Highway Trust Fund: Nearly All States Received More Funding Than They Contributed in Highway Taxes Since 2005
Published: 2010-06-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Federal funding for highways is provided to the states mostly through a series of grant programs known as the Federal-Aid Highway Program, administered by the Department of Transportation's (DOT) Federal Highway Administration (FHWA). In 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) authorized $197.5 billion for the Federal-Aid Highway Program for fiscal years 2005 through 2009. The program operates on a "user pay" system, wherein users contribute to the Highway Trust Fund through fuel taxes and other fees. The distribution of funding among the states has been a contentious issue. States that receive less than their highway users contribute are known as "donor" states and states that receive more than their highway users contribute are known as "donee" states. GAO was asked to examine for the SAFETEA-LU period (1) how contributions to the Highway Trust Fund compared with the funding states received, (2) what provisions were used to address rate-of-return issues across states, and (3) what additional factors affect the relationship between contributions to the Highway Trust Fund and the funding states receive. To conduct this review, GAO obtained and analyzed data from FHWA, reviewed FHWA and other reports, and interviewed FHWA and DOT officials. DOT reviewed a draft of this report and provided technical comments, which we incorporated as appropriate.
section_title: What GAO Found
paragraphs: Since 2005, every state received as much or more funding for highway programs than they contributed to the Highway Account of the trust fund. This was possible because more funding was authorized and apportioned than was collected from the states and the fund needed to be augmented with general revenues. If the percentage of funds states contributed to the total is compared with the percentage of funds states received (i.e., relative share), then 28 states received a relatively lower share and 22 states received a relatively higher share than they contributed. Thus, depending on the method of calculation, the same state can appear to be either a donor or donee state. The Equity Bonus Program was used to address rate-of-return issues. It guaranteed a minimum return to states, providing them about $44 billion. Nearly all states received Equity Bonus funding and about half received a significant increase, at least 25 percent, over their core funding. The infusion of general revenues into the Highway Trust Fund affects the relationship between funding and contributions, as a significant amount of highway funding is no longer provided by highway users. Since fiscal year 2008, Congress has transferred nearly $30 billion of general revenues to address shortfalls in the highway program when more funding was authorized than collected. Using rate of return as a major factor in determining highway funding poses challenges to introducing a performance and accountability orientation into the highway program; rate-of-return calculations in effect override other considerations to yield a largely predetermined outcome--that of returning revenues to their state of origin. Because of these and other challenges, funding surface transportation programs remains on GAO's High-Risk list.

section_title: Letter
paragraphs: Over decades, the nation has built a vast highway infrastructure that  includes about 4 million miles of roads and 600,000 bridges, with the  federal government providing a significant portion of funding for this  system. In 2005, the Safe, Accountable, Flexible, Efficient Transportation  Equity Act: A Legacy for Users (SAFETEA-LU) authorized over $190  billion for the Federal-Aid Highway Program for fiscal years 2005 through  2009. The Highway Trust Fund has been the principal source of funding  for this authorization. These funds are primarily collected from taxes on  motor fuel and truck-related items and distributed to the states using a  series of complex formulas that take into account a number of factors,  including the estimated share of taxes highway users in each state  contributed to the fund. Because the Federal-Aid Highway Program has  operated on a “user pay” system, wherein users contribute to the building  and upkeep of the system, states have taken a strong interest in the rate of  return on contributions. Thus, how the funding has been distributed  among states has been contentious. States that receive less than the  estimated contributions of their highway users are known as “donor”  states. States that receive more than the estimated contributions of their  highway users are known as “donee” states.
To better understand the relationship between contributions to the  Highway Trust Fund and the amount of federal funding states received, at  your request, we examined:    The amount of revenue contributed to the Highway Trust Fund  Highway Account compared with the funding states received during  the SAFETEA-LU period;    The provisions in place during the SAFETEA-LU period to address  rate-of-return issues across states, and how they affected the highway  funding states received; and    Additional factors that affected the relationship between contributions  to the Highway Trust Fund and the funding states receive.
