This is the accessible text file for GAO report number GAO-09-316 
entitled 'Highway Trust Fund: Improved Solvency Mechanisms and 
Communication Needed to Help Avoid Shortfalls in the Highway Account' 
which was released on March 9, 2009.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to the Committee on Environment and Public Works, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

February 2009: 

Highway Trust Fund: 

Improved Solvency Mechanisms and Communication Needed to Help Avoid 
Shortfalls in the Highway Account: 

Highway Account Solvency: 

GAO-09-316: 

GAO Highlights: 

Highlights of GAO-09-316, a report to the Committee on Environment and 
Public Works, U.S. Senate. 

Why GAO Did This Study: 

The Highway Account within the Highway Trust Fund is the primary 
mechanism for funding federal highway programs. The account— 
administered by the Federal Highway Administration (FHWA) within the 
Department of Transportation (DOT)—channels about $33 billion in 
highway user excise taxes annually to states for highway projects. 
Although DOT and others projected that the account could run out of 
funds in fiscal year 2009, the balance fell more rapidly than expected 
and a shortfall became imminent in August 2008. In September, Congress 
passed legislation to provide $8 billion to replenish the account, but 
DOT officials anticipate the account could reach a critical stage again 
in fiscal year 2009. 

This report (1) describes the events that led to the decline in the 
account balance, including how DOT responded, and (2) identifies 
potential improvements in mechanisms to manage account solvency. This 
report also includes information on strategies GAO has reported on in 
the past that could be used to better align account outlays and 
revenues. To conduct this work, GAO analyzed information in legal and 
budget documents, reviewed account estimates, and interviewed agency 
officials and stakeholders. 

What GAO Found: 

The Highway Account balance declined for several reasons. In 2005, 
estimated outlays from the account specified in legislation exceeded 
estimated revenues and, if these estimates were realized over the 
fiscal year 2005 to 2009 authorization period, would draw the account 
balance down to about $0.4 billion by the end of fiscal year 2009. 
However, actual revenues for fiscal year 2008 were about $4 billion 
lower than the estimates due to fewer purchases of trucks and motor 
fuel—two primary sources of account revenue. In the summer of 2008, DOT 
received indicators that the Highway Account balance was declining 
faster than expected and developed cash management practices to slow 
outlays to states but estimated that the account would remain solvent 
through the end of fiscal year 2008. Following a large downturn in 
revenues allocated to the account in August, DOT officials announced on 
Friday, September 5—three weeks later—that the practices to slow 
outlays would begin the following Monday, leaving states little time to 
adjust. DOT officials recognize that communication with stakeholders 
could be improved and are developing a plan to improve communication. 

Figure: Highway Account Balance, Fiscal Years 1998 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year: 1998; 
End of year balance, with $8 billion transfer: $16.5 billion; 

Fiscal year: 1999; 
End of year balance, with $8 billion transfer: $19.2 billion; 

Fiscal year: 2000; 
End of year balance, with $8 billion transfer: $22.6 billion; 

Fiscal year: 2001; 
End of year balance, with $8 billion transfer: $20.4 billion; 

Fiscal year: 2002; 
End of year balance, with $8 billion transfer: $16.1 billion; 

Fiscal year: 2003; 
End of year balance, with $8 billion transfer: $13 billion; 

Fiscal year: 2004; 
End of year balance, with $8 billion transfer: $10.8 billion; 

Fiscal year: 2005; 
End of year balance, with $8 billion transfer: $10.6 billion; 

Fiscal year: 2006; 
End of year balance, with $8 billion transfer: $9 billion; 

Fiscal year: 2007; 
End of year balance, with $8 billion transfer: $8.1 billion; 
End of year balance, without $8 billion transfer: 8.1 billion. 

Fiscal year: 2008 (estimate); 
End of year balance, with $8 billion transfer: $10 billion; 
End of year balance, without $8 billion transfer: 2 billion. 

Fiscal year: 2009 (estimate); 
End of year balance, with $8 billion transfer: $2.7 billion; 
End of year balance, without $8 billion transfer: -3.1 billion. 

Source: GAO analysis of FHWA data. 

[End of figure] 

Improving mechanisms intended to help maintain Highway Account solvency 
could reduce the likelihood of a funding shortfall. First, statutory 
mechanisms designed to make annual adjustments to the Highway Account 
could be modified and implemented to perform better. In fact, DOT 
analyses prepared at GAO’s request show that these modifications could 
have prevented or at least signaled the fiscal year 2008 decline. 
Second, DOT could monitor additional indicators throughout the 
year—such as changes in vehicle miles traveled—to help anticipate 
sudden changes in account revenues. Despite improvements in mechanisms, 
without either reduced expenditures or increased revenues, or a 
combination of the two, account shortfalls will likely continue. DOT 
officials noted that improved solvency mechanisms would be effective 
only if the authorization act better aligns expenditures from the 
account with revenues. In the past, GAO has reported on strategies that 
could be used to align expenditures and revenues. 

What GAO Recommends: 

GAO is making recommendations to help DOT improve solvency mechanisms 
for the Highway Account and communication on the account’s status with 
stakeholders. DOT reviewed the draft report and generally agreed with 
the report’s findings and recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-316]. For more 
information, contact Phillip R. Herr at (202) 512-2834 or 
herrp@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Several Events Led to the Decline in the Balance of the Highway 
Account: 

Improved Mechanisms Could Help Maintain Highway Account Solvency: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Figures: 

Figure 1: Sources of revenue for the Highway Trust Fund, Fiscal Years 
2005 to 2008: 

Figure 2: Federal Highway User Excise Taxes and the Percentage 
Allocations to the Highway Account and the Mass Transit Account of the 
Highway Trust Fund: 

Figure 3: Process for Collecting and Distributing Highway Account 
Receipts: 

Figure 4: Highway Account Balance, Fiscal Years 1998 through 2009: 

Figure 5: Actual Highway Account Receipts Compared with Receipt 
Estimates in SAFETEA-LU, Fiscal Years 2005 to 2008: 

Figure 6: Quarterly Adjustments to Highway Account Receipts Based on 
IRS Certification of Actual Results during SAFETEA-LU, Fiscal Years 
2005 to 2008: 

Abbreviations: 

CBO: Congressional Budget Office: 

DOT: Department of Transportation: 

FHWA: Federal Highway Administration: 

GARVEE: Grant Anticipation Revenue Vehicle: 

GVW: gross vehicle weight: 

IRS: Internal Revenue Service: 

OMB: Office of Management and Budget: 

RABA: Revenue Aligned Budget Authority: 

