Introduction

The federal government has provided some form of highway funding to the states for more than 100 years. Three major characteristics of the federal highway program have been constant since the early 1920s. First, most funds are apportioned to the states by formula, with implementation left primarily to state departments of transportation (state DOTs).¹ Second, the states and localities are required to provide matching funds, normally including 20% of the cost of non-Interstate System road projects and 10% for Interstate System projects. Third, generally, federal money can be spent only on designated federal-aid highways, which make up roughly a quarter of U.S. public roads, with some bridge and safety improvements being the major exceptions. The majority of funding comes from the Highway Trust Fund (HTF).

On November 15, 2021, President Joe Biden signed the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58). The IIJA made major changes to federal highway programs. It authorized $356.5 billion for FY2022-FY2026, providing a major increase in highway spending compared with the $225.2 billion, unadjusted for inflation, authorized under the previous five-year surface transportation act, the Fixing America's Surface Transportation Act of 2015 (FAST Act; P.L. 114-94). It increased spending from the HTF, but also provided additional funds through multiyear advance appropriations from the Treasury general fund, in effect making the IIJA both a reauthorization act and a multiyear appropriations act.

Although the IIJA retained the FAST Act highway programs, it restructured highway programs generally by creating four additional formula programs and authorizing 18 new discretionary programs.² The modified grant structure reflects an increased emphasis on bridge improvement and climate change mitigation and resilience. The Federal Highway Administration (FHWA) has issued a policy memorandum expressing its intent to encourage investments in repair or improvement of existing infrastructure prior to advancing projects that would build new general-purpose travel lanes.³

How Federal Highway Programs Work

Traditionally, federal support for highways has come through programs administered by FHWA.⁴ These programs are almost entirely focused on highway construction, and generally do not support operations (such as state DOT salaries or fuel costs) or routine maintenance (such as mowing roadway fringes or filling potholes). Each state is required to have a Long-Range Statewide Transportation Plan, which sets priorities for the state's use of federal highway funds, and a Statewide Transportation Improvement Plan (STIP), a four-year program of transportation projects. State DOTs largely determine which projects are funded, let the contracts, and oversee project development and construction. More recently, metropolitan planning organizations (MPOs) have played a growing role in project decisionmaking in urban areas, but most federal project funding continues to flow through state DOTs. In the cases of federal lands highways and tribal highways, the FHWA's Federal Lands Highways Division works with the federal land management agencies and tribal governments, respectively.

Historically, the federal highway program, unlike most other federal programs, has not relied on appropriated budget authority. Instead, for most of the funding, FHWA exercises contract authority (see text box below) over monies in the HTF and may obligate funds for eligible projects prior to an appropriation. Once funds have been obligated, the federal government has a legal commitment to provide the funds. This approach has sheltered highway construction projects from annual decisions about appropriations.

Under the IIJA, nine FHWA programs are formula programs funded from the HTF (see Table 1). Each state's annual share of total spending for these programs is determined and then divided up among the programs based on mathematical calculations set forth in the law. Two more new programs are funded with multiyear appropriations and apportioned to the states based on formulas unique to those programs. The federal highway programs do not provide money in advance. Rather, a state DOT or other grantee lets bids, supervises construction, and receives bills from private contractors for work completed. It then pays those bills according to its own procedures and submits vouchers for reimbursement to FHWA. FHWA certifies each claim for payment and notifies the Department of the Treasury, which disburses money electronically, often on the same day it receives the voucher.⁵

The IIJA greatly expanded the number of discretionary programs that may fund highways. Under some of these programs, grants are to be awarded by the Secretary of Transportation, not FHWA.⁷ In many cases, local governments and certain nongovernmental entities are eligible to apply for discretionary grants. As with formula grants, federal payments to the project sponsor are made on a reimbursable basis as work is completed. Like the formula programs, the discretionary programs are to be administered under the highway title of the U.S. Code, Title 23. This also means that these project grants are subject to Title 23's planning requirements and that the projects must be listed in the state's STIP. Depending on the program, discretionary programs may be funded with contract authority, supplemental appropriations, or a combination of these funding sources. The IIJA also authorizes additional general fund money, subject to appropriation.

