United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Highways, 

Transit, and Pipelines, Committee on 

Transportation and Infrastructure, U.S. 

House of Representatives 

HIGHWAY TRUST FUND

Overview of Highway Trust 

Fund Estimates 

Statement of Katherine Siggerud, Director 

Physical Infrastructure Issues 

For Release on Delivery

Expected at 2:00 p.m. EST 

Tuesday, April 4, 2006

 

GAO-06-572T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 4, 2006

HIGHWAY TRUST FUND 

Overview of Highway Trust Fund 

Highlights of GAO-06-572T, a report to Estimates 

Subcommittee on Highways, Transit, and 

Pipelines, Committee on Transportation 

and Infrastructure, U.S. House of 

Representatives 

The Highway Trust Fund is the 

principal mechanism for funding 

federal highway and transit 

programs through receipts from

excise taxes charged to highway 

users, such as taxes on motor fuels. 

The Department of Treasury

(Treasury) and the Congressional 

Budget Office (CBO) each prepare 

estimates of future receipts for the

Highway Trust Fund semiannually. 

Treasury's receipt estimates are 

combined with the Department of

Transportation's (DOT) estimates 

of outlays to create an estimate of 

the Highway Trust Fund balance 

for the President's Budget; CBO 

also projects outlays to develop an

estimate of the fund balance. The 

agencies’ most recent estimates 

show that the Highway Account 

within the Highway Trust Fund

could have a negative balance as 

early as 2009, raising concerns 

about whether funding for federal 

highway programs—which were

recently authorized by the Safe, 

Accountable, Flexible, Efficient 

Transportation Equity Act: A 

Legacy for Users—will continue to 

be met. Consequently, the 

Subcommittee asked us to review

and compare recent estimates

made by Treasury and CBO. This 

testimony provides information on 

how (1) estimates are used to 

provide key information about the 

Highway Trust Fund, (2) the most 

recent Highway Trust Fund

estimates—based on receipt

estimates made by Treasury and

CBO—compare, and (3) Treasury’s 

and CBO’s estimates compare to 

actual receipts for recent years. 

Due to the nature of the receipts and disbursement processes of the 

Highway Trust Fund, estimates are used regularly not only to project the 

Highway Trust Fund’s future balance, but also to determine its current 

balance. Treasury’s receipts collection processes for the Highway Trust 

Fund rely on estimates based on historical receipts to determine how much 

should be transferred from the General Fund into the Highway Trust Fund 

on a semimonthly basis. DOT and the Office of Management and Budget 

(OMB) also use estimates based on future receipts in calculating annual 

adjustments to authorization levels, and DOT uses estimates based on 

historical fuel consumption to determine apportionments from the Highway 

Trust Fund to states. Because estimates are used throughout the process of 

collecting and disbursing funds for the Highway Trust Fund, it is important 

that estimates be as accurate as possible. 

The most recent Highway Trust Fund estimates from the President’s Budget 

and CBO show similar trends, even though Treasury and CBO use different 

assumptions to estimate receipts for the fund. The Highway Trust Fund 

balance is projected to steadily decline because estimated outlays of the 

Highway Account exceed estimated revenues each year from 2006 through 

2011. Treasury projects lower receipts levels than CBO, and therefore the 

President’s Budget contains estimates of negative Highway Trust Fund 

balances occurring one year earlier than CBO is projecting. The differences

in receipts estimates developed by Treasury and CBO are caused in part by 

the use of different economic assumptions, such as economic growth and 

fuel prices. 

When compared with actual Highway Trust Fund receipts, the accuracy of 

Treasury’s and CBO’s Highway Trust Fund estimates are not very different 

from each other. Neither agency’s estimates have been consistently closer 

or further away from the actual amounts. For example, the estimates of the 

two agencies are closest or furthest from actual receipts in the same years. 

These comparisons of past performance should not be taken as an indicator 

of the future performance of the models. 

Current Highway Trust Fund Year-End Balance Estimates 

www.gao.gov/cgi-bin/getrpt?GAO-06-572T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine 

Siggerud, (202) 512-2834, 

siggerudk@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

We appreciate the opportunity to testify on important Highway Trust Fund 

issues. The Highway Account within the Highway Trust Fund is the 

principal mechanism for funding federal highway programs authorized by 

the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 

Legacy for Users (SAFETEA-LU). SAFETEA-LU set specific annual 

funding levels for most federal highway programs on the basis of projected 

receipts to the Highway Trust Fund for fiscal years 2005 through 2009. The 

Department of the Treasury (Treasury) and the Congressional Budget 

Office (CBO) each prepare estimates of future receipts for the Highway 

Trust Fund biannually. Treasury’s receipt estimates are combined with the 

Department of Transportation’s (DOT) estimates of outlays to create an 

estimate of the Highway Trust Fund balance for the President’s Budget; 

CBO also projects outlays to develop an estimate of the Highway Trust 

Fund balance. The agencies’ most recent estimates show that the Highway 

Account within the Highway Trust Fund could have a negative balance as 

early as 2009, raising concerns about whether funding for federal highway 

programs—which were recently authorized by the Safe, Accountable, 

Flexible, Efficient Transportation Equity Act: A Legacy for Users—will 

continue to be met. 

