Key Issues > High Risk > Funding the Nation's Surface Transportation System
High Risk Medallion

Funding the Nation's Surface Transportation System

Congress should pass a long-term, sustainable solution for funding surface transportation.

View the 2021 Report

  1. Share with Facebook 
  2. Share with Twitter 
  3. Share with LinkedIn 
  4. Share with mail 

The nation’s surface transportation system—including highways, transit, maritime ports, and rail systems that move both people and freight—is under growing strain. Further, the cost to repair and upgrade the system to meet current and future demand is estimated in the hundreds of billions of dollars.

The oldest portions of the Interstate Highway System are over 60 years old, and over 7 percent of the nation’s bridges were rated in poor condition in 2019.These challenges are intensified by a range of factors such as shifting demographics, a growing economy, and rapid development of new technologies. This issue has been on our High-Risk List since 2007.

These surface transportation challenges come at a time when traditional funding sources are eroding and the federal government lacks a long-term sustainable strategy for funding surface transportation. Funding is further complicated by the federal government’s financial condition and fiscal outlook.

The nation is on an unsustainable long-term fiscal path of deficits and debt, and Congress and the administration face difficult policy choices about federal revenues, spending and investment. These choices need to be accompanied by a broader fiscal plan to put the government on a more sustainable long-term fiscal path.

Funding the Nation's Surface Transportation System

We are not rating this high-risk area because addressing the identified issues will primarily involve congressional action.

Motor fuel taxes and additional truck-related taxes that support the Highway Trust Fund—the major source of federal surface transportation funding—are eroding. Because of inflation, the 18.4 cent-per-gallon federal tax on gasoline has about one-third less purchasing power than it did when the federal motor fuel tax was last raised in 1993.

To maintain spending levels for highway and transit programs and to cover revenue shortfalls, Congress transferred a total of about $155 billion in general revenues to the Highway Trust Fund on nine occasions from 2008 through 2020, including $13.6 billion by the Continuing Appropriations Act, 2021 and Other Extensions Act, enacted in October 2020.

These transfers each represented a one-time infusion of funding, not a sustainable long-term source of revenues. This funding approach effectively ended the long-standing principle of “users pay” in highway finance, breaking the link between the taxes highway users paid and the benefits they received.

The Fixing America’s Surface Transportation (FAST) Act appropriated around $70 billion of the $141 billion in transfers for fiscal years 2015 through 2020. In 2021, the gap between projected revenues and spending will recur. In September 2020, the Congressional Budget Office estimated that $188 billion in additional funding would be required to maintain current spending levels plus inflation from fiscal years 2021 through 2030. This estimate did not include the effects of the $13.6 billion transferred by the Continuing Appropriations Act, 2021 and Other Extensions Act. See figure 7.

Figure 7: Projected Cumulative Highway Trust Fund Balance, Fiscal Years 2021 through 2030

Projected Cumulative Highway Trust Fund Balance, Fiscal Years 2021 through 2030

Note: This projection assumes no further augmentation of highway-related taxes to the Highway Trust Fund after 2021 from general revenues or other sources. By law, the Highway Trust Fund cannot incur negative balances.

A long-term sustainable plan for funding surface transportation involves congressional action and remains the pivotal action that will determine whether this issue remains on, or is removed from, our High-Risk List. However, it is also important that federal funding for surface transportation be spent wisely and efficiently.

Over the last decade we have noted opportunities to improve performance and accountability in how surface transportation funds are spent by maximizing the use of existing resources and linking funding to performance. These opportunities include (1) implementing a performance-based approach to surface transportation funding, and (2) improving how surface transportation projects are selected through the Department of Transportation’s (DOT) discretionary grant programs.

Performance-based approach to surface transportation funding. Historically, spending for surface transportation programs has not effectively addressed key challenges, such as deteriorating infrastructure conditions and increasing congestion and freight demand. This is because (1) federal goals and roles have been unclear, (2) programs have lacked links to performance, and (3) programs have not used the best tools and approaches to ensure effective investment decisions.

Since 2008, we have suggested that Congress consider a fundamental reexamination of these programs to improve performance and accountability by (1) clarifying federal goals and roles, (2) establishing performance links, and (3) improving investment decision-making.

Provisions enacted in 2012 in the Moving Ahead for Progress in the 21st Century Act (MAP-21) have begun to address these key challenges. Specifically, MAP-21 included provisions to move toward a more performance-based surface transportation program by establishing national performance goals in areas such as infrastructure condition, safety, and system performance.

The act and its implementing regulations set forth a three-stage process in which (1) DOT establishes performance measures and standards, (2) states and other grantees set targets based on these performance measures and states report progress to DOT, and (3) DOT evaluates whether grantees have met or made significant progress toward their targets.

