to obligate and complete TE projects.28 A concern raised by some transportation
professionals is that if a state wants to spend more than the maximum 90% of STP
funds allowed by law, they would have to reduce the amount of spending allowed
under other parts of the STP program, such as the TE or the CMAQ programs. It was
suggested that some states may be choosing to allocate funds in this manner.29
Another reason cited for the relatively slow obligation rate is that funds for TE
programs are typically not obligated until project sponsors complete the planning and
engineering portions of projects and are ready to begin construction. The delay caused
26
NLC. 2002 National Municipal Policy. Transportation chapter, p. 11.
27
A summary of this study is found in NTEC, “Study Focuses on TE Implementation,”
Connections, Summer 2002.
28
29
Ibid.
NTEC. Making Enhancements Work: Proceedings. Transportation Enhancements
Professional Seminar, September 25-26, 2001, St. Louis, MO. January 2002.
[http://www.enhancements.org/misc/proceedings2001.pdf]
CRS-21
by planning and engineering can amount to a one-to-two year lag from project
selection to obligation of funds.30 (CRS contact: Glennon Harrison.)
Congestion Mitigation and Air Quality Improvement Program
TEA21 authorized a total of $8.1 billion in guaranteed funds for the Congestion
Mitigation and Air Quality Improvement Program (CMAQ) from FY1998 to FY2003.
While the CMAQ program represents a relatively modest percentage of total highway
funding, it potentially has greater significance from an environmental perspective,
since it is the largest source of federal funding for air quality projects. However,
questions have been raised about the program’s effectiveness, and whether to modify
various elements will be a likely topic of discussion in the reauthorization debate.
The primary purpose of the CMAQ program is to fund projects that reduce traffic
congestion, and the resulting emissions from motor vehicles. Through funding these
types of projects, the program is designed to help mitigate the air quality impacts of
highway travel, and thereby assist states in complying with the National Ambient Air
Quality Standards (NAAQS) for carbon monoxide, ozone, and particulate matter. The
Clean Air Act requires the Environmental Protection Agency (EPA) to develop safe
standards for these pollutants, and states with areas that do not meet the standards
must develop plans to attain and maintain them. The CMAQ program is based on the
fundamental concept that lowering the number of miles traveled by motor vehicles,
and reducing congestion to make vehicles operate more efficiently, can reduce
emissions and help states improve overall air quality.
Under current law, states with areas that are in nonattainment with the NAAQS,
and those that must maintain them, receive CMAQ funds according to a formula based
on the severity of air pollution in those areas and the population residing in them.
States that do not have any nonattainment or maintenance areas receive 0.5% of the
total annual CMAQ apportionment, and have the flexibility to use this amount for
transportation projects that are eligible under CMAQ or the Surface Transportation
Program. CMAQ projects generally fall into one of the following categories: 1) mass
transit; 2) traffic flow improvements; 3) rideshare programs; 4) traffic demand
management programs; 5) bicycle and pedestrian projects; 6) public education; 7)
vehicle inspection and maintenance programs; or 8) alternative fuel conversions.
Historically, more funding has been obligated for mass transit projects than for other
activities.
In response to concerns about the effectiveness of the CMAQ program, Congress
included a provision in TEA21 that required the National Academy of Sciences (NAS)
to study whether the emission reductions from CMAQ projects have been large
enough to help states comply with the NAAQS. The NAS released a report on its
findings in the spring of 2002. The study concluded that the air quality benefits of
individual CMAQ projects are relatively small and less cost-effective than other
pollution control measures. However, when assessed collectively, the NAS concluded
that overall air quality benefits were likely great enough to help states achieve and
maintain the NAAQS in areas that are on the margin of compliance. Consequently,
30
Ibid.
CRS-22
the NAS recommended that the program be continued and suggested various
modifications to improve its effectiveness.
The findings of the NAS will likely generate numerous issues in the
reauthorization debate. Since the impact of the program on air quality was difficult
to quantify, there may be a discussion of whether to shift the focus to reducing traffic
congestion in general, rather than linking eligibility to the potential for reducing
emissions. There also may be related discussions of whether the statutory formula
should be amended to provide a higher amount of minimum funding to states that do
not have any nonattainment or maintenance areas, but that would still benefit from a
reduction in traffic congestion.
On the other hand, issues related to the statutory formula also may arise in
support of increasing funding for air quality projects. For example, the current
formula does not include a factor to account for areas that are in nonattainment with
the current particulate matter standard, and for areas that would be classified under the
new ozone standard. Whether to include a factor for these areas to allow potentially
affected states to receive greater funding may be an issue. (CRS Contact: David
Bearden)
Environmental Streamlining
Many stakeholders at the state and local level have expressed long-standing
concerns over delays, duplication of effort, and additional costs frequently associated
with the environmental review process for highway construction projects. However,
some environmental organizations have argued that thorough reviews are necessary
to assess compliance with environmental laws, and that significant time and costs are
sometimes warranted due to the extent of alterations to the natural landscape and the
potential effects of increased capacity on air quality. The National Environmental
Policy Act of 1969 (NEPA, P.L. 91-190) is the primary federal statute which sets the
environmental review process in motion. The law requires federal agencies to prepare
an Environmental Impact Statement (EIS) for any major activity that significantly
affects the environment. This statement must describe the project, characterize the
surrounding environment, analyze the environmental effects of all reasonable
construction alternatives, and indicate plans for complying with environmental laws
and mitigating environmental damage.
