Highway Trust Fund
Improved Solvency Mechanisms and Communication Needed to Help Avoid Shortfalls in the Highway Account Gao ID: GAO-09-316 February 6, 2009The 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.
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. 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.
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Director: Team: Phone:GAO-09-316, Highway Trust Fund: Improved Solvency Mechanisms and Communication Needed to Help Avoid Shortfalls in the Highway Account
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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]
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