DOT has been implementing the performance-based approach envisioned in MAP-21. For example, starting in fiscal year 2014, the National Highway Traffic Safety Administration (NHTSA) required states to establish targets for safety-related performance measures such as traffic fatalities and serious injuries. Additionally, in January 2017, the Federal Highway Administration finalized the last of six interrelated rules establishing performance measures in the areas of safety, pavement and bridge conditions, and system performance.

In 2019, we reported that it was sometimes unclear whether states had achieved their safety-related targets. As a result, we recommended that NHTSA develop and implement a mechanism that communicates whether states have achieved their targets. In response, NHTSA plans to provide performance data on states' achievement of their 2020 targets on its website when data becomes available in the fall of 2021.

Discretionary grants. Discretionary grants are an important component in improving the performance and accountability of transportation funding decisions. We have reported that the historic approach to funding surface transportation, in particular highways, poses challenges because funding has been principally provided through statutory formulas designed largely to return revenues to their attributed state of origin to closely align the states’ contributions to the Highway Trust Fund with the funding they receive.

The FAST Act authorized about a dozen new discretionary grant programs, including the Nationally Significant Freight and Highway Projects Program, authorized at $4.5 billion over 5 fiscal years for highway, rail, port, and intermodal freight and highway projects, which DOT named the Infrastructure for Rebuilding America (INFRA) program. While more than 90 percent of funding from the Highway Trust Fund will continue to be distributed by statutory formula, the FAST Act represents a promising development to address national and regional transportation priorities.

Since 2011 we have identified numerous challenges with DOT discretionary grant programs, including problems with the transparency of the application review and selection process and a lack of documentation of key decisions. In June 2019 we reported that we were unable to determine the basis for about $2.3 billion in discretionary grant awards from fiscal years 2016 through 2018 due to the continued lack of consistency and transparency in DOT’s management of the program.

For example, for the INFRA awards made in 2018, DOT initially found that 97 applications contained insufficient information for an eligibility determination and subsequently followed up with 42 of the 97 applicants to request additional information. However, DOT did not sufficiently document why it followed up with certain applicants and not others.

Moreover, while DOT established criteria to evaluate projects, DOT forwarded information on all 165 projects that were found to be statutorily eligible to the Secretary of Transportation for potential award, regardless of how well they scored on the evaluation criteria. DOT’s documentation did not provide insight into why projects were selected for awards.

We recommended in June 2019 that DOT clarify for applicants for the remaining INFRA awards the circumstances under which DOT may request additional information. We also recommended that DOT inform applicants how scores on merit criteria are used, if at all, to determine whether projects advance to the Secretary for selection. DOT agreed with these recommendations and stated it would implement them for the fiscal year 2020 INFRA funding awards, which were announced in June 2020.

As of December 2020, DOT officials told us they developed more formal procedures in 2020 for seeking additional information from applicants. However, DOT did not inform applicants about the circumstances under which DOT may request additional information or how merit criteria scores are used to advance projects to the Secretary, as we recommended.

As we reported in June 2019, the reauthorization of DOT’s surface transportation programs, which expire in October 2021, provides Congress the opportunity to require DOT to take additional action to ensure consistency and transparency in the management of its discretionary grant programs. We suggested that Congress consider including language in the next reauthorization that would require DOT to develop and implement transparency measures for its discretionary grant programs.

Such measures should, at a minimum, help to ensure that the evaluation process is clearly communicated, that applications are consistently evaluated, and that the rationale for DOT’s decisions is clearly documented.

Congressional Actions Needed

New revenues from users can come only from taxes and fees; ultimately, major changes in transportation spending or in revenues, or in both, will be needed to bring the two into balance. In 2008, we reported that Congress should consider addressing the imbalance between federal surface transportation revenues and spending. That matter has not been addressed, and the current authorization for surface transportation funding expires in October 2021.Congress and the administration should agree on a long-term plan for funding surface transportation. Continuing to augment the Highway Trust Fund with general revenues may not be sustainable, given competing demands and the federal government’s long-term fiscal challenges. A sustainable solution would balance revenues to and spending from the Highway Trust Fund.

New revenues from users can come only from taxes and fees; ultimately, major changes in transportation spending or in revenues, or in both, will be needed to bring the two into balance. In 2008, we reported that Congress should consider addressing the imbalance between federal surface transportation revenues and spending. That matter has not been addressed, and the current authorization for surface transportation funding expires in October 2021.

While passage by Congress of a long-term sustainable plan for funding surface transportation is the pivotal action that is needed to remove this issue from our High-Risk List, it is also increasingly important that the effectiveness of surface transportation programs be improved by maximizing the use of existing resources and linking funding to performance. Specifically, DOT can 

  • continue to make progress implementing the performance-based framework established in MAP-21, and
  • enhance the management of its discretionary grant programs and respond to our recommendations to ensure the integrity of future DOT discretionary grant programs.
Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
  • portrait of Elizabeth (Biza) Repko
    • Elizabeth (Biza) Repko
    • Acting Director, Physical Infrastructure
    • RepkoE@gao.gov
    • (202) 512-2834