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Funding Challenges in Highway and Transit

Posted by Content Coordinator on Wednesday, March 4th, 2015


All Levels of Government Fund Highways and Transit

With the temporary increase in funding for the federal highway trust fund set to run out by May 2015, states and localities are again facing the prospect that shortfalls in the fund could delay or reduce the federal money they rely on for transportation projects. As they wait to see what federal policymakers will do, many states are taking action to make their own transportation funding more sustainable. These efforts highlight the major challenges that all levels of government face in maintaining investments in highways and transit systems—problems that will require policymakers to make difficult choices in the years ahead.

Roads, bridges, and transit are funded through a partnership among the levels of government in which the financial contributions are substantial and deeply intertwined.

Surface Transportation Funding Flows Among Levels of Government

Revenue for the highway trust fund, the source of most federal funding for roads and transit systems, has fallen short of expenditures for more than 10 years. These gaps are expected to continue to grow. The federal government has made up the difference through a combination of drawdowns from trust fund balances and, since 2008, transfers from the general fund.

A major reason for the federal and state governments’ difficulty in maintaining funding is declining gas tax revenue, on which they rely heavily to pay for transportation. This revenue has fallen substantially in real terms over the past decade as a result of changing driving habits and increased fuel efficiency. In addition, the federal and many state gas taxes remain at fixed per-gallon amounts, even as transportation construction costs increase.

These temporary fixes do not solve the underlying problem of trust fund revenue not keeping up with spending. Indeed, an infusion of $10.8 billion from the general fund in July 2014 is expected to sustain current levels of trust fund spending only through May 2015. And the challenges extend beyond the federal government; state funding for roads and transit fell by 15 percent in real terms from 2002 to 2012.  There is broad consensus that these challenges are occurring at a time when the system needs more investment.  For example, the Congressional Budget Office, using Federal Highway Administration data, finds that simply maintaining the current performance of the highway and transit system would require at least $13 billion more per year than is already spent at all levels of government.

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From its first day in 1948, Pew’s founders steeped the new institution with the entrepreneurial and optimistic spirit that characterized their lives. As the country and the world have evolved, we have remained dedicated to our founders’ emphasis on innovation. Today, Pew is a global research and public policy organization, still operated as a non-partisan, non-governmental organization dedicated to serving the public.

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