**Analysis of the Conference Report to H.R.3 as filed on 7/28/05**

**(RTA-000-1664A)**

The following is a five-year apportionment analysis (FY 2005 through FY
2009) developed by the Federal Highway Administration's Office of
Legislation and Strategic Planning based on the Conference Report on
H.R.3 as filed on 7/28/05. Note that all values shown are estimates
intended for policy analysis purposes only, and do not reflect penalties
or the programmatic redistribution of Equity Bonus funds. The official
apportionment notices and supplementary tables that will be issued by
the FHWA will reflect these types of adjustments, and will be rounded to
whole dollars. The official apportionments will also be subject to the
"Byrd Test", and could be proportionally reduced if the Highway Trust
Fund would not be able to sustain them.

The factors used to compute the apportionments had generally been
certified by an FHWA program office as representing the latest available
data as of June 2005, suitable for use in computing FY 2005
apportionments under H.R.3. However, as the FHWA is legally required to
apportion funds based on the latest data available at the time the
apportionments are made, some of these factors could potentially be
revised. This analysis does not reflect the effects of the 0.8% across
the board rescission or the discretionary takedown of up to 4.1% on
certain programs that were imposed by the Consolidated Appropriations
Act of 2005 (P.L. 108-447). The official apportionments for FY 2006
through FY 2009 will be based on the latest available data as of October
1 for each of those years; consequently, apportionments in those years
will naturally differ from the estimates presented here. The results of
this analysis are summarized in the attached Excel file
"RTA-000-1664.xls".

**[Equity Bonus Provisions]{.underline}**

The Conference report includes a new "Equity Bonus" program, authorized
as "such sums as are necessary". This Equity Bonus would replace the
current law Minimum Guarantee approach (\$1,000,000 minimum; kept States
as close as possible to an initial set of shares while raising States to
a specified percentage of their share of contributions to the Highway
Account of the Highway Trust Fund (HTF)) with a modified approach that
would only provide funding to States as necessary to bring them up to a
specified percentage of their share of HTF contributions, subject to
certain floors. As with TEA-21's Minimum Guarantee, the Equity Bonus
program would be calculated iteratively, to ensure that all basic
criteria are met even after funding for some States has been adjusted.
All formula programs and High Priority Projects are included in the
Equity Bonus computation; all other allocated programs are excluded.

The Equity Bonus provides that each State would be guaranteed a minimum
percentage of its relative share of HTF contributions for each
individual fiscal year: 90.5% in FY 2005-2006, 91.5% in FY 2007, and 92%
in FY 2008-2009. However, a special provision provides that certain
States would receive the greater of this minimum percentage of their
share of HTF contributions, or their share of total apportionments over
the 6-year period of TEA-21. This would include States meeting one or
more of a set of five criteria: 1) States with at least 1.25% of their
total acreage under Federal jurisdiction based on GSA data as of 9/30/04
and a population density of less than 40 persons per square mile based
on the latest decennial census; 2) States with a total population of
less than 1 million, based on the decennial census; 3) States with a
median household income of less than \$35,000, based on the decennial
census; 4) States with a fatality rate on Interstate highways in 2002 of
greater than 1.0 per 100 million vehicle miles of travel (VMT); or 5)
States with an indexed State motor fuel excise tax rate that is higher
than 150% of the Federal motor fuel excise tax rate. Twenty-seven States
would qualify for this provision. (AL-Alabama, AK-Alaska, AZ-Arizona,
AR-Arkansas, CO-Colorado, DE-Delaware, DC-District of Columbia,
FL-Florida, ID-Idaho, KY-Kentucky, LA-Louisiana, MS-Mississippi,
MO-Missouri, MT-Montana, NE-Nebraska, NV-Nevada, NM-New Mexico, ND-North
Dakota, OK-Oklahoma, OR-Oregon, SD-South Dakota, TX-Texas, VT-Vermont,
UT-Utah, WV-West Virginia, WI-Wisconsin, and WY-Wyoming).