The Highway Trust Fund (HTF)

The HTF derives revenue from taxes on fuels, heavy truck tires, truck and trailer sales, and a weight-based heavy-vehicle use tax.⁸ Approximately 85%-90% of the revenue from these sources comes from excise taxes on motor fuels, 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel. The HTF consists of two separate accounts—highway and mass transit. The highway account receives an allocation equivalent to 15.44 cents of the gasoline tax and 21.44 cents of the diesel tax. The mass transit account receives the revenue generated by 2.86 cents of the gasoline and diesel taxes.⁹ Because the fuel taxes are set in terms of cents per gallon rather than as a percentage of the sale price, their revenues do not increase with inflation or fuel price. The fuel tax rates were last raised in 1993.

Sluggish growth in vehicle travel and improved vehicle efficiency have depressed fuel consumption and therefore the growth of fuel tax revenue. Since FY2008, the revenues flowing into the highway account of the HTF have been insufficient to fund the expenditures authorized by Congress.¹⁰ Congress has resolved this discrepancy by transferring money from the general fund to the HTF. As required under the IIJA, the U.S. Treasury transferred $90 billion from the general fund to the highway account of the HTF following enactment.

Funding Federal Highways

The average annual authorization of $73.1 billion in combined contract authority, multiyear supplemental appropriations, and authorizations subject to appropriation in the IIJA compares to an average annual authorization of $45.3 billion in the FAST Act, or a 61% increase (see Table 2 and Figure 1). However, an average annual $2.9 billion of the IIJA funds are subject to appropriations that may or may not occur. Subtracting this amount from the total still results in a 56% increase in the average annual spending under the IIJA compared to the FAST Act.

Of the total average annual authorizations under the IIJA, roughly 83% is HTF contract authority; 13% is multiyear supplemental appropriations; and 4% is authorizations subject to appropriations. Under the FAST Act the average annual authorizations were 99.5% contract authority and 0.5% authorizations subject to appropriation. Neither law included congressional earmarks.

Figure 1. Federal Highway Funding: FY2021-2026

Source: Federal Highway Administration. Notes: Totals are unadjusted for inflation. Amount subject to appropriation for FY2021 was $210 million, not visible in the figure.

Highway Formula Programs

Under the IIJA there are nine "core" formula programs, which are funded with contract authority from the HTF. In addition to the core programs, the IIJA created two new formula programs that also provide funding to the states but are funded via supplemental appropriations.

Core Formula Programs

Each year, FHWA begins the process of distributing highway formula funds by calculating the apportionment total for each state. For the amounts available for apportionment in each year under the IIJA, see the bottom line of Table 1.

The base amount for each state is determined by multiplying the authorized base apportionment amount for the apportioned programs by the ratio that each state's FY2021 apportionments bore to the nationwide total. Next, the initial amounts are adjusted, if necessary, to assure that each state's aggregate amount of the base apportionment is not less than 95 cents for every dollar the state contributed to the highway account of the HTF; at least 2% greater than the apportionment for FY2021; and at least 1% greater than the apportionment received for the previous fiscal year. After the state amounts are determined, each state's amount is divided up among the core programs according to statute. Table 1 shows the dollar amounts of the programmatic split.¹¹

National Highway Performance Program (NHPP; 23 U.S.C. §119; IIJA §11105)

NHPP is the largest of the federal-aid highway programs, with annual authorizations averaging $29.6 billion. The program supports improvement of the condition and performance of the National Highway System, which includes Interstate System highways and bridges as well as virtually all other major highways. NHPP funds projects to achieve national performance goals consistent with state and metropolitan planning. The IIJA broadens NHPP to permit spending for resiliency and protective features (such as raising bridges or adding drainage structures) that reduce the risk of recurring damage from extreme weather events and other natural disasters.