Consequently, the Subcommittee asked us to review and compare recent 

estimates made by Treasury and CBO. Accordingly, this testimony 

provides information on how (1) estimates are used to provide key 

information about the Highway Trust Fund, (2) the most recent Highway 

Trust Fund estimates—based on receipt estimates made by Treasury and 

CBO— compare, and (3) Treasury’s and CBO’s estimates compare to 

actual receipts for recent years. (All years in this statement are fiscal 

years. See app. I for information on our scope and methodology.) 

In summary: 

• Because of the nature of the Highway Trust Fund receipt and

disbursement processes, estimates are used regularly to determine and 

project the balance of the Highway Trust Fund. Treasury’s processes for 

allocating tax receipts to the Highway Trust Fund regularly rely on 

estimates based on historical receipts to determine how much should be 

transferred from the General Fund into the Highway Trust Fund, because 

Treasury does not obtain data from business taxpayers on the type of

excise tax it collects. DOT and the Office of Management and Budget 

(OMB) also use estimates based on future receipts in calculating annual 

adjustments to authorization levels, and DOT uses estimates based on 

Page 1 GAO-06-572T 
historical fuel consumption to determine apportionments from the 

Highway Trust Fund to the states. Because estimates are used to make 

semimonthly receipt transfers into the Highway Trust Fund, to calculate 

adjustments to the Fund, and to identify appropriate funding authorization 

levels for budget planning and legislation—like SAFETEA-LU—it is 

important that estimates be as accurate as possible. 

• The most recent Highway Trust Fund estimates contained in the 

President’s Budget and those released by CBO show similar trends, with 

balances estimated to continue to decline into 2011. The Highway Trust 

Fund balance is gradually being depleted because estimated outlays of the 

Highway Account exceed estimated revenues each year from 2006 through 

2011. Treasury estimates lower receipts levels than CBO during this 

period, and therefore the President’s Budget contains estimates of 

negative Highway Trust Fund balances occurring one year earlier than 

CBO is projecting. The differences in receipts estimates developed by 

Treasury and CBO are caused, in part, by the use of different economic 

assumptions, such as economic growth and fuel prices. 

• When compared with actual Highway Trust Fund receipts, the accuracy of 

Treasury’s and CBO’s Highway Trust Fund estimates are not very different 

from each other. Neither agency’s estimates have been consistently closer 

or further away from the actual amounts. For example, the estimates of 

the two agencies are closest or furthest from actual receipts in the same 

years. These comparisons of past performance should not be taken as an 

indicator of the future performance of the models. 

The Highway Trust Fund was established in 1956 to provide a dedicated 

source of federal funding for highways. In 1983, the Highway Trust Fund 

was divided into two accounts: the Highway Account and the Mass Transit 

Account. Periodically, Congress enacts multiyear legislation, such as 

SAFETEA-LU, authorizing federal spending for the nation’s surface 

transportation programs—including highway, transit, highway safety, and

motor carrier programs—and setting overall funding for these activities. 

Funding for the federal-aid highway program is provided through the 

Highway Trust Fund, a “pay as you go” system that uses receipts from 

Background 

Page 2 GAO-06-572T 
highway user excise taxes to fund various surface transportation 

programs.1

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). Someone other than the consumer generally 

pays the excise taxes directed to the Highway Trust Fund. The highway 

user pays the other taxes indirectly, since these taxes become part of the 

purchase price. Thus, the motor fuels taxes are paid by businesses rather 

than consumers at retail pumps. Oil companies, for example, typically pay

a per-gallon tax on the motor fuels when their fuel is loaded into tanker 

trucks or rail cars at a terminal. Tire manufacturers pay taxes on truck 

tires, and retailers pay taxes on the sales price of new trucks and trailers. 

Owners of heavy highway vehicles—trucks weighing 55,000 pounds and 

over—pay taxes on the use of these vehicles, making this the only highway 

tax directly paid by the highway user. 

Receipts from the gasoline tax constitute the single largest source of 

revenue for the Highway Account, and approximately 84 percent of the 

receipts from the gasoline tax go to this account. Overall, the Highway 

Account receives the majority of the tax receipts for the Highway Trust 

Fund, including all receipts from truck-related taxes. Table 1 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 Account and the Mass Transit Account within the fund. 

 1

The federal-aid highways program is funded by contract authority contained in SAFETEALU. Appropriation acts contain an obligation limitation reflecting the authorized level, 

including an adjustment based on revenue. Obligations made against the Highway Trust 

Fund can exceed the actual cash balances up to the receipts anticipated to be collected in

the following 2 years. 

Page 3 GAO-06-572T 
Table 1: Federal Highway User Excise Taxes and the Percentage Allocations to the Highway Account and the Mass Transit 

Account of the Highway Trust Fund, as of March 1, 2006 

Motor fuel taxes 

Distribution of tax 

Type of Excise Tax Tax rate (cents) Highway Account Mass Transit Account

Gasoline 18.3 per gallon 84% 16%

Diesel 24.3 per gallon 88% 12%

Gasohol 18.3 per gallon 84% 16%

Liquefied petroleum gas 13.6 per gallon 84% 16%

Liquefied natural gas 11.9 per gallon 84% 16%

M85 (from natural gas) 9.15 per gallon 84% 16%

Compressed natural gas 48.54 per thousand cubic feet 80% 20%

Truck-related Taxes - All proceeds to Highway Account 

Tires 9.45 cents for each 10 pounds (so much of the maximum rated load capacity thereof as 

exceeds 3,500 pounds) 

Truck and trailer sales 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

Heavy-vehicle use 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. 