SAFETEA-LU: Safe, Accountable, Flexible, Efficient Transportation 
Equity Act--A Legacy for Users: 

TEA-21: Transportation Equity Act for the 21st Century: 

Treasury: Department of the Treasury: 

VMT: vehicle miles traveled: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

February 6, 2009: 

The Honorable Barbara Boxer: 
Chairman: 
The Honorable James Inhofe: 
Ranking Member: 
Committee on Environment and Public Works: 
United States Senate: 

The Highway Account within the Highway Trust Fund is the principal 
mechanism for funding federal highway programs. The fund, administered 
by the Federal Highway Administration (FHWA) within the Department of 
Transportation (DOT), annually channels about $33 billion in highway 
user excise taxes--primarily from purchases of motor fuel and truck- 
related items--through the account for distribution to states for 
highway and related spending. Although DOT, the Congressional Budget 
Office (CBO), GAO[Footnote 1] and others have reported that the Highway 
Account could experience a cash shortfall in fiscal year 2009, the 
balance of the account dropped more rapidly than anticipated and 
approached a zero balance in August 2008. Congress subsequently passed 
legislation in September 2008 to appropriate $8 billion from the 
General Fund of the Treasury to replenish the account.[Footnote 2] DOT 
and CBO officials anticipate that the Highway Account could reach a 
critical stage again by the fiscal year 2009 end of the current highway 
program authorization of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act--A Legacy for Users (SAFETEA-LU).[Footnote 3] 

Given the important role of the Highway Account in providing funds to 
build, operate, and maintain our nation's roadways, we were asked to 
examine why the account balance declined and how to better anticipate 
such a decline in the future. Consequently, this report (1) describes 
the events that led to the decline in the balance of the Highway 
Account, as well as actions DOT took in response, and (2) identifies 
improvements in mechanisms to manage Highway Account solvency that 
Congress and DOT could consider to better ensure the sustainability of 
the account. In addition to improved solvency mechanisms, this report 
also includes information on several strategies we have reported on in 
the past that could be used to better align expenditures and 
revenues.[Footnote 4] To conduct this work, we reviewed statutes, 
regulations, budget documents, and reports related to the Highway 
Account and analyzed information contained in those documents. We also 
reviewed Highway Account estimates developed by DOT, asked DOT to 
conduct scenarios of the implementation of existing mechanisms that are 
designed to help keep the Highway Account solvent--the Byrd Test and 
Revenue Aligned Budget Authority (RABA)--and analyzed these scenarios. 
We interviewed officials from the Department of Transportation's Office 
of the Secretary and FHWA, Department of the Treasury (Treasury), 
Office of Management and Budget (OMB), Congressional Budget Office, 
Congressional Research Service, and the American Association of State 
Highway and Transportation Officials. We performed this work between 
November 2008 and January 2009 in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Background: 

Congress established the Highway Trust Fund in 1956 to hold and 
distribute highway user excise taxes to fund various surface 
transportation programs. In 1983, the Highway Trust Fund was divided 
into two accounts: the Highway Account and the Mass Transit Account. 
Receipts for the Highway Trust Fund are derived from two main sources: 
federal excise taxes on motor fuels (gasoline, diesel, and special 
fuels taxes) and truck-related taxes (truck and trailer sales, truck 
tires, and heavy-vehicle use taxes). Receipts from the motor fuels tax 
constitute the single largest source of revenue for the Highway Trust 
Fund (about 88 percent of total receipts from fiscal year 2005 to 
2008); the gasoline tax--a flat rate of 18.4 cents per gallon--is the 
same amount as in 1993, although the portion of that tax dedicated to 
the Highway Trust Fund has increased twice since that year. Receipts 
from truck and trailer sales (about 8 percent of total receipts from 
fiscal year 2005 to 2008) are the second largest source of revenue for 
the fund. (See figure 1.) 

Figure 1: Sources of revenue for the Highway Trust Fund, Fiscal Years 
2005 to 2008: 

[Refer to PDF for image: pie-chart] 

Sources of revenue for the Highway Trust Fund, Fiscal Years 2005 to 
2008: 
Gasoline: 64.0% (receipts that come from fuel taxes); 
Diesel and special fuels: 24.1% (receipts that come from fuel taxes); 
Truck and trailer sales: 7.8% (receipts that come from sources other 
than fuel taxes); 
Heavy-vehicle use: 3.0% (receipts that come from sources other than 
fuel taxes); 
Tire tax: 1.2% (receipts that come from sources other than fuel taxes). 

Source: GAO analysis of FHWA data. 

[End of figure] 

The Highway Account receives the majority of the tax receipts allocated 
to the fund. Figure 2 shows the amount of motor fuels and truck-related 
taxes levied for the Highway Trust Fund and how receipts from the taxes 
are allocated between the Highway and Mass Transit Accounts within the 
fund. 

Figure 2: Federal Highway User Excise Taxes and the Percentage 
Allocations to the Highway Account and the Mass Transit Account of the 
Highway Trust Fund: 

[Refer to PDF for image: table] 

Motor fuel taxes: 

Type of excise tax: Gasoline; 
Tax rate (cents): 18.4 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
83.9; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 15.5; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.5. 

Type of excise tax: Diesel; 
Tax rate (cents): 24.4 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
87.9; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 11.7; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.4. 

Type of excise tax: Gasohol; 
Tax rate (cents): 18.4 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
83.9; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 15.5; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.5. 

Type of excise tax: Liquefied petroleum gas; 
Tax rate (cents): 18.3 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
88.4; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 11.6; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.0. 

Type of excise tax: Liquefied natural gas; 
Tax rate (cents): 24.3 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
92.3; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 7.7; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.0. 

Type of excise tax: M85 (from natural gas); 
Tax rate (cents): 9.25 per gallon; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
83.5; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 15.5; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 1.1. 

Type of excise tax: Compressed natural gas; 
Tax rate (cents): 144.47 per thousand cubic feet; 
Distribution of tax: Highway Account, Highway Trust Fund (percent): 
93.3; 
Distribution of tax: Mass Transit Account, Highway Trust Fund 
(percent): 6.7; 
Distribution of tax: Leaking Underground Storage Tank Trust Fund 
(percent): 0.0. 

Truck-related taxes—all proceeds to Highway Account: 

Type of excise tax: Tires; 
Tax rate (cents): 9.45 cents for each 10 pounds of the maximum rated 
load capacity over 3,500 pounds. 

