Historically, transportation policy battle lines have often formed along regional rather than partisan alignments. The regional character of transportation policy is evident in the debate over the need for an equitable distribution of federal highway aid among the states. Since 1982, Congress has included legislative provisions in every surface transportation reauthorization act to address these perceived funding distribution concerns through a variety of rate-of-return guarantee provisions. For many years, some states (mostly Southern as well as some Mid-Western and certain fast growing Western states) have complained that they receive significantly less federal highway aid than their highway users pay in federal highway taxes to the highway account of the highway trust fund (HTF). These states, referred to as donor states, argue that they are not getting their perceived fair share of federal-aid highway spending and have pressed for legislative remedies that would assure them a higher rate-of-return on their tax payments. Donee states, states that receive more federal highway aid than they pay in federal highway taxes, have not opposed equity provisions per se in recent years but have opposed any reduction in their own existing percent shares of total federal highway aid. Since the 1970s much of the debate has been data driven. The data used to designate states as either donor or donee have been drawn from Table FE-221 of the Federal Highway Administration's (FHWA) annual Highway Statistics publication, which estimates states' ratios of contributions to the HTF to the federal highway funding that is made available to them each fiscal year. Data from the most recent (FY2007) Table FE-221 is reproduced in Table 1 of this report. The current authorization, under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA; P.L. 109-59 ), expires September 30, 2009. Proposals for reauthorization are expected during the first session of the 111 th Congress. For an overview of reauthorization issues see CRS Report R40053, Surface Transportation Program Reauthorization Issues for the 111th Congress . Following a background and overview discussion, this report provides a brief history of the donor-donee issue and its origins. It also describes the existing programmatic rate-of-return guarantee mechanism, the Equity Bonus (EB) Program. The report then discusses issues related to the EB program and possible modifications that may be considered as part of the reauthorization debate. Finally, the report reviews a number of overarching issues related to the donor-donee state debate that could be of interest to Congress during the upcoming reauthorization of SAFETEA. A number of characteristics of the Federal-Aid Highway Program (FAHP) need to be kept in mind in a discussion of the donor-donee question. First, the federal monies for highway project spending are not provided to states up front. Rather, when amounts are "distributed" to the states, it is only a notification of the availability of federal funds. Once a project is approved and the work is started, the states may submit vouchers to the FHWA for reimbursement for the project's costs as, or after, they are incurred. Second, the FAHP is an umbrella term for nearly all the highway programs administered by the Federal Highway Administration (FHWA). Most of these programs can be described as being either formula (apportioned) programs, which constitute the vast majority of program funding, or discretionary (allocated) programs. The formula programs apportion funds to the State Departments of Transportation (state DOTs) based on formulas set forth in legislation. The discretionary programs are programs nominally under the control of the FHWA that were designed to provide funds to projects chosen through competition with other projects. In recent years, however, most of the discretionary program funding has been earmarked by Congress. The distinction between formula and discretionary programs becomes especially significant in the process of creating equity programs, such as the current Equity Bonus Program (EB), that could make states' federal spending rates-of-return on their federal highway taxes more uniform. It is difficult to conceive of how discretionary programs could be constructed to guarantee a designated percent return to states on their payments to the HTF and still remain discretionary. The formula programs were originally created, at least in part, to fulfill perceived policy needs. Some highway needs, such as roads on federal lands, border crossing infrastructure, trade corridors, and interstate system maintenance, have inherently federal aspects that would likely not be fully addressed if the Federal-Aid Highway Programs were predicated on a return to all states. Even advocates of devolving the FAHP to the states have acknowledged some federal needs. In addition, donor states themselves have in the past recognized the need for some states to get a larger than normal share of federal-aid funds. During the debate that preceded passage of the Intermodal Surface Transportation Act of 1991 (ISTEA; P.L. 102-240 ), for example, donor states agreed that large sparsely populated states and some small states (such as Rhode Island, Vermont, and Delaware) should receive larger shares. Authorizers also thought that the sparsely populated "pass-though" states had insufficient state resources to build and maintain their parts of the national highway network, so they were given larger shares. To deal with these problems in a way that retains these programmatic policy goals and at the same time achieves improvement in the uniformity of states' rates-of-return, Congress has decided to include some programs in the equity programs (such as the current EB) and exclude others. Often referred to as the "scope," the list of programs (as well as how large a percentage of the overall federal highway aid budget they total) that are subject to the equity adjustments, has varied since the first equity program was introduced in 1982. The major formula programs were always within the scope of the equity guarantee. Which other programs were included changed under the various surface transportation authorization acts. The scope of the equity program is important for a number of reasons. First, under a guaranteed share mechanism, the more program dollars left outside the equity program's scope, the more likely that at least some donor states will not reach their minimum percentage return relative to the entire Federal-aid highway program. Second, in general, the more inclusive the equity program's scope, the more costly the program. Third, earmarking of programs within the scope generally provides no new dollars to the state receiving the earmarks. These earmarks simply allow Members of Congress to set project priorities. Earmarks of programs outside the scope actually provide more money to the state getting the earmark. Scope issues are discussed in detail in the " Overarching Issues for Congress " section, later in this report. The highway account of the HTF is supported by revenue from a combination of a variety of fuel taxes (15.44 cents per gallon for gasoline, 21.44 cents per gallon for diesel and kerosene, and a variety of special fuels taxes, at differing rates) as well as a number of truck taxes including, a heavy tire tax, a truck and trailer sales tax, and a heavy vehicle use tax. Revenues from the fuel taxes are also distributed to the Mass Transit Account (2.86 cents per gallon) and the unrelated Leaking Underground Storage Tank Trust Fund (0.1 cents per gallon). All tire, truck and trailer, and heavy vehicle use tax revenues go solely to the highway account. Because the federal taxes on fuel are collected at the first point of distribution (at the terminal "rack," usually at a refinery or a fuel tank farm) rather than at the retail level, most of the revenue is collected from a small number of corporations (often large oil companies or distributors that own fuel farms) located in a relatively small number of places. This means that the Treasury has no way of knowing how much fuel tax should be attributed to each state. FHWA has a process to estimate each states share of payments to the highway account. In simplified form, the process of attributing each state's shares to the highway account is as follows: The Treasury Department provides the basic national revenue estimates for each kind of tax (gasoline, diesel, special fuels, and truck-related sales, etc.). The FHWA then examines state fuel tax data to produce estimates of on-highway gallons of fuel taxed in each state (use is difficult to track as vehicles can gas up in one state and then travel in another). Each state's on-highway gallons are divided by national total gallons. The resulting distribution is a representation of each state's share of national consumption, measured in gallons. The Treasury's estimates of total revenues received from highway users are then multiplied by the derived state shares of gallons to produce each state's estimated payments to the highway account of the HTF. The share of the various truck-related taxes are extrapolated from diesel fuel use in the states. Gathering and compiling the data takes time, usually over a year. This means that the data underlying the state-by-state federal tax payments data is normally two years old when used to determine attribution. A number of statistical issues have an impact on the rate-of-return guarantees. The use of non-current data (i.e., revenue estimates from two years prior) may skew the state donor-donee ratios and lead to conclusions about donor or donee status that are questionable. Also, state-by-state data may not always be completely accurate or up to date. The economic cycle can also have an impact on revenues and the budgetary process that can lead to years when revenues and spending levels differ significantly from each other: this can have an impact on relative rates-of-return. As mentioned above, the Equity Bonus and other equity adjustment proposals attempt to achieve a specified "share" return based on two year old payments data.