Primer on Federal Funding for Transportion

Primer on Federal Funding for Transportion

In this and the next couple of posts, I will discuss federal funding for public transit projects, how it works, where the money is going, and how much is available in the “pipeline”. To start off with, I want to just set the stage for how federal funding works and breaks down.

Most people are under the impression that federal transportation spending is all driven by gas tax revenues. However, since the gas tax has not been raised since 1993, its value has dropped by about 40% (see the chart below from ITEP). Although some (Republicans) have called for investment to be limited to the value of the gas tax, actual authorizations from Congress have generally remained flat or grown a little bit year over year.

Gas Tax Value.jpg

With the value of the gas tax declining, today it only covers about 80% of total federal transportation expenditures with the rest covered by the general fund. In setting funding levels for the next five years, Congress could not agree on any permanent solution to transportation funding so a series of one-time offsets were used to fill the hole. Based on the gas tax and the additional funds, the current 5-year transportation bill contains a total of $305 billion in investment breaking down to $233 billion for highways, $49 billion for public transit, and $10 billion for intercity rail (Amtrak) with the rest going to a variety of other programs. The share of funding covered by the gas tax is falling and major deficits are forecast in the future.

Of the $49 billion that goes toward public transit, most of that will be distributed by a series of formulas back to the states, metropolitan planning organizations, and transit agencies. However, about $2.3 billion per year will be awarded competitively to projects around the country. This program is called the Fixed Guideway Capital Investment Grants, Section 5309, or New Starts.[1] Traditionally, these funds have been used to build new transit lines but more recently the funds have also been made available to invest in core systems to increase capacity on congested existing lines. Generally, grants range from $10s of millions to $100s of millions and they account for 50% or less of the funding for most projects. Taken together, the Section 5309 funds represent just barely more than one-third of one percent of overall federal transportation investment.

Here is how all of this breaks down:

fast-act-funding

With this post being just the primer for federal funding as a whole, the other posts in this series will focus just on this competitive grant program since it represents the largest public transit investment where the federal government actually trades off projects against each other instead of simply redistributing the funds back via predetermined formulas.

[1] Although the previous federal transportation authorization bill also added a new set of eligible projects called core capacity projects that are funded out of the same funds.

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