TEA-21 - Transportation Equity Act for the 21st Century
Moving Americans into the 21st Century
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Guaranteed spending levels. In a major change to Federal budget rules, highway (including most highway safety programs) and transit programs are now guaranteed a minimum level of spending under TEA-21. Prior to enactment of TEA-21, funding for surface transportation programs was one item among many on a list of priorities for Federal program spending in the budget. Under the new budget rules, highway guaranteed amounts are keyed to actual Highway Trust Fund (HTF) Highway Account receipts and can only be used to support projects eligible under Federal highway and highway safety programs. Transit funding is guaranteed at a selected fixed amount over the TEA-21 period and can be used only to support projects eligible under transit programs.
Authorizations and spending. The amount guaranteed for surface transportation, as explained above, is estimated to be $198 billion. In essence, the guaranteed amount is a floor; it defines the least amount of the authorizations that may be spent. The full authorizations for the highway (including highway safety) and transit programs in TEA-21 total almost $218 billion. In the remainder of the brochure, as well as in the authorization table on pages 44-49, the funding levels shown are the authorized amounts, not the guaranteed amounts.
There are two ways that highway and highway safety spending levels can be increased. First, the guaranteed spending level is adjusted each year. To the extent that the HTF Highway Account receipts projected for the coming fiscal year exceed the estimate for that year stated in TEA-21, the obligation limitation (described on page 4) and the authorizations will automatically increase. The difference between the authorization level and the obligation limitation would remain constant. A downward adjustment of the obligation limitation and authorizations could also occur, but this is improbable given the conservative receipt estimates used to set the guaranteed spending levels in TEA-21. Second, the Congress, through the annual budget process, could choose to raise spending by dedicating a part of the general budget allocation for other Federal programs to highways and highway safety. This action would decrease the difference between authorized amounts and the obligation limitation.
For transit, the spending floor will be based on the guaranteed amount specified in TEA-21. The guaranteed funding level assumes that 80 percent of transit spending will derive from the Transit Account of the HTF and the remaining 20 percent will derive from the General Fund. Congress, through the annual budget process, could choose to raise the floor by dedicating a part of the general budget allocation for other Federal programs to transit.
Highway obligation limitations. In addition to defining the floor for highway spending (described above), TEA-21 specifies how the highway obligation limitation will operate. The obligation limitation is the mechanism for limiting highway spending each year. Under TEA-21, the highway obligation limitation applies to all programs within the overall Federal-aid highway program except (1) Emergency Relief, (2) a part of the new Minimum Guarantee program, and (3) remaining balances from the repealed Minimum Allocation program and demonstration projects authorized in previous legislation. A portion of each years limitation is reserved, or set aside, for administrative expenses and certain allocated programs, with the balance of the limitation being distributed to the States.
A new feature in this Act is that the limitation set aside each year for certain programsHigh Priority (demonstration) projects authorized in TEA-21, the Appalachian Development Highway System, the Woodrow Wilson Memorial Bridge, and an additional portion of the Minimum Guarantee programdoes not expire if not used by the end of the fiscal year, but instead is carried over into future years. In addition, limitation set aside for research and technology programs may also be carried over, but only for 3 years.
Highway Funding Equity - Minimum Guarantee
Federal-aid highway funds for individual programs are apportioned by formula using factors relevant to the particular program. After those computations are made, additional funds are distributed to ensure that each State receives an amount based on equity considerations. This provision is called the Minimum Guarantee and ensures that each State will have a guaranteed return on its contributions to the Highway Account of the Highway Trust Fund. An open-ended authorization is provided, ensuring that there will be sufficient funds to meet the objectives of the Guarantee.
Specific share. For each State, the Act specifies a certain share of the aggregate funding for the following programs: Interstate Maintenance (IM), National Highway System (NHS), Bridge, Congestion Mitigation and Air Quality (CMAQ) Improvement, Surface Transportation Program (STP), Metropolitan Planning, High Priority Projects, Appalachian Development Highway System, Recreational Trails, and the Minimum Guarantee funding itself. The shares specified were pegged to meet the objective of a 90.5 return (described below) based on the data available at the time of enactment.
Adjustments to the share to guarantee a 90.5 return. The shares described above will be adjusted each year to ensure that each States share of apportionments for the specified programs is at least 90.5 percent of its percentage share of contributions to the Highway Account based on the latest data available at the time of the apportionment. The shares of States falling below that minimum return will be increased and the shares of the remaining States will be decreased. Each State must receive at least $1 million per year under the Minimum Guarantee program.
Administration of funds. Of the Minimum Guarantee Funds made available, $2.8 billion is administered as though it were STP funding except that the STP provisions requiring setaside of funds for safety and transportation enhancements and sub-State allocation of funds do not apply. Within each State, the remainder of the funds (the amount above $2.8 billion) is divided among certain programsIM, NHS, Bridge, CMAQ, and STPbased on the share the State received for each program under the program formula.
Highway Trust Fund
Operation of the Highway Trust Fund. The Highway Trust Fund is the source of funding for most of the programs in the Act. The HTF is composed of the Highway Account, which funds highway and intermodal programs, and the Mass Transit Account. Federal motor fuel taxes are the major source of income into the HTF. As part of the changing budgetary treatment of the surface transportation programs, the HTF will no longer earn interest after September 30, 1998. At that time, any excess (amounts more than $8 billion) cash balance in the Highway Account will be transferred to the General Fund. The Transit Account balance will not be adjusted.
Federal law regulates not only the imposition of the taxes, but also their deposit into and expenditure from the HTF.
TEA-21 extends the highway-user taxes, at the rates that were in place when the legislation was enacted, through September 30, 2005. The truck taxes and all but the permanent 4.3 cents per gallon of the motor fuel tax were scheduled to expire on October 1, 1999. Provisions for full or partial exemption from highway-user taxes were also extended. The partial exemption from the fuel tax for alcohol fuels is extended through September 30, 2007 and the related income tax credit is extended through December 31, 2007. Both the exemption and the credit are phased down slightly beginning in 2001.
Provision for deposit of almost all of the highway-user taxes into the Highway Trust Fund is extended through September 30, 2005. The Transit Account share of the fuel taxes is changed to 2.86 cents (from 2.85 cents) per gallon retroactively to October 1, 1997 to correct an error in previous legislation.
Authority to expend from the Highway Trust Fund for programs under the Act and previous authorization acts is provided through September 30, 2003. After that date, expenditures may be made only to liquidate obligations made before that date.
Highway tax compliance. The highway programs of the Federal government and most States depend on highway-user tax receipts as the principal source of funding. The Act continues the Highway Use Tax Evasion program to halt motor fuel tax evasion. Because of the high rate of return on investment for compliance efforts, TEA-21 provides both a separate authorization for these initiatives and allows States to use up to one-fourth of 1 percent of their STP funds for this purpose. Funds authorized for this program will be used by the Internal Revenue Service to develop, operate, and maintain an excise fuel reporting system and may also be used by State and Federal tax agencies to augment fuel tax enforcement.
Other Revenue Provisions
The transfer of receipts from boat gasoline and small engine fuel taxes to the Aquatic Resources Trust Fund is extended, as is the authority to expend the funds for boat safety programs. The portion of the boat gasoline tax that is dedicated to the Aquatic Fund is increased to 13 cents per gallon (from 11.5 cents) on October 1, 2001, and to 13.5 cents on October 1, 2003.
The deficit reduction tax on rail diesel is reduced from 5.55 cents per gallon to 4.3 cents, effective October 1, 1998.