	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. This occurred because overall, more funding was authorized and  apportioned than was collected from highway users, as the account was  supplemented by general funds from Treasury. Each 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. States Received More Funding from the Highway Trust Fund Than Was Contributed from Fiscal Years 2005 through 2009, but Rate of Return Varies Depending on the Calculation Used

		States Received More Funding Than Was Contributed from Fiscal Years 2005 through 2009

Our analysis of the entire 5-year period of SAFETEA-LU shows that every  state was a donee state, receiving more funding for highway programs  than their users contributed to the Highway Account (see fig. A state can appear to be a donor using one type of calculation  and a donee using a different type. FHWA conducts Equity Bonus  calculations annually. However, with the extension of SAFETEA-LU  authorization for 2 years, the Equity Bonus Program has not been  recalculated. As a result, half of all states  received at least a 25 percent increase in their overall Federal-Aid  Highway Program funding 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 further complicate the relationship between states’  contributions to the Highway Trust Fund and the funding states receive. Using rate of return as a major factor in determining federal highway  funding levels is at odds with re-examining and restructuring federal  surface transportation programs so that performance and accountability  for results is factored into transportation investment decisions. 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 attributed state of origin. Agency Comments and Our Evaluation

We provided a draft of this report to DOT for review and comment. DOT  provided technical comments, which we incorporated as appropriate. Appendix I: Objectives, Scope and Methodology

This report addresses the following objectives: (1) the amount of revenue  contributed to the Highway Trust Fund Highway Account compared with  the funding states received during the Safe, Accountable, Flexible,  Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)  period; (2) 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; and (3) additional factors that affected  the relationship between contributions to the Highway Trust Fund and the  funding states receive. We met with FHWA and other Department of Transportation  (DOT) officials to discuss availability of data and appropriate  methodologies. FHWA provides feedback to the states on  these adjustments and estimates through FHWA Division Offices.
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 highway users contribute are known as "donor" states and states that receive more than 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.

What GAO Found

From 2005 to 2009, every state received more funding for highway programs than they contributed to the Highway Account of the Highway Trust Fund. This was possible because more funding was authorized and apportioned than was collected from the states, and the fund was augmented with about $30 billion in general revenues since fiscal year 2008. 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 with 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. Additionally, using rate of return as a major factor in determining highway funding poses challenges related to performance and accountability in the highway program; in effect, rateof- return calculations 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.

What GAO Recommends

GAO is not making any recommendations. DOT reviewed a draft of this report and provided technical comments, which we incorporated as appropriate.