Another special provision in the Equity Bonus requires that in any
fiscal year 2005 to 2009, no State may receive less than a set
percentage of its average annual TEA-21 apportionments for each
individual fiscal year: 117% in FY 2005, 118% in FY 2006, 119% in FY
2007, 120% in FY 2008, 121% in FY 2009.

**[Congestion Mitigation and Air Quality Program:]{.underline}**

The Conference Report specifies that the CMAQ formula would take into
consideration maintenance and non-attainment areas for ozone under the
new 8-hour standards and carbon monoxide (CO). The formula multiplies
county population by different weighting factors.

Like the 1-hour ozone standard revoked by the EPA on June 15, 2005, the
8-hour standard classifies areas based on the severity of their ozone
problem. Areas are classified and weighted as follows: 1.0-basic,
1.0-marginal, 1.1-moderate, 1.2-serious, 1.3-severe, and 1.4-extreme.

The weighting factor for ozone and carbon monoxide (CO) maintenance
areas is set at 1.0. An additional weighting of 1.2 is applied for areas
that are in non-attainment or maintenance status for CO
**[and]{.underline}** non-attainment or maintenance for ozone.

**[Technical Notes:]{.underline}**

This analysis was primarily based on apportionment factors representing
the latest available data as of June 2005, although more recent data was
used in a few cases. (These factors supersede an earlier set that was
utilized in analyses prior to Conference, which represented the latest
available data as of September 2004).

The Highway Trust Fund contributions used in this analysis have been
modified in the latter years to reflect the crediting to the Highway
Account of two additional increments of revenues from gasohol taxes (2.5
and 5.2 cents).

The Surface Transportation Extension Act of 2004, Part V and the
American Jobs Creation Act of 2004 \[Public Law 108-357; 118 Stat.
1418\] included provisions that would change the amount of revenue
deposited into the Highway Account of the Highway Trust Fund per gallon
of gasohol. The 2.5 cents per gallon of the gasohol tax previously
retained by the General Fund was redirected to the Highway Account of
the Highway Trust Fund retroactively, beginning October 1, 2003. Also,
gasohol's partial exemption from the gas tax was eliminated effective
January 1, 2005. Since Highway Account contributions are calculated
based on revenue and gallonage data from prior years, there would
normally be a lag between the timing of these tax changes and when they
would begin to be reflected in the apportionment factors. The
redirection of the 2.5 cent increment would begin to affect the
apportionments starting in FY 2006, while the elimination of the partial
exemption would begin to affect the apportionments starting in FY 2007.
The HTF factors for FY 2008 and FY 2009 have also been modified to
attribute combined gasoline/gasohol revenue using combined
gasoline/gasohol gallonage, as tax revenue data for these different
types of fuels will no longer be tracked separately once they are taxed
at the same rate.

The Surface Transportation Extension Act of 2004 allowed unobligated
bridge funds (23 USC § 144) to be transferred without penalty. The Act
goes on to say that the funds must be restored as soon as practicable
upon enactment of a new highway bill. If any State does not restore
these funds, then 23 U.S.C. § 144 would require that when the next
National Bridge Inventory is completed and all needs have been assessed,
the total needs figure for those States will be reduced by the amount
which was transferred, which would affect the apportionment factors for
the Highway Bridge Program. Several States did transfer bridge funds to
other categories. In those cases in which States have indicated that
certain transfers were intended to be permanent, and would not be
restored to their bridge accounts upon enactment of a new bill, the
apportionment factors have been revised accordingly.

This scenario includes a new Coordinated Border Infrastructure Program,
to be distributed among border States based on the following formula:
20% based on the total number of incoming commercial truck crossings
through the land border ports of entry, 30% based on the total number of
incoming personal vehicle and incoming bus crossings through the land
border ports of entry, 25% based on the total weight of incoming cargo
by commercial trucks that pass through land border ports of entry, and
25% based on the total number of land border ports of entry.

