	Introduction

Surface transportation "devolution" refers to shifting most current federal responsibility for building and maintaining highways and public transportation facilities from the federal government to the states. Thereafter, Congress will need either to reduce federal spending for surface transportation or find additional resources to fund highway and public transportation programs. The Case for Devolution

Advocates of devolution have generally made the following case since the 1980s:
The federal government is overinvolved in the planning and construction of highways and public transportation. Changes during the last two surface transportation reauthorization acts have given states greater control over highway expenditures, and Congress has adhered to an earmark ban since 2011. These changes have addressed some of the complaints that originally led to calls for devolution. Upfront Costs

Devolving the current federal highway and transit programs to the states would involve substantial upfront costs. Even if the federal government hands responsibility for funding new highway and public transportation projects to the states, it would need to retain motor fuels taxes or some other revenue source to assure repayment of outstanding obligations. Federal Revenue Losses

Although devolution would reduce federal spending on transportation, the net savings to the federal government would be less than the amount of the spending reduction because many states extensively use tax-exempt bonds as part of their financing mechanisms. Replacing the Relinquished Federal Taxes

Virtually all surface transportation devolution proposals would reduce or phase out most of the federal motor fuels taxes (and in most cases also eliminate the other taxes on highway users) over several years. The simplest way to do this would be for the states to increase their own taxes on gasoline and highway diesel fuel by the same amount as the reduction in the federal taxes. However, there are reasons to believe that replacing federal motor fuels taxes with state fuels taxes on a cent-for-cent basis would not provide sufficient revenue to fund the current level of spending on highways and public transportation. These states currently receive less in federal highway funding than the national average, relative to their motorists' payments of federal fuel taxes, and would therefore benefit more than other states from devolution. A number of federal requirements would remain in effect. States are free to use whatever design standards they wish for projects that do not involve federal funds, and this would presumably apply to a much larger number of projects if the highway program were to be devolved to the states.
Surface transportation "devolution" refers to shifting most current federal responsibility for building and maintaining highways and public transportation systems from the federal government to the states. Devolution legislation has been introduced in each Congress since the mid-1990s, supported by Members who regard the federal government as being overinvolved in highways and public transportation. Under such proposals, the federal taxes that now support surface transportation programs, mostly fuels taxes, would be reduced in line with the shift of responsibility to the states. The states could then raise their own taxes to pay for highway and transit projects as they see fit. A small program, funded by much-reduced motor fuel taxes, would remain in place at the federal level to maintain roads on federal lands, fund highway safety efforts, and support other programs Congress decides not to devolve.
Beyond the basic small government argument, advocates of devolution generally assert that it will lower costs and accelerate construction of highway and transit projects by freeing them from a wide variety of federal regulations. They also contend that devolution will be fairer than the present systems for distributing highway and public transportation funding, which give some states more money, relative to their residents' motor fuel tax payments, than other states.
Opponents of devolution question whether it will save money and worry that it could interfere with national goals established by Congress, such as maintaining important interstate freight corridors and adhering to uniform national construction standards. They point out that the last two surface transportation reauthorization acts have greatly reduced the number of programs and given states greater control over highway expenditures while excluding earmarks, addressing some of the complaints that originally led to calls for devolution.
There are several significant issues Congress would face if it were to consider devolution. Among them are the following:
Devolution would involve substantial upfront costs, possibly as much as $84 billion over a period of several years, to pay for outstanding highway and transit obligations. Even if the federal government hands responsibility for funding new highway and public transportation projects to the states, it would need to retain federal motor fuels taxes or some other revenue source until it has repaid the states for projects in progress as of the date devolution takes effect. Replacing the reduced federal taxes on a cent-for-cent basis would not provide enough revenue to fund the current level of spending on surface transportation. Nearly all states would have to increase their taxes by an amount larger than the reduction in federal taxes, unless they choose to reduce spending. Devolution would likely increase the use of tax-exempt bonds by the states, reducing federal revenue beyond the amount of forgone highway taxes.