According to the Federal Highway Administration, approximately 3% of all
federally funded highway projects have a significant enough impact on the
environment to require the preparation of an EIS. While this amount represents a
small portion of the total projects that receive federal funding each year, such projects
are usually large and affect sizeable populations. Consequently, construction delays
are often controversial. The preparation of an EIS requires significant amounts of
time and money, which can result in substantial delays in construction, especially if
plans for complying with environmental requirements are challenged as inadequate.
Depending on size and complexity, the Federal Highway Administration reports that
the planning and construction of a major highway project typically takes between 9
CRS-23
and 19 years, and that the environmental review process accounts for 1 to 5 years of
this time.
To reduce the approval time for highway projects and speed the delivery of
federal highway funds to states and local areas, Congress included provisions in
Section 1309 of TEA21 which require the Secretary of Transportation to streamline
the environmental review process. The Department of Transportation has taken
numerous administrative actions in response to this requirement, but has not issued
final regulations to put streamlining into practice on a national scale. While the
Clinton Administration did submit a streamlining regulatory proposal in May 2000,
it was widely criticized on numerous grounds by Congress, the states, highway interest
groups, and environmental organizations. The principal criticisms were that it did not
fully address the requirements of TEA21, and that it would have added new elements
to the planning and development process that may have resulted in further project
delays. Due to the these concerns, the Bush Administration withdrew the proposal in
September 2002, and indicated that a new proposal would not be issued until TEA21
is reauthorized. In the interim, President Bush has issued an executive order which
directs federal agencies to expedite environmental reviews for high-priority
transportation projects, and has established specific goals to reduce the time frames
for review.31
Several oversight hearings were held during the 107th Congress to examine the
streamlining issue. Some Members expressed their disappointment that the
Department of Transportation’s actions have mostly been administrative in nature, and
that five years after the enactment of the law, streamlining regulations have yet to be
finalized. In the conference report on TEA21 (H.Rept. 105-550), Congress stated its
expectation that the Secretary of Transportation would implement the streamlining
requirements through the regulatory process. The lack of final regulations has
increased interest in further legislative action to speed project delivery and meet public
demands for transportation infrastructure. Two bills were introduced near the end of
the 107th Congress to address the streamlining issue (H.R. 5455 and S. 3031). While
there were differences between the two bills, both included proposals to grant the
Secretary of Transportation greater authority over the environmental review process,
establish statutory deadlines for agency comment periods, and allow qualified states
to assume federal responsibilities. Due to the ongoing interest in streamlining,
Congress will likely consider similar proposals in its debate over the reauthorization
of TEA21. (CRS contact: David Bearden)
Highway Safety Programs
Existing surface transportation law deals with numerous aspects of highway
safety. Title I of TEA-21 includes authorization for the Surface Transportation
Program, a federal categorical grant program which includes set asides for hazards
elimination and grade crossing infrastructure improvements. Funding derived from
31
http://www.fhwa.dot.gov/stewardship/index.htm
CRS-24
both of these set asides helps pay for devices or structures that directly promote
highway safety. Title I also authorizes other infrastructure-related funds that help
finance reconfiguration of safer highway interchanges and repair of bridges. Title II
of TEA 21 contains an authorization to conduct research and development related to
traffic safety, as well as authorizations for grants to increase occupant protection,
reduce alcohol-impaired driving, improve the collection of state highway safety data,
and operate the National Driver Registry. For example, the National Highway Traffic
Safety Administration (NHTSA) deploys Title II funds to pay for the development of
new strategies for traffic enforcement (e.g., work to advance drug recognition
technologies and to train detection experts). Title II funds are used by the states to
encourage the deployment of innovative highway safety programs (e.g., the Section
402 program). NHTSA uses Title II funds to conduct evaluations of the effectiveness
of different traffic safety strategies (the Section 403 program). Title IV includes
authorization for numerous motor carrier safety programs. And, Title V includes
authorization for various research and technical assistance and deployment programs
and for the Intelligent Transportation Systems (ITS) program (discussed
subsequently), which, in part, support activities intended to promote highway safety.
As part of the reauthorization process, funding levels for the safety-oriented
activities and grants administered by the NHTSA and the Federal Motor Carrier Safety
Administration (FMCSA) are likely to be reviewed. For FY2003, the Administration
requested a total of $430 million for NHTSA. The FY2002 appropriation provides
total NHTSA funding and associated state grants to improve traffic safety of
approximately $423.3 million. The FY2003 request for the FMCSA and associated
state grants to improve truck and bus safety is $371 million; the appropriation for
FY2002 was $354.4 million. Other relevant issues include: Should NHTSA’s
activities and the grants it administers be funded entirely out of the Highway Trust
Fund? What is an appropriate level of funding for these activities? Should additional
funds be authorized to increase seat belt use rates, to reduce impaired driving, and
improve motor carrier safety?