The nature of the Highway Trust Fund’s receipts collection and 

disbursement processes is such that estimates are needed not only to 

project the fund’s future balance but also to determine its current balance. 

Changing circumstances—for example, shifts in motor fuel usage—can 

affect the accuracy of past estimates of receipts that will flow into the 

Highway Trust Fund, rendering it necessary to make regular adjustments. 

Treasury’s estimates of Highway Trust Fund receipts are used to make 

these regular adjustments to the Highway Trust Fund balance, and DOT 

uses these estimates in turn to calculate what is called the Revenue 

Aligned Budget Authority (RABA) adjustment, which can increase or 

decrease the levels of funding enacted by legislation and funded through 

the Highway Account. 

Estimates Are Integral 

to Determining 

Highway Trust Fund 

Receipts and 

Distributions 

The process for collecting and distributing Highway Trust Fund moneys is 

summarized in figure 1. As it shows, the basic process involves receiving 

money from business entities and individual taxpayers, passing it into 

Treasury’s General Fund and determining how much should be transferred 

into the Highway Trust Fund, determining how much is available in the 

Highway Trust Fund for disbursement, and then distributing this money to 

the states or allocating it to specific projects. 

Page 4 GAO-06-572T 
Figure 1: Process for Collecting and Distributing Highway Trust Fund Receipts 

Business

taxpayers

Treasury’s

General Fund

Highway

Trust Fund States

Semi-Monthly

Treasury collects

excise taxes on 

motor fuels and 

truck-related taxes

from business

entities and 

individual 

taxpayers.

Taxes Paid into

General Fund

Treasury makes

transfers equivalent 

to the collected 

taxes from the 

General Fund to the 

Highway Trust Fund 

based on estimates

from OTA. 

Initial Transfer

to Highway

Trust Fund

Monthly

Treasury’s FMS

and BPD make 

adjustments to the 

initial transfer 

based on IRS

certifications. 

Adjustments to

Highway Trust

Fund transfer

Quarterly, 6 months after end of quarter DOT and OMB 

calculate the annual 

RABA adjustments

based on 

comparisons of 

actual and estimated 

receipts. 

RABA

Calculation

Annually

FHWA estimates

the amount to be 

apportioned to 

each state based 

on data provided 

by States about the 

amount of relevant 

excise tax collected 

from them. 

Apportionment to

States/Allocation to

Various Projects

Annually

Sources: GAO; MapArt.

Collection and determination of Highway Trust Fund receipts. The 

collection and allocation of the receipts is complex and involves several 

organizations. Twice a month, business taxpayers make deposits of excise 

taxes—including the highway user excise taxes levied for the Highway 

Trust Fund—generally through Treasury’s Electronic Federal Tax 

Payment System. When these semimonthly deposits are made, Treasury 

does not obtain data from business taxpayers on the type of excise taxes 

(highway user or otherwise) that these deposits are intended to cover; 

therefore, the deposits flow into Treasury’s General Fund. On a 

semimonthly basis, Treasury’s Financial Management Service (FMS) and 

Bureau of Public Debt (BPD) use estimates made by the Treasury’s Office 

of Tax Analysis (OTA) based on historical tax receipts certified by Internal

Revenue Service (IRS) data and actual total current excise tax revenue

collections to make an initial transfer into the Highway Trust Fund. 

Treasury later adjusts these initial deposits based on actual tax receipts, 

which are certified by IRS on a quarterly basis 6 months after each quarter 

Page 5 GAO-06-572T 
has ended.2

 Information about the actual Highway Trust Fund receipts is 

therefore subject to a lag between when the tax is paid to Treasury by the

business entity or taxpayer, when IRS certifies the receipts, and when 

Treasury adjusts the Highway Trust Fund accordingly. 

Determination of Highway Trust Fund monies available for 

disbursement. DOT and OMB are involved in calculating an adjustment 

to the amounts authorized and available for obligation based on Highway 

Trust Fund receipts; these calculations also depend on estimates. Since 

fiscal year 2000, DOT and OMB have been responsible for calculating and 

making the annual RABA adjustment, which ties highway funding to 

receipt levels. To determine the RABA adjustment, DOT and OMB rely on 

information about past Highway Account receipts and estimates of future 

Highway Account receipts from Treasury. The RABA adjustment, based on 

a comparison of actual and estimated receipt data, can increase or 

decrease the guaranteed levels of funding enacted by legislation and 

funded through the Highway Account. 

Apportionment to states and allocation to projects. The Federal

Highway Administration (FHWA) of DOT apportions funding to the states 

on a formula basis using estimates of each state’s relative contribution of 

taxes to the Highway Trust Fund. Because businesses, rather than 

consumers, generally pay highway user taxes, most of the federal motor 

fuels and truck taxes come from the handful of states where those 

businesses have their corporate headquarters and pay their taxes. As a 

result, Treasury does not provide FHWA with state-level data on highway 

tax receipts, and FHWA must therefore estimate these data in order to 

distribute highway program funds to the states. FHWA estimates statelevel contributions through what it refers to as its “attribution process.” 