Type of excise tax: Truck and trailer sales; 
Tax rate (cents): 12 percent of retailer's sales price for tractors and 
trucks over 33,000 pounds gross vehicle weight (GVW) and trailers over 
26,000 pounds GVW. 

Type of excise tax: Heavy-vehicle use; 
Tax rate (cents): Annual tax for trucks 55,000 pounds and over GVW: 
$100 plus $22 for each 1,000 pounds (or fraction thereof) in excess of 
55,000 pounds. Maximum tax: $550. 

Source: GAO analysis of FHWA data. 

[End of figure] 

The collection and distribution of taxes through the Highway Account is 
a complex process, as shown in figure 3. The collection process 
involves Treasury receiving excise taxes from business entities, 
estimating how much should be allocated to the Highway Account, and 
adjusting the estimated allocation after the Internal Revenue Service 
(IRS) certifies the actual amount that should be allocated.[Footnote 5] 
Distribution of funds begins with a multiyear authorization act, such 
as SAFETEA-LU. The act provides specific amounts of annual contract 
authority[Footnote 6] over the authorization period and also specifies 
annual obligation limitations that establish "guaranteed" funding 
levels. These guaranteed funding levels are based on assumptions about 
future receipts to the Highway Account and can be modified in 
subsequent annual appropriations acts.[Footnote 7] Annually, DOT 
apportions (through formula) and allocates to the states the contract 
authority provided in the authorization act.[Footnote 8] DOT also 
divides the obligation limitations among the federal highway programs 
and the states based on a multistep process provided in the 
appropriation act. No cash is actually distributed to the states at 
this time; instead, states are notified of the amount of federal funds 
available for use in that state. DOT then obligates federal funds for 
approved projects. An obligation is a legally binding commitment by the 
federal government. Once an obligation is made, the federal government 
must reimburse the states when they submit a voucher for completed 
work, which, due to the length of time it takes to complete projects, 
could be months or years after the obligation is made. As phases of the 
projects are completed, states submit vouchers to FHWA to be reimbursed 
from the Highway Account. Consequently, DOT cannot directly control 
outlays--outlays are determined through limitations on obligations. 

Figure 3: Process for Collecting and Distributing Highway Account 
Receipts: 

[Refer to PDF for image: illustration of process] 

Collection: To Highway Account (Annual appropriations act: provides 
funds to pay federal obligations). 

Taxes paid to Treasury: Semimonthly, businesses pay excise taxes on 
motor fuels, truck-related items, and other taxable items. 

Initial allocation to Highway Account: Semimonthly, Treasury allocates 
an estimated portion of taxes that were collected to the Highway 
Account. 

Adjustments to allocation: Quarterly, about 4.5 months after the end of 
each quarter, Treasury adjusts the amount allocated based on IRS 
certifications of actual receipts. 

Distribution: From Highway Account; 

Multiyear authorization act: Provides budget authority in the form of 
contract authority; 
Adjustments and other factors affecting distribution: RABA adjustments. 

Annual apportionment or allocation to states: No cash is actually
distributed at this time; states are notified that federal funds
are available for use; 
Adjustments and other factors affecting distribution: Byrd test 
adjustments if applicable. 

Total federal highway aid available to states for fiscal year: 
Adjustments and other factors affecting distribution: Unobligated 
balances from prior years. 

Obligation of federal funds: Federal government makes commitment to pay 
federal share. Occurs when project is approved and agreement is 
executed between FHWA and states; 
Adjustments and other factors affecting distribution: Annual 
limitations on obligations. Annual appropriations act: provides funds 
to pay federal obligations. 

States complete project phases: Contractors complete work and send 
bills to state. States send electronic vouchers to FHWA requesting 
reimbursement. 

Reimbursement to states for project phases: Treasury is required to pay
the state promptly after the state pays out its own funds for project-
related purposes. 

Source: GAO. 

[End of figure] 

Two mechanisms are intended to help keep the Highway Account solvent by 
making annual adjustments to ensure there are adequate funds to 
reimburse states (through the Byrd Test) and align outlays with actual 
revenues (through RABA). 

* Byrd Test. In 1956, Congress was concerned that the proceeds of the 
taxes to be deposited in the Highway Trust Fund might not be sufficient 
to reimburse states when the states submitted their claims. To address 
this concern, Congress amended the bill under consideration to require 
DOT to compare current and projected resources with existing and 
projected unpaid authorizations and to adjust the amounts apportioned 
to the states if the two were out of balance.[Footnote 9] This 
comparison was referred to as the Byrd Amendment or the Byrd Test. 
Under the Byrd Test, as modified by SAFETEA-LU, unpaid commitments in 
excess of amounts available in the Highway Account at the end of the 
fiscal year in which the apportionment is to be made must be less than 
the revenues anticipated to be earned in the following 4-year period. 
If a shortfall is projected using this test, the apportionments to the 
states from the Highway Account would be deferred proportionately until 
a recalculation shows that some or part of the deferred apportionments 
can be released without triggering the Byrd Test.[Footnote 10] Prior to 
SAFETEA-LU, estimated unpaid commitments at the end of the year were 
required to be less than revenues anticipated to be earned in the 
following 24-month period. In the history of the Highway Trust Fund, 
the Byrd Test has twice triggered adjustments to apportionments: 1961 
and 2004.[Footnote 11] 

* RABA. Established in the Transportation Equity Act for the 21st 
Century (TEA-21) in 1998 and modified in SAFETEA-LU, RABA was designed 
to align Highway Account program levels with actual revenues and help 
assure that the account is used to fund highway programs instead of 
accumulating large balances. RABA provisions require DOT, as part of 
the annual budget submission process, to compare current revenue 
estimates with revenue estimates in the multiyear authorization act, 
most recently SAFETEA-LU. Based on these comparisons, DOT is required 
to adjust both contract authority and obligation limitations either 
upward, when the account has greater revenues than projected, or 
downward, when revenues do not meet projected levels.[Footnote 12] 
However, under SAFETEA-LU, no downward adjustments will be made in a 
fiscal year if, as of October 1 of that fiscal year, the balance in the 
Highway Account is more that $6 billion. SAFETEA-LU also modified how 
the RABA adjustments were calculated in order to smooth out the effects 
of the adjustment over 2 fiscal years. 

Despite these mechanisms, Highway Account revenues were insufficient to 
cover outlays, and the balance of the Highway Account has declined from 
fiscal year 2000 to 2008. As shown in figure 4, the account approached 
a zero balance near the end of fiscal year 2008; legislation on 
September 15, 2008--to provide $8 billion to replenish the account--and 
the final receipts deposit of about $2 billion[Footnote 13] for fiscal 
year 2008 on October 8, 2008 resulted in a final fiscal year 2008 
balance of about $10 billion. 

Figure 4: Highway Account Balance, Fiscal Years 1998 through 2009: 

[Refer to PDF for image: line graph] 

Fiscal year: 1998; 
End of year balance, with $8 billion transfer: $16.5 billion; 

Fiscal year: 1999; 
End of year balance, with $8 billion transfer: $19.2 billion; 

Fiscal year: 2000; 
End of year balance, with $8 billion transfer: $22.6 billion; 

Fiscal year: 2001; 
End of year balance, with $8 billion transfer: $20.4 billion; 

Fiscal year: 2002; 
End of year balance, with $8 billion transfer: $16.1 billion; 

Fiscal year: 2003; 
End of year balance, with $8 billion transfer: $13 billion; 

Fiscal year: 2004; 
End of year balance, with $8 billion transfer: $10.8 billion; 

Fiscal year: 2005; 
End of year balance, with $8 billion transfer: $10.6 billion; 

Fiscal year: 2006; 
End of year balance, with $8 billion transfer: $9 billion; 

Fiscal year: 2007; 
End of year balance, with $8 billion transfer: $8.1 billion; 
End of year balance, without $8 billion transfer: 8.1 billion. 

Fiscal year: 2008 (estimate); 
End of year balance, with $8 billion transfer: $10 billion; 
End of year balance, without $8 billion transfer: 2 billion. 

Fiscal year: 2009 (estimate); 
End of year balance, with $8 billion transfer: $2.7 billion; 
End of year balance, without $8 billion transfer: -3.1 billion. 

Source: GAO analysis of FHWA data. 

Notes: The 2008 estimated balance includes a final fiscal year 2008 
Treasury deposit of about $2 billion on October 8, 2008. Receipts for 
last quarter of fiscal year 2008 are anticipated to be certified by IRS 
in February 2009. 

The 2009 estimated balance is based on a midsession review from July 
2008. 

[End of figure] 

Several Events Led to the Decline in the Balance of the Highway 
Account: 

SAFETEA-LU authorization levels, combined with lower than anticipated 
receipts, caused the Highway Account balance to decline over the 
authorization period. Although DOT has reported since February 2006 
that the Highway Account balance would be depleted in fiscal year 2009 
and recommended several actions to offset the decline, DOT officials 
acknowledge that communication with stakeholders on the status of the 
Highway Account could be improved and are developing a plan to improve 
communication. 

SAFETEA-LU Authorizations and Lower-Than-Anticipated Receipts Led to 
the Decline of the Highway Account Balance: 

Estimated outlays from Highway Account programs under SAFETEA-LU 
exceeded estimated receipts throughout the authorization period by 
about $10.4 billion.[Footnote 14] While estimated outlays for fiscal 
years 2005 through 2009 totaled $182 billion (ranging from $31.3 
billion in fiscal year 2005 to $40.7 billion in fiscal year 2009), 
estimated receipts totaled $171.6 billion (ranging from $31.6 billion 
in fiscal year 2005 to $36.2 billion in fiscal year 2009). Based on the 
estimated outlays and receipts included in SAFETEA-LU, the Highway 
Account balance would be drawn down from $10.8 billion to about $0.4 
billion over the authorization period, providing more federal funding 
for highway projects. This left little room for error. Assuming all 
outlays were spent, a revenue shortfall of even 1 percent below what 
SAFETEA-LU had predicted over the 5-year period would result in a cash 
shortfall in the account balance. Given the inherent uncertainty 
associated with estimating receipts and outlays over multiple years, a 
cash shortfall was always a real possibility. 

In fact, actual Highway Account receipts were lower than had been 
estimated in SAFETEA-LU, particularly for fiscal year 2008. As a 
result, the account balance dropped more precipitously than had been 
anticipated and was nearly depleted in August 2008--1 year earlier than 
the end of the SAFETEA-LU authorization period. Account receipts were 
lower in fiscal year 2008 due to a weakening economy and higher motor 
fuel prices that resulted in fewer truck sales and lower motor fuel 
purchases--the two major sources of Highway Account revenue. Revenue 
associated with truck, bus, and trailer sales accounted for the largest 
decline--$2.4 billion (from $3.8 billion to $1.4 billion)--during 
fiscal year 2008. In addition, through September 2008, drivers drove 
3.5 percent less compared with the first 9 months of 2007 as prices 
rose[Footnote 15] from $3.02 to $3.71 per gallon for gasoline and from 
$3.31 to $4.02 per gallon for diesel for the same period.[Footnote 16] 
Fewer miles driven resulted in fewer gallons of motor fuel purchased, 
which, in turn, translated into a decline in tax receipts of about 
$0.53 billion--about $0.083 billion for gasoline and about $0.45 
billion for diesel. As a result, receipts for the Highway Account for 
fiscal year 2008 were $31.3 billion--about $4 billion less than the 
$35.4 billion estimate for that year (see figure 5). 

Figure 5: Actual Highway Account Receipts Compared with Receipt 
Estimates in SAFETEA-LU, Fiscal Years 2005 to 2008: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2005: 
Actual receipts: $32.9; 
Estimated receipts: $31.6. 

Fiscal year 2006: 
Actual receipts: $33.7; 
Estimated receipts: $33.7. 

Fiscal year 2007: 
Actual receipts: $34.3; 
Estimated receipts: $34.6. 

Fiscal year 2008: 
Actual receipts: $31.3; 
Estimated receipts: $35.5. 

Source: GAO analysis of FHWA data. 

Note: Receipts for last quarter of fiscal year 2008 are anticipated to 
be certified by IRS in February 2009. 

[End of figure] 

In addition, the effect of the lower receipts on the Highway Account 
was not fully recognized until well after the decline began because 
receipts are not confirmed until the IRS certifies the actual amount of 
receipts allocated to the account--a process that can take about 4.5 
months after the end of each calendar quarter. Thus, the Highway 
Account operates using Treasury estimates of tax receipts to be 
allocated to the account until certification is completed. Treasury 
made a downward adjustment to the Highway Account of about $783 million 
on May 14, 2008, based on the difference between certified and 
estimated receipts from the first quarter of fiscal year 2008.[Footnote 
17] Another downward adjustment of about $631 million based on the 
difference between certified and estimated receipts from the second 
quarter of fiscal year 2008 occurred on August 18, which placed the 
account in imminent risk of a shortfall. These downward adjustments-- 
which were at least twice as large as other downward adjustments made 
during the SAFETEA-LU authorization period--occurred during the 
seasonal peak of outlays, the summer months when most highway projects 
are under construction and states request reimbursement from DOT. 
Quarterly adjustments to the Highway Account have varied during SAFETEA-
LU (see figure 6). 

