Conditions and Performance Chapter Listing

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Introduction

Summary

Highway and Bridge Finance

Transit Finance

Total Highway Expenditures - Trends

The composition of highway expenditures has changed over time. The percentage of total highway expenditures that went for capital outlay peaked at 61.3 percent in 1958. Subsequently, capital out-lay's share of total spending gradually declined to a low of 43.8 percent in 1983. Since 1993 this percentage has risen each year. The 48.1 percent figure for 1997 is the highest since 1980. [See Exhibit 6-8].

Exhibit 6-8. Expenditures for Highways by Type, All Units of Government 1957-1997

The percentage of total highway expenditures devoted to maintenance and traffic services has declined from its recent-year peak of 30.9 percent in 1983, but that has stabilized in recent years, remaining between 26 and 27 percent since 1988. In 1997, 26.0 percent of total highway expenditures went for maintenance and traffic services, the same percentage as in 1995.

In this report, "other non-capital expenditures" refers to amounts used for highway law enforcement and safety, administration and research, or interest payments. Other non-capital expenditures grew steadily as a percentage of total expenditures for a number of years, peaking at 22.5 percent in 1990. Other non-capital expenditure's share of total spending fell from 21.9 percent in 1995 to 21.2 percent in 1997.

Over the years, an increasing percentage of total highway expenditures has been devoted to the regulation of the existing highway system through highway law enforcement and safety programs. This includes such activities as enforcement of traffic laws, supervision and direction of traffic, crash investigation, vehicle inspection, vehicle size and weight enforcement, driver education, safety awareness campaigns and motorcycle safety programs. The highway law enforcement and safety component of other non-capital expenditures grew 13.4 percent between 1995 and 1997, rising from $8.2 billion to $9.3 billion.

The administrative component of other non-capital expenditures has also grown. As the extent and complexity of the highway system and highway programs increased over time, the relative resources required for planning, research and general administration of highway programs also grew. However, total expenditures for administration have stabilized since 1994, and actually declined in 1997, down $0.3 billion to $8.1 billion. Part of this decline may stem from improved administrative efficiency. However, some of it may be the result of improved accounting procedures on the part of State and local governments; improved cost-accounting systems are allowing some States to assign some costs directly to the specific capital outlay and maintenance projects they relate to instead of lumping them into administrative overhead.

Constant Dollar Expenditures

Highway expenditures grew more quickly than inflation between 1995 and 1997. Total expenditures increased at an average annual rate of 4.1 percent, from $93.5 billion to $101.3 billion. Over the same period, it is estimated that highway construction costs increased at an annual rate of 3.5 percent, and other costs rose at an annual rate of 2.6 percent. In constant dollar terms, total highway expenditures increased 2.0 percent between 1995 and 1997.

Exhibit 6-9 shows that highway expenditures have grown steadily in current dollar terms since 1957. In constant dollar terms, total highway expenditures by all levels of government reached a plateau in 1971. From 1972 to 1981, highway spending did not keep pace with inflation. Since 1981, highway expenditures have grown faster than inflation; constant dollar spending in 1996 exceeded the 1971 mark for the first time, and constant dollar spending reached an all time high in 1996. In constant dollar terms, total highway expenditures in 1997 were 2.0 percent higher than 1995 levels, 50.2  percent higher than the low point in 1981, and 20.2 percent higher than the 1971 mark. Constant dollar expenditures in 1997 dipped 2.0 percent below 1996 levels. This occurred in part because in 1996 construction costs fell 1.4 percent, driving up constant dollar expenditures, and in 1997 construction costs rose 8.7 percent, driving down constant dollar expenditures. Historically, construction costs have generally been more volatile than other components of highway spending.

Exhibit 6-9

Total Highway Expenditures in Current and Constant 1997 Dollars, All Units of Government 1957-1997

Much of the increase in constant dollar spending since 1981 has been driven by highway capital outlay expenditures, which have grown more quickly than maintenance and other non-capital expenditures in both current and constant dollar terms. Over this 16-year period highway capital outlay expenditures grew at an average annual rate of 5.8 percent, from $19.7 billion to $48.7 billion, while total highway spending increased an average annual rate of 5.6 percent. In constant dollar terms, this equates to a 78.4 percent increase. Over this same period, maintenance and services grew by 22.6 percent in constant dollars, and other non-capital expenditures grew by 35.2 percent in constant dollars. Highway construction costs grew much more slowly than the CPI during this period, so the purchasing power of funds used for capital outlay expenditures has not eroded as quickly. Highway construction costs grew at an average annual rate of rate of 2.1 percent since 1981, compared to an average annual increase in the CPI of 3.6 percent. [See Exhibit 6-10].

Exhibit 6-10. Highway Capital, Maintenance, and Other Non-Capital Expenditures in Current and Constant 1997 Dollars, All Units of Government 1957-1997

Constant Dollar Expenditures per VMT

While all types of highway expenditures would not necessarily be expected to grow proportionally to vehicle miles traveled (VMT), increases in VMT do increase the wear and tear on existing roads, leading to higher capital and maintenance costs. As the extent of the system has grown to accommodate additional traffic, costs have risen since these new lanes and roads also need to be constructed and maintained. Traffic supervision and safety costs also are related in part to traffic volume. As the highway system has grown and become more complex, the cost of administering the system has grown as well.

In current dollar terms, total expenditures per VMT have grown steadily. Since 1995, expenditures per VMT increased from 3.8 cents to 4.0 cents. However, in constant dollar terms, expenditures have not kept pace with travel growth. During the 1960s and 1970s total expenditures per VMT declined steadily in constant dollar terms, but the rate of decline slowed during the 1980s and 1990s. Since 1982, highway expenditures per VMT dropped only 7.3 percent in constant dollar terms. Over this period, highway capital outlay expenditures per VMT increased 8.2 percent in constant dollar terms, but this was offset by declines in maintenance and other non-capital expenditures. [See Exhibit 6-11]

Exhibit 6-11. Highway Expenditures per Vehicle Mile of Travel, All Units of Government 1957-1997