Section 1098 of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) tasked GAO with reviewing the process for distributing highway funds to the states. In discussion with the congressional committees identified in section 1098, we agreed to address (1) the way the formula works and the relevancy of the data used for the formula and (2) the major funding objectives implicit in the formula and the implications of alternative formula factors for achieving these objectives. Funding for these demonstration projects is not distributed by formula. Funding for the other program categories is also based on separate calculations. 3.) First, a state’s total funding share for the four largest programs is fixed over the life of ISTEA. For major highway programs, the data underlying the distribution of highway funds to the states are generally outdated, unresponsive to changing conditions, and often not reflective of the nation’s highway system or its usage. Alternatives for Distributing Federal Highway Funds

On the basis of our analysis and discussions with federal and state transportation officials, ISTEA’s myriad objectives for highways can be placed into four overarching categories: (1) maintaining and improving the highway infrastructure, (2) returning the majority of funds to the state where the revenue was generated, (3) fostering social benefits, and (4) safeguarding the states’ historical funding shares. However, a formula based on direct measures of need could prove problematic.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the formula for distributing federal highway funds, focusing on the: (1) relevancy of the data used for the formula; (2) major funding objectives implicit in the formula; and (3) implications of alternative formula factors for achieving these objectives.

What GAO Found

GAO found that: (1) the federal highway funding formula is complex and cumbersome; (2) the underlying data and factors used in the formula are to a large extent irrelevant, since funding outcomes are essentially predetermined; (3) annual combined funding for the four largest highway programs is fixed throughout the 6-year life of the Intermodal Surface Transportation Efficiency Act (ISTEA); (4) some of the factors used in formula calculations are based on outdated information, are unresponsive to changing conditions, and often do not reflect the highway system's utilization; (5) equity adjustments increase many states' final funding levels; (6) funding for demonstration projects is not determined by formula; (7) ISTEA objectives include maintaining and improving the highway infrastructure, returning Highway Trust funds to the states where the revenue was generated, advancing selected goals, and safeguarding the states' historical funding shares; and (8) a combination of objectives based on states' needs and resources could form the basis for a new formula, but any new formula is likely to change the states' highway funding levels.