As an outcome of the reauthorization process, Congress determines the total
amount of funds specifically set aside for safety initiatives and the allocation of these
funds among many competing demands. In view of a recent NHTSA study which
estimated that the total costs to society of all traffic crashes was over $230 billion per
year, there is likely to be increased attention to the question of whether there are
sufficient funds for traffic safety and whether existing funds are being wisely
allocated.32
To influence this decisionmaking process, various groups continue to offer a
wide array of recommendations on the future federal role in traffic or highway safety
and the amount of future funding for particular safety-oriented infrastructure or
behavioral (primarily driver) investments. For example, the railroad freight industry
seeks increased funding to improve the infrastructure and safety of highway/grade
crossings and seeks a change in federal law that would allow the Section 130 funds
32
NHTSA. DOT. The Economic Impact of Motor Vehicle Crashes 2000. May 2000. 86p.
CRS-25
to be used to maintain the infrastructure at crossings. Mothers Against Drunk Driving
(MADD) seeks additional funding to improve traffic safety (e.g., to combat impaired
driving), and the validation by research and testing of impaired driving
countermeasures. The American Road & Transportation Builders Association
(ARTBA) seeks a $1 billion per year “High Risk Two-Lane Road Safety Program.
Likewise, AASHTO emphasizes the need for safety improvements, especially on twolane roads, to reduce the high rate of fatalities on rural roads. Most traffic fatalities
(24,524 in 2000) occur on rural roads. The American Highway Users Alliance wants
Congress to focus on the safety of roadways themselves, because they assert that this
area offers the most opportunity for improvement. Also, the American Traffic Safety
Services Association seeks a $3 billion per year “Roadway Safety Program,” that
would target with infrastructure improvements many high-risk challenges, such as
intersections and run-off-the-road crashes. The AAA recommends that increased
attention be paid to interventions that will prevent crashes before they occur. That
association recommends improving roads through demonstration projects to improve
intersection safety, conducting road safety state audits, integrating safety into the
transportation planning process, collecting improved crash causation data, and
protecting vulnerable drivers (older and younger drivers).
A major component of the federal role in surface transportation safety is the
financial assistance that DOT provides to states and local governments. As part of the
reauthorization process, Congress is considering: How could federal funds be better
used to assist state and local governments conduct their traffic safety functions? TEA21 reauthorized two traffic safety grants, and authorized six new grant programs. In
retrospect, many state officials maintain that TEA-21 authorized too many grant
programs to administer. Not surprisingly, the states, as evidenced by statements from
both the Governors Highway Safety Association (formerly the National Association
of Governors Highway Safety Representatives) and AASHTO, seek a unified grant
approach with rewards for a state’s performance.33 Congress is beginning to consider
the advantages and disadvantages of instituting a unified grant program, including
programs similar or comparable to those authorized in TEA-21, including those
authorized in sections 2003(b), 410, and 402.
Also, there is likely to be considerable interest in exploring ways to increase seat
belt use rates, because this strategy is widely recognized as the most cost effective
way to save a substantial number of lives that might otherwise be lost as a result of
traffic crashes. Relevant questions include: Should a goal for a national seat belt use
rate be set in statute? If so, how could the Nation achieve a significantly higher (e.g.,
85% or 90%) seat belt use rate by the end of the next authorization period then the
current rate of 75%? How might federal funds be used to promote additional state and
local efforts intended to help achieve that objective? If a financial penalty (or
sanction) for not having a primary seat belt enforcement law were rejected by
Congress, what specific provisions intended to increase seat belt use rates might be
incorporated into a highway bill? (CRS contact: Paul Rothberg)
33
See statement presented at safety roundtable before the Senate Committee on Environment
and Public Works, June 14, 2002.
CRS-26
Intelligent Transportation Systems (ITS)
ITS, often use telecommunications, sensors, or computers, to seek to improve the
performance or safety of highway and transit systems. ITS includes traffic
management centers receiving real-time video and other measures or indicators of
traffic flow, crashes, and roadway or weather conditions. Such information helps
operators redirect traffic, coordinate emergency response, or improve the efficiency
of the surface transportation system. The federal investment in ITS has been roughly
$200 million per year. TEA-21 specifies the current federal role regarding ITS
research and technical assistance as well as deployment. The reauthorization process
provides an opportunity to consider ways to improve ITS-related federal policies and
programs. The focus of this debate is not likely to be whether there should be a
federal role; but rather, the debate is likely to focus on the scope, direction, goals, and
funding level for future federally-sponsored ITS activities. Congress is expected to
consider the level of future funding for ITS research and technical assistance, and
whether and how monies from the federal highway trust fund might be used to
accelerate ITS deployment.
