Highway Program Equity Guarantee Issues

Publication Date: December 2004

Publisher: Library of Congress. Congressional Research Service


Research Area: Transportation



Since 1982 Congress has included legislative provisions in every surface transportation reauthorization act to remedy concerns about the "equity" of the distribution of federal highway aid to the states. For many years some states have complained that they received significantly less federal highway aid than they paid in federal highway taxes to the highway trust fund. These states, referred to as donor states, have pressed for legislative remedies that would assure them a higher share of federal highway aid, most recently 95%. Donee states, states that receive more federal highway aid than they pay in federal highway taxes, have not opposed equity provisions per se but have opposed any reduction in their existing shares. Providing equity remedies that keep both donor and donee states reasonably content has been accomplished by giving more money to all states but giving more to donor states to bring their shares up to a designated per cent share, currently 90.5%. Providing equity in this way is very expensive in dollar terms, the minimum guarantee under TEA-21, in fact, became the largest highway program.

The current budgetary environment is more constrained than it was under the last reauthorization cycle, making it unlikely that the 95% goal can be achieved under the current equity framework. There are, however, a number of options that could help. The options range in scope from changes that may be seen as fine tuning the existing minimum guarantee (MG) system to options that would eliminate the TEA21 MG framework completely.

During the 108th Congress, the House- and Senate-passed surface transportation bills took very different approaches to the equity issue. The House-passed reauthorization bill (H.R. 3550) retained the TEA-21 minimum guarantee structure ( 90.5%). The Senate-passed reauthorization bill (S. 1072) would have achieved the 95% return level in the last year of the authorization through an equity bonus mechanism. House and Senate conferees were unable to come to agreement during the 108th Congress. Congress will again address equity guarantee issues when reauthorization legislation is reintroduced in the 109th Congress.

In a broader sense the debate over equity remedies has implications for a number of overarching issues. An equity guarantee of a 95% rate of return could, in the minds of some, leave little room for addressing other or additional transportation needs that are uniquely federal. Another issue is whether the MG should be broadened, as some states have proposed, to include Federal Transit Administration programs. This report will not be updated.