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Chapter 7: Government Revenues and Expenditures

Introduction

Federal, state, and local governments play a major role in providing transportation services and infrastructure in the United States. Governments spend funds on critical activities like building highways, operating the Nation’s air traffic control system, and maintaining transit facilities. These funds come from several government revenue sources, including user fees, taxes, bonds, and grants.

This chapter presents data on government transportation revenue and spending from three sources:

  1. Government Transportation Financial Statistics (box 7-1), which examines transportation revenue and spending at the federal level and at the state and local level;
  2. State Transportation Statistics (STS) and the Survey of State Funding for Public Transportation from the American Association of State Highway and Transportation Officials (AASHTO), which examine transportation revenue and spending in individual states; and
  3. National Highway Construction Cost Index (NHCCI), which measures the prices that state transportation departments pay for roadway construction materials and services.
     

Government Transportation Revenue

Government transportation revenue comes from user taxes and fees, such as gasoline taxes and tolls, air ticket taxes, and general revenues, as well as income from investing transportation funds and receipts from fines and penalties. In 2012, revenue collected and dedicated to transportation programs totaled $350.4 billion. A portion of this revenue ($180.2 billion, or 51.4 percent) comes from taxes and charges levied on transportation-related activities, while $170.3 billion (48.6 percent) comes from non-transportation-related activities but supports transportation programs (e.g., state or local sales or property taxes used to finance transportation projects). On top of the $350.4 billion, governments collected an additional $21.4 billion in revenue from transportation-related activities but diverted this revenue to non-transportation programs (e.g., revenue from motor fuel taxes directed to the general fund for other uses). In real 2009 dollars, total revenue collected and dedicated to transportation programs increased by 43.3 percent from 1995 to 2012 (figure 7-1).

Sources of Government Transportation Revenue

Highway and aviation, which have trust funds supported by dedicated taxes, accounted for 95.6 percent of federal transportation revenue in 2012 (figure 7-2). The Federal Government collected $40.3 billion (72.6 percent) in highway revenues and $12.8 billion (23.1 percent) in aviation revenues, as well as $2.3 billion (4.1 percent) in water transportation revenues and $90.0 million (0.2 percent) in pipeline revenues.

In real 2009 dollars, highway trust fund revenues decreased by 8.7 percent from 1995 to 2012 (figure 7-3). The Federal Government has not increased the federal taxes for gasoline and diesel—18.4 cents per gallon for gasoline and 24.4 cents per gallon—since October 1997, causing real revenues to decline. Revenues also declined because vehicle gas mileage improved over the last two decades and because vehicle miles traveled declined during the 2007 to 2009 recession. Highway revenue data also show a spike in 1999 because legislative changes shifted some fuel tax revenues from fiscal year 1998 to fiscal year 1999.1 Highway revenues slowly increased since the recession, as did air revenues, but remain below historic levels.

State and local governments collected $237.6 billion of the $350.4 billion (67.8 percent) in government revenues. Of this revenue, the state and local governments collected $124.7 billion from transportation-related activities, most of which is from highway revenue sources ($84.8 billion, or 68.0 percent of transportation revenue in 2012), which include fuel taxes, motor vehicle taxes, and tolls (figure 7-4). Aviation-related revenue ($18.3 billion, 14.7 percent) comes from landing fees, terminal area rentals, and several other sources. Transit revenue ($17.6 billion, 14.1 percent) is almost entirely from fares. In real 2009 dollars, highway, aviation, and water revenues all declined during the recession, although highway revenue has since exceeded pre-recession levels (figure 7-5).

Revenue collected from transportation-related activity and dedicated to transportation programs continues to fall short of government transportation expenditures. In 2012 transportation revenues covered 56.3 percent of expenditures. The gap between transportation revenues and expenditures has declined since 2009 when revenues covered 51.0 percent of expenditures. When revenues do not cover expenditures, general tax receipts (e.g., from sales and property taxes), trust fund balances, and borrowing are needed to cover shortages.

Government Transportation Spending

Most government spending on transportation takes place at the state and local levels, although state and local capital expenditures are often paid for in part with federal funds (box 7-3). In 2012, the Federal Government spent $38.5 billion on transportation (excluding federal transfers to states), and state and local governments spent $281.4 billion (including expenditures paid for with federal transfers such as the Federal-Aid Highway Program and the Airport and Airway Trust Fund).

In real 2009 dollars, transportation expenditures at all levels of government have increased since 1995 (figure 7-6). From 1995 to 2012, real state and local expenditures (including expenditures paid for with federal funds) increased by 36.8 percent, while federal expenditures increased by 17.3 percent. Governments increased transportation spending following the 2007 to 2009 recession to stimulate the economy. In 2009 the Federal Government enacted the American Recovery and Reinvestment Act of 2009, which authorized $48.1 billion in transportation stimulus spending. As a result, transportation expenditures for the Federal government reached peaks in 2008 and 2009.