Figure 6: Quarterly Adjustments to Highway Account Receipts Based on 
IRS Certification of Actual Results during SAFETEA-LU, Fiscal Years 
2005 to 2008: 

[Refer to PDF for image: line graph] 

Fiscal year quarter: 2005, Q3: 
Adjustment: -$0.16 billion. 

Fiscal year quarter: 2005, Q4: 
Adjustment: $0.39 billion. 

Fiscal year quarter: 2006, Q1: 
Adjustment: -$0.32 billion. 

Fiscal year quarter: 2006, Q2: 
Adjustment: $0.22 billion. 

Fiscal year quarter: 2006, Q3: 
Adjustment: $0.189 billion. 

Fiscal year quarter: 2006, Q4: 
Adjustment: $0.94 billion. 

Fiscal year quarter: 2007, Q1: 
Adjustment: $0.80 billion. 

Fiscal year quarter: 2007, Q2: 
Adjustment: -$0.19 billion. 

Fiscal year quarter: 2007, Q3: 
Adjustment: -$0.14 billion. 

Fiscal year quarter: 2007, Q4: 
Adjustment: -$0.47 billion. 

Fiscal year quarter: 2008; Q1: 
Adjustment: -$0.78 billion. 

Fiscal year quarter: 2008, Q2: 
Adjustment: -$0.63 billion. 

Fiscal year quarter: 2008, Q3: 
Adjustment: -$0.15 billion. 

Source: GAO analysis of FHWA data. 

[End of figure] 

DOT Recommended Actions to Offset the Decline and Implemented Cash Flow 
Management Procedures, but Communication with Stakeholders Could Be 
Improved: 

Beginning in February 2006, DOT reported several times that there could 
be a shortfall in the Highway Account during fiscal year 2009 and 
recommended corrective actions to offset the decline. 

* In February 2006--based on the President's fiscal year 2007 budget, 
which had lowered forecasted receipts based on a marked increase in 
crude oil prices--DOT projected a continuous decline in the Highway 
Account balance and a shortfall of $2.3 billion during fiscal year 
2009. DOT noted that two commissions established in SAFETEA-LU would 
provide information on potential alternatives to support highway and 
transit funding.[Footnote 18] DOT also stated at that time that the 
next reauthorization would need to address whether the Highway Trust 
Fund has become insufficient to fund transportation programs. 

* In February and July 2007, DOT proposed forgoing an anticipated 
upward RABA adjustment to the obligation limitation for fiscal year 
2008, estimating a Highway Account shortfall of up to $3.8 billion in 
fiscal year 2009 with no RABA adjustment. However, instead of forgoing 
the upward RABA adjustment, Congress increased the obligation 
limitation by $1 billion, to be used for bridge construction projects 
in the wake of a bridge collapse on August 1, 2007. 

* In February 2008, DOT projected a shortfall of about $3.1 billion in 
the Highway Account in fiscal year 2009 and proposed a downward RABA 
adjustment of $1 billion as well as a further $800 million reduction in 
obligation limitations for fiscal year 2009. DOT also requested 
legislative authority for repayable advances from the Mass Transit 
Account to cover the projected Highway Account shortfall through fiscal 
year 2009. In July 2008, Congress proposed legislation to appropriate 
$8 billion from the General Fund of the Treasury to address the 
projected shortfall. Although DOT initially opposed the legislation, in 
part because the $8 billion would come from the General Fund of the 
Treasury, the agency requested that Congress pass the legislation in 
September so that states would not be adversely affected. 

Indicators throughout the spring and summer of 2008--such as the 
downward adjustment to the Highway Account in May, the weakening 
economy, evidence of fewer vehicle miles traveled, and a reduction in 
Treasury receipts--pointed toward a continuing decline in the account 
balance. According to DOT officials, based on the Mid-Session review 
released in July 2008, they estimated that the Highway Account balance 
would still be positive--about $4.3 billion--at the end of fiscal year 
2008. However, DOT officials told us that after the August downward 
adjustment based on certified tax receipts, they realized that the 
account might reach a zero balance before October 2008. 

In preparation for an anticipated decline in the Highway Account in 
fiscal year 2009, DOT explored options for keeping the account solvent 
to avoid violating the Antideficiency Act, which prohibits FHWA from 
reimbursing states unless there are sufficient funds available in the 
Highway Account.[Footnote 19] Since DOT cannot decrease outlays that 
have been obligated, the agency focused on slowing down the rate of 
outlays--payments made to states twice each day--to better match 
Treasury semimonthly deposits of receipts to the Highway Account. DOT 
also asked all DOT agencies that receive Highway Account funds to turn 
in excess cash. As DOT does not have statutory authority to borrow, DOT 
recognized that once the cash in the Highway Account was depleted, the 
agency would have been unable to cover outlays until the next Treasury 
payment was deposited to the account. DOT officials consulted with 
Treasury officials on whether the frequency of receipt deposits to the 
account could be increased; Treasury officials responded that they 
could temporarily increase the frequency of deposits, but that there 
would be little benefit. On September 5, 2008, DOT announced that FHWA 
would begin reimbursing states on a weekly basis (rather than twice 
daily) on the following Monday and that the agency supported draft 
legislation to appropriate $8 billion from the General Fund of the 
Treasury to the Highway Account.[Footnote 20] DOT also considered 
making prorated payments to states--based on the percentage of funds 
available to cover all reimbursements--if the account balance dropped 
below $1 billion. Although the account balance dropped from $8.1 
billion at the beginning of fiscal year 2008 to below $1 billion on 
August 22, FHWA ultimately did not implement this measure because the 
cash balance rose above $1 billion the next business day--August 25-- 
when Treasury semi-monthly receipts were deposited.[Footnote 21] 

In light of the indicators throughout the spring and summer of 2008 
that the Highway Account balance was approaching a zero balance faster 
than previously anticipated, we believe DOT officials could have 
communicated with state DOT agencies and Congress in a more timely 
manner on the status of the account and their efforts to keep it 
solvent. In a letter to state DOT agencies dated July 8, 2008, FHWA 
stated that, in the event of a shortfall in the Highway Account--still 
anticipated in fiscal year 2009--reimbursements to states would be 
delayed. DOT officials knew that the account's solvency was in question 
after the August downward adjustment and anticipated changing its cash 
management procedures, but did not publicly inform state DOT agencies 
until Friday, September 5 that prorated payments could go into effect 
the following Monday, September 8. If DOT were to implement prorated 
payments, state DOT agencies would then need to fund the difference 
between the DOT prorated payment and their obligations to contractors. 
State DOTs, particularly those with scheduled Grant Anticipation 
Revenue Vehicles (GARVEE) bond payments, were concerned of the 
potential impact on their ability to pay their debt service.[Footnote 
22] More timely communication could have allowed states to plan for 
changing circumstances. DOT officials acknowledge that earlier 
communication is desirable and are developing a plan--including a 
framework for notifying the Secretary of Transportation, Congress, OMB, 
state DOT agencies, and other stakeholders of a pending shortfall--to 
improve communications in the future. 