To determine how the amount of revenue contributed compared to  funding states received, we obtained and analyzed Federal Highway  Administration (FHWA) data including FHWA estimates of payments made  into the Highway Account of the Highway Trust Fund, by state, and the  actual total apportionments and allocations states received during the  SAFETEA-LU period. Because different methods of calculating a rate of  return can provide different results, we analyzed four different scenarios  to address this question. To determine provisions in place to address rate  of return issues and their effect on funding, we obtained and analyzed  FHWA data on state funding during the SAFETEA-LU period, and  determined the extent to which rate of return provisions increased state  funding. To determine additional factors that affect the relationship  between contribution to the Highway Trust Fund and states’ funding, we  reviewed FHWA, GAO and other reports, including our body of work on  surface transportation financing and the Highway Trust Fund. For each  objective, we also reviewed DOT and FHWA reports and interviewed DOT  and FHWA officials. We also obtained additional information from FHWA  on the steps taken to ensure data reliability and determined the data were  sufficiently reliable for our purposes.
We conducted this performance audit from April 2010 through June 2010  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. Appendix I provides more  detailed information on our scope and methodology. Appendix II  discusses how FHWA determined state contributions to the Highway  Account of the Highway Trust Fund during SAFETEA-LU.
subsections: section_title: Background
paragraphs: Federal funding for highways is provided to the states mostly through a  series of grant programs collectively known as the Federal-Aid Highway  Program. Periodically, Congress enacts multiyear legislation that  authorizes the nation’s surface transportation programs. In 2005, Congress  enacted SAFETEA-LU, which authorized $197.5 billion for the Federal-Aid  Highway Program from fiscal years 2005 through 2009. In a joint federal- state partnership the FHWA, within the Department of Transportation  (DOT), administers the Federal-Aid Highway Program and distributes  most funds to the states through annual apportionments established by  statutory formulas. Once FHWA apportions these funds, the funds are  available for states to obligate for construction, reconstruction, and  improvement of highways and bridges on eligible federal-aid highway  routes, as well as for other purposes authorized in law. The amount of  federal funding made available for highways was substantial—from $34.4  to $43.0 billion per year for fiscal years 2005 through 2009.
The Highway Trust Fund was instituted by Congress in 1956 to construct  the Interstate Highway System, which is currently 47,000 miles in length.  The Highway Trust Fund holds certain excise taxes collected on motor  fuels and truck-related taxes, including taxes on gasoline, diesel fuel,  gasohol, and other fuels; truck tires and truck sales; and heavy vehicle use.  In 1983, the fund was divided into the Highway Account and the Mass  Transit Account. More than 80 percent of the total fund is the Highway  Account, including a majority of the fuel taxes as well as all truck-related  taxes (see fig. 1).
Most Highway Account funds (about 83 percent) were apportioned to  states across 13 formula programs during the 4 years of the SAFETEA-LU  period for which data are available. Included among these 13 programs are  6 “core” highway programs (see table 1).
In addition to formula programs, for the time during the SAFETEA-LU  period for which final data are available:    Congress directly allocated about 8 percent of Highway Account funds  to state departments of transportation through congressionally  directed High Priority Projects.
The remaining funds, about 9 percent of the total, represent dozens of  other authorized programs allocated to state DOTs, congressionally  directed projects other than High Priority Projects, administrative  expenses and funding provided to states by other DOT agencies such  as the National Highway Traffic Safety Administration and Federal  Motor Carrier Safety Administration (see fig. 2).
Some of the apportioned programs use states’ contributions to the Highway  Account of the Highway Trust Fund as a factor in determining program  funding levels for each state. Because the Department of Treasury (Treasury)  collects fuel taxes from a small number of corporations located in a relatively  small number of places—not from states—FHWA has to estimate the fuel tax  contributions made to the fund by users in each state. Likewise, FHWA must  estimate the state of origin of various truck taxes. FHWA calculates motor  fuel-related contributions based on estimates of the gallons of fuel used on  highways in each state. To do so, FHWA relies on data gathered from state  revenue agencies and summary tax data available from Treasury as part of  the estimation process (see app. II). Because the collection and estimation  process takes place over several years (see fig. 3), the data used to calculate  the formula are 2 years old. For example, the data used to apportion funding  to states in fiscal year 2009 were based on estimated collections attributable  to each state in fiscal year 2007.