Much of the surface transportation community generally would favor continued:
1) federal investment in ITS research, development and technical assistance, focused
on advancing and testing new technologies, improving ITS standards and architecture,
and conducting training; 2) federal investment to help states deploy the Commercial
Vehicle Information Systems and Networks in order to increase the efficiency of the
truck and bus inspection process and to yield other regulatory cost savings; 3) federal
support of the Intelligent Vehicle Initiative to expedite deployment of crash avoidance
technologies and to conduct research on driver distraction issues associated with the
use of ITS; and 4) deployment of a nationwide, integrated or coordinated ITS
infrastructure by the states to provide more reliable and comprehensive data needed
to better manage and operate highway and transit systems and measure their
performance. There remains substantial disagreement on how a deployment effort
should be funded.34
As part of the reauthorization process, Congress is likely to determine a funding
level for federal investment in the National ITS Program, the ITS goals or objectives
that the DOT should pursue with those funds, and the federal policy regarding
deployment of ITS. Questions that are likely to be discussed include: Should there be
a dedicated categorical grant program to accelerate ITS deployment? Should there
be a set aside program to accelerate ITS deployment? Congress may also consider
whether the scope and direction of the federal role in ITS should focus more on public
safety and national security concerns. Other relevant questions include: How might
the ITS program contribute more to highway safety? Could the deployment of lifesaving crash-avoidance technologies be accelerated? Would a fleet demonstration
34
Rothberg, Paul F. Intelligent transportation systems for highways and transit: status,
federal role, and options for reauthorization. CRS Report. RL31283 : Feb. 11, 2002. 25
p.
CRS-27
of integrated crash-avoidance technologies and emergency notification systems
(perhaps three or more systems in the same vehicle) be a worthwhile investment?
(CRS contact: Paul Rothberg)
Research and Development and Technology
Deployment
In both the short- and long-term, research and development as well as technology
deployment activities (RD and TD) have a role in helping to reduce the various
challenges that affect the efficiency or operation of the Nation’s surface transportation
systems. These challenges include: congestion, security of infrastructure, loss of life
and injury due to traffic crashes, degradation of environmental or life quality (e.g.,
runoff and suburban sprawl), and the continual need for infrastructure rehabilitation.
The federal role in RD and TD seeks to advance and accelerate the use of improved
or safer technologies, processes, policies, vehicles, and infrastructure to reduce these
challenges. The federal role is primarily administered or overseen by the FHWA,
FTA, NHTSA, and the Research and Special Programs Administration (RSPA) of the
DOT. In terms of the transportation budget, two of the largest efforts of RD and TD
pertain to ITS ( previously discussed) and FHWA’s RD and TD program (discussed
below).
FHWA conducts an extensive RD and TD program that involves all aspects of
the highway system. For these activities, Title V of TEA-21 provides an authorization
level of roughly $200 million per year. These FY2003 RD&TD funds are authorized
in the following amounts: $103 million for surface transportation research, $50
million for technology deployment, $20 million for training and education, and $26
million for University Transportation Research. Research funds are used primarily
to advance and deploy technologies intended to improve highway pavements,
structures, roadway safety, and highway policies. Much of the technology
deployment funds are earmarked for specific types of research or projects; and much
of the university-oriented funds are earmarked for specific institutions. Many state
and industry experts assert that FHWA’s RD and TD funds are of fundamental
importance to the states and their long-term ability to maximize the effective use of
federal aid funds. The states support continuation of the FHWA RD and TD program
as well as the Strategic Planning and Research Program, which is a takedown off of
the federal aid program that provides R&D funds directly to the states.
As part of the reauthorization process, Congress is likely to address how much
money should be authorized for the core RD and TD activities conducted or supported
by the FHWA, which objectives of research and technology deployment should
receive emphasis or dedicated funding, and, in some cases, which organizations
should conduct research or the training of new investigators. Also, the reauthorization
statute is likely to include a specific funding amount for the Local Technical
Assistance Program, National Highway Institute, and the University Transportation
Centers.
CRS-28
In addition, Congress may also examine ways to strengthen and improve federal
involvement in surface transportation RD and TD activities. There are several issues
of continuing concern: how to increase and improve stakeholder input into the
process, ways to foster more effective accounting and use of RD and TD expenditures,
and methods to improve the implementation and coordination of a diverse research
program within a decentralized and diverse community. Also, many groups are
concerned over the extent of earmarking that historically occurs with these funds.
(CRS contact: Paul Rothberg)
Transit Issues
Transit Program Structure
TEA21 made few changes in the overall structure of the federal transit program.
There are two major transit programs: the Urbanized Area Formula Grants Program
($3.3 billion in FY2002) and the Capital Investment Program ($2.8 billion in
FY2002). The Capital Investment Program has three components: New Starts
(earmarked funding for new or expanded fixed-guideway systems), Fixed-Guideway
Modernization (formula funding for repairs to existing systems), and Bus & Bus
Facilities (discretionary funding). There are also several smaller programs, including
the Non-Urbanized Areas Formula Program, Grants for Elderly & Individuals with
Disabilities, Job Access & Reverse Commute Program, Rural Transportation
Accessibility Program, the Clean Fuels Program, and Research and Planning
programs.
