Federal Funding for
Texas Highways

About one-third of TxDOT’s budget is comprised of federal funds, which are deposited in the State Highway Fund. The General Appropriations Act (GAA) includes federal funds in TxDOT’s bill pattern as reimbursements for payments on projects that meet certain federal requirements.


Revenue collected from the federal tax on gasoline and diesel is deposited in the federal Highway Trust Fund (HTF). HTF dollars are distributed to states primarily through highway and transit formulas and discretionary allocations.

 

For decades, federal aid for highways was supported solely by tax and fee revenue deposited into the HTF. Since 1993, the federal motor fuels tax rate has remained at 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel. These collections have not kept up with the rising demands on the nation’s transportation system. Since 2008, the federal Highway Trust Fund has been supplemented with federal general funds to compensate for the diminishing value of the federal fuel tax revenue.


In 2017, Texas is one of only three donor states in the nation and will recoup 95 cents for every dollar that we send to Washington in federal fuel taxes that are paid in our state. A donor state is a state that contributes more funds to the HTF via federal fuel taxes than it receives in return in apportionments.

 

Traditionally, Texas fuel receipts being deposited into the HTF range from10% to 12% of the total amount nationally, but the state receives between 8% and 9% back in apportionments. This disparity equates to Texas’ loss of approximately $701 million in 2016 and $738 million in 2017.

 

--Transportation Funding In Texas 2016-2017 Edition, TxDOT

State Highway Funds Will Likely Serve as Match in
Upcoming Federal Infrastructure Program

 

September 5, 2017

 

It appears that public-private partnerships and tolling will not be the only focus of the Trump Administration’s infrastructure funding program now taking shape. That is good news for highway projects in Texas where toll fatigue has taken hold in some quarters and there is a renewed focus on “pay-as-you go” public funding for road projects.


The Wall Street Journal reported on Sept. 1 that the administration is proposing $200 billion in new federal funding as the central piece of its evolving $1 trillion proposal to improve the nation’s infrastructure. Most of the $200 billion, White House officials say, will be parceled out as incentives to localities that raise their own funding for building projects, with the aim of reaching the administration’s overall goal.


During a recent Texas Transportation Commission workshop session, Commissioner Bruce Bugg of San Antonio reported on a meeting TxDOT representatives had with the White House infrastructure team.  He said that while the administration’s proposal was still taking shape it is likely that any non-federal income streams, including Texas’ Proposition 1 and Proposition 7 funds, will be counted as matching funds for federal dollars available in the program.


Funds for roads, bridges and other infrastructure currently come from a variety of sources, including the Federal Highway Trust Fund and formula grants that the Trump Administration says it will maintain.


Funding for Texas’ State Highway Fund — almost $26.5 billion for the state’s 2018-2019 biennium — comes from several sources, the largest being the federal government, which supplies about 35% of annual Texas highway funding. The state’s motor fuels taxes, auto registration fees, sales tax revenue from Proposition 7, and oil and gas production revenue from Proposition 1 account for the bulk of state revenue.


The Wall Street Journal’s Ted Mann reports that the proposed 20-80 split of federal to local contributions for certain projects in the Trump plan would change parts of the current system. Though funding levels vary, the federal government generally pays about 80% of certain highway projects and up to 90% of projects at airports, with the remainder coming from state and local government. In mass transit and passenger rail, there is no formula funding, and the federal share of funds varies widely, as local systems compete for grants by offering to accept smaller shares of federal money.

 

The Trump White House wants to continue and expand some priorities of the Obama administration, including encouraging the use of public-private partnerships where possible, and expanding low-cost federal loan programs to help pay for major building projects.

 

At the same time, the White House wants to change the way states and cities approach the pools of federal capital that are used to initiate large projects, saying Washington can encourage local governments to make smarter investments by awarding grants to communities that compete based on how much of the cost they are willing to take on themselves.

 

“If we’re putting in a dollar, we want a state or a locality to have ideally four dollars that they’re putting in,” the senior official said. “This gets us to the trillion.”

 

Mann writes that there have been early signs of resistance from the Republican-controlled Congress, which will draft and ultimately vote on the administration’s plan. A Senate transportation subcommittee reversed an array of 2018 budget cuts proposed by the White House, including in infrastructure grant programs relied on by states and cities for new transit lines.

 

The Trump Administration points to the rising number of state initiatives raising funds for infrastructure as evidence for the wisdom of its approach.  This includes passage of gasoline and diesel tax increases in seven states during the past year.

 

There was strong pushback across the country earlier this year against the idea of depending on the private sector for the majority of the proposed $1 trillion investment in public works.  That approach would have focused on tolling and fees required to attract private investors.  In Texas, the Legislature this year cut off new public-private partnerships for now, underscoring the feeling that tolls have become politically problematic in some parts of the state.

 

In 2013 and 2015 state lawmakers included provisions in both Proposition 1 and Proposition 7 prohibiting those funds from being used on toll projects.  That anti-toll momentum continued in 2017 as lawmakers rejected a bill that would have authorized certain specific project to be considered for funding under comprehensive development agreements (CDAs).  CDAs have been a valuable tool in delivering urban highway projects in recent years including the Grand Parkway in the Houston area, the DFW Connector, the North Tarrant Express and the 635 LBJ Express. Lawmakers also put restrictions on how state funds can be used on future toll projects.