Improved Mechanisms Could Help Maintain Highway Account Solvency: 

Improving the mechanisms that DOT uses to monitor the Highway Account 
balance--including improving existing mechanisms to make annual 
adjustments to the account and developing additional indicators to help 
DOT monitor and manage the account balance throughout the year--could 
help maintain the solvency of the account. Ultimately, however, without 
either reduced expenditures or increased revenues, or a combination of 
the two, Highway Account shortfalls will continue. 

Modifying and Implementing Existing Mechanisms Could Help DOT Make 
Annual Adjustments to the Highway Account: 

Although the Byrd Test was intended to help the federal government 
ensure there were sufficient funds in the Highway Account when states 
submitted their claims, under SAFETEA-LU, the test has no effect. 
First, SAFETEA-LU expanded the interval over which future estimated 
receipts are included in the calculation from 2 to 4 years, thereby 
increasing the amount of receipts that would be compared to unpaid 
commitments in the coming year. This modification made it more 
difficult for the test to signal a decline in the Highway Account 
balance. According to a DOT analysis--prepared at GAO's request--of the 
impact on the Highway Account had the test remained at 2 years rather 
than 4, the account would have failed the Byrd Test annually for fiscal 
years 2005 through 2008. In other words, the existing account balance 
each year plus the amount of receipts anticipated to be received over 
the next 2 years would have been insufficient to offset unpaid 
commitments in the next year. According to DOT officials, it would be 
nearly impossible for the Highway Account to fail the Byrd Test using a 
4-year window, but triggering a 2-year Byrd Test provides one of the 
first tangible indicators that a shortfall is imminent. 

Second, even if the Highway Account had failed the Byrd Test, the 
resulting adjustment prescribed by the test--deferring the amount of 
contract authority apportioned to states--would not have curtailed 
future outlays from the account because the guaranteed funding levels 
(obligation limitations) for states in SAFETEA-LU are already lower 
than apportioned contract authority. For example, DOT's analysis of the 
effect of a 2-year Byrd Test on the Highway Account balance showed that 
the account would have failed the test in fiscal year 2005 because the 
amount of anticipated receipts fell short of anticipated outlays by 
$1.2 billion, indicating that $1.2 billion in apportioned contract 
authority to states should be deferred. However, because the amount of 
contract authority as of fiscal year 2005 exceeded the guaranteed 
funding level by more than $1.2 billion, adjusting contract authority 
would have not affected the amount that states were able to obligate. 

In contrast, RABA is designed to affect obligation limitations and, if 
implemented as originally intended, could help align Highway Account 
spending with actual revenues. For example, in 2003, the RABA 
calculation called for a negative adjustment in obligation limitations 
of about $4.4 billion--from about $27 billion to about $23 billion--but 
Congress waived the negative RABA adjustment for that year as part of a 
supplemental appropriations act.[Footnote 23] Congress chose instead to 
increase the obligation limit to $31.8 billion. We asked DOT to run a 
simulation to estimate the Highway Account balance for fiscal years 
2003 to 2008, assuming the calculated downward RABA adjustment in 2003 
had not been waived. According to the simulation, the account balance 
at the end of fiscal year 2008 would have been about $6 billion if no 
other changes had been made.[Footnote 24] Under this scenario, the 
account balance would have been sufficient to reimburse states without 
the $8 billion infusion from the General Fund of the Treasury. 

DOT officials we spoke with stated that RABA could be an effective 
mechanism if obligation limitations are better aligned with outlays and 
receipts. However, they said that the provision enacted in SAFETEA-LU 
requiring no negative adjustments in a fiscal year if the Highway 
Account balance is greater than $6 billion as of October 1 of that 
fiscal year may not provide a sufficient cushion to offset a possible 
shortfall. For example, a negative RABA adjustment of about $1 billion 
for fiscal year 2009 was not implemented because the Highway Account 
balance was greater than $6 billion as a result of the $8 billion 
appropriation from the General Fund. However, DOT officials said that, 
although they currently project a balance of about $2.7 billion in the 
account at the end of fiscal year 2009 (using Treasury receipt 
estimates released in July),[Footnote 25] the account could reach a 
zero balance prior to the end of the fiscal year if receipts continue 
to be lower than anticipated and that the RABA adjustment could help 
delay or reduce the magnitude of such a shortfall. 

Effective mechanisms to annually evaluate the solvency of the Highway 
Account and make appropriate adjustments are important to maintaining 
account solvency because DOT has no control over revenues and can 
manage outlays only indirectly through annual obligation limitations, 
which are determined in legislation months or years prior to when 
states are reimbursed from the account. Without such mechanisms, the 
account balance runs the risk of declining to a level at which it may 
not be able to withstand a sudden drop in revenues. DOT officials agree 
that both of the existing solvency mechanisms have their roles in 
helping to maintain Highway Account solvency, although RABA has the 
greater potential to affect spending.[Footnote 26] They also noted that 
solvency mechanisms--even with improvements--would be effective only if 
the authorization act sets account outlays in proportion to estimated 
program receipts and that neither mechanism is designed to deal with 
near-term shortfalls in the Highway Account balance. 

Monitoring Additional Indicators throughout the Year Could Help DOT 
Anticipate Sudden Declines in the Highway Account Balance: 

In addition to modifying existing mechanisms that are applied annually, 
monitoring indicators throughout the year that could signal sudden 
changes in the Highway Account revenues could help DOT better manage 
the account balance and anticipate changes. Monitoring the account 
balance is particularly important during times when the account balance 
drops to a level at which a sudden decline in revenues or increase in 
outlays could put the account at risk of reaching a zero balance. 
Indicators that DOT could monitor throughout the year include data from 
Treasury's monthly statements and vehicle miles traveled (VMT) data 
from FHWA. According to DOT officials, as a result of the decline in 
account revenues last summer, they are more experienced in cash 
management for the account and are exploring additional indicators that 
could be used to monitor the account balance on a daily basis. Regular 
monitoring of indicators that affect revenue flowing into the Highway 
Account would improve DOT's ability to anticipate whether a downward 
adjustment might occur when receipts are certified by IRS. 