Transit Reauthorization Issues
Reducing the Federal Share for New Starts. One response to the alleged
gap between transit capital funding needs and the level of funds available has been a
proposal to reduce the federal matching share for FTA’s New Starts program. This
program helps finance new fixed-guideway transit systems or extensions to existing
systems. The current federal share for transit projects by statute is 80%, the same as
for most highway projects (this was raised from 75% in 1991 by ISTEA). Congress
has directed FTA not to sign any full-funding grant agreements for New Starts projects
that provide a federal share of more than 60% after FY200235; the Bush
Administration has proposed reducing the federal share to 50% after FY2003.36
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-
35
House Report 107-308, to accompany H.R. 2299 (the FY2002 Department of
Transportation and Related Agencies Appropriations Bill), p. 114.
36
Federal Transit Administration, FY2003 Annual Report on New Starts, p. 7.
CRS-29
November 2001). However, the individual agreements making up this average ranged
from 19% to 80%.37 This reduction in the average federal share for recent New Starts
projects may be due in part to FTA’s own efforts to stretch available funding by using
the amount of federal share requested as a consideration in prioritizing candidate
projects.
Critics of the proposal to formally cap the federal share at a lower level point to
the success of FTA’s efforts as evidence that a blanket lower cap is unnecessary. They
argue a blanket lower cap would 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. They also note that state and local
officials have testified that lowering the federal share may encourage transportation
planners to take advantage of flexible funding and move funding away from transit
projects toward highway projects, where the federal match is still 80%.
Supporters of lowering the cap on the federal share argue that the change would
simply formalize the current trend 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, perhaps weeding out some marginal
projects. They note that the level of local match provided in New Starts projects
seems to have little relation to the fiscal ability of the community; rather, the variance
in level of local match provided seems related primarily to a community’s willingness
to ask for a higher federal match, and therefore penalizes communities which provide
a higher local match. And they also note that even though FTA has produced a low
average federal share recently, a blanket cap would still free up a significant amount
of money.38
Increased Funding for Transit as Part of Any Increase in the Federal
Fuels Tax. The primary funding source for transit is the previously mentioned Mass
Transit Account of the Highway Trust Fund. The account currently receives 2.86¢ of
the 18.4¢ federal excise tax (15.5% of the tax), which brings in about $4.6 billion
annually. Transit interests believe that they should share in any new revenue increases
for the overall surface transportation program due to a long standing informal
agreement that directs 20% of each increase in the federal fuel tax to the Mass Transit
Account.
TEA-21 produced a significant increase in the size of FTA’s programs, from $4.8
billion in FY1998 to $7.2 billion in FY2003. In 2000, total transit spending from all
sources was $32.2 billion: $9.6 billion for capital investment and $22.6 billion for
37
General Accounting Office, FTA’s New Starts Commitments for Fiscal Year 2003, GAO02-603, 24.
38
Of the 49 projects currently in final design or preliminary engineering that GAO reviewed
for the report cited in footnote #4, 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-02603, p. 24.
CRS-30
operating expenses. Total federal assistance was $7.7 billion, 24% of total transit
spending. Almost all federal transit assistance (94% in FY2000) is for capital
investment.
In the face of growing traffic congestion and air quality problems, and increasing
transit ridership, many communities without transit systems want them and
communities with transit systems want to expand them. As mentioned earlier in this
report, a not yet released biannual needs study by the FHWA and FTA is expected to
show a large gap between the amount of funding available for transit and the Nation’s
transit needs. The transit industry, therefore, supports all efforts to provide additional
funds during the reauthorization period.
Maintaining the Guaranteed Obligation Limit. One of the innovations of
the TEA-21 authorizing legislation described earlier was the creation of guaranteed
obligation limits for transportation programs funded from the Highway Trust Fund.
Proponents of transit support this guaranteed obligation limit noting that it has
provided a steady increase in transit funding during the current authorization period;
also, it has enabled recipients to predict their future funding levels, assisting their
long-term capital planning and making possible innovations in project financing.
Funding for Small Transit Intensive Cities. The formula for apportioning
transit formula funds to small cities–urbanized areas with populations less than
200,000–is different from that used for larger areas. The formula for small cities uses
only population and population density as factors, while that for larger areas includes
factors reflecting the amount of service that the city provides.
Some argue that as a result, small cities that provide a higher-than-average level
of transit service do not receive a level of funding that recognizes their transit efforts.
As a result of these concerns, Section 3033 of the TEA-21 directed DOT to study the
issue. The DOT study concluded that sufficient issues existed to consider changes in
the Urbanized Area Formula program formulas in the next reauthorization.39
Rural Transit. The bulk of transit formula funds ($3.5 billion in FY2002) go
to large urbanized areas: 83% to areas over 200,000 in population, 9% to areas
between 50,000 and 200,000, and 6% to non-urbanized areas (populations under
50,000).
