Highway Funding

Under the federal-aid highway program, billions of dollars are distributed to the states each year for the construction and repair of highways and related activities. The Intermodal Surface Transportation Efficiency Act of 1991 authorized about $120 billion for this program for fiscal years 1992 through 1997. This report discusses (1) the way the formula works and the relevancy of the data used for the formula and (2) the major funding objectives implicit in the formula and the implications of alternative formula factors for achieving them.

GAO found that: (1) the federal highway funding formula is complex and cumbersome; (2) the underlying data and factors used in the formula are to a large extent irrelevant, since funding outcomes are essentially predetermined; (3) annual combined funding for the four largest highway programs is fixed throughout the 6-year life of the Intermodal Surface Transportation Efficiency Act (ISTEA); (4) some of the factors used in formula calculations are based on outdated information, are unresponsive to changing conditions, and often do not reflect the highway system's utilization; (5) equity adjustments increase many states' final funding levels; (6) funding for demonstration projects is not determined by formula; (7) ISTEA objectives include maintaining and improving the highway infrastructure, returning Highway Trust funds to the states where the revenue was generated, advancing selected goals, and safeguarding the states' historical funding shares; and (8) a combination of objectives based on states' needs and resources could form the basis for a new formula, but any new formula is likely to change the states' highway funding levels.