Federal spending on highways (or, synonymously, roads) totaled $47 billion in 2019. Most of those outlays were for grants to state and local governments to support their spending on capital projects. (Those governments typically spend roughly three times as much of their own funds on highways each year, not only on capital projects but also to operate and maintain roads.) That $47 billion also included spending for federal programs that subsidize state and local governments’ borrowing for highway projects; other subsidies for state and local borrowing are provided through the tax code.
Most federal spending for highways is paid for by revenues credited to the highway account of the Highway Trust Fund, largely from excise taxes on gasoline, diesel fuel, and other motor fuels. For more than a decade, those revenues have fallen short of federal spending on highways, prompting transfers from the Treasury’s general fund to the trust fund to make up the difference.
The Congressional Budget Office projects that balances in both the highway and transit accounts of the Highway Trust Fund will be exhausted in 2022. If the taxes that are currently credited to the trust fund remained in place and if funding for highway and transit programs increased annually at the rate of inflation, the shortfalls accumulated in the Highway Trust Fund’s highway and mass transit accounts from 2022 to 2031 would total $195 billion, according to CBO’s baseline budget projections as of February 2021.
The current authorization for federal highway programs expires on September 30, 2021. As they consider reauthorization, policymakers have many decisions to make about how much to spend on highway programs, how to pay for them, and the extent to which they want to provide additional federal subsidies for state and local borrowing for highway spending.