Advocates of increased funding for small urban and rural areas assert that transit
is needed by people who cannot afford cars or who cannot drive, and that rural areas
have few transportation options and limited resources to fund transit; they say transit
ridership in those areas would increase if transit were more available. Critics note that
transit is most efficient where there are large concentrations of people, and it is also
most needed in those areas, because the congestion created by large numbers of people
commuting to work overwhelms the road network.
39
The study is available at http://www.fta.dot.gov/library/policy/rtc/.
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Advocates of increased funding for rural transit have proposed that the
distribution ratio for transit formula funds be changed to that used for the Job Access
and Reverse Commute Program, thus providing more money to small urban areas and
especially to rural areas. Critics of this proposal assert that the majority of transit
funding should go where the majority of transit ridership is, which is in large urban
areas. There were 405 urbanized areas in 2000, of which only 33 had populations
over 1 million; these 33 largest urbanized areas alone accounted for 82% of all transit
trips in 2000.40
Bus Transit Issues. The other large transit program is the Capital Grants
program, which received $2.8 billion in FY2002. The Capital Grants Program is
divided into three components: Fixed-Guideway Modernization, New Starts, and Bus
& Bus Facilities. The funding for these three programs is divided 40-40-20; thus
about 80% of the funding goes to fixed-guideway systems (mostly heavy and light rail,
though Bus Rapid Transit also qualifies as a fixed-guideway system).
Some argue that a greater percentage of the Capital Grants Program funds should
go to buses, because buses carry the majority of all transit riders, and most
communities have little or no fixed-guideway service, and so are not eligible for the
80% of funds distributed to fixed-guideway systems.
Opponents of this policy change argue that while buses carry the majority of
riders, the capital costs of bus service are relatively low because bus systems do not
have to pay for their own infrastructure. They note that fixed-guideway transit
systems are more efficient than buses by some measures; although only 13 cities have
heavy rail transit systems, those systems alone account for about one-third of all
transit trips, and for almost half of all transit passenger miles traveled. But fixedguideway systems are expensive to build and maintain. Since the capital needs of
fixed-guideway systems are great, while the capital needs of bus systems are relatively
small, proponents of the status quo argue that most of the Capital Grants Program
funds should go to fixed-guideway systems, rather than to bus systems. (CRS contact:
Randy Peterman)
Intermodal Issues
Intermodal Connectors
Recent Department of Transportation (DOT) studies have found persistent traffic
bottlenecks and inadequate access to freight transfer facilities. The access roads to
these terminals are referred to as “intermodal connectors.” In TEA21 (Section 1106),
Congress called on FHWA to examine the condition of intermodal connectors. The
40
Urbanized area figure from Census Bureau; ridership figures from American Public
Transportation Association, Public Transportation Fact Book, Tables 26 & 28.
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FHWA published its findings in January 2001.41 The Maritime Administration
(MARAD) has examined the condition of intermodal connectors with seaports that
includes rail as well as road access.42 The FHWA study found that the pavement of
intermodal connectors is often in poor condition and the roads have deficient
geometrics (limited turning radii at intersections, low clearances, inadequate shoulder
width, etc.) for the heavy truck traffic they serve. Intermodal connectors that are in
poor shape reduce service reliability and predictability. If connectors are a weak link
in the transportation system, they raise shipping costs, limiting the productivity and
competitiveness of U.S. businesses. Poor intermodal connectors can also result in
long lines of idling trucks, reducing air quality and increasing energy consumption.
In many cases, poor intermodal connectors also have a serious negative impact on
traffic in the communities in which they are located.
As trade volumes have increased at rapid rates, and congestion is increasing on
the nation’s highway system, the issue of intermodal connections may be a microcosm
of broader issues regarding the federal government’s role in the nation’s intermodal
transportation system. Among the issues being discussed are: Do existing
institutional arrangements encourage a cross-modal approach for transportation
planning? Are existing funding programs too limited to include multimodal projects?
Do we plan and operate the system as a system, and not as individual modes or
elements? Freight stakeholders have made several proposals to seek what they view
as adequate funding for intermodal freight connectors. They include dedicating a
portion of NHS funds for intermodal connector projects, specifying that access to
ports and gateways qualify for funding under the CORBOR program, and modifying
CMAQ language to specify and encourage funding for freight projects. Others have
proposed the creation of a multimodal trust fund at either the state or federal level to
provide a funding source for intermodal transportation needs.
Freight Rail Infrastructure Funding
Class I freight railroads primarily finance projects themselves with almost no
public assistance. Federal programs have funded some rail related projects but
relative to other modes, funding is limited. Some policymakers are concerned with
the railroads’ ability to keep pace with changing economic circumstances. Economic
and trade growth have raised questions about the current pace of development in rail
freight capacity. Many observers believe that intermodal rail (truck trailers and
containers) is a viable means of relieving congestion on certain parts of the nation’s
interstate highway system. At the same time, intercity passenger and commuter rail
are increasingly asking the freight railroads for cooperation in corridor improvements.