Through this process, it determines each state’s share of highway motor 

fuels usage on the basis of data about such things as gas and diesel fuel 

consumption from each state’s records on the collection of state-imposed 

fuel taxes. FHWA uses these data to estimate the Highway Account 

receipts attributable to each state’s highway users as well as other data to

ultimately determine the apportioned amounts of funding that should flow 

to a state for highway programs funded from the Highway Account. 

 2

IRS certifies the Quarterly Federal Excise Tax Return (Form 720) that taxpayers are

required to submit to report their excise tax liability. Form 720 contains information that 

ultimately determines how these receipts should be distributed to government trust funds, 

including the Highway Trust Fund. 

Page 6 GAO-06-572T 
Because of the extensive use of estimates in determining the Highway 

Trust Fund balance, it is not surprising that estimates of amounts that will 

be available in future years may be subject to considerable change. While a 

future balance of the Highway Trust Fund can be calculated as the 

difference between receipts and outlays (spending) over the life of the 

fund, a determination of this future balance can change as more up-to-date 

information becomes available.3

 For example, Treasury’s estimates of 

Highway Trust Fund receipts for 2005 have changed every year since the 

initial estimate was made in 2000. Various factors, economic and 

otherwise, can cause them to change.

4

 Because estimates are used in 

determining the initial transfer to the Highway Trust Fund, in calculating 

the RABA adjustment, and in identifying appropriate funding authorization 

levels for budget planning and legislation, such as SAFETEA-LU, it is 

important that estimates be as accurate as possible. 

Highway Trust Fund estimates contained in the President’s Fiscal Year 

2007 Budget—based on receipts estimates from Treasury and outlay 

estimates from DOT—and those released by CBO in January 2006 project 

different balances, but the trends are similar. For example, the estimates 

show that CBO is projecting higher year-end Highway Trust Fund balances 

than the President’s Budget for fiscal years 2006 through 2011, but both 

show declining balances over that period.5

 Both sets of estimates project a 

negative Highway Trust Fund balance by the end of fiscal year 2011; but 

the President’s Budget projects the depletion of the Fund by 2010 and 

CBO’s estimates show a negative balance occurring in 2011. More 

specifically, the Highway Account—which makes up the majority of 

Highway Trust Fund receipts—is projected to have a negative balance as 

early as 2009, because of the growing difference between projected 

receipts and outlays. The variation in economic assumptions used by 

Treasury and CBO, such as those for gross domestic product and fuel 

Recent Highway Trust 

Fund Estimates Show 

Similar Trends, Even 

Though Different 

Assumptions are Used 

in Making the 

Estimates 

 3

Outlays during a fiscal year may be for payment of obligations incurred in prior years or in 

the same year. Outlays, therefore, flow in part from unexpended balances of prior year 

budgetary resources and in part from budgetary resources provided for the year in which 

the money is spent. 

4

Additionally, estimates do not include RABA adjustments, which also can have an effect

on balances. 

5

For the purposes of this study we are using Highway Trust Fund year-end balance 

estimates released by CBO in January 2006 and by the President’s Fiscal Year 2007 Budget

in February 2006 as the current or most recent estimates.

Page 7 GAO-06-572T 
prices, accounts for part of the difference in Highway Account receipt 

estimates.6

Estimates Result in Similar 

Trends, but Diverge over 

Time

Both the President’s Budget and CBO’s estimates currently show a 

continuing downward trend of cash balances in the Highway Trust Fund, 

and both estimates show a negative balance in the Highway Trust Fund by 

fiscal year 2011. Differences between the estimates are greater in the later 

years because the uncertainty of estimates increases as the projections 

extend into the future. As figure 2 shows, CBO estimates higher year-end

balances for every year through 2011, projecting a balance of negative $2.4

billion at the end of 2011, while the President’s Budget estimates project a 

negative balance occurring first in 2010 and reaching an estimated 

negative $10 billion by 2011. It should be noted, however, that legislative 

or economic changes affecting Highway Trust Fund receipts occurring in

the interim could change these projected negative balances. For example, 

a number of changes, such as provisions to reduce tax evasion that 

provided increased receipts to the Highway Trust Fund, were adopted in 

the American Jobs Creation Act of 2004. 

 6

In 2002, in order to help determine the reasonableness of Treasury’s estimates, we 

compared them with CBO’s estimates. This comparison did not raise any questions about 

the reasonableness of Treasury’s estimates. (See the list of related GAO products at the end 

of this testimony.) 

Page 8 GAO-06-572T 
Figure 2: Current Highway Trust Fund Year-End Balance Estimates 

-10

-5

0

5

10

15

20

President’s budget

Congressional Budget Office

2006 2007 2008 2009 2010 2011

Fiscal year

Dollars in billions

Source: GAO analysis of data provided in the President's Budget and by CBO.

The Highway Account, which makes up about 84 percent of the Highway 

Trust Fund receipts, is projected to have a negative balance by the 

President’s Budget estimates in 2009 and by CBO in 2010. Projected 

outlays are outpacing estimated receipts, which leads to the projected 

negative balances in the Highway Account and ultimately the Highway 

Trust Fund. For example, for 2006 through 2011, the Highway Account 

receipts are estimated to average $35.8 billion by Treasury and $37.4 

billion by CBO. For that same period, average outlays are estimated at 

$39.6 billion by DOT and $40.3 billion by CBO. See table 2 for receipt and 

outlay estimates for 2006 through 2011. 

Page 9 GAO-06-572T 
Table 2: Highway Account Receipt and Outlay Estimates for 2006 through 2011, as 

of March 1, 2006 

Estimates Dollars in Billions 

2006 2007 2008 2009 2010 2011

Average 

2006-2011 

Receipts $34.1 $34.6 $35.4 $36.2 $36.9 $37.6 $35.8

Outlays $34.5 $38.2 $39.7 $40.8 $41.8 $42.3 $39.6

Treasury/DOT 

Difference -$0.40 -$3.60 -$4.30 -$4.60 -$4.90 -$4.70 -$3.80

Receipts $34.9 $35.9 $36.9 $37.9 $38.8 $39.7 $37.4

Outlays $34.9 $37.9 $40.5 $41.7 $42.7 $43.8 $40.3

CBO 

Difference $0.00 -$1.94 -$3.58 -$3.81 -$3.89 -$4.07 -$2.90

Source: GAO analysis of data provided by DOT and CBO. 

In addition to the current estimates, we also reviewed Treasury’s and 

CBO’s annual estimates for 1999 through 2006. These historical estimates 

showed that although estimates have been further apart and closer 

together at different times, the projected trends have been similar. For 

example, in the winter 1998 estimates, both Treasury and CBO projected 

Highway Trust Fund receipts to decline over $4 million between 1999 and 

2000, before experiencing a steady increase from 2000 through 2003. These 

historical estimates also show that for the last four budget forecasts, 

starting with estimates for 2003, CBO has estimated higher Highway Trust 

Fund receipts levels than Treasury in each year. 

Differences in Estimated 

Balances Are Largely Due 

to Differing Assumptions 

about Future Receipts 

Differences in receipts estimates, that is, the amounts estimated to be 

collected through federal excise taxes on fuels and truck-related taxes, 

appear to be the driving factor in the difference between the two estimated

balances. (See fig. 3 for current Treasury and CBO receipts estimates.) 

Treasury and CBO officials indicated that differences in receipts estimates 

are not unusual, given the different economic assumptions used by each of

the models.7

 DOT’s outlays are based on currently enacted law, and CBO’s 

are based on historical spending patterns; however, the resulting estimates 

are not very different. As figure 4 illustrates, estimates of outlays track 

much more closely than do estimates of receipts over the same period of 

time. 

 7

How each organization constructs its tax models, generally referred to as technical 

differences, are also an important factor in the differences between Treasury’s and CBO’s 

estimates. 

Page 10 GAO-06-572T 
Figure 3: Current Treasury and CBO Estimates of Highway Trust Fund Receipts 

Treasury

Congressional Budget Office

Fiscal year

Dollars in billions

Source: GAO analysis of data provided by Treasury and CBO.

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011

Page 11 GAO-06-572T 
Figure 4: Current estimates of Highway Trust Fund outlays 

President’s budget

Congressional Budget Office

Fiscal year

Dollars in billions

Source: GAO analysis of data provided in the President's Budget and by CBO.

2006 2007 2008 2009 2010 2011

0

10

20

30

40

50

60

Treasury and CBO develop Highway Trust Fund estimates for different 

purposes: Treasury’s estimates are used and reported in the President’s 

Budget, and CBO’s estimates aid Congress in formulating budget policy. 

Both agencies use models to make Highway Trust Fund estimates twice a 

year, once in the summer and once in the winter. Neither model predicts 

future regulatory or legislative changes that could affect Highway Trust 

Fund receipts. As a result, any changes that affect Highway Trust Fund 

receipts will affect the accuracy of the estimates.8

 Despite their differing 

assumptions about economic policy, the two sets of estimates are very 

close. For example, the President’s Budget estimates show that the 

Highway Trust Fund year-end balance for 2006 will be $16.1 billion, and

CBO estimates it will be $16.6 billion—a difference of about 3 percent.

Treasury and CBO officials told us that, although their models and 

assumptions differ, their near-term estimates are generally not that 

different. We did not evaluate the models and assumptions used by either 

agency. 

 8

Treasury’s model generally assumes that the proposals contained in the President’s Budget 

will be enacted. 

Page 12 GAO-06-572T 
A major driver of Highway Trust Fund receipts is the economy and 

assumptions about the economy. Both receipts and outlays are affected by

changes in economic conditions. This sensitivity complicates budget 

planning because errors in economic assumptions lead to errors in 

estimates. Treasury and CBO officials attributed the current differences in

estimates, in part, to the economic assumptions used in the models, such 

as economic growth and the relative prices of fuel. For example, at the 

time of the 2007 President’s Budget, the administration’s estimate for real 

gross domestic product (GDP) growth—which is used in Treasury’s 

estimates—is below CBO’s for 2006 through 2009; but for 2006 through 

2011, the administration and CBO project similar percent average annual 

growth rates (3.2 and 3.3, respectively). (See table 3 for real GDP growth 

rate estimates.) 

Table 3: Comparison of Real GDP Growth Rate Assumptions between 2007 

President’s Budget and CBO 

Real GDP 

assumptions 2006 2007 2008 2009 2010 2011

Average 

2006-2011

2007 Budget 3.4% 3.3% 3.3% 3.1% 3.1% 3.1% 3.2%

CBO 3.6% 3.4% 3.4% 3.3% 3.0% 2.8% 3.3%

Source: 2007 President’s Budget.

Treasury’s estimates incorporate economic assumptions formulated for 

the President’s Budget by the “Troika,” which consists of the Council of 

Economic Advisors, OMB, and Treasury. The Troika’s economic 

assumptions are used in estimates contained throughout the President’s 

Budget and are not limited to Highway Trust Fund estimates. Several of

the administration’s economic assumptions, such as those for the real 

GDP and consumer price index, are publicly available. However, most 

Troika assumptions are not publicly available. The economic and technical 

assumptions on which Treasury’s Highway Trust Fund estimates are based 

represent estimates of what is most likely to occur if the President’s 

policies included in the Budget are enacted and implemented. Thus, they 

may not match the “actual” data if some of the President’s policies are not

enacted and implemented, if an understanding of the effects of policies or 

the underlying relationships is less than perfect, or if unexpected events 

occur. By comparison, CBO’s model projects future highway excise tax

receipts by looking at past and expected changes in relative fuel prices as 

well as historical relationships between sources of Highway Trust Fund 

receipts and real economic growth and by holding current law constant. 

For example, estimates of fuel consumption depend on estimates of 

economic growth, relative fuel prices, and average fuel efficiency, which 

Page 13 GAO-06-572T 
are then multiplied by the current federal tax rate on fuel. CBO’s estimates 

of Highway Trust Fund receipts are added to CBO’s estimates of other 

sources of federal revenues in order to generate projections of total 

federal revenues. Both Treasury and CBO continuously update their 

models to incorporate legislative, economic, and other relevant changes—

which are then reflected in the next forecasting exercise. 

When Treasury’s and CBO’s estimates of receipts are compared with 

actual Highway Trust Fund receipts, both agencies’ track records, in terms 

of how close their estimates come to the actual amounts, are not very 

different. Neither agency is consistently closer: Treasury’s estimates have 

been closer to actual receipts in some instances and CBO’s in others. 

However, these comparisons should not be taken as an indicator of the 

future performance of the models. 

Accuracy of 

Treasury’s and CBO’s

Estimates of Receipts 

Has Been Comparable 

Before looking at the results, it is necessary to explain more precisely 

what we compared, and how. Each year, Treasury and CBO estimate 

Highway Trust Fund receipts for at least the next 6 years. In forecasting, 

estimates of what will occur within a year or two are generally more 

reliable than estimates of what may occur several years later, because the 

longer the period involved, the greater the opportunity for conditions to 

change in unexpected ways. We focused our analysis on Treasury’s and 

CBO’s 1-year and 2-year estimates—for example, what the two agencies 

estimated in 2000 as the Highway Trust Fund receipts in 2001 and 2002. We 

compared the annual estimates of receipts made by each agency in 1998 

through 2004 to actual Highway Trust Fund receipts that were collected 1 

year and 2 years after the estimates were made.9

On average, the two agencies were nearly identical in the degree to which

their 1-year estimates mirrored actual results, and Treasury’s estimates 

were slightly better in the degree to which 2-year estimates mirrored 

actual results. As figure 5 shows, Treasury’s 1-year estimates were off by 

an average of 5.74 percent, while CBO’s were off by 5.77 percent.10 This 

 9

To make the comparison, we used actual receipt data reported in the President’s Budget. 

Our comparisons were for the entire Highway Trust Fund, including both the Highway 

Account and the Mass Transit Account. We were unable to assess estimates made for years

after 2005 because we did not have data points of actual results for the analysis. 

10The comparison period covered forecasts for fiscal years 1999 through 2005. The

percentages are based on the absolute value of the forecast, which is the difference—

regardless of whether it is positive or negative—between the actual and the forecasted 

values for each year. 

Page 14 GAO-06-572T 
translates to an average difference between estimates and actual receipts

of about $1.9 billion each year.11 For 2-year estimates, Treasury’s estimates 

differed from actual receipts, on average, by about 6.85 percent, while 

CBO’s estimates differed by about 7.61 percent. These differences 

translate to about $2.3 billion for Treasury’s forecast and about $2.6 billion 

for CBO’s, on average, each year. 

Figure 5: Accuracy of Treasury and CBO Estimates Made in 1998-2004 for Highway

Trust Fund Receipts 1 Year and 2 Years Ahead of the Estimates 

0

1

2

3

4

5

6

7

8

9

10

Treasury

Congressional Budget Office

1 year ahead 2 years ahead

Projection

Percentage

Source: GAO analysis of data provided by Treasury and CBO.

A comparison of the results for each year showed that both agencies’ 

estimates also followed a similar pattern in how far they were off from 

actual amounts in any given year, and whether their estimates were too 

low or too high. Figure 6 shows the year-to-year results for the 1-year 

estimates. While there were some differences, the estimates from both 

agencies followed the same general trend. For example, both agencies’ 

 11The dollar value represents Mean Absolute Error (MAE,) which is the average value of the

difference between estimated and actual receipts, regardless of whether it is positive or 

negative—over the comparison period. 

Page 15 GAO-06-572T 
estimates were furthest from actual amounts in the same 2 years—fiscal 

years 2001 and 2002. In those years, both agencies’ 1-year estimate was 

above the actual receipts by 12 percent or more. In those 2 years, a 

weakened economy led to a decline in highway excise taxes paid. 

Figure 6: Accuracy of Annual Treasury and CBO Estimates Made for Highway Trust 

Fund Receipts 1 Year Ahead of the Estimates 

Treasury

Congressional Budget Office

Fiscal year

Percentage

Source: GAO analysis of data provided by Treasury and CBO.

-15

-10

-5

0

5

10

1999 2000 2001 2002 2003 2004 2005

These comparisons of historical performance, while interesting, should 

not be taken as an indicator of the future performance of the two models. 

However, the results tend to move in tandem, suggesting that both models 

are likely to predict the same kinds of results. We did not collect detailed 

information on factors and assumptions used in the models because some

of the information used in Treasury’s model is based on economic 

assumptions by the administration that are not publicly available. To 

evaluate these models, one would need to analyze and test the various 

components of each model—something we did not do. 

Page 16 GAO-06-572T 
Treasury’s and CBO’s estimates of Highway Trust Fund receipts play an 

important role not only determining appropriate levels of funding for 

transportation programs, but also for distributing the funds to states for 

approved highway and transit projects. Even though the estimates from 

both agencies have tended to perform similarly, the estimates continue to

change with each forecasting exercise, making it difficult for those relying 

on the estimates to anticipate future Highway Trust Fund balances. 

However, because changes in economic conditions or legislation are hard 

to foresee, there is no easy solution to this problem. While the Highway 

Trust Fund may not reach a negative balance within 5 years as current 

forecasts project, the trend of declining balances is clear, a trend that the

Congress and the administration have already begun to address through 

two commissions charged with reviewing and making recommendations 

on issues affecting the Highway Trust Fund. 

Mr. Chairman, this concludes my prepared statement. I would be pleased

to respond to any questions that you or the other Members of the 

Subcommittee might have. 

For further information on this testimony, please contact Katherine 

Siggerud at (202) 512-2834 or siggerudk@gao.gov. Individuals making key 

contributions to this testimony were Heather MacLeod, Mehrzad Nadji, 

Stan Stenersen, Friendly Vang-Johnson, and Sara Vermillion. 

Concluding 

Observations 

GAO Contacts and 

Staff 

Acknowledgement 

Page 17 GAO-06-572T 
Page 18 GAO-06-572T 

Appendix I: Scope and Methodology 

To identify why estimates are used to provide key information about the 

Highway Trust Fund, we reviewed Department of Transportation (DOT) 

documents and prior GAO reports on Highway Trust Fund processes. We 

also interviewed officials from Treasury, the Congressional Budget Office

(CBO), and DOT about how estimates are involved in these processes. 

To compare Treasury’s and CBO’s estimates, we analyzed data for fiscal 

years 1998 through 2006 from both agencies; Treasury’s estimates of 

receipts were published annually in the President’s Budget (which also 

included outlay estimates from DOT), and CBO’s estimates of receipts and

outlays were prepared in that time frame each year. Specifically, for the

Highway Trust Fund and the Highway Account within the fund, we 

examined the differences in receipt and outlay estimates, the percentage 

difference in the estimates, and the overall trends in the forecasts. We also 

reviewed information from both agencies on the overall factors and 

assumptions that are included in the models used to prepare estimates and 

interviewed officials from Treasury and CBO about the factors that were 

most likely responsible for any differences in their estimates. We did not 

collect detailed information on factors and assumptions used in the 

models because some of the information used in Treasury’s model is based 

on economic assumptions developed by the administration that are not 

publicly available. Consequently, we were not able to evaluate the 

reliability of Treasury’s or CBO’s model for preparing Highway Trust Fund 

estimates. 

To compare Treasury’s and CBO’s estimates to actual Highway Trust Fund 

receipts, we analyzed the annual estimates of receipts made by each 

agency in each year from fiscal year 1998 through fiscal year 2004 and 

compared them to actual Highway Trust Fund receipts, as published 

annually in the U.S. Budget Historical Statistics. The comparisons were 

made for 1- and 2-year estimates for the entire Highway Trust Fund, 

including both the Highway Account and the Mass Transit Account. The 

percentage differences in estimates and actual receipts were computed on

the basis of the absolute value of the differences regardless of whether the 

values were negative or positive. The differences in dollar value represent 

Mean Absolute Error (MAE), which is the average value of the difference 

between estimated and actual receipts, regardless of whether the value is 

positive or negative. These accuracy measures are general and descriptive 

statistics, which were not tested for statistical significance because of the 

relatively small number of data available. 
Page 19 GAO-06-572T 

Related GAO Products 

21st Century Challenges: Reexamining the Base of the Federal 

Government. GAO-05-325SP. Washington, D.C.: February 1, 2005. 

Applying Agreed-Upon Procedures: Highway Trust Fund Excise Taxes. 

GAO-04-213R. Washington, D.C.: November 20, 2003. 

Applying Agreed-Upon Procedures: Highway Trust Fund Excise Taxes. 

GAO-03-360R. Washington, D.C.: January 23, 2003. 

Highway Financing: Factors Affecting Highway Trust Fund Revenues. 

GAO-02-667T. Washington, D.C.: May 9, 2002. 

Highway Trust Fund: Overview of Highway Trust Fund Financing. 

GAO-02-435T. Washington, D.C.: February 11, 2002. 

Federal Trust and Other Earmarked Funds: Answers to Frequently 

Asked Questions. GAO-01-199SP. Washington, D.C.: January 1, 2001. 

Highway Funding: Problems With Highway Trust Fund Information 

Can Affect State Highway Funds. GAO/RCED/AIMD-00-148. Washington,

D.C.: June 30, 2000. 

Budget Issues: Trust Funds in the Budget. GAO/T-AIMD/RCED-99-110. 

Washington, D.C.: March 9, 1999. 

Agreed-Upon Procedures: Highway Trust Fund Excise Taxes. 

GAO/AIMD-99-71R. Washington, D.C.: February 25, 1999. 

Highway Trust Fund: Financial Condition as of September 30, 1997. 

GAO/RCED-98-171R. Washington, D.C.: April 24, 1998. 

Highway Trust Fund: Possible Impact If It Had Financed All Highway 

Expenditures. GAO/RCED-98-78R. Washington, D.C.: February 6, 1998. 

Surface Transportation: Regional Distribution of Federal Highway 

Funds. GAO/RCED/HEHS-97-167R. Washington, D.C.: May 30, 1997. 

Highway Funding: Alternatives for Distributing Federal Funds. 

GAO/RCED-96-6. Washington, D.C.: November 28, 1995. 

Highway Fund Audit. GAO/AIMD-97-14R. Washington, D.C.: November 4, 

1996. 
Highway Planning: Agencies Are Attempting to Expedite Environmental 

Reviews, but Barriers Remain. GAO/RCED-94-211. Washington, D.C.: 

August 2, 1994. 

Surface Transportation: Tight Budget Environment Requires Sound 

Investment Strategy. GAO/T-RCED-94-146. Washington, D.C.: March 8, 

1994. 

Highway Demonstration Projects. GAO/RCED-93-193R. Washington, D.C.: 

August 10, 1993. 

Surface Transportation: Funding Limitations and Barriers to CrossModal Decision Making. GAO/T-RCED-93-25. Washington, D.C.: March 31, 

1993. 

Transportation Infrastructure: Major Program Revisions Present 

Challenges. GAO/T-RCED-92-93. Washington, D.C.: September 17, 1992. 

Highway Trust Fund: Strategies for Safeguarding Highway Financing. 

GAO/RCED-92-245. Washington, D.C.: September 15, 1992. 

Highway Trust Fund: Revenue Sources, Uses, and Spending Controls. 

GAO/RCED-92-48FS. Washington, D.C.: October 16, 1991. 

Transportation Infrastructure: Department of Transportation Highway 

and Mass Transit Program Reauthorization Proposals. GAO/T-RCED-91-

26. Washington, D.C.: April 18, 1991. 

Transportation Infrastructure: Federal Highway Administration FY 

1992 Budget. GAO/T-RCED-91-12. Washington, D.C.: March 5, 1991. 

Transportation Infrastructure: Flexibility in Federal-Aid Funding 

Essential to Highway Program Restructuring. GAO/T-RCED-91-4. 

Washington, D.C.: December 10, 1990. 

Operations and Outlook for the Highway Trust Fund. GAO/T-RCED-90-

79. Washington, D.C.: May 9, 1990. 

Operations of and Outlook for the Transportation Trust Funds. GAO/TRCED-90-78. Washington, D.C.: May 8, 1990. 

Page 20 GAO-06-572T 
Issues to Be Considered During Deliberations to Reauthorize the 

Federal-Aid Highway Program. GAO/T-RCED-90-50. Washington, D.C.: 

March 19, 1990. 

The Budget Treatment of Trust Funds. GAO/T-AFMD-90-03. Washington,

D.C.: October 18, 1989. 

The Budget Treatment of Trust Funds. GAO/T-AFMD-90-01. Washington,

D.C.: October 12, 1989. 

Transportation Infrastructure: Reshaping the Federal Role Poses 

Significant Challenges for Policy Makers. GAO/RCED-90-81A. 

Washington, D.C.: December 28, 1989. 

Transportation Infrastructure: Panelists’ Remarks at New Directions in

Surface Transportation Seminar. GAO/RCED-90-81B. Washington, D.C.:

December 28, 1989. 

Transportation Trust Funds. GAO/T-RCED-89-36. Washington, D.C.: May 

11, 1989. 

Highway Trust Fund: Condition and Outlook for the Highway Account. 

GAO/RCED-89-136. Washington, D.C.: May 9, 1989. 

Budget Issues: Trust Funds and Their Relationship to the Federal 

Budget. GAO/AFMD-88-55. Washington, D.C.: September 30, 1988. 

Deteriorating Highways and Lagging Revenues: A Need to Reassess the 

Federal Highway Program. GAO/CED-81-42. Washington, D.C.: March 5,

1981. 

Why Urban System Funds Were Seldom Used for Mass Transit. 

GAO/CED-77-49. Washington, D.C.: March 18, 1977. 

U.S. Transportation System—Federal Government’s Role and Current 

Policy Issues. GAO/RED-76-34. Washington, D.C.: October 22, 1975. 

Costs and Problems of Completing the Interstate Highway System. 

GAO/RCED-76-19. Washington, D.C.: September 4, 1975. 

Page 21 GAO-06-572T (542088) 
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