By the early 1980s, construction of the Interstate Highway System was  nearing completion, and a larger portion of the funds from the Highway  Trust Fund were being authorized for non-Interstate programs. The  Surface Transportation Assistance Act of 1982 provided, for the first time,  that each state would for certain programs receive a “minimum allocation”  of 85 percent of its share of estimated tax payments to the Highway  Account of the Highway Trust Fund. This approach was largely retained  when Congress reauthorized the program in 1987. The Intermodal Surface  and Transportation Efficiency Act of 1991 (ISTEA) raised the minimum  allocation to 90 percent. The Transportation Equity Act for the 21st  Century (TEA-21) of 1997 guaranteed each state a specific share of the  total program (defined as all apportioned programs plus High Priority  Projects), a minimum 90.5 percent share of contributions. It also  introduced rate-of-return considerations into funds states received for the  Interstate Maintenance, National Highway System, and Surface  Transportation Programs. In 2005, Congress implemented through  SAFETEA-LU the Equity Bonus Program that was designed to bring all  states up to a guaranteed rate of return of 92 percent by fiscal year 2008.
section_title: Rate of Return Varies Depending on the Calculation Used, but States Received More Funding from the Highway Trust Fund Than Their Users Contributed
subsections: section_title: States Received as Much or More Funding Than Their Highway Users Contributed
paragraphs: For the time period for which final data are available, fiscal years 2005  through 2008, our analysis shows that every state but one received more  funding for highway programs than users contributed to the Highway  Account (see fig. 4). The only exception, Texas, received about $1.00 (99.7  cents) for each dollar contributed. Among other states, this ranged from a  low of $1.02 for both Arizona and Indiana to a high of $5.63 for the District  of Columbia. In addition, all states, including Texas, received more in  funding than their highway users contributed during both fiscal years 2007  and 2008. In effect, almost every state was a donee state during the first 4  years of SAFETEA-LU. This occurred because overall, more funding was  authorized and apportioned than was collected from highway users. The  account was supplemented by general funds from the Treasury.
Our rate-of-return analysis has two notable features:  It compares funding states received from the Highway Trust Fund  Highway Account with the dollars estimated to be have been collected  in each state and contributed by each state’s highway users into the  Highway Account in that same year. For example, for fiscal year 2008,  it compares the highway funds states received in fiscal year 2008 with  the amount collected and contributed in that fiscal year—data that did  not become available until December 2009. Because of the 2-year lag  (see fig. 3), fiscal year 2008 is the latest year for which these data are  available. Thus, the final year of the original SAFETEA-LU  authorization period, fiscal year 2009, is not included.
Unlike other calculations used to apportion certain funds discussed  further in this report, this analysis includes all funding provided to the  states from the Highway Account, including (1) funds apportioned by  formula, (2) High Priority Projects, and (3) other authorized programs,  including safety program funding provided to states by other DOT  agencies such as the National Highway Traffic Safety Administration  and Federal Motor Carrier Safety Administration (see fig. 2 for a  breakdown of these funds).
section_title: Rate of Return Varies, as Other Methods of Calculating State’s Rate of Return Provide Different Results
paragraphs: Using the above methodology, our analysis shows that states generally  received more than their highway users contributed. However, other  calculations, as described below, provide different results. Because there  are different methods of calculating a rate of return, and the method used  affects the results, confusion can result over whether a state is a donor or  donee. A state can appear to be donor using one type of calculation and a  donee using a different type.
A second way to calculate rate of return is to apply the same dollar return  calculation method, but use contribution data that are available at the time  funds are apportioned to the states. This calculation method indicates that  all states were donees. The data used to calculate the rate of return per  dollar contributed differs from our preceding analysis in two ways:    As shown in figure 3, it uses 2-year-old data on contributions for  apportionments, due to the time lag between when the Treasury  collects fuel and truck excise taxes and funds are apportioned.