Surface Transportation Block Grant Program (STBG; 23 U.S.C §133; IIJA §11109)

STBG is the federal-aid highway program with the broadest eligibility criteria. IIJA provides an annual average of $14.4 billion for STBG. Funds can be used on any federal-aid highway and for bridge projects on any public road. Of each year's allocation, states must set aside 10% for bicycle paths, walkways, and other transportation alternatives. STBG funds may be used for Appalachian Development Highway System projects with no state match. Nearly any public transit project may be eligible for STBG funds.

Highway Safety Improvement Program (HSIP; 23 U.S.C. §148; IIJA §11111)

HSIP supports projects that improve the safety of road infrastructure by correcting hazardous road locations, such as dangerous intersections, or making road improvements, such as adding striping or rumble strips.¹² The IIJA provides an annual average of $3.1 billion for HSIP. These funds may also be used for road safety projects not on federal-aid highways.

Railway-Highway Grade Crossing Program (23 U.S.C. 130; IIJA §11108)

The Railway-Highway Grade Crossing Program is funded by an HSIP set-aside of not less than $245 million per year. The IIJA raised the federal share to 100%, eliminating the state match.

Congestion Mitigation and Air Quality Improvement Program (CMAQ; 23 U.S.C. §149; IIJA §11115)

CMAQ was established to fund projects and programs that may reduce emissions of transportation-related air pollutants. Since FY2011, over $1 billion of the annual CMAQ funding has been transferred to the Federal Transit Administration.¹³ Under the IIJA, the average annual authorization for CMAQ is $2.64 billion.

Metropolitan Planning (MP; 23 U.S.C. §134; IIJA §11201)

MP establishes a cooperative framework for making transportation investment decisions in metropolitan areas. The program funds metropolitan planning organizations (MPOs) and planning activities. The IIJA provides an annual average of $456 million for this program.

National Highway Freight Program (NHFP; 23 U.S.C. §167; IIJA §11114)

Annual apportionments for NHFP average $1.43 billion through FY2026. This program is to help states and MPOs remove impediments to the movement of goods. The IIJA expands the road mileage eligible under the program.

Carbon Reduction Program (CRP; 23 U.S.C. §175; IIJA §11403)

This new formula program is funded at an average annual level of $1.284 billion. The CRP is to reduce carbon dioxide emissions from motor vehicles. The funds may be used for traffic monitoring, management, bike and pedestrian paths, truck stop electrification, and public transportation. States have two years to develop a carbon reduction strategy. Sixty-five percent of CRP funds are distributed within the states based on urbanized area population categories.

Promoting Resilient Operations for Transformative, Efficient, and Cost-saving Transportation (PROTECT; 23 U.S.C. §176; IIJA §11405)

The new PROTECT formula program is funded at an annual average of $1.46 billion. PROTECT supports transportation infrastructure resilience under Title 23, under Chapter 53 of Title 49 (Public Transportation), and for certain port facilities and highway evacuation routes. Section 11405 also creates a PROTECT competitive grant program.

Transferability Among the Core Programs

States may transfer up to 50% of any apportionment to any other apportioned program. However, no transfers are permitted of funds suballocated to areas by population (such as in STBG) or of Metropolitan Planning funds. Transportation Alternatives set-aside funds may be transferred only under specific conditions.

Multiyear Appropriation Formula Programs

Bridge Replacement, Rehabilitation, Preservation, Protection, and Construction Program (Division J, Title VIII)

The IIJA provides $27.5 billion in equal annual amounts for FY2022-FY2026. Funds are apportioned to the states based on each state's relative cost to replace poor-condition bridges and rehabilitate fair-condition bridges, relative to the national total. At least 15% must be spent on bridges not on the federal-aid system. For public bridges owned below the state level the federal project share may be 100%. All bridges on the National Bridge Inventory (NBI) are eligible.

