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|Federal Highway Administration > Publications > Public Roads > Vol. 63· No. 3 > Highway Finance Information: A Key 21st Century Transportation Decision-Making Tool|
Highway Finance Information: A Key 21st Century Transportation Decision-Making Tool
by Thomas W. Howard
Making informed transportation decisions for the 21st century will be a great challenge for transportation officials at all levels of government and for others during the TEA-21 era and beyond.
TEA-21 is the Transportation Equity Act for the 21st Century, which authorizes highway, highway safety, transit, and other surface transportation programs for six years — fiscal years 1998 through 2003. TEA-21 guarantees that a minimum of $198 billion will be spent during these six years for surface transportation projects.
Highway Statistics, an annual publication of the Federal Highway Administration (FHWA), provides vital information that helps decision-makers meet the challenge to develop transportation programs that will serve our nation's needs in the new century.1
This article highlights some of the key aspects of the highway finance section of Highway Statistics. Highway finance data is currently used extensively for a wide range of key efforts, including the preparation of the biennial report to Congress on the Status of the Nation's Surface Transportation System — Conditions and Performance.2 FHWA plans to make greater use of highway finance data in the future in support of the Department of Transportation's Strategic Plan and in other forward-looking ways.
Highway Finance — The Big Picture
In 1997, highway receipts and disbursements for all levels of government (federal, state, and local) both exceeded the $100 billion level. Figure 1 shows the federal, state, and local receipts for years 1945-1997. For 1997, federal receipts were $22 billion; state receipts were $55 billion; and local receipts were $30 billion. On a nationwide basis, this averaged to about $400 per capita and a little more than four cents per vehicle-mile traveled.
The federal government and most state governments rely chiefly on highway-user revenues, such as motor-fuel and motor-vehicle taxes. Local governments rely on other sources, such as appropriations and property taxes, for their receipts.
Expenditures of $101 billion for highways by all levels of government in 1997 are shown in figure 2. Almost half of all spending for highways in 1997 — about $49 billion — was for capital projects. Another 25 percent was for maintenance and traffic services. Administration, highway law enforcement, bond interest, and other expenditures made up the remaining spending.
Federal Highway Program Financing
The federal government, chiefly FHWA, is a major player in the world of highway finance. The Federal Highway Trust Fund is by far the largest single source of income supporting federal surface transportation programs. The Federal Highway Trust Fund is comprised of two accounts: a highway account for the federal highway capital investment program and a mass transit account created in 1983 for transit capital improvements.
Most of the Highway Trust Fund income is derived from motor-fuel taxes, including an 18.4-cent per gallon tax on gasoline and a 24.4-cent per gallon tax on diesel fuel. Other Highway Trust Fund income results from an excise tax on heavy vehicle use, truck tires, and a retail tax on new trucks.
TEA-21's expanded authorization and Highway Trust Fund levels will drive federal highway income and spending significantly higher than the approximately $20 billion achieved by the end of the ISTEA-era (the Intermodal Surface Transportation Efficiency Act of 1991) in fiscal year 1997. Innovative infrastructure finance provisions, such as credit assistance, will further expand and leverage federal investment opportunities.
The status of the Highway Trust Fund highway account's net income, outlays, and balances from 1957 to1997 is shown in figure 3. Other details about the Highway Trust Fund, such as tax structure and history, are included in the Highway Statistics FE series of tables. This series also includes a table that relates highway account receipts attributable to highway users in each state to federal-aid apportionments and allocations in each state.
Attribution of highway account income to users, which figures very importantly as a TEA-21 apportionment factor, is based on motor-fuel use. An explanation of FHWA's attribution process is contained in an Aug. 3, 1998, Highway Information Update. (See http://www.fhwa.dot.gov/policyinformation/, the Web site of FHWA's Office of Highway Policy Information [OHPI]. Click on “Products and Publications” and then on “Highway Information Newsletters — Quarterly and Updates.”)
Federal-aid funds as apportioned to the states based on the federal legislative formula are shown by state. Apportioned funds are later committed or obligated by the states and finally reimbursed to the states. The FA series of tables reflects the apportionments, obligations, and expenditures of federal funds. The legislative formulas and state shares of major formulas are also shown as separate tables.
As federal legislation has generally expanded the ways in which states can use federal funds, the need for decision-makers to know about how states are using federal funds has increased. To meet this information requirement, Highway Statistics also includes additional details on federal-aid obligation by improvement category. Figure 4 shows several years of federal roadway project financing classified as “capacity additions,” “new routes,” and “system preservation.”
State Highway Program Financing
States account for most of the highway income and expenditures. Total highway revenues for the states in 1997 were $75.4 billion, and total expenditures were $72.3 billion for that same year. Both amounts include federal funds.
Highway-user revenues — including motor-fuel taxes, motor-vehicle taxes, and tolls — are the largest sources of income for state highway programs. Every state imposes a tax on motor-fuel. The taxes range from 7.5 cents per gallon to 32 cents per gallon on gasoline and from 7.5 cents per gallon to 30.5 cents per gallon on diesel fuel. (The current state taxes on motor fuel are listed in “Monthly Motor Fuel Reported by State” under “Products and Publications” on the OHPI Web site.)