It uses a subset of Federal-Aid Highway programs including both  programs apportioned to states by formula and High Priority Projects.  However, it does not include other allocated highway programs or  other funding states receive from programs other DOT agencies such  as the National Highway Traffic Safety Administration and Federal  Motor Carrier Safety Administration (see fig. 2).
Using this approach every state received more in funding from the  Highway Account of the Highway Trust Fund than its users contributed for  the SAFETEA-LU period. The rate of return ranged from a low of $1.04 per  dollar for 16 states, including Texas, to a high of $5.26 per dollar for the  District of Columbia, as shown in figure 5. This calculation results in states  generally having a lower dollar rate of return than our calculation using  same-year data (see fig. 4).
A third calculation, based on a state’s “relative share”—the amount a state  receives relative to other states instead of an absolute, dollar rate of  return—results in both donor and donee states. Congress defined this  method in SAFETEA-LU as the one FHWA uses for the calculating rates of  return for the purpose of apportioning highway funding to the states. In  order to calculate this rate of return, FHWA must determine what  proportion of the total national contributions came from highway users in  each state. The state’s share of contributions into the Highway Account of  the Highway Trust Fund is then used to calculate a relative rate of  return—how the proportion of each state’s contribution compares to the  proportion of funds the state received. A comparison of the relative rate of  return on states’ contributions showed 28 donor states, receiving less than  100 percent relative rate of return, and 23 states as donees receiving a  more than a 100 percent relative rate of return (see fig. 6). States’ relative  rates of return ranged from a low of 91.3 percent for 12 states to a high of  461 percent for the District of Columbia. Like the return per dollar analysis  in figure 5, this calculation includes only formula funds and High Priority  Projects allocated to states, and excludes other DOT authorized programs  allocated to states (see fig. 2). The difference between a state’s absolute  and relative rate of return can create confusion because the share  calculation is sometimes mistakenly referred to as “cents on the dollar.”
Using the relative share method of calculation will result in some states  being “winners” and other states being “losers.” If one state receives a  higher proportion of highway funds than its highway users contributed,  another state must receive a lower proportion than it contributed. The  only way to avoid this is for every state to get back exactly the same  proportion that it contributed, which is impractical because estimated  state contribution shares are not known until 2 years after the  apportionments and allocations. Furthermore, because more funding has  recently been apportioned and allocated from the Highway Account than  is being contributed by highway users, a state can receive more than it  contributes to the Highway Trust Fund Highway Account, making it a  donee under its rate of return per dollar, but a donor under its relative  share rate of return.
California provides a useful example of this. From fiscal year 2005 through  2008, using same year contributions and funding across all Highway Trust  Fund Highway Account allocations and apportionments, California  received $1.16 for each dollar contributed. This analysis shows California  as a donee state (see table 2). Alternatively, when calculating a dollar rate  of return over the full SAFETEA-LU period (fiscal years 2005 through  2009) using state contribution estimates available at the time of  apportionment (fiscal year 2003 through 2007 (as shown in fig. 3) and  including only programs covered in rate-of-return adjustments, California  remains a donee state, but received $1.04 for each dollar contributed. In  contrast, using the relative share approach for the fiscal year 2005 through  2009 period, California received 91 percent of the share its highway users  contributed in federal highway-related taxes, which would make it a donor  state.