Intermodal traffic volume has tripled in the last twenty years from 3.1 million trailers
41
U.S. Department of Transportation, NHS Intermodal Freight Connectors, A Report to
Congress, July 2000. Available at [http://ops.fhwa.dot.gov/freight/infrastr/nhs/].
42
Maritime Administration, Intermodal Access to US Ports -Report of Survey Findings,
Transportation Research Board, 27th Annual Summer Ports, Waterways, Freight &
International Trade Conference, Pittsburgh, June 23-26, 2002.
Available at
[http://gulliver.trb.org/publications/mb/2002Ports/06Chitwood.pdf].
CRS-33
and containers in 1980 to 9.2 million units in 2000.43 Much of the increase in
intermodal volumes is the result of burgeoning trade volumes, particularly in marine
containers. When double-stack trains first came into use in the early 1980s, the
intermodal traffic absorbed the railroads’ excess capacity. Today, however, due in
large part to deregulation, supply and demand are in closer balance. If the railroads
are to absorb the additional traffic forecasted, they will need to make (and are making)
substantial investments in track and terminal capacity.
If policymakers choose to consider additional federal resources for rail capital
improvements, among the approaches that have been proposed are the creation of a
rail trust fund or the expansion of existing federal programs to include more
eligibility for rail related projects. A trust fund, by providing a more predictable and
steady source of funding, facilitates the planning and construction of long term
projects. However, a rail trust fund could further fragment and compartmentalize
federal funding along modal lines. Funding and managing transportation on a modal
basis could make it more difficult to target resources where capacity may be needed
most, such as the connections among modes. A second approach, permitting the use
of highway trust fund dollars for rail projects, might increase the flexibility of local
transportation planners in solving their transportation needs. Greater participation by
the freight railroads in the local planning process may also augment state and local
resources with private sector capital. However, a more liberal dispersion of highway
trust fund dollars to non-highway users could diffuse political support for the program.
In addition, expanding the eligibility of existing highway trust fund financed
programs, such as CMAQ or CORBOR, to include rail, does not ensure that state
DOTs and local MPOs will shift more resources to rail related projects. There are also
some potential disincentives in law that may cause railroads not seek a greater role in
intermodal projects pursued by localities.
A concern with federal assistance for rail freight projects is that unlike other
modes, such as highways, waterways, and airways, freight railways are privately
owned.44 Another important difference with other modes is that railroads do not
generally share their infrastructure with competitors. Many question if public funding
should be used to support projects in private ownership and under private control. A
possible drawback of public financial assistance is that it could, in extreme cases, lead
to overinvestment in rail capacity. If public funds were available for construction of
a new project, the project may have to pass a lower hurdle in terms of evaluating risk
and return than if the project were financed by a railroad on a stand-alone basis.
Industry observers caution that the physical life of a freight facility can outlive its
economic life. Another concern with government participation in rail project funding
is that it could defer the industry’s cost saving strategies. Railroads have been
improving profitability through mergers, trying to capture more market share from
trucks through service improvements, selling light density track to regional and
43
44
Association of American Railroads, Railroad Facts, 2001 ed. p. 26.
Amtrak owns the Northeast Corridor and operates on the tracks of freight railways outside
the corridor.
CRS-34
shortline railroads, and investing in more fuel efficient locomotives. (CRS contact:
John Frittelli)
CRS-35
Appendix 1: Transportation Budget Terminology
Transportation budgeting uses a confusing lexicon (for those unfamiliar with the
process) of budget authority and contract authority — the latter, a form of budget
authority. Contract authority, provides obligational authority for the funding of trust
fund financed programs, such as the federal-aid highway program. Prior to TEA21,
changes in spending in the annual transportation budget component had been achieved
in the appropriations process by combining changes in budget/contract authority and
placing limitations on obligations. The principal function of the limitation on
obligations is to control outlays in a manner that corresponds to congressional budget
agreements.
Contract authority is tantamount to, but does not actually involve, entering into
a contract to pay for a project at some future date. Under this arrangement, specified
in Title 23 U.S.C., which TEA21 amends, authorized funds are automatically made
available to the states at the beginning of each fiscal year and may be obligated
without appropriations legislation. Appropriations are required to make outlays at
some future date to cover these obligations. TEA21 greatly limited the role of the
appropriations process in core highway and transit programs because the Act
enumerated the limitation on obligations level for the period FY1999 through FY2003
in the Statute.45
Highway and transit grant programs work on a reimbursable basis: states pay
for projects up front and federal payments are made to them only when work is
completed and vouchers are presented, perhaps months or even years after the project
has begun. Work in progress is represented in the trust fund as obligated funds and
although they are considered “used” and remain as commitments against the trust
fund balances, they are not subtracted from balances. Trust fund balances, therefore,
appear high in part because funds sufficient to cover actual and expected future
commitments must remain available.
