United States Department of Transportation - Federal Highway Administration FHWA HomeFeedback

Financing Federal-Aid Highways

Authorization Act

The first and most crucial step in financing the Federal-Aid Highway Program (FAHP) is development of authorizing legislation. An authorization is a statutory provision that establishes or continues a Federal agency, activity, or program for a fixed or indefinite period of time. Authorizing legislation for highways began with the Federal-Aid Road Act of 1916 and the Federal Highway Act of 1921. These acts provided the foundation for the FAHP as it exists today. The FAHP has been continued or renewed through the passage of multi-year authorization acts ever since then. In addition, since 1978, Congress has passed highway legislation as part of larger, more comprehensive, multi-year surface transportation acts.

Surface transportation acts can vary in their scope and duration. For instance, they can come in the form of a stop-gap funding bill—such as the 6-month Surface Transportation Extension Act enacted on December 1, 1997—which was designed to extend the program and keep it operational while more comprehensive authorizing legislation was debated and eventually passed by Congress. However, most surface transportation acts are major multi-year bills, such as the Intermodal Surface Transportation Efficiency Act (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21). The TEA-21, enacted June 9, 1998, is the most recent authorization act for the FAHP. 1 Appendix B provides a chronology of events leading to passage of the TEA-21. The TEA-21 included nine titles: I - Federal-aid Highways; II - Highway Safety; III - Federal Transit Administration Programs; IV - Motor Carrier Safety; V - Transportation Research; VI - Ozone and Particulate Matter Standards; VII - Miscellaneous; VIII - Transportation Discretionary Spending Guarantee and Budget Offsets; and IX - Amendments of the Internal Revenue Code of 1986.

The financing of other Federal programs may be much more dependent on a second legislative act, known as an appropriations act, than on authorizing legislation. Appropriations acts and their impact on the FAHP will be discussed in more detail in a later section. The remainder of this section is devoted to a general overview of the steps involved in developing an authorization act, and a more detailed description of the FAHP itself.

Administration Bill

The Administration (executive branch) normally proposes legislation to reauthorize highway and other surface transportation programs. Although not required to by law, the Administration develops a legislative proposal in order to present its position on the future of surface transportation. The Departmentof Transportation (DOT) will prepare the proposed legislation, with affected operating administrations (e.g., the FHWA, the National Highway Traffic Safety Administration (NHTSA), the Research and Special Programs Administration (RSPA), the Federal Railroad Administration (FRA), the Federal Transit Administration (FTA), and the Bureau of Transportation Statistics (BTS)) participating in the development. To ensure consistency with the Administration’s policy, the Office of Management and Budget (OMB) reviews and approves the legislation prior to the Administration sending the bill to Congress.

The comprehensive Administration bill prepared by the DOT is introduced in Congress at the request of the Administration. Although the bill must be sponsored by at least one member of Congress in order to be introduced, this does not necessarily mean that the sponsor endorses all provisions in the proposed bill. Congress will consider the Administration bill in formulating its own legislation, and may incorporate entire provisions verbatim, but rarely enacts an entire Administration bill without change.

Congressional Bills

Figure 1 displays the typical process as described.

Figure 1

Figure 1.—Congressional Procedures (simplified, typical process).

Federal-aid Highway Program

It is critical to understand the meaning of the word "program." First, "program" is used as an umbrella term referring to activities administered by the FHWA.4 When this report uses "program" in this all-encompassing sense, it will use the term "Federal-aid Highway Program" (FAHP). Second, "program" also refers to any one of the separately funded categories that make up the overall FAHP. For example, the Interstate Maintenance (IM) Program and the Surface Transportation Program (STP) each has its own specific and separate funding, described in law, and each is considered a program.

In addition to having its own distinct and separate funding, each program has associated with it certain activities for which that funding may be used. These are described in law and are referred to as eligible activities. These activities, often eligible under a number of programs, are not considered programs in the financial sense of the term as used in this report because the legislation does not single out these activities for specific funding.

When an authorization act establishes a program, it sets certain ground rules under which the program operates, including: the amount of funds available to the program for each fiscal year; a description of how those funds are to be distributed; the length of time during which the funds may be used, termed a period of availability; and a listing of eligible activities. These can be changed by subsequent authorization acts, as well as by other acts.

Previous | Table of Contents | Next

Electronic version of Publication No. FHWA-PL-99-015

FHWA Home | TEA-21 Home | Feedback

United States Department of Transportation - Federal Highway Administration