A fourth method for calculating a state’s rate of return is possible, but not  normally calculated by FHWA. It involves evaluating the relative share as  described above, but using the same year comparison data. Again, because  of the time lag required to estimate state highway user contributions to the  Highway Account, such analysis is possible only 2 years after FHWA  calculates apportionments for states. Our analysis using this approach  results in yet another set of rate of return answers. For example, using  available data from fiscal years 2005 to 2008, the relative rate of return for  California becomes 97 percent, rather than 91 percent. When this analysis  is applied to all states, a state may change its donor/donee status. For  example, Minnesota, Nebraska, and Oklahoma appear both as donor and  donee states, depending on the calculation method. This comparison of  the relative rate of return on states’ contributions showed 27 states  receiving less than 100 percent relative rate of return, and 24 states as  receiving a more than a 100 percent relative rate of return. Table 3 shows  the results for all four methods described and the wide variation of states’  rate of return based on the method used.
section_title: Equity Bonus Provisions in SAFETEA-LU Addressed Rate of Return among States
paragraphs: Since 1982, Congress has attempted to address states’ concerns regarding the  rate of return on highway users’ contribution to the Highway Trust Fund. In  2005, Congress enacted in SAFETEA-LU the Equity Bonus Program, designed  to bring all states up to a “guaranteed” rate of return. The Equity Bonus is  calculated from a subset of Federal-Aid Highway programs, which include 12  formula programs, plus High Priority Projects designated by Congress. In  brief, since SAFETEA-LU, the Equity Bonus allocates sufficient funds to  ensure that each state receives a minimum return of 90.5 percent for fiscal  years 2005-2006, 91.5 percent for fiscal year 2007, and 92 percent for fiscal  years 2008-2009 for the included programs. The Equity Bonus provides more  funds to states than any other individual Federal-Aid Highway formula  program. Over SAFETEA-LU’s initial 5-year authorization period, the Equity  Bonus provided $44 billion to the states, while the second largest formula  program, the Surface Transportation Program, provided $32.5 billion. Each  year about $2.6 billion stay as Equity Bonus program funds and may be used  for any purpose eligible under the Surface Transportation Program. Any  additional Equity Bonus funds are added to the apportionments of the six  “core” federal-aid highway formula programs: the Interstate Maintenance,  National Highway System, Surface Transportation, Congestion Mitigation and  Air Quality, Highway Bridge and the Highway Safety Improvement programs.  States are frequently able to transfer a portion of their funds among the core  programs, making funding of core programs less critical than it might be.
States may qualify for Equity Bonus funding by meeting any of three  criteria (see fig. 7). A state that meets more than one criterion receives  funding under whichever provision provides it the greatest amount of  funding. FHWA conducts Equity Bonus calculations annually.
For the first criterion, the guaranteed relative rate of return, for fiscal year  2005 all states were guaranteed at least 90.5 percent of their share of  estimated contributions. The guaranteed rate increased over time, rising to  92 percent in fiscal year 2009. The second criterion, the guaranteed  increase over average annual Transportation Equity Act for the 21st  Century (TEA-21) funding, also varied by year, rising from 117 percent in  fiscal year 2005 to 121 percent for fiscal year 2009. The number of states  qualifying under the first two provisions can vary from year to year. For  the third criterion, a guarantee to “hold harmless” states that had certain  qualifying characteristics at the time SAFETEA-LU was enacted, 27 states  had at least one of these characteristics. A number of these states had  more than one of these characteristics.
Forty-seven states received Equity Bonus funding every year during the  SAFETEA-LU period. However, the District of Columbia, Rhode Island,  and Vermont each had at least 1 year where they did not receive Equity  Bonus funding because they did not need it to reach the funding level  specified under the three provisions. Maine was the only state that did not  receive an Equity Bonus in any year. Half of all states received a significant  increase in their overall Federal-Aid Highway Program–at least 25 percent  over their core funding. Each state’s percent increase in its overall funding  total for apportioned programs and High Priority Projects for fiscal years  2005 through 2009 due to Equity Bonus funding is shown in figure 8.
section_title: Adding General Revenues into the Trust Fund and Other Challenges Raise Questions about Relying on States’ Rate-of-Return to Distribute Federal Highway Funds
paragraphs: Additional factors affect the relationship between contributions to the  Highway Trust Fund and the funding states receive. These include (1) the  infusion of significant amounts of general revenues into the Highway Trust  Fund, (2) the challenge of factoring performance and accountability for  results into transportation investment decisions, and (3) the long-term  sustainability of existing mechanisms and the challenges associated with  developing new approaches to funding the nation’s transportation system.
First, the infusion of significant amounts of general revenues into the  Highway Trust Fund Highway Account breaks the link between highway  taxes and highway funding. The rate-of-return approach was designed to  ensure that, consistent with the user pay system, wherein the costs of  building and maintaining the system are borne by those who benefit, users  receive a fair return on their investment to the extent possible. However,  in fiscal year 2008 the Highway Trust Fund held insufficient amounts to  sustain the authorized level of funding and, partly as a result, we placed it  on our list of high-risk programs. To cover the shortfall, from fiscal years  2008 through 2010 Congress transferred a total of $34.5 billion in  additional general revenues into the Highway Trust Fund, including $29.7  billion into the Highway Account. This means that, to a large extent,  funding has shifted away from the contributions of highway users,  breaking the link between highway taxes paid and benefits received by  users. Furthermore, the infusion of a significant amount of general fund  revenues complicates rate-of-return analysis because the current method  of calculating contributions does not account for states’ general revenue  contributions. For many states, the share of Highway Trust Fund  contributions and general revenue contributions are different, therefore  state-based contributions to all the funding in the Trust Fund are no longer  clear. In addition, since March 2009, the American Recovery and  Reinvestment Act of 2009 apportioned an additional $26.7 billion to the  states for highways—a significant augmentation of federal highway  spending that was funded with general revenues.
Second, using rate of return as a major factor in determining federal  highway funding levels is at odds with reexamining and restructuring  federal surface transportation programs so that performance and  accountability for results is factored into transportation investment  decisions. As we have reported, for many surface transportation programs,  goals are numerous and conflicting, and the federal role in achieving the  goals is not clear. Many of these programs have no relationship to the  performance of either the transportation system or of the grantees  receiving federal funds and do not use the best tools and approaches to  ensure effective investment decisions. Our previous work has outlined  the need to create well defined goals based on identified areas of federal  interest and a clearly defined federal role in relation to other levels of  government. We have suggested that where the federal interest is less  evident, state and local governments could assume more responsibility,  and some functions could potentially be assumed by the states or other  levels of government. Furthermore, incorporating performance and  accountability for results into transportation funding decisions is critical  to improving results. However the current approach presents challenges.  The Federal-Aid Highway program, in particular, distributes funding  through a complicated process in which the underlying data and factors  are ultimately not meaningful because they are overridden by other  provisions designed to yield a largely predetermined outcome—that of  returning revenues to their state of origin. Moreover, once the funds are  apportioned, states have considerable flexibility to reallocate them among  highway and transit programs. As we have reported, this flexibility,  coupled with a rate-of-return orientation, essentially means that the  Federal-Aid Highway program functions, to some extent, as a cash  transfer, general purpose grant program. This approach poses  considerable challenges to introducing performance orientation and  accountability for results into highway investment decisions. For three  highway programs that were designed to meet national and regional  transportation priorities, we have recommended that Congress consider a  competitive, criteria-based process for distributing federal funds.
Finally, using rate of return as a major factor in determining federal highway  funding levels poses problems because funding the nation’s transportation  system through taxes on motor vehicle fuels is likely to be unsustainable in  the longer term. Receipts for the Highway Trust Fund derived from motor fuel  taxes have declined in purchasing power, in part because the federal gasoline  tax rate has not increased since 1993. In fiscal year 2008 (the last year for  which data are available) total contributions to the Highway Account of the  Highway Trust Fund decreased by more than $3.5 billion from fiscal year  2007, the first year of decrease during the SAFETEA-LU period. Over the long  term, vehicles will become more fuel efficient and increasingly run on  alternative fuels—for example, higher fuel economy standards were enacted  in 2010. As such, fuel taxes may not be a sustainable source of transportation  funding. Furthermore, transportation experts have noted that transportation  policy needs to recognize emerging national and global challenges, such as  reducing the nation’s dependence on imported fuel and minimizing the effect  of transportation systems on the global climate. A fund that relies on  increasing the use of motor fuels to remain solvent might not be compatible  with the strategies that may be required to address these challenges.
In the near future, policy discussions will need to consider what the most  adequate and appropriate transportation financing systems will be and  whether or not the current system continues to make sense. The National  Surface Transportation Infrastructure Financing Commission—created by  SAFETEA-LU to, among other things, explore alternative funding  mechanisms for surface transportation—identified and evaluated  numerous revenue sources for surface transportation programs in its  February 2009 report including alternative approaches to the fuel tax,  mileage-based user fees, and freight-related charges. The report also  discussed using general revenues to finance transportation investment but  concluded that it was a weak option in terms of economic efficiency and  other factors, and recommended that new sources of revenue to support  transportation be explored. These new sources of revenue may or may not  lend themselves to using a rate of return approach.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this to DOT for review and comment. DOT provided  technical comments, which we incorporated as appropriate.
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. The report also will be available at no charge on the GAO Web  site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-2834 or herrp@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO Staff who made major contributions to this report are  listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To determine the amount of revenue states contributed to the Highway  Trust Fund Highway Account compared with the funding they received  during the Safe, Accountable, Flexible, Efficient Transportation Equity  Act: A Legacy for Users (SAFETEA-LU) period, we completed four  analyses using Federal Highway Administration (FHWA) data. We met  with FHWA and other DOT officials to discuss availability of data and  appropriate methodologies. We used FHWA estimates of payments made  into the Highway Account of the Highway Trust Fund, by state, and the  actual total apportionments and allocations made from the fund, by state.  This is sometimes referred to as a “dollar-in, dollar-out” analysis. Because  the contribution data takes about 2 years for FHWA to compile, for our  analyses we used data for 4 of 5 years of the SAFETEA-LU period, 2005  through 2008, as data for 2009 were not yet available. The source data are  published annually in Highway Statistics and commonly referred to as  table FE-221, titled “Comparison of Federal Highway Trust Fund Highway  Account Receipts Attributable to the States and Federal-Aid  Apportionments and Allocations from the Highway Account.” FHWA  officials confirmed that it contains the best estimate of state contributions  and also contains the total appropriations and allocations received by  states from the Highway Account of the fund. We did not independently  review FHWA’s process for estimating state highway users’ contributions  into the Highway Trust Fund. However, we have reviewed this process in  the past, and FHWA officials verified that they have made changes to the  process as a result of that review. In addition, we did not attribute any  prior balances in the Highway Trust Fund back to states of origin because  these funds are not directly tied to any specific year or state. We only  examined the fiscal year 2005 through 2008 period; other time periods  could provide a different result.
We performed alternative analyses to demonstrate that different  methodologies provide different answers to the question of how the  contributions of states’ highway users compared to the funding states  received. Using the same data as described above, we performed a  “relative share” analysis, which compared each state’s estimated  proportion of the total contributions to the Highway Account to each  state’s proportion of total Federal-Aid Highway funding. We also examined  how states fared using FHWA’s approach for determining the Equity  Bonus Program funding apportionments. We performed this analysis to  show the outcomes for states based on the information available at the  time the Equity Bonus program apportionments are made. The Equity  Bonus program amounts are calculated using the statutory formulas for a  subset of Federal-Aid Highway Programs. These include all programs  apportioned by formula plus the allocated High Priority Projects. FHWA  uses the most current contribution data available at the time it does its  estimates. However, as explained above, the time lag for developing this  data is about 2 years. Therefore, we applied the contribution data for 2003  through 2007 to the funding data for 2005 through 2009, the full SAFETEA- LU period. For these data, we (1) analyzed the total estimated  contributions by state divided by the total funding received by state—the  dollar-in, dollar out methodology—and (2) a comparison of the share of  contributions to share of payments received for each state. We obtained  data from the FHWA Office of Budget for the analysis of state dollar-in  dollar-out outcomes, and state relative share data for the Equity Bonus  Program. We completed our analyses across the total years of the  SAFETEA-LU period, 2005 through 2009. We interviewed FHWA officials  and obtained additional information from FHWA on the steps taken to  ensure data reliability and determined the data were sufficiently reliable  for the purposes of this report  To determine the provisions in place during the SAFETEA-LU period to  address rate-of-return issues across states and how they affected the  highway funding states received, we reviewed SAFETEA-LU legislation,  reports by the Congressional Research Service (CRS) and FHWA. We also  spoke with FHWA and DOT officials to get their perspectives. We also  conducted an analysis of FHWA data on the Equity Bonus Program  provisions which were created explicitly to address the rate-of-return  issues across states. Our analysis compared funding levels distributed to  states via apportionment programs and High Priority Projects before and  after Equity Bonus Program provisions were applied, and calculated the  percentage increase each state received as a result of the Equity Bonus.
To determine what additional factors affected the relationship between  contributions to the Highway Trust Fund and the funding states receive,  we reviewed GAO reports on federal surface transportation programs and  the Highway Trust Fund, as well as CRS and FHWA reports, and the report  of the National Surface Transportation Infrastructure Financing  Commission. In addition, we reviewed FHWA data on the status of the  Highway Account of the Highway Trust Fund. We also met with officials  from Department of Transportation’s Office of Budget and Programs and  FHWA to obtain their perspectives on the issue.
section_title: Appendix II: FHWA Estimates Contributions to the Highway Trust Fund
paragraphs: Currently, FHWA estimates state-based contributions to the Highway  Account of the Highway Trust Fund through a process that includes data  collection, adjustment, verification, and final calculation of the states’  highway users’ contributions. FHWA first collects monthly motor fuel use  data and related annual state tax data from state departments of revenue.  FHWA then adjusts states’ data by applying its own models using federal  and other data to establish data consistency among the states. FHWA  provides feedback to the states on these adjustments and estimates  through FHWA Division Offices. Finally, FHWA applies each state’s  highway users’ estimated share of highway fuel usage to total taxes  collected nationally to arrive at a state’s contribution to the Highway Trust  Fund. We did not assess the effectiveness of FHWA’s process for  estimating the amount of tax funds attributed to each state for this report.
According to FHWA officials, data from state revenue agencies is more  reliable and comprehensive than vehicle miles traveled data, so FHWA  uses state tax information to calculate state contributions. States submit  regular reports to FHWA, including a monthly report on motor-fuel  consumption due 90 days after month’s end, and an annual motor-fuel tax  receipts report due 90 days after calendar year’s end. States have a wide  variety of fuel tracking and reporting methods, so FHWA adjusts the data  to achieve uniformity. FHWA analyses and adjusts fuel usage data, such as  off-highway use related to agriculture, construction, industrial, marine,  rail, aviation and off-road recreational usage. It also analyzes and adjusts  use data based on public-sector use, including federal civilian, and state,  county, and municipal use.
FHWA headquarters and Division Offices also work together to  communicate with state departments of revenue during the attribution  estimation process. According to FHWA officials, each year FHWA  headquarters issues a memo prompting its Division Offices to have each  state conduct a final review of the motor fuel gallons reported by their  respective states. FHWA division offices also are required to assess their  state’s motor fuel use and highway tax receipt process at least once every  3 years to determine if states are complying with FHWA guidance on  motor fuel data collection.
Once the data are finalized, FHWA applies each state’s estimated share of  taxed highway fuel use to the total taxes collected to arrive at a state’s  contribution in the following manner. Finalized estimations of gallons of  fuel used on highways in two categories—gasoline and special fuels— allow FHWA to calculate each state’s share of the total on-highway fuel  usage. The shares of fuel use for each state are applied to the total amount  of taxes collected by the Department of the Treasury in each of the 10  categories of highway excise tax. The state’s gasoline share is applied to  the gasoline and gasohol taxes, and the state’s special fuels share, which  includes diesel fuel, is applied to all other taxes, including truck taxes.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Steve Cohen (Assistant Director),  Robert Ciszewski, Robert Dinkelmeyer, Brian Hartman, Bert Japikse, Josh  Ormond, Amy Rosewarne, and Swati Thomas made key contributions to  this report.