	Background

Federal funding for highways is provided to the states mostly through a  series of grant programs collectively known as the Federal-Aid Highway  Program. In 2005, Congress  enacted SAFETEA-LU, which authorized $197.5 billion for the Federal-Aid  Highway Program from fiscal years 2005 through 2009. 1). Rate of Return Varies Depending on the Calculation Used, but States Received More Funding from the Highway Trust Fund Than Their Users Contributed

		States Received as Much or More Funding Than Their Highway Users Contributed

For the time period for which final data are available, fiscal years 2005  through 2008, our analysis shows that every state but one received more  funding for highway programs than users contributed to the Highway  Account (see fig. This occurred because overall, more funding was  authorized and apportioned than was collected from highway users. A state can appear to be donor using one type of calculation and a  donee using a different type. The state’s share of contributions into the Highway Account of  the Highway Trust Fund is then used to calculate a relative rate of  return—how the proportion of each state’s contribution compares to the  proportion of funds the state received. This analysis shows California  as a donee state (see table 2). Half of all states received a significant  increase in their overall Federal-Aid Highway Program–at least 25 percent  over their core funding. Adding General Revenues into the Trust Fund and Other Challenges Raise Questions about Relying on States’ Rate-of-Return to Distribute Federal Highway Funds

Additional factors affect the relationship between contributions to the  Highway Trust Fund and the funding states receive. The Federal-Aid Highway program, in particular, distributes funding  through a complicated process in which the underlying data and factors  are ultimately not meaningful because they are overridden by other  provisions designed to yield a largely predetermined outcome—that of  returning revenues to their state of origin. DOT provided  technical comments, which we incorporated as appropriate. Appendix I: Objectives, Scope, and Methodology

To determine the amount of revenue states contributed to the Highway  Trust Fund Highway Account compared with the funding they received  during the Safe, Accountable, Flexible, Efficient Transportation Equity  Act: A Legacy for Users (SAFETEA-LU) period, we completed four  analyses using Federal Highway Administration (FHWA) data. We interviewed FHWA officials  and obtained additional information from FHWA on the steps taken to  ensure data reliability and determined the data were sufficiently reliable  for the purposes of this report  To determine the provisions in place during the SAFETEA-LU period to  address rate-of-return issues across states and how they affected the  highway funding states received, we reviewed SAFETEA-LU legislation,  reports by the Congressional Research Service (CRS) and FHWA. Our analysis compared funding levels distributed to  states via apportionment programs and High Priority Projects before and  after Equity Bonus Program provisions were applied, and calculated the  percentage increase each state received as a result of the Equity Bonus. To determine what additional factors affected the relationship between  contributions to the Highway Trust Fund and the funding states receive,  we reviewed GAO reports on federal surface transportation programs and  the Highway Trust Fund, as well as CRS and FHWA reports, and the report  of the National Surface Transportation Infrastructure Financing  Commission.
Why GAO Did This Study

Federal funding for highways is provided to the states mostly through a series of grant programs known as the Federal-Aid Highway Program, administered by the Department of Transportation's (DOT) Federal Highway Administration (FHWA). In 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) authorized $197.5 billion for the Federal-Aid Highway Program for fiscal years 2005 through 2009. The program operates on a "user pay" system, wherein users contribute to the Highway Trust Fund through fuel taxes and other fees. The distribution of funding among the states has been a contentious issue. States that receive less than their highway users contribute are known as "donor" states and states that receive more than their highway users contribute are known as "donee" states. GAO was asked to examine for the SAFETEA-LU period (1) how contributions to the Highway Trust Fund compared with the funding states received, (2) what provisions were used to address rate-of-return issues across states, and (3) what additional factors affect the relationship between contributions to the Highway Trust Fund and the funding states receive. To conduct this review, GAO obtained and analyzed data from FHWA, reviewed FHWA and other reports, and interviewed FHWA and DOT officials. DOT reviewed a draft of this report and provided technical comments, which we incorporated as appropriate.

What GAO Found

Since 2005, every state received as much or more funding for highway programs than they contributed to the Highway Account of the trust fund. This was possible because more funding was authorized and apportioned than was collected from the states and the fund needed to be augmented with general revenues. If the percentage of funds states contributed to the total is compared with the percentage of funds states received (i.e., relative share), then 28 states received a relatively lower share and 22 states received a relatively higher share than they contributed. Thus, depending on the method of calculation, the same state can appear to be either a donor or donee state. The Equity Bonus Program was used to address rate-of-return issues. It guaranteed a minimum return to states, providing them about $44 billion. Nearly all states received Equity Bonus funding and about half received a significant increase, at least 25 percent, over their core funding. The infusion of general revenues into the Highway Trust Fund affects the relationship between funding and contributions, as a significant amount of highway funding is no longer provided by highway users. Since fiscal year 2008, Congress has transferred nearly $30 billion of general revenues to address shortfalls in the highway program when more funding was authorized than collected. Using rate of return as a major factor in determining highway funding poses challenges to introducing a performance and accountability orientation into the highway program; rate-of-return calculations in effect override other considerations to yield a largely predetermined outcome--that of returning revenues to their state of origin. Because of these and other challenges, funding surface transportation programs remains on GAO's High-Risk list.