Property taxes and assessment, general fund appropriations, and other taxes and fees are the other sources of highway income. As noted above in the total picture of highway finance, federal funds are transferred from the federal government to the states, thus constituting a major source of revenues for the states.
Capital improvements constitute the largest portion of state disbursements, with states spending almost $35.7 billion for capital projects. Highway Statistics contains other details such as capital spending by functional class, by area, by improvement type, and by whether the project is “on” or “off” the National Highway System.
In addition to capital programs, states are responsible for maintenance to keep highways in usable condition and for highway and traffic services, including traffic control operations, snow and ice removal, and miscellaneous services. In 1997, state spending for maintenance and services was $11.3 billion. In addition, other state spending was for grants to local governments; enforcement and safety activities; bond retirement; interest on debt; and administration, planning, and research.
The FHWA publication Highway Taxes and Fees provides a very detailed analysis of the highway legislative financing and spending structure for each state. (The 1998 version of Highway Taxes and Fees is available on the OHPI Web site under “Products and Publications.”)
Local Highway Program Financing
Local governments play a significant role in financing highway programs. Total highway revenues for local governments in 1996 (the last year for which actual data is available in Highway Statistics) were $38.7 billion, and the total expenditures for that year were $38.1 billion.
Unlike the federal and state governments, highway-user revenues — $2.2 billion in 1996 — constitute a relatively minor part of local highway finance receipts. The majority of local highway finance income is from general fund appropriations, which were $11.1 billion in 1996, and from transfers from the state and federal governments, which provided $11.9 billion. Other income sources for local governments include property taxes and assessments of $5.1 billion in 1996, bond proceeds of $2.9 billion, and other taxes and fees of $5.5 billion.
Maintenance is the largest single spending type for local governments. At $14.4 billion in 1996, local governments spent more than state governments and the federal government, which spends very little for maintenance activities. Local capital improvement spending — $12.2 billion in 1996 — constitutes more than 25 percent of total capital spending. In addition, other local spending is for highway law enforcement and safety, interest on debt, bond retirement, administration, and transfers to state governments.
Using Highway Finance Data
Decision-makers at all levels of government, as well as the private sector, interest groups, and academia, rely on FHWA's highway finance data as the best picture of highway finance at all levels of government.
As already noted, the congressionally required Status of the Nation's Surface Transportation System — Conditions and Performance relies on highway finance data as well as Highway Performance Monitoring System (HPMS) data to estimate highway needs and to develop appropriate future federal responsibility for highways. The highway finance data is also used by Congress to develop federal-state matching ratios, formula development, and toll provisions, as well as many other financial provisions of federal legislation pertaining to highway issues. Technical assistance provided to Congress is based on this data.
FHWA's highway finance data is also used by other agencies within the U.S. Department of Transportation, particularly the Federal Transit Administration (FTA). Other federal departments, including the Department of Commerce and Department of Labor, use FHWA's highway finance data in their decision-making and policy development.
States and local governments use FHWA's highway finance data to help in the development of their own transportation legislation and in transportation financial planning. By seeing in Highway Statistics how other states and local governments finance their highways, states can determine what legislation or other practices may work well for them.
National interest groups and associations use highway finance information in their own reports and analyses to support their positions on highway issues.
The private sector makes extensive use of highway finance data. Industry suppliers, other transportation-sensitive sectors, corporations, investment firms, and consulting firms use the data for a wide range of purposes, including business decisions and bond ratings. (Highway Statistics includes extensive coverage of state and local debt and of bond issuance.)
Foreign governments, international organizations, academia, and the media all make use of highway finance data.
What about the future? Developers of FHWA's Strategic Plan and Corporate Management Strategies rely on highway policy information, including highway finance data to assess progress toward key goals. To do this, the highway finance data will be reassessed as part of a larger tactical review, as well as independently, to ensure that it adequately addresses contemporary information needs both inside FHWA and beyond.
The highway finance data can be linked closely the several key goals and measures in the Strategic Plan. These linkages will permit FHWA executives and others to infer relationships between investment and goal accomplishment.
The linking of Geographic Information System applications to Highway Performance Monitoring System data is already possible and has great potential in extending the use of HPMS data.3 It may become possible to overlay and/or link certain elements of federal highway finance data to this application, thus permitting the visual display of the data on a map.
As FHWA moves into the 21st century, an essential part of FHWA's mission will continue to be to provide information to decision-makers for use in developing and managing the nation's transportation programs. Much of the useful highway policy and finance information, will continue to come from the Office of Highway Policy Information.
1. Highway Statistics, Publication No. FHWA-PL-98-020, Federal Highway Administration, Washington, D.C., November 1998.
2. Status of the Nation's Surface Transportation System — Conditions and Performance, Report to Congress No. 4, Federal Highway Administration and Federal Transit Administration, Washington, D.C., 1997.
3. GIS Applications to HPMS Data, Publication No. PL-99-023, Federal Highway Administration, Washington, D.C., June 1999.
Thomas W. Howard is chief of the Highway Funding and Motor Fuel Division in FHWA's Office of Highway Policy Information. He has served in that position since January 1996. He joined FHWA in December 1979, and his career has included assignments in budget, legislation, and policy. He has a bachelor's degree in economics from Fordham University and master's degrees from Fairfield University and The George Washington University.
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