Key Issues > High Risk > Funding the Nation's Surface Transportation System
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Funding the Nation's Surface Transportation System

This information appears as published in the 2015 High Risk Report.

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The nation’s surface transportation system—including highways, transit, and rail systems that move both people and freight—is critical to the economy and affects the daily lives of most Americans. However, the system is under growing strain, and the cost to repair and upgrade the system to meet current and future demands is estimated in the hundreds of billions of dollars. At the same time, traditional funding sources are eroding, and funding is further complicated by the federal government’s financial condition and fiscal outlook.

There is no rating for this high-risk area because addressing it primarily involves congressional action and the high-risk criteria and subsequent ratings were developed to reflect the status of agencies’ actions and the additional steps they need to take.

Motor fuel and other truck-related taxes that support the Highway Trust Fund—the major source of federal surface transportation funding—are eroding. Federal motor fuel tax rates have not increased since 1993, and drivers of passenger vehicles with average fuel efficiency currently pay about $96 per year in federal gasoline taxes. Because of inflation, the 18.4 cent-per-gallon tax on gasoline enacted in 1993 is worth about 11.5 cents today. This trend will likely continue as demand for gasoline decreases with the introduction and adoption of more fuel-efficient and alternative fuel vehicles. To maintain spending levels of about $45-50 billion a year for highway and transit programs and to cover revenue shortfalls, Congress transferred a total of about $63 billion in general revenues to the Highway Trust Fund on six occasions between 2008 and 2014. This approach has effectively ended the long-standing principle of “users pay” in highway finance, breaking the link between the taxes paid and the benefits received by highway users. In August 2014, the Congressional Budget Office estimated that $157 billion in additional revenues would be required to maintain current spending levels plus inflation between 2015 and 2024, as shown in figure 5.

Figure 5: Projected Highway Trust Fund Balance, Fiscal Years 2015 to 2024

Note: This projection assumes no further augmentation of highway-related taxes to the Highway Trust Fund after 2014 from general revenues or other sources. By law, the Highway Trust Fund cannot incur negative balances.

The challenge of funding the Nation’s surface transportation system is magnified by the fact that spending for surface transportation programs has not commensurately improved system performance. Many programs have not effectively addressed key challenges—such as increasing congestion and freight demand—because federal goals and roles have been unclear, programs have lacked links to performance, and programs have not used the best tools and approaches to ensure effective investment decisions. As a result, we have recommended that Congress consider a fundamental reexamination of these programs to clarify federal goals and roles, establish performance links, and improve investment decision-making. In July 2012, the President signed into law the Moving Ahead for Progress in the 21st Century Act (MAP-21). This legislation included provisions to move toward a more performance-based highway and transit program and established a framework to address key challenges in the area of freight movement. Among other things, MAP-21 established national performance goals in areas such as pavement and bridge conditions, traffic injuries and fatalities, and traffic congestion; it also outlined a 3-stage process in which (1) the Department of Transportation (DOT) establishes performance measures for these national goals, (2) states and other grantees set annual targets based on these performance measures and report their progress, and (3) DOT evaluates whether grantees have met their targets and reports to Congress. In addition, the Act established national goals and directed the Secretary of Transportation to establish a national freight network, develop a strategic plan, and provide the tools necessary to support a performance-based approach for evaluating and selecting new freight projects.

DOT is developing nine rules that will implement the MAP-21 performance-based approach; however, only five of the nine rules have been released for public comment and none have been finalized. DOT’s efforts have been affected by a number of factors, including the varying experiences implementing a performance-based approach within DOT. DOT has also begun establishing a national freight network, including establishing a National Freight Advisory Committee and developing data and tools for planning and evaluating freight projects; however, the national freight network has yet to be finalized and DOT’s freight strategic plan is still in development.

Congress and the administration need to agree on a long-term plan for funding surface transportation. Continuing to augment the Highway Trust Fund with general revenues may not be sustainable, given competing demands and the federal government’s fiscal challenges. A sustainable solution would balance revenues to and spending from the Highway Trust Fund. New revenues from users can come only from taxes and fees; ultimately, major changes in transportation spending, in revenues, or in both, will be needed to bring the two into balance.

A long term sustainable plan for funding surface transportation requires congressional action and remains the pivotal action that will determine whether the funding of surface transportation remains on, or is removed from, our High Risk List. DOT will also need to continue implementing the performance-based approach to surface transportation mandated in MAP-21. It will become increasingly important to improve the effectiveness of surface transportation programs by establishing links to performance and by measuring progress toward clear national goals.

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Transportation: Key Issues and Management Challenges
http://gao.gov/products/GAO-12-581T

GAO-12-581T: Published: Mar 29, 2012. Publicly Released: Mar 29, 2012.
  • portrait of Susan Fleming
    • Susan Fleming
    • Director, Physical Infrastructure
    • flemings@gao.gov
    • (202) 512-2834