Monitoring additional indicators would also enhance DOT's plan for 
communicating with stakeholders on the status of the Highway Account. 
Specifically, establishing trigger points for key indicators would 
prompt DOT to report to stakeholders on potential problems. For 
example, one indicator could be the account balance, and the trigger 
could be when the balance drops below a certain level. However, since 
the account balance typically varies throughout the year--building up 
during winter months when states are not able to work on road projects 
and drawing down during summer months as projects are implemented and 
states submit vouchers for reimbursement--the trigger could vary 
accordingly. According to DOT officials, they are closely monitoring 
the account balance and plan to communicate regularly with 
stakeholders. 

Although Improving Mechanisms Could Help Maintain Highway Account 
Solvency, Other Measures Are Needed to Ensure Long-Term Fund 
Sustainability: 

Although improved mechanisms could help maintain the solvency of the 
Highway Account, ultimately, without either reduced expenditures or 
increased revenues, or a combination of the two, shortfalls will 
continue. In the past, we have reported that the following strategies 
could be used to better align expenditures and revenue: 

* Ensure current revenue sources (i.e., fuel taxes) are aligned with 
outlays. The Highway Account's current source of revenue could be 
better aligned with actual outlays. According to CBO and others, the 
existing fuel taxes could be altered in a variety of ways to address 
the erosion of purchasing power caused by inflation, including 
increasing the per-gallon tax rate and indexing the rates to inflation. 

* Ensure users are paying fully for benefits. Revenues can also be 
designed to more closely follow the user-pay concept--that is, require 
users to pay directly for the cost of the infrastructure they use. This 
concept seeks to ensure that those who use and benefit from the 
infrastructure are charged commensurately. Although current per-gallon 
fuel taxes reflect usage to a certain extent, these taxes are not 
aligned closely with it and do not convey to drivers the full costs of 
road use--such as the costs of congestion and pollution. We have 
reported that other user-pay mechanisms--for example, charging 
according to vehicle miles traveled, tolling, implementing new freight 
fees for trucks, and introducing congestion pricing (pricing that 
reflects the greater cost of traveling at peak times)--may better 
recoup costs. 

* Supplement existing revenue sources. We have also reported on 
strategies to supplement existing revenue sources. A number of 
alternative financing mechanisms--such as enhanced private-sector 
participation--can be used to help state and local governments finance 
surface transportation. These mechanisms, where appropriate, could help 
meet growing and costly transportation demands. However, these 
potential financing sources are forms of debt that must ultimately be 
repaid. 

* Improve the efficiency of current facilities. Finally, better 
managing existing system capacity and improving performance of existing 
facilities could minimize the need for additional expenditures. We have 
reported that the efficiency of the nation's surface transportation 
program is declining and that the return on investment could be 
improved in a number of ways, including creating incentives to better 
utilize existing infrastructure. 

Furthermore, sustainable surface transportation programs require 
targeted investment with adequate return on investment from not only 
the federal government but also state and local governments and the 
private sector. Many current surface transportation programs are not 
effective at addressing key challenges because federal goals are 
numerous and sometimes conflicting; roles are unclear; programs lack 
links to the performance of the transportation system or of the 
grantees; and some programs do not use the best goals and approaches-- 
such as rigorous economic analysis--to ensure effective investment 
decisions. Consequently, GAO has called for a fundamental re- 
examination of the surface transportation program. 

Conclusions: 

Drawing down the account balance over the SAFETEA-LU authorization 
period provided additional federal funding for state highway projects, 
but it also reduced the account balance to a level at which it was not 
able to withstand the sudden downturn in revenues in fiscal year 2008. 
While DOT's cash management efforts in August kept the account solvent 
until Congress could approve the $8 billion appropriation from the 
General Fund of the Treasury, such ad hoc efforts should not be part of 
a fiscally sound, sustainable funding approach. If Congress's goal is 
to maintain the Highway Account at a minimum balance in order to 
maximize funding provided to states, then improved mechanisms are 
needed to help keep the account solvent. Specifically, modifying and 
implementing existing mechanisms that help DOT annually evaluate 
account solvency and propose adjustments is important because adjusting 
obligation limitations is DOT's only option for managing the amount of 
funds that eventually are distributed to states. Furthermore, 
monitoring indicators throughout the year--such as VMT--could help DOT 
better anticipate changes in account revenues. In addition to improved 
solvency mechanisms, another critical aspect of maintaining the account 
balance at a minimum level is communicating with stakeholders on the 
status of the account. Acting on "lessons learned" from the summer of 
2008, DOT is developing a communication plan to augment existing 
communication channels. In light of another potential shortfall in the 
account in fiscal year 2009, monitoring the account balance and 
communicating regularly with Congress are particularly relevant. It is 
also important to note that without either reduced expenditures or 
increased revenues, or a combination of the two, Highway Account 
deficits will likely continue. 

Recommendations for Executive Action: 

To improve DOT's communication with stakeholders on the status of the 
Highway Account and the mechanisms the agency uses to help maintain 
account solvency, we are recommending that the Secretary of 
Transportation take the following three actions: 

* Identify changes to existing solvency mechanisms designed to make 
annual adjustments to the Highway Account and communicate to Congress 
the potential benefits and limitations of these changes. 

* Monitor additional indicators that can impact the account balance 
throughout the year to better anticipate sudden changes in the balance. 

* Include in its proposed communication plan a periodic reporting 
schedule that includes information on the status of the Highway Account 
balance--based, in part, on information gained from monitoring 
additional indicators--and actions that may be needed to maintain 
account solvency. 

Agency Comments and Our Evaluation: 

DOT officials reviewed a draft of this report and provided comments 
through e-mail. The officials generally agreed with the report's 
findings and recommendations and provided technical corrections, which 
we incorporated as appropriate. While they agreed that the account's 
solvency mechanisms could be improved, they noted that even improved 
mechanisms would be effective only if the account balance is at a 
sufficient level to withstand sudden declines in receipts, and future 
program levels are set to match estimated program receipts. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to interested 
congressional committees and the Secretary of Transportation. This 
report will also be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our 
Offices of Congressional Relations and Public affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in appendix I. 

