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

This information appears as published in the 2017 High Risk Report.

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The nation's surface transportation system—including highways, transit, maritime ports, and rail systems that move both people and freight—is critical to the economy and affects the daily lives of most Americans. However, the system is under growing strain, and the cost to repair and upgrade the system to meet current and future demands is estimated in the hundreds of billions of dollars. The oldest portions of the Interstate Highway System are approaching 60 years of age, and 10 percent of the nation's bridges were rated as structurally deficient in 2015. While this percentage of bridges rated as structurally deficient improved from 13 percent in 2006, bridge conditions may become more challenging to address as a growing proportion approach the end of their 50-year design life.

Challenges to the nation's surface transportation system are amplified by shifting demographics, the need to transport the goods and services to support a growing economy, rapid development of new technologies, and other factors. The U.S. population is expected to increase by 70 million over the next 30 years. As the Department of Transportation (DOT) has reported, this projected increase includes a growing percentage of Americans over the age of 65 with limited ability to drive or use transit to access critical services, and millennials, many of whom drive less than previous generations and choose to live in urban areas where they can walk, bike, or use public transportation. Though employment options in suburban areas are increasing, poverty is also increasing in such areas. Collectively, these changes will complicate future infrastructure planning decisions.

These trends are altering transportation investment decision making. The amount of freight moving through the country is expected to grow, a factor that will place strain on existing freight bottlenecks. Rapidly evolving vehicle technologies present new opportunities, but also pose challenges to creating a statutory and regulatory framework that will allow people to use these technologies while addressing privacy and other concerns they raise. Climate change also poses risks to existing transportation assets and presents opportunities and challenges to enhance resilience and reduce potential future losses, rather than simply pursuing a reactive approach of funding after a disaster occurs.

These challenges to the nation's surface transportation system come at a time when traditional funding sources are eroding, and the federal government lacks a long-term sustainable strategy for funding surface transportation, as discussed below. Funding the nation's surface transportation system is further complicated by the federal government's financial condition and fiscal outlook. Funding the nation's surface transportation system has been on GAO's High-Risk List since 2007.

Funding the Nation's Surface Transportation System

There is no rating for this high-risk area because addressing it primarily involves congressional action and the high-risk criteria and subsequent ratings were developed to reflect the status of agencies' actions and the additional steps they need to take.

Motor fuel taxes and additional truck-related taxes that support the Highway Trust Fund—the major source of federal surface transportation funding—are eroding. Federal motor fuel tax rates have not increased since 1993, and drivers of passenger vehicles with average fuel efficiency currently pay about $96 per year in federal gasoline taxes. Because of inflation, the 18.4 cent-per-gallon tax on gasoline enacted in 1993 is worth about 11 cents today. The tax base will likely continue to erode as demand for gasoline decreases with the introduction and adoption of more fuel-efficient and alternative fuel vehicles. To maintain spending levels of about $45-50 billion a year for highway and transit programs and to cover revenue shortfalls, Congress transferred a total of about $141 billion in general revenues to the Highway Trust Fund on eight occasions from 2008 through 2015.1 This funding approach has effectively ended the long-standing principle of "users pay" in highway finance, breaking the link between the taxes paid and the benefits received by highway users.

The most recent surface transportation reauthorization measure, enacted in December 2015 and which authorized funding through 2020, was the Fixing America's Surface Transportation (FAST) Act. In addition to funds authorized from the Highway Trust Fund, the FAST Act provided around $70 billion of the $141 billion in transfers from general revenues. The general revenues provided in the FAST Act represented a one-time transfer of funding, not a sustainable long-term source of revenues. After 2020, the gap between projected revenues and spending will recur. In March 2016, the Congressional Budget Office estimated that $107 billion in additional funding would be required to maintain current spending levels plus inflation from 2021 through 2026, as shown in figure 9.

Figure 9: Projected Cumulative Highway Trust Fund Balance, Fiscal Years 2021 through 2026

Figure 9: Projected Cumulative Highway Trust Fund Balance, Fiscal Years 2021 through 2026

Note: This projection assumes no further augmentation of highway-related taxes to the Highway Trust Fund after 2014 from general revenues or other sources. By law, the Highway Trust Fund cannot incur negative balances.

[1] The transfers from the General Fund of the U.S. Treasury were subject to sequestration, which resulted in somewhat lower dollar amounts transferred into the Highway Trust Fund.

Congress and the administration need to 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 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.

A long-term sustainable plan for funding surface transportation requires congressional action and remains the pivotal action that will determine whether the funding of surface transportation remains on, or is removed from, our High-Risk List. DOT will also need to continue implementing the performance-based approach to surface transportation mandated in the Moving Ahead for Progress in the 21st Century Act (MAP-21) and discussed below. It will become increasingly important to improve the effectiveness of surface transportation programs by establishing links to performance, measuring progress toward clear national goals, and enhancing the management of discretionary grant programs. These actions are essential to maximizing the use of available resources.

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    • Susan Fleming
    • Director, Physical Infrastructure
    • (202) 512-2834