| The Intermodal Surface Transportation Efficiency Act of
1991 (ISTEA) is a complex piece of legislation which provided higher levels
of funding than preceding "highway bills", but also allowed the money to
be spent on much more than highways.
Debates over donor/donee contributions and returns from the Highway
Trust Fund, use of gas tax money for air pollution, congestion mitigation,
mass transit and transportation enhancements like tourist facilities and
historic preservation, are raging in Washington and across this country
this summer in anticipation of the necessary reauthorization of federal
surface transportation legislation by Oct. 1.
Legislation such as ISTEA can be confusing even to long-time observers
and participants in the road building industry. Here's a brief primer to
the essential elements of ISTEA, adapted from Congressional briefings from
the staff of the Senate Transportation and Infrastructure Subcommittee.
Federal-aid formulas
For decades, the federal-aid highway formula has been a series of calculations
that determine how federal highway funds are distributed among the states.
The current formulas established in ISTEA determine distribution of funds
for various funding categories -- the largest of which are the National
Highway System (NHS) and the Surface Transportation Program (STP).
Five funding categories are mechanisms to increase individual states'
shares to address equity concerns of states that contribute more in highway
user taxes than they receive in federal-aid highway funds, and to provide
each state with the same relative share of overall funding that it received
in the past.
In ISTEA, underlying data and factors used to determine the distribution
of funds for certain programs are only a part of the final highway funding
distribution. ISTEA also contains numerous programs that are used to adjust
the amount a state receives to a predetermined percentage.
For example, the four largest highway programs in ISTEA are the Interstate
Maintenance Program (IM), the Bridge Program, the NHS and STP. Individual
calculations are made to determine a state's funding under the IM, Bridge
and NHS programs, but then the STP program is used to adjust a state's
share to ensure it receives a certain percentage of funds based on that
state's historic 1987-91 share of the program.
Therefore, if a state receives more NHS and Bridge funds in one year
over the previous, a corresponding and offsetting decrease in STP funds
will be made that year to guarantee that overall funding to each state
under these programs remains stable.
The Minimum Allocation program (MA) was first incorporated into the
highway program in 1982 in order to provide additional funding to those
states which did not receive a certain percentage of funds from the basic
program in relation to their contributions to the Trust Fund.
The MA was set at 85 percent in 1982 and was increased in ISTEA to
90 percent. Other equity adjustment programs related to a state's contribution
to the Trust Fund included in ISTEA are the 90 percent of payments and
the donor state bonus program, which are described below. In fiscal year
1995, 41 states and the District of Columbia received a total of $2.8 billion
in equity adjustments -- 16 percent of the federal highway aid apportioned
to states that year.
Finally, the "hold harmless" provision preserves a state's funding to
legislatively prescribed levels as set forth in section 1015 of ISTEA.
Distribution of funds
Many elements figure into how much federal money a state will receive.
These are:
Interstate Maintenance (IM). Funds are distributed to each state based
55 percent on interstate lane miles and 45 percent on vehicle miles traveled
on the interstate.
National Highway System (NHS). Funds are distributed based on a state's
historic average of federal-aid highway funds (IM, Primary, Secondary,
Urban, Bridge and Minimum Allocation) received over the period of 1987-91.
Bridge Replacement and Rehabilitation Program. Based on each state's relative
share of bridge needs and costs to address those needs in the state.
Surface Transportation Program (STP). A variable amount of funds may be
received by a state to ensure that the IM, Bridge, and NHS funds received
equal its 1987-91 historic average of funding.
Congestion Mitigation and Air Quality Program (CMAQ). Funds are distributed
to states based on each state's share of population in air quality non-attainment
area, and the severity of the non-attainment levels in each state. However,
each state is guaranteed at least 0.5 percent of CMAQ funds.
Interstate Construction. This was a "cost-to-complete" program with a specific
amount of funding provided to each state based on the cost to complete
the Interstate in that state. The program expired at the end of fiscal
year 1995.
Adjustments to formulas
Standard formulas don't necessarily work well in the real world. ISTEA
contains Adjustment Programs which permit the formulas to be tailored to
a state's particