Report to the Committee on 

Environment and Public Works, U.S. 

Senate 

United States Government Accountability Office

GAO 

HIGHWAY TRUST 

FUND 

Improved Solvency 

Mechanisms and 

Communication 

Needed to Help Avoid 

Shortfalls in the 

Highway Account 

February 2009 

GAO-09-316 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2009

HIGHWAY TRUST FUND

Improved Solvency Mechanisms and Communication 

Needed to Help Avoid Shortfalls in the Highway 

Highlights of GAO-09-316, a report to the Account 

Committee on Environment and Public 

Works, U.S. Senate 

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 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. 

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. 

Highway Account Balance, Fiscal Years 1998 through 2009 

-5

0

5

10

15

20

25

End-of-year balance (in billions of dollars)

Source: GAO analysis of FHWA data.

Fiscal year

With $8 billion transfer

Without $8 billion transfer

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Estimated

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. 

To view the full product, including the scope 

and methodology, click on GAO-09-316. 

For more information, contact Phillip R. Herr

at (202) 512-2834 or herrp@gao.gov. 
Contents 

Letter 1

Background 2

Several Events Led to the Decline in the Balance of the Highway 

Account 9

Improved Mechanisms Could Help Maintain Highway Account 

Solvency 16

Conclusions 20

Recommendations for Executive Action 21 

Agency Comments and Our Evaluation 21 

Figures 

Figure 1: Sources of revenue for the Highway Trust Fund, Fiscal 

Years 2005 to 2008 3 

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 4 

Figure 3: Process for Collecting and Distributing Highway Account 

Receipts 6

Figure 4: Highway Account Balance, Fiscal Years 1998 through 

2009 8

Figure 5: Actual Highway Account Receipts Compared with 

Receipt Estimates in SAFETEA-LU, Fiscal Years 2005 to 

2008 11

Figure 6: Quarterly Adjustments to Highway Account Receipts 

Based on IRS Certification of Actual Results during 

SAFETEA-LU, Fiscal Years 2005 to 2008 12 

Page i GAO-09-316 Highway Account Solvency
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 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 

Page ii GAO-09-316 Highway Account Solvency
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), 

GAO1

 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.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).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 

 1

GAO, Highway Trust Fund: Overview of Highway Trust Fund Estimates, GAO-06-572T 

(Washington, D.C.: Apr. 4, 2006); and Physical Infrastructure: Challenges and Investment

Options for the Nation’s Infrastructure, 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). 

Page 1 GAO-09-316 Highway Account Solvency
 

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.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. 

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

Background 

 4

GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007);

Surface Transportation: Restructured Federal Approach Needed for More Focused

Performance-Based, and Sustainable Programs, GAO-08-400 (Washington, D.C.: Mar. 6,

2008); and Surface Transportation Programs: Proposals Highlight Key Issues and

Challenges in Restructuring the Programs, GAO-08-843R (Washington, D.C.: July 29, 

2008). 

Page 2 GAO-09-316 Highway Account Solvency
 

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 fig. 1.) 

Figure 1: Sources of revenue for the Highway Trust Fund, Fiscal Years 2005 to 2008

7.8%

24.1%

64.0%

Source: GAO analysis of FHWA data.

Highway Trust Fund receipts that come from fuel taxes

Highway Trust Fund receipts that come from sources other than fuel taxes

3.0%

Heavy-vehicle use

1.2%

Tire tax

Diesel and special fuels

Truck and trailer sales

Gasoline

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. 

Page 3 GAO-09-316 Highway Account Solvency
 

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 

Motor fuel taxes

Truck-related taxes—all proceeds to Highway Account

Gasoline

Diesel

Gasohol

Liquefied petroleum gas

Liquefied natural gas

M85 (from natural gas)

Compressed natural gas

Type of excise tax Tax rate (cents)

Distribution of tax 

Highway 

Account, 

Highway Trust 

Fund (percent)

Mass Transit 

Account,

Highway Trust 

Fund (percent)

Leaking Underground Storage Tank Trust Fund 

(percent)

18.4 per gallon

24.4 per gallon

18.4 per gallon

18.3 per gallon

24.3 per gallon

9.25 per gallon

144.47 per 

thousand cubic feet

83.9

87.9

83.9

88.4

92.3

83.5

93.3

15.5

11.7

15.5

11.6

7.7

15.5

6.7

0.5

0.4

0.5

0.0

0.0

1.1

0.0

Truck and trailer sales

Heavy-vehicle use

Tires 9.45 cents for each 10 pounds of the maximum rated load capacity over 

3,500 pounds

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

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 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.5

 Distribution of funds begins with 

a multiyear authorization act, such as SAFETEA-LU. The act provides 

specific amounts of annual contract authority6

 over the authorization 

 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. 

Page 4 GAO-09-316 Highway Account Solvency
 

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.7

 Annually, DOT 

apportions (through formula) and allocates to the states the contract 

authority provided in the authorization act.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.

 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 SAFETEALU is funding for High Priority Projects. 

Page 5 GAO-09-316 Highway Account Solvency
 

Figure 3: Process for Collecting and Distributing Highway Account Receipts 

Distribution

Collection

Adjustments and other and other

factors affectin affecting distribution tribution

Adjustments and other

factors affecting distribution

RABA

adjustments

Unobligated 

balances from 

prior years

Byrd test 

adjustments

if applicable

Annual 

limitations on 

obligations

Source: GAO.

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.

Highway Account

Multiyear 

authorization 

act

Provides

budget 

authority in 

the form of 

contract 

authority. 

Annual 

apportionment 

or allocation 

to states

No cash is

actually 

distributed at 

this time; states

are notified that 

federal funds

are available for 

use.

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.

Total federal 

highway aid 

available to 

states for 

fiscal year

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.

Annual appropriations act

Provides funds to pay federal obligations.

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). 

Page 6 GAO-09-316 Highway Account Solvency
 

• 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.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.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 2004.11

• 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.12 However, under SAFETEA-LU, no 

 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. 

10If 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. 

11As 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.

12The adjustment of annual authorizations is called RABA, but this term is often used to 

refer to the entire adjustment process. 

Page 7 GAO-09-316 Highway Account Solvency
 

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 billion13 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 

-5

0

5

10

15

20

25

End-of-year balance (in billions of dollars)

Source: GAO analysis of FHWA data.

Fiscal year

With $8 billion transfer

Without $8 billion transfer

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Estimated

 13The $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. 

Page 8 GAO-09-316 Highway Account Solvency
 

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. 

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. 

Estimated outlays from Highway Account programs under SAFETEA-LU 

exceeded estimated receipts throughout the authorization period by about 

$10.4 billion.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 SAFETEALU, 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 

Several Events Led to 

the Decline in the 

Balance of the 

Highway Account 

SAFETEA-LU 

Authorizations and LowerThan-Anticipated Receipts 

Led to the Decline of the 

Highway Account Balance 

 14Outlay 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.

Page 9 GAO-09-316 Highway Account Solvency
 

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 rose15 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.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 fig. 5). 

 15U.S. Department of Transportation, Federal Highway Administration, Office of Highway 

Policy Information, Traffic Volume Trends: September 2008 (Washington, D.C., 2008).

16U.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). 

Page 10 GAO-09-316 Highway Account Solvency
 

Page 11 GAO-09-316 Highway Account Solvency 

Figure 5: Actual Highway Account Receipts Compared with Receipt Estimates in 

SAFETEA-LU, Fiscal Years 2005 to 2008 

Note: Receipts for last quarter of fiscal year 2008 are anticipated to be certified by IRS in February 

2009. 

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 2008.17 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 

 17The 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. 

0

10

20

30

40

2005 2006 2007 2008

Dollars (in billions)

Source: GAO analysis of FHWA data.

Fiscal year

Actual receipts

Estimated receipts
 

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 fig. 6). 

Figure 6: Quarterly Adjustments to Highway Account Receipts Based on IRS 

Certification of Actual Results during SAFETEA-LU, Fiscal Years 2005 to 2008 

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Adjustment (in billions of dollars)

Source: GAO analysis of FHWA data.

Tax deposit quarter

2008, Q3

2008, Q2

2008, Q1

2005, Q3

2005, Q4

2006, Q1

2006, Q2

2006, Q3

2006, Q4

2007, Q1

2007, Q2

2007, Q3

2007, Q4

Page 12 GAO-09-316 Highway Account Solvency
 

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.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. 

DOT Recommended 

Actions to Offset the 

Decline and Implemented 

Cash Flow Management 

Procedures, but 

Communication with 

Stakeholders Could Be 

Improved 

• 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 

 18Congress 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. 

Page 13 GAO-09-316 Highway Account Solvency
 

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.

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.20 DOT also considered making 

 19The 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. 

20FHWA 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. 

Page 14 GAO-09-316 Highway Account Solvency
 

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 semimonthly receipts were deposited.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.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. 

 21According 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. 

22A GARVEE is a debt-financing instrument authorized to receive federal reimbursement of

debt service and related financing costs. 

Page 15 GAO-09-316 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. 

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. 

Improved 

Mechanisms Could 

Help Maintain 

Highway Account 

Solvency 

Modifying and 

Implementing Existing 

Mechanisms Could Help 

DOT Make Annual 

Adjustments to the 

Highway Account 

Page 16 GAO-09-316 Highway Account Solvency
 

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.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.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),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. 

 23See 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). 

24The $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.

25DOT 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. 

Page 17 GAO-09-316 Highway Account Solvency
 

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.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. 

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 

Monitoring Additional 

Indicators throughout the 

Year Could Help DOT 

Anticipate Sudden 

Declines in the Highway 

Account Balance 

 26RABA 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. 

Page 18 GAO-09-316 Highway Account Solvency
 

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 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. 

Although Improving 

Mechanisms Could Help 

Maintain Highway Account 

Solvency, Other Measures 

Are Needed to Ensure 

Long-Term Fund 

Sustainability 

• 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. 

Page 19 GAO-09-316 Highway Account Solvency
 

• 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. 

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 

Conclusions 

Page 20 GAO-09-316 Highway Account Solvency
 

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. 

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. 

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 www.gao.gov. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 21 GAO-09-316 Highway Account Solvency
 

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. 

Phillip R. Herr

Director, Physical Infrastructure Issues 

Page 22 GAO-09-316 Highway Account Solvency
Appendix I: 

A

GAO Contact and Staff 

cknowledgments 

Page 23 GAO-09-316 

Appendix I: GAO Contact and Staff 

Acknowledgments 

Phillip R. Herr, (202) 512-2834 or herrp@gao.gov

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. 

GAO Contact 

Staff 

Acknowledgments 

(546014) Highway Account Solvency
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