Federal Transportation Spending by Mode

Most federal spending (excluding federal transfers to states) is for aviation ($18.2 billion in 2012, or 47.4 percent) and highways ($8.7 billion, or 22.7 percent) (figure 7-7 and box 7-3). In real 2009 dollars, aviation spending peaked in 2002, when governments increased spending on airport

security in response to the September 11, 2001 terrorist attacks and since has decreased by 42.3 percent (figure 7-8). Federal highway spending peaked in 2010 with the recession stimulus spending, and then declined.

State and Local Transportation Spending by Mode

In 2012, 70.2 percent ($197.5 billion) of state and local spending on transportation (including expenditures paid for with federal grants) went to highways, and 19.6 percent ($55.1 billion) went to transit (figure 7-9). The remaining amount went to air ($23.6 billion, 8.4 percent), water ($5.2 billion, 1.8 percent), and pipeline ($.03 billion, 0.01 percent). In real 2009 dollars, both highway and transit expenditure have increased over the last two decades—highways by 34.0 percent and transit by 36.5 percent (figure 7-10). Highway and transit spending peaked in 2009 after the recession as a result of the American Recovery and Rehabilitation Act stimulus spending.

Figure 7-11 shows the percentage of total expenditures that each state and its local governments spent on transportation in 2013 (box 7-4).2 There is a regional pattern with higher expenditures in low-density, resource-rich states in the northern Great Plains. These states have considerable demand for transportation to support industries that rely on bulky, transportation-intensive products such as oil, coal, and minerals.

States and local governments also allocate funds among transportation modes differently because they have different geographies and economies, which lead to different transportation needs. For example, state and local governments in the District of Columbia and New York devote over half of their transportation expenditures to transit (81.3 and 61.4 percent, respectively) (figure 7-12). In contrast, inland low-density states in the Great Plains, like North Dakota and Kansas, spend over 90 percent of their transportation expenditures on highways. Nevada, Alaska, and Virginia spend a larger percentage of their transportation dollars (20 percent or more) on aviation. Finally, Washington, Virginia, South Carolina, and Louisiana, with economically significant ports, spend greater percentages on water transportation (6 to 9 percent) than most other states.

State and Federal Funding of Public Transit

The amount that states spend on public transit varies greatly by state, as does the relative share of state and Federal Government spending on transit (box 7-4). In 2012 New York had the highest state and federal transit expenditure ($6.17 billion), with the state government contributing 72 percent ($4.47 billion) and the Federal Government contributing 28 percent ($1.70 billion) (figure 7-13). Figure 7-13 demonstrates that a small number of states account for the majority of transit expenditures: while the top states have average expenditures of $1.87 billion, the remaining states have average expenditures of $139 million. Within the top 10 states, the proportion of state spending ranges from a low of 4 percent in Texas to a high of 82 percent in Maryland. State governments in Hawaii, Arizona, Alabama, and Utah spent no money on transit in 2012.

Government Transportation Revenue v. Expenditures

Figure 7-14 illustrates combined transportation revenue and expenditures for all levels of government from 1995 to 2012 in chained 2009 dollars. Transportation revenue includes own-source revenue as well as supporting revenue from other sources like general funds. Transportation expenditures exceeded revenues from 2001 to 2004 and in 2009 and 2010. Governments increased transportation spending from 2001 to 2003 to improve security after the September 11, 2001 terrorist attacks, and the American Recovery and Reinvestment Act of 2009 increased federal supporting revenue in 2009. In addition, the recession of 2007 to 2009 suppressed consumption-based, own-source revenues, such as the motor fuel tax, as well as state and local supporting revenues.

National Highway Cost Construction Index

Construction costs affect the amounts that governments spend on new roads, highways, and bridges. Construction costs depend on the prices of many different inputs, including materials like steel and asphalt, labor costs, and overhead costs. The National Highway Cost Construction Index (NHCCI) measures the prices that state transportation departments pay for roadway construction materials and services (box 7-5). It can be used to track price changes in highway construction, plan and budget funding for infrastructure, and convert current-dollar highway construction expenditures to real (inflation-adjusted) expenditures.

In recent years, the NHCCI has shown a trend similar to the broader economy. Figure 7-15 shows that the NHCCI increased by 8.5 percent from March 2003 to December 2015. The NHCCI increased 41.8 percent between December 2003 and September 2006 when housing construction boomed and global raw material prices increased; however, this dramatic increase was followed by an equally dramatic decline of 26.1 percent from September 2006 to December 2009 when the economy went into recession from 2007 to 2009. Since December 2009, the NHCCI has shown some fluctuation while increasing 4.2 percent from December 2009 to December 2015.

1 The Tax Payer Relief Act of 1997 allowed taxpayers to delay paying fuel taxes due in August and September 1998 until Oct. 5, 1998.The act shifted about $6 billion in Highway Trust Fund receipts from fiscal year 1998 to fiscal year 1999 as a result.

2 The percentages spent in each state may change due to annual fluctuations in state transportation expenditures.

Updated: Tuesday, June 27, 2017