Financing Transportation
Last modified Wednesday, July 16, 2008 15:02
Federal Funding for Transportation
Federal funding for transportation is authorized through a transportation bill which sets upper limits on funding by categories for both highways and transit facilities. Revenues to support spending as contained in the transportation bill are primarily raised through federal taxes on fuel. Tax revenues are tracked through the use of a Highway Trust Fund. The Highway Trust Fund is comprised of two accounts – a highway account and a mass transit account. The highway account is the larger of the two accounts with a monetary value of roughly 90% of the total Highway Trust Fund value.
Federal Transportation Tax Revenues going to the Highway Trust Fund (PDF)
Historically, the Highway Trust Fund has carried a positive net balance due to Federal decisions to distribute or spend less than incoming tax revenues on an annual basis. However, today the balance of the Highway Trust Fund is declining rapidly, and is likely to decline to zero sometime between 2009 and 2011. If this should happen, at a maximum, only incoming tax revenues can be distributed to the states on an annual basis for federal transportation funding. Future federal transportation bills must take the status of the Highway Trust Fund into account when authorizing federal transportation spending.
The Federal Transportation Bill: SAFETEA-LU
On August 10, 2005, the President signed into law Congress’s reauthorization of the federal TEA-21 transportation funding bill or law. This transportation bill establishes the ceiling on the amount of federal transportation dollars to be spent across the nation for federal fiscal years 2005 to 2009. The new name for the law is Safe, Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy for Users (SAFETEA-LU). SAFETEA-LU contains guaranteed funding for roads, interstates, safety, public transit, bicycle and pedestrian facilities, and other transportation projects. T otaling $244.1 billion, SAFETEA-LU represents the largest surface transportation investment in our nation’s history. For specific information on SAFETEA-LU funding categories and anticipated federal transportation funds coming to the State of Georgia, visit the Federal Highway Administration site. (A summary of the transit programs is not available on the Federal Transit Administration site at this time.)
To help address the federal transportation funding crisis, SAFETEA-LU created a National Surface and Transportation Policy Study Commission. The Commission was chaired by USDOT Secretary Mary Peters and comprised of 12 members representing federal, state and local governments, MPOs, transportation related industries and public interest organizations. The Commission was tasked with examining the condition and future needs of the nation's surface transportation system, and proposing short and long-term alternatives to replace or supplement the fuel tax as the principal revenue source to support the Highway Trust Fund over the next 30 years. The Commission conducted field hearings across the US to gather information, including a hearing in Atlanta in February 2007.
The Commission presented their final report to Congress in early 2008. Key recommendations include:
- Do not reauthorize the current federal surface transportation program
- Develop a new program that is performance driven, outcome based, and mode neutral
- Consolidate the current 108 programs into 10 programs - asset management, freight transportation, metropolitan mobility, safety, access for smaller cities and rural areas, intercity passenger rail, environmental stewardship, energy and security, federal lands, and research.
- Reorganization of USDOT into functional areas to reinforce the functional orientation of the 10 new programs, rather than the current modal orientation.
- Establish an independent National Surface Transportation Commission
- Reform the project delivery process
- Address the current funding shortfall by increasing gas tax by 25-40 cents/gallon over 5 years
- Charge container fees and ticket taxes
State Funding for Transportation
The State of Georgia collects motor fuel taxes to fund transportation investments. Georgia motor fuel taxes come from 2 sources: 7.5 cents per gallon tax and a 4% retail tax (3% is earmarked for transportation and 1% goes into the State General Fund). In 2005, the State of Georgia spent about $730 million in motor fuel tax revenues to build, maintain, and operate interstates, highways, and surface streets throughout the state. Because the states gas tax revenues can only be spent on roads and bridges as required by the Georgia Constitution, any State transit expenditures must come out of the State General Fund. The FY 2007 State Budget allocated approximately $7 million to the Department of Transportation for transit, all out of the State General Fund.
In addition, the State of Georgia has the ability to issue bonds to enable the construction of roads and transit facilities. On April 14, 2004, Governor Sonny Perdue introduced the Fast Forward Congestion Relief Program to leverage future state and federal transportation funds and accelerate the construction of key projects throughout the state. Fast Forward is a 6-year, $15.5 billion transportation bond program designed to relieve congestion and spur economic growth through the acceleration of existing projects. It is important to note that bonds are not new sources of funding but are used to optimize cash flow and build infrastructure sooner than current revenues could allow. Bonds must be paid back over time out of future revenues from taxes or user fees.
For additional information on state funds for transportation or other transportation funding informtion, please visit the following:
If you have questions, comments or would like additional information on transportation funding, please contact us or call 404.463.3272.
