U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
Publication No. FHWA-PL-17-011
Because of a continuing demand for information concerning the funding of Federal-aid highways, the Federal Highway Administration (FHWA) prepared a report, “Financing Federal-Aid Highways,” in January 1974 to describe how Federal-aid highways are funded. The FHWA modified and updated this report in July 1976, May 1979, October 1983, November 1987, May 1992, August 1999, March 2007, and January 2017. The FHWA prepared these updates following enactment of new highway or surface transportation acts to reflect changes made by those acts.
This latest update of the report incorporates changes in funding procedures brought about by the 2012 enactment of Public Law 112-141, the Moving Ahead for Progress in the 21st Century Act (MAP-21) and the 2015 enactment of Public Law 114-94, the Fixing America’s Surface Transportation (FAST) Act. With this update comes a new title—“Funding Federal-Aid Highways”—that more accurately reflects the report’s content and focus.
As with previous versions, this report follows the fiscal process from inception in an authorization act to payment from the Highway Trust Fund and discusses the congressional and Federal agency actions that occur throughout that process.
The four “As” and two “Os”. This report, and the Federal-aid Highway Program (FAHP) more broadly, relies heavily on a few key terms:
Authorization. The term “authorization” is typically used in the context of an authorization bill or act (law): substantive legislation that establishes or continues Federal programs or agencies and establishes an upper limit on the amount of funds for the program or programs. Within such an act, the term may also refer to the program-specific upper limit.
Appropriation. The term “appropriation” is typically used in the context of an appropriations bill or act: a law that typically makes funds available for obligation and expenditure with specific limitations as to amount, purpose, and duration.
Apportionment. For the purposes of this publication as it relates to funding Federal-aid highways, the distribution of funds to States as prescribed by a statutory formula.
Allocation. For purposes of this publication as it relates to funding Federal-aid highways, an administrative distribution of funds for programs that are not distributed to States by a statutory formula.
Obligation. The Federal government’s legal commitment (promise) to pay or reimburse a State or other entity for the Federal share of a project’s eligible costs.
Outlays. Actual cash (or electronic transfer) payments made to the State or other entity to pay the entity for eligible costs incurred. Outlays generally are provided as work progresses for the Federal share for approved highway program activities.
The report discusses each of those terms in greater detail in the coming chapters, and appendix A provides a more complete glossary of FAHP-related terminology.
Use of the term “State”. The overwhelming majority of Federal highway funding is distributed to (and used by) States—a term that in this context encompasses both Puerto Rico and the District of Columbia. However, there are other non-State recipients of Federal highway funding, such as selected U.S. territories and other Federal agencies.
The Department and its operating administrations. The Department of Transportation encompasses nine “operating administrations,” each of which deals primarily with a specific mode (or aspect) of transportation. In addition to FHWA, this includes the Federal Aviation Administration (FAA), Federal Motor Carrier Safety Administration (FMCSA), Federal Railroad Administration (FRA), Federal Transit Administration (FTA), Maritime Administration (MARAD), National Highway Traffic Safety Administration (NHTSA), Pipeline and Hazardous Materials Safety Administration (PHMSA), and the Saint Lawrence Seaway Development Corporation. This report uses the respective acronym when referring to one of these operating administrations.
Acronyms for surface transportation authorization acts. This report refers throughout to a variety of surface transportation authorization laws, including each of those listed below (shown in the order in which they were enacted). When discussing one of these laws, the report relies on the law’s respective acronym.
The Federal-aid funding lifecycle follows a step-by-step process. As with a construction project, each step builds upon the previous step.
Figure 1 shows the major steps in the lifecycle of Federal-aid highway funding.
Figure 1. Lifecycle of Federal-aid highway funding.
The structure of this report largely parallels the Federal-aid highway funding lifecycle. Chapter 2 lays the foundation: the authorization process for the FAHP and the contract authority that it creates. Chapter 3 describes how FHWA distributes the authorized funding. Chapter 4 describes how and when FHWA obligates funding at the request of funding recipients (most often States), as well as the Federal budget process and the role of the annual appropriations act. Chapter 5 focuses on the portion of the appropriations act that most impacts the Federal program: an annual obligation limitation. Chapter 6 wraps up the highway funding lifecycle with an examination of the outlay of funding. Finally, Chapter 7 discusses the history and operations of the Highway Trust Fund, which funds the entirety of the FAHP.
The report ends with appendices that provide greater detail on a number of topics mentioned in individual chapters.