Appendix B:
The Highway Trust Fund is the source of funding for most of the federal government’s surface transportation programs (certain transit programs receive appropriations from the Treasury’s general fund), and the programs are administered by the Federal Highway Administration (FHWA) and the Federal Transit Administration.1
The Highway Trust Fund is an accounting mechanism in the federal budget that comprises two separate accounts, one for highways and one for mass transit. It records specific cash inflows (revenues from certain excise taxes on motor fuels and trucks) and cash outflows (spending on designated highway and mass transit programs). By far, the largest component of the trust fund is the Federal-Aid Highway program.
Spending from the trust fund is not automatically triggered by tax revenues credited to it. Authorization acts provide budget authority for highway programs, mostly in the form of contract authority (the authority to incur obligations in advance of appropriations). Annual spending is largely controlled by limits on the amount of contract authority that can be obligated in a particular year.
Such obligation limitations are customarily set in annual appropriation acts. The most recent authorization law governing spending from the trust fund, called SAFETEA-LU, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, was enacted in 2005 and is due to expire at the end of 2009. The law provides specific amounts of contract authority for the period from 2005 to 2009, and it authorizes appropriations for certain programs that are not funded through contract authority. It also specifies annual obligation limitations, which may be superseded each year by limitations set in appropriation acts.
In 2007, the obligation limitation included in the appropriation act was $47.7 billion, and the total in outlays from both accounts of the trust fund came to $39.2 billion. In 2008, the Congress added $1 billion to the obligation limitation for highways, specifically to repair bridges; the total obligation limitation is $50.2 billion.
Spending from the trust fund started to increase rapidly in 1999 because of changes enacted in the Transportation Equity Act for the 21st Century (TEA-21), which provided budget authority and contract authority of $218 billion over the 1998–2003 period (an average of $36.3 billion per year). Consequently, annual outlays rose by 40 percent from 1999 to 2003. SAFETEA-LU, which provided contract authority of $286 billion (an average of $57.2 billion per year), represented a further significant increase in funding. From 2005 to 2007, outlays from the highway account grew from about $33 billion to $35 billion, an increase of about 3 percent per year.
Balances in the highway account were steady during the 1980s and in the first half of the 1990s—they stayed in the vicinity of $10 billion. Receipts substantially exceeded outlays from 1996 to 2000, and the unexpended balance in the highway account (sometimes called the cash balance) grew from $10 billion in 1995 to a peak of about $23 billion in 2000 (see Figure B-1). Revenues fell sharply in 2001 but have increased steadily since then—at an average rate of about 3.4 percent per year through 2007.Spending generally has exceeded revenues since 2001, and by the end of 2007, unspent balances in the highway account had declined to about $7.4 billion.
Actual and Projected Highway Account Receipts, Outlays, and Balances or Shortfalls, 1998 to 2018
Source: Congressional Budget Office.
Note: Actual data are in nominal dollars for 1998 through 2007. Projections for 2008 to 2018 assume that the Highway Trust Fund’s taxes, which are scheduled to expire in 2011, will be reauthorized at current levels. Under current law, the Highway Trust Fund cannot incur negative balances. A negative level is a projected shortfall, reflecting the trust fund’s inability to pay obligations out of estimated receipts. Projections are based on the authorization levels in SAFETEA-LU, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users.
In general, balances in the mass transit account also have been falling since 2000, although more slowly than in the highway account. At the end of 2007, the balance in the mass transit account totaled about $7.3 billion. If recent trends persist and spending from the trust fund continues to exceed its revenues, the balances in the highway account will be depleted during fiscal year 2009.2
The highway account receipts shown in the figure, incorporating projections from the Congressional Budget Office’s (CBO’s) March 2008 baseline, also are shown in the Table B-1, which expresses those receipts as a share of GDP and provides comparable figures for the mass transit account and for the trust fund as a whole. Because of decreased consumption of gasoline and diesel fuel, CBO projects, receipts will not keep pace with GDP over the next 10 years, and total receipts as a share of GDP will decline from 0.27 percent in 2008 to 0.20 percent in 2018. Because of the sharp increases in fuel prices since those estimates were prepared, people are now driving less than anticipated. As a result, the decline in trust fund receipts relative to GDP will probably be faster and the shortfall in the trust fund greater than the amounts shown in the table and in Figure B-1.
Actual and Projected Highway Trust Fund Receipts, 1998 to 2018
Source: Congressional Budget Office.
Notes: After 2007, revenues are estimated; GDP = gross domestic product.
Other agencies within the Department of Transportation that also receive funding from the Highway Trust Fund include the Federal Motor Carriers Administration and the National Highway Transportation Safety Administration. In 2007, those two entities received a total of about 3 percent of the trust fund’s budgetary resources.
The Highway Trust Fund cannot incur negative balances. A negative number indicated in the figure represents a projected shortfall, reflecting the trust fund’s inability to pay obligations out of estimated receipts.
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