National Electric Vehicle Formula Program (Division J, Title VIII)

This new program is funded at $5 billion per year for FY2022-FY2026, to provide funding to states to strategically deploy electric vehicle charging infrastructure, establish an interconnected network, and facilitate data collection, access, and reliability. Apportionment is based on a state's base apportionment shares, adjusted to provide funding for Puerto Rico and the territories. Alternative fuel corridors must be built out first, after which funds may be used for any public road or other publicly accessible locations.

Other Highway Programs

Nationally Significant Freight and Highway Projects (NSFHP/INFRA; 23 U.S.C. §117; IIJA §11110)

The NSFHP, also referred to as Infrastructure for Rebuilding America (INFRA), provides $14 billion in authorizations—$8 billion is assured contract authority and supplemental appropriations, and another $6 billion is subject to future appropriations acts. These funds are for discretionary grants for projects of regional or national importance. States, groups of states, metropolitan planning organizations, municipal governments, special-purpose districts or transportation authorities, Indian tribes, federal land agencies, and other public entities may apply. Applicants apply directly to the Secretary of Transportation; state DOTs are not necessarily involved.¹⁴ Applications must emphasize improving freight movement and must involve work on the National Highway Freight Network, highway or bridge projects on the National Highway System, intermodal projects, or railway-highway grade crossing or separation projects.

Emergency Relief Program (ER; 23 U.S.C. §125; IIJA §§11106, 11519)

ER funds are made available following natural disasters or catastrophic failures (from an external cause) for emergency repairs, restoration of federal-aid highway facilities to pre-disaster conditions, and addition of protective features to damaged facilities. The program is funded by a permanent annual HTF authorization of $100 million and general fund appropriations authorized on a "such sums as necessary" basis. ER funds can be used only on federal-aid highways.¹⁵

Territorial and Puerto Rico Highway Program (23 U.S.C. §165; IIJA §11126)

The Puerto Rico and Territorial Highway programs are funded at an annual average of $180.2 million and $47.9 million, respectively, through FY2026.

Appalachian Development Highway System Program (ADHS; IIJA Division J, Title VIII)

The ADHS is made up of designated corridors in 13 participating Appalachian states. ADHS projects are incorporated into the eligibilities of NHPP and STBG.¹⁶ The IIJA, however, provides a stand-alone $250 million per year in supplemental appropriations distributed by a cost-to-complete formula for FY2022-FY2026. Section 11506(f) also authorizes $200 million per year, subject to appropriation, for the Appalachian Regional Commission.

Construction of Ferry Boats and Ferry Facilities (23 U.S.C. §147; IIJA §11121)

The Ferry Boats and Ferry Terminal Facilities Program is a formula program that distributes funds to public ferry systems. The program's funding totals $912 million ($570 in contract authority and $342 in supplemental appropriations) under the IIJA, an average of $182 million per year. The IIJA adds operating costs as eligible expenses under the program. Construction costs for ferry boats and facilities are eligible expenses under NHPP and STBG.

Federal Lands and Tribal Transportation Programs (IIJA §§11112-11113)

Tribal Transportation Program (TTP; 23 U.S.C. §202). The TTP distributes funds among tribes mainly under a statutory formula based on road mileage, tribal population, and relative need. The IIJA provides an average annual authorization of $602 million in contract authority for the TTP. Each year, $9 million is set aside for the Tribal High Priority Projects Program.

Federal Lands Transportation Program (FLTP; 23 U.S.C. §203). The IIJA funds the FLTP at an average annual authorization of $439 million in contract authority. Of this amount, the following average annual allocations are provided: $346 million for the National Park Service; $36 million for the Fish and Wildlife Service; and $26 million for the Forest Service.

Federal Lands Access Program (FLAP; 23 U.S.C. §204). The FLAP supports projects that provide access to federal lands. It is funded at an annual average of $298 million in contract authority.

Nationally Significant Federal Lands and Tribal Projects Program (NSFLTP). This competitive grant program is to support large projects on federal and tribal lands. The IIJA provides $55 million per year in contract authority for the program. The act also authorized $300 million per year subject to appropriations.

Transportation Infrastructure Finance and Innovation Act Program (TIFIA; 23 U.S.C. §§601-609; IIJA §§12001-12002)

The TIFIA program provides secured loans, loan guarantees, and lines of credit for major surface transportation projects. For a project to be eligible, its sponsor must identify a means of repaying the loan, such as a toll on a road, bridge, or tunnel.¹⁷ The IIJA provides $250 million annually in contract authority for TIFIA.

New Competitive Discretionary Grant Programs

The IIJA creates new competitive discretionary highway programs. Most of these programs make virtually all sub-state governmental entities and some nongovernmental entities eligible to compete for grants that are awarded directly by the Secretary of Transportation and not by the states. Most also allow states to apply.¹⁸ The nine programs discussed below are funded with either contract authority or supplemental appropriations.

• Bridge Investment Program (23 U.S.C. §124; IIJA §11118) is funded at an annual average of $2.5 billion for projects to replace, rehabilitate, preserve or protect bridges on the NBI. Section 11101(b)(2)(A)(i) authorizes an additional average of $653 million per year, subject to appropriation.
• Congestion Relief Program (23 U.S.C. §129(d); IIJA §11404) is funded at $50 million per year for projects that advance innovative integrated and multimodal solutions to congestion relief.
• Charging and Fueling Infrastructure Grants (23 U.S.C. §151(f); IIJA §11401) are funded at an average of $500 million per year. The grants are to fund contracts with private entities to acquire and install publicly accessible electric vehicle, hydrogen, propane, or natural gas charging or fueling infrastructure.
• Rural Surface Transportation Grant Program (23 U.S.C. §173; IIJA §11132) is funded at an annual average of $400 million to improve and expand rural surface transportation infrastructure.
• PROTECT (Discretionary) Grant Program (23 U.S.C. §176(d); IIJA §11405) is funded at a $280 million annual average. The funding is divided into four set-asides for Planning Grants, Resilience Improvement grants, Community Resilience & Evacuation routes grants, and At-risk Coastal Infrastructure grants.
• Reduction of Truck Emissions at Port Facilities Program (IIJA §11402) is funded at $80 million per year. The program is to encourage the electrification of port operations and reduce truck idling and emissions at port facilities.
• Wildlife Crossing Pilot Program (IIJA §11123(b)(1)) is funded at a $70 million annual average. It provides grants for projects intended to reduce wildlife-vehicle collisions or increase habitat connectivity.
• Prioritization Process Pilot Program (IIJA §11204) is funded at $10 million per year, to support data-driven approaches to planning that allow for an accessible and transparent prioritization process.
• Reconnecting Communities Pilot Program (IIJA §11509) is funded at an average of $200 million per year for planning and construction grants for removing, retrofitting, or mitigating transportation facilities, such as viaducts or limited access highways, that create barriers to community connectivity.

The IIJA authorized nine other new programs subject to annual appropriations. These programs are included in the list in Table 2.

Funding Beyond Highway Programs

Division B of the IIJA provides funding for multimodal, highway and motor vehicle safety, and research and innovation programs that are not treated as highway programs in Title 23, Chapter 1 of the U.S. Code. These include the Nationally Significant Projects Program; the Local and Regional Project Assistance Program (also referred to as RAISE grants); the National Culvert Removal, Replacement, and Restoration Grant Program; the Safe Streets and Roads for All program; and the SMART Grant Program. For these five programs, Division B of the IIJA authorizes, subject to appropriation, $4.6 billion annually. In addition, Division J provides appropriations totaling $3.8 billion per year. These funds are under the control of the Office of the Secretary of Transportation.