Both the highway and transit accounts have substantial short- and long-term
commitments. These include payments that will be made in the current fiscal year as
projects are completed and, to a much greater extent, outstanding obligations to be
made at some unspecified future date. Additionally, there are unobligated amounts
that are still dedicated to highway and transit projects, but have not been committed
to specific projects.
Two terms are associated with the distribution of contract authority funds to the
states and to particular programs. The first of these, apportionments, refers to funds
distributed by the FHWA to the states under formulas set by TEA21. For example,
all national highway system (NHS) funds are apportioned to the states. Allocated
funds, are funds distributed by FHWA, typically to programs under direct federal
control. For example, federal lands highway program monies are allocated; the
45
Because the limitation on obligations is still included in appropriations limitations the
funds provided are still considered discretionary for purposes of the congressional budget.
CRS-36
allocation can be to another federal agency, to a state, to an Indian tribe, or to some
other governmental entity. These terms do not appear in the congressional budget, but
often provide a frame of reference for highway program recipients, who may assume,
albeit incorrectly, that a state apportionment is part of the federal budget per se.
CRS-37
Appendix 2: Reauthorization Hearings in the 107th
Congress, 2nd Session
U.S. Congress. Senate. Committee on Commerce, Science & Transportation.
Hearing on NTSB Reauthorization. June 25, 2002.
U.S. Congress. Senate. Committee on Banking, Housing, and Urban Affairs.
Hearing. Perspectives on America’s Transit Needs. October 8, 2002.
- - - - -. Subcommittee on Housing and Transportation. Hearing. Transit in the 21st
Century: Successes and Challenges. March 13, 2002.
- - - - -. Hearing. Transit in the 21st Century: Successes and Challenges. April 25,
2002.
- - - - -. Hearing. TEA-21: A National Partnership. June 13, 2002.
- - - - -. Hearing. TEA-21: Investing in Our Economy and Environment. June 26,
2002.
- - - - -. Hearing. Transit: A Lifeline for America’s Citizens. July 17, 2002.
U.S. Congress. Senate. Committee on Environment and Public Works. Hearing.
Transportation for the Next Generation. August 20, 2002.
- - - - -. Hearing. Transportation and Air Quality. July 30, 2002.
- - - - -. Hearing. Transportation Planning and Smart Growth. May 15, 2002.
- - - - -. Hearing. Mobility, Congestion and Intermodalism. March 19, 2002.
- - - - -. Hearing. Partners for America's Transportation Future. January 24, 2002.
- - - - -. Subcommittee on Transportation, Infrastructure, and Nuclear Safety.
Hearing. TEA-21: State of the Highway Infrastructure. September 30, 2002.
- - - - -. Subcommittee on Transportation, Infrastructure, and Nuclear Safety.
Hearing. FY2003 FHWA Budget. February 11, 2002.
- - - - - , and U.S. Congress. Senate. Committee on Finance. Joint Hearing on TEA21 Reauthorization: Innovative Financing – Beyond the Highway Trust Fund.
September 25, 2002.
- - - - - , and U.S. Congress. Senate. Committee on Commerce, Science &
Transportation. Subcommittee on Surface Transportation and Merchant Marine.
Joint Hearing on Intermodal Transportation. September 9, 2002.
CRS-38
U.S.
Congress. House. Committee on Transportation and Infrastructure.
Subcommittee on Highways and Transit. Hearing on Federal Lands Highway
Program. October 9, 2002.
- - - - -. Hearing on H.R. 5455: Expediting Project Delivery to Improve
Transportation and the Environment Act.. October 8, 2002.
- - - - -. Hearing on Status of the Nation’s Highway and Transit Systems: Capital and
Maintenance Needs. September 26, 2002.
- - - - -. Hearing on Stakeholder Proposals for the Reauthorization of Surface
Transportation Programs. September 19, 2002.
- - - - -. Hearing on Intelligent Transportation Systems. September 10, 2002.
- - - - -. Hearing on Transportation Solutions in a Community Context: The Need for
Better Transportation Systems for Everyone. July 25, 2002.
- - - - -. Hearing on Long-term Outlook on Highway Trust Fund: Are Fuel Taxes a
Viable Measure? July 16, 2002.
- - - - -. Hearing on Trucking Safety. July 9, 2002.
- - - - -. Hearing on Various Approaches to Improving Highway Safety. June 27,
2002.
- - - - -. Hearing on Federal Transit Capital Grants Programs. June 20, 2002.
- - - - -. Hearing on Intermodalism: Moving America’s People and Goods. June 18,
2002.
- - - - -. Hearing on Relieving Highway Congestion through Capacity Enhancements
and Increased Efficiency. May 21, 2002.
- - - - -. Hearing on Major Project Management: Solutions for Major Success. May
1, 2002.
- - - - -. Hearing on How Transit Serves and Benefits U.S. Communities. April 17,
2002.
- - - - -. Hearing on Ensuring the Integrity of the Highway Trust Fund. March 20,
2002.
- - - - -. Hearing on Perspectives of Governors and Local Elected Officials on
Reauthorization of TEA 21. February 28, 2002.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.