For many years, "donor states" (mostly in the South, but also including some states in the Midwest and the West) have complained that they receive significantly less federal highway aid than their highway users pay into the highway account of the highway trust fund (HTF; unless otherwise indicated all references to the HTF are to the highway account). On the other side of the debate, "donee states," those that receive more federal highway aid than they pay in federal highway taxes, have opposed any reduction in their existing shares of total federal highway aid. The donor-donee issue has often been the most difficult issue to resolve during surface transportation reauthorization. The most recent multi-year authorization, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA; P.L. A series of extension acts has extended SAFETEA, most recently through December 31, 2011. The Donor-Donee State Arguments

The donor state argument is that for the sake of equity each state should receive federal highway funding roughly equal to the fees and taxes that the state's highway users pay into the HTF. Donor state advocates generally contend that they have been subsidizing the repair and improvement of donee state infrastructure, especially of the older highway infrastructure in the Northeast. They also argue that some needs are inherently federal, such as a national highway network, and that these needs cannot be funded solely according to state or regional boundaries. The pattern of revenue flow from the taxpayers to the general fund is unrelated to highway user taxes and charges. Which States Are Donors? One method of determining a state's status as a donor or donee is based on dollars; if the state's highway users are estimated to have paid more into the highway account in a given year than the state's apportionment and allocation of federal highway funding, it would be considered a donor state. Each year, 
the first $2.639 billion is apportioned to the Surface Transportation Program (STP); the next $2 million of the Equity Bonus are special no-year obligation funds (differing from the normal one-year obligation limitation) and are distributed to the states proportionally to their share of the overall Equity Bonus; the rest of the distribution is to each of the core formula programs based on the ratio of each program's apportionment to the total apportionment of all six programs for each state. This would reduce the amount of money needed to bring the donor states up to a guaranteed rate of return because the rate of return would already be embedded in each formula program. In a SAFETEA baseline scenario that assumes transfers from the general fund to the highway trust fund, having a scope limited to the part of the highway budget funded by the HTF might make sense. And if Congress were to opt for an increase in highway revenues, perhaps through an increase in fuel taxes large enough to make the Highway Account of the HTF self-sufficient again, the argument for resolving the donor-donee issue by devolving federal highway programs to the states might be revitalized. This would remove the amount of money flowing into and out of the highway trust fund as an issue in highway funding, perhaps eliminating the donor-donee issue as an obstacle to reauthorization.
Few issues in federal highway finance have raised such heated debate as how closely each state's federal highway grants should match its highway users' payments to the Highway Trust Fund (HTF). This "donor-donee" state issue has been contentious during every reauthorization of federal surface transportation programs since 1982. It has again emerged during the congressional debate over reauthorization of the current highway funding program, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA; P.L. 109-59), which has been extended through December 31, 2011.
"Donor states" are states whose highway users are estimated to pay more to the highway account of the Highway Trust Fund than they receive. "Donee states" receive more than they pay.
Traditionally, the donor states, located mainly in the South and Midwest, have asserted that they have been subsidizing the repair and improvement of infrastructure in other parts of the country, especially in the Northeast. Donee state advocates have responded that some transportation needs are inherently federal rather than state, and that a national highway network cannot be based solely on state or regional boundaries. Although the argument continues, the facts on the ground have changed: Federal Highway Administration figures indicate that for FY2007-FY2009 all 50 states were donee states, because outlays from the Highway Trust Fund exceeded federal highway tax receipts in each year.
This report examines the donor-donee issue in the context of the effort to reauthorize federal surface transportation programs. The main questions facing Congress are the following:
How can the donor-donee controversy be resolved amid efforts to reduce the federal deficit, given that the solution in the past was to give all states more money? How might the donor-donee issue be resolved if highway program spending were limited to the annual revenues flowing into the highway account of the HTF? How can the donor-donee issue be resolved if highway spending over the next several years is restricted to the SAFETEA baseline level? Has the "user pays" principle, under which highway infrastructure is funded by taxes paid by the highway users who benefit from it, been violated and, if so, what are the implications for the "equity" of the distribution of federal highway spending?
In recent years, Congress has provided three transfers from the general fund totaling $29.7 billion to shore up the highway account. These general fund transfers to the HTF are unrelated to highway taxes and thereby weaken the arguments for a guaranteed rate of return on each state's highway tax payments to the HTF. If highway user taxes were to be increased or the highway program budget cut to bring the revenues flowing into the HTF into alignment with the funding flowing out, the case for a guaranteed rate of return would be strengthened.