Finance: Highways

Taken together, all levels of government spent $147.5 billion for highways in 2004. Cash outlays by the Federal government for highway-related purposes were $33.1 billion (22.4 percent of the combined total for all levels), including both direct highway expenditures and amounts transferred to State and local governments for use on highways. States funded $72.9 billion (49.4 percent). Counties, cities, and other local government entities funded $41.5 billion (28.1 percent). Private sector investment is playing an increasingly important role in highway finance; this subject is discussed in Chapter 13.

Of the total $147.5 billion spent for highways in 2004, $70.3 billion (47.6 percent) was used for capital investments. Spending on maintenance and operations totaled $36.3 billion (24.6 percent); administrative costs (including planning and research) were $12.7 billion; $14.3 billion was spent on highway patrol functions and safety programs; $5.8 billion was used to pay interest; and $8.0 billion was used for bond retirement.

Total highway expenditures by all levels of government increased 44.7 percent between 1997 and 2004. Highway spending rose faster than inflation over this period, growing 22.7 percent in constant dollar terms. Capital spending grew by 45.2 percent between 1997 and 2002. Federal cash expenditures for capital purposes rose 52.9 percent, while State and local capital investment increased by 39.9 percent. As a result of Federal capital spending rising more quickly, the portion of total capital outlay funded by the Federal government rose from 41.6 percent in 1997 to 43.8 percent in 2004. The Federal percentage in 2002 was 46.1 percent, the highest level since 1986.

Of the $70.3 billion of capital spending by all levels of government in 2004, $36.4 billion (51.8 percent) was spent for system rehabilitation, the resurfacing, rehabilitation, and reconstruction of existing roadways and bridges. An estimated $14.7 billion (20.9 percent) was used to construct new roads and bridges; $12.8 billion (18.3 percent) went for adding new lanes to existing roads; and $6.4 billion (9.0 percent) went for system enhancements such as safety, operational, or environmental enhancements.

Highway-user revenues—the total amount generated from motor-fuel taxes, motor-vehicle fees, and tolls imposed by Federal, State, and local governments—were $105.8 billion in 2004. Of this, $83.0 billion (78.4 percent) was used for highways. This represented 57.1 percent of the total revenues generated by all levels of government in 2004 for use on highways. Other major sources of revenues for highways included bond proceeds of $15.8 billion (10.9 percent) and general fund appropriations of $23.6 billion (16.2 percent). Other sources such as property taxes, other taxes and fees, lottery proceeds, and interest income totaled $23.0 billion (15.8 percent).