This scenario also includes a new Safe Routes to School program, to be
distributed among the States based on total student enrollment in
primary and middle schools, with each State guaranteed a minimum
apportionment of \$1,000,000 per year.

This scenario adds a new Highway Safety Improvement Program (HSIP), to
be distributed among the States based 1/3 on lane miles of Federal-aid
Highways, 1/3 on VMT on Federal-aid Highways, and 1/3 on fatalities on
Federal-aid Highways. The Railway-Highway Crossing program is funded as
a takedown on HSIP but is distributed among the States via a different
formula based 50% on the Surface Transportation Program (STP) formula as
outlined in current law, and 50% on the number of public rail-highway
grade crossings.

**[Guide to Tables]{.underline}**

The attached Excel file contains 11 tables. (The following list is based
on the names on the tabs in the Excel spreadsheet, rather than the
titles on the printed output.)

The "Return Summary" page compares 5-year funding for each State under
this scenario with that under TEA-21. This table also includes each
State's relative rate of return on their contributions to the Highway
Trust fund. (This later computation is used in the Equity Bonus
computation).

The "Aggregate" page contains the 5-year total apportionments by program
and State. This is followed by the "Average" page, which shows average
annual values, and the "2005", 2006", "2007", "2008" and "2009" pages,
which show the same information for individual years.

The "Share Comp" page shows each State's percentage of the total
apportionments for each individual year under TEA-21, and under the
Senate Amendment.

The "Annual Comp" page shows each State's total apportionments by year,
and compares them with their average annual apportionment under TEA-21.
(This latter computation is used in the percentage floors relative to
TEA-21 in the Equity Bonus computation).

The "Net Apportionments" page takes total State apportionments from the
"Aggregate" page, and subtracts out estimated amounts for the
\$8,543,000,000 rescission that would occur on 9/30/09 pursuant to
Section 10212. Note that the Section 10212 language refers to programs
that were in the House version of H.R.3, but not included in the
conference report, and excludes some programs that were not in the House
version of H.R.3. Two sets of net apportionments are shown, one which
follows the language as written, and one that follows the presumed
intent of including all apportioned programs (but not High Priority
Projects or any allocated programs) in the list.

**[Estimated Required Size of the Equity Bonus]{.underline}**

Based on the latest available data as of June 2005, and the assumptions
listed above, the total required five-year cost of the Equity Bonus is
estimated to be \$40.9 billion.

+---------+-----------------+---+------------+---+----------------+---+
| ##      |                 |   |            |   |                |   |
| ####### |                 |   |            |   |                |   |
|  Equity |                 |   |            |   |                |   |
|  Bonus  |                 |   |            |   |                |   |
| Summary |                 |   |            |   |                |   |
+---------+-----------------+---+------------+---+----------------+---+
|         | Floor Relative  |   | Rate of    |   | Equity Bonus   |   |
|         | to              |   | Return     |   |                |   |
|         |                 |   |            |   |                |   |
|         | TEA-21 Avg.     |   |            |   |                |   |
+---------+-----------------+---+------------+---+----------------+---+
| 2005    | 117.0%          |   | 90.5%      |   | \$ 7.4 bil.    |   |
+---------+-----------------+---+------------+---+----------------+---+
| 2006    | 118.0%          |   | 90.5%      |   | \$ 6.9 bil.    |   |
+---------+-----------------+---+------------+---+----------------+---+
| 2007    | 119.0%          |   | 91.5%      |   | \$ 8.3 bil.    |   |
+---------+-----------------+---+------------+---+----------------+---+
| 2008    | 120.0%          |   | 92.0%      |   | \$ 9.2 bil.    |   |
+---------+-----------------+---+------------+---+----------------+---+
| 2009    | 121.0%          |   | 92.0%      |   | \$ 9.1 bil.    |   |
+---------+-----------------+---+------------+---+----------------+---+
| **      |                 |   |            |   | **\$40.9       |   |
| Total** |                 |   |            |   | bil.**         |   |
+---------+-----------------+---+------------+---+----------------+---+

HPLS-30; 08/01/05