Signed by: 

Phillip R. Herr: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Phillip R. Herr, (202) 512-2834 or herrp@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Sara Vermillion (Assistant 
Director), Richard Calhoon, Jay Cherlow, Patrick Dudley, Carol Henn, 
Hannah Laufe, Maureen Luna-Long, and Amy Rosewarne made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, Highway Trust Fund: Overview of Highway Trust Fund Estimates, 
[hyperlink, http://www.gao.gov/products/GAO-06-572T] (Washington, D.C.: 
Apr. 4, 2006); and Physical Infrastructure: Challenges and Investment 
Options for the Nation's Infrastructure, [hyperlink, 
http://www.gao.gov/products/GAO-08-763T] (Washington, D.C.: May 8, 
2008). 

[2] Pub. L. No. 110-318, 122 Stat. 3532 (2008). 

[3] Pub. L. No. 109-59, 119 Stat. 1144 (2005). 

[4] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-07-310] (Washington, D.C.: January 
2007); Surface Transportation: Restructured Federal Approach Needed for 
More Focused Performance-Based, and Sustainable Programs, [hyperlink, 
http://www.gao.gov/products/GAO-08-400] (Washington, D.C.: Mar. 6, 
2008); and Surface Transportation Programs: Proposals Highlight Key 
Issues and Challenges in Restructuring the Programs, [hyperlink, 
http://www.gao.gov/products/GAO-08-843R] (Washington, D.C.: July 29, 
2008). 

[5] When businesses pay excise taxes, they do not specify what specific 
excise tax produced the revenue; that information is provided at the 
end of each quarter, when businesses file tax returns with the IRS. 

[6] Budget authority is the authority provided by federal law to enter 
into financial obligations that will result in immediate or future 
outlays involving federal government funds. Contract authority is a 
form of budget authority that permits obligations to be incurred in 
advance of appropriations. Contract authority is unfunded, and a 
subsequent appropriation is needed to liquidate, or pay, the 
obligations. 

[7] The Transportation Equity Act for the 21st Century (TEA-21), Pub. 
L. No. 105-178, 112 Stat. 107 (1998), and SAFETEA-LU amended the rules 
of the House of Representatives to specify that it is out of order to 
consider a bill, joint resolution, amendment, or conference report that 
would result in funding at a lower level than the amounts set in the 
authorization acts, as adjusted. 

[8] In most cases, allocated funds are distributed among the states 
according to statutory criteria. In some cases, Congress directs that 
allocated funds be used for specific projects. Congress may do this 
either in the legislative language or in committee reports accompanying 
the legislation. An example of congressionally directed funds in 
SAFETEA-LU is funding for High Priority Projects. 

[9] DOT performs this test four times per year, but the results of the 
test are most significant when apportionments are about to be made, 
usually at the beginning of the fiscal year. 

[10] If the period of availability for obligation of the deferred 
apportionments lapses (generally, the period of availability is 4 
years) before the apportionments can be released, the lapsed amounts 
are permanently lost. 

[11] As a result of triggering the Byrd Test, Interstate System 
construction apportionments for fiscal year 1961 were reduced; for 
fiscal year 2004, all Highway Account apportionments were reduced. 

[12] The adjustment of annual authorizations is called RABA, but this 
term is often used to refer to the entire adjustment process. 

[13] The $2 billion year-end receipt represents the final deposit from 
Treasury for fiscal year 2008. Treasury normally makes final year-end 
deposits for all trust funds in early October; these final deposits are 
routinely included in the year-end balance, although the funds are not 
available in that fiscal year for reimbursement to states. 

[14] Outlay estimates in SAFETEA-LU are partly based on obligations 
incurred in the previous reauthorization--TEA-21--as outlays can spend 
out over a number of years. 

[15] U.S. Department of Transportation, Federal Highway Administration, 
Office of Highway Policy Information, Traffic Volume Trends: September 
2008 (Washington, D.C., 2008). 

[16] U.S. Department of Energy, Energy Information Administration, 
Monthly U.S. Regular Conventional Retail Gasoline Prices and Monthly 
U.S. No 2 Diesel Retail Sales by All Sellers (Washington, D.C., 2008). 

[17] The May downward adjustment was not included in the President's 
Mid-Session Review, which is the basis for projecting future estimates 
of the Highway Account balance. 

[18] Congress created the National Surface Transportation Policy and 
Revenue Study Commission and the National Surface Transportation 
Infrastructure Financing Commission in SAFETEA-LU to assess potential 
alternatives to the motor fuel tax as the principal revenue source for 
the Highway Trust Fund. 

[19] The Antideficiency Act prohibits an officer or employee of the 
federal government from incurring an obligation, or making an 
expenditure, in advance or in excess of an appropriation. 31 U.S.C. § 
1341(a)(1). The Federal-Aid-Highway Program is funded primarily with 
contract authority, and programs funded with contract authority can 
incur obligations in advance of an appropriation. However, DOT cannot 
make cash reimbursements to the states until liquidating cash is 
appropriated from the Highway Account. For example, the fiscal year 
2008 Consolidated Appropriations Act provides a liquidating 
appropriation from the Highway Fund of $41.9 billion or what is 
available in the Highway Account. If there are no receipts in the 
Highway Account, DOT would incur an expenditure in excess of an 
appropriation and thus violate the Antideficiency Act. 

[20] FHWA made three weekly payments to states using this method before 
Congress passed legislation for the $8 billion appropriation from the 
General Fund of the Treasury. As a result of moving to a weekly payment 
schedule, Treasury was required to pay interest to states on the 
delayed payments; DOT estimates the interest totaled about $100,000. 

[21] According to DOT, these cash balances do not include cash held by 
two other DOT entities--the Federal Motor Carrier and Safety 
Administration and the National Highway Transportation Safety 
Administration--or the Miscellaneous Highway Trust Fund account cash 
balance. 

[22] A GARVEE is a debt-financing instrument authorized to receive 
federal reimbursement of debt service and related financing costs. 

[23] See the 2002 Supplemental Appropriations Act for Further Recovery 
from and Response to Terrorist Attacks on the United States, Pub. L. 
No. 107-206, § 1402, 116 Stat. 820, 898 (2002). 

[24] The $6 billion estimate includes a $2 billion deposit to the 
Highway Account from the Treasury on October 8, 2008, but not the $8 
billion appropriation from Treasury's General Fund on September 15, 
2008. 

[25] DOT combines its own estimates of outlays with Treasury's 
estimates of revenues to create an estimate of the Highway Account 
balance; CBO projects revenues and outlays to develop an estimate. 

[26] RABA adjustments to obligation limitations have the largest impact 
the year after the adjustment is made because a significant portion of 
the Highway Program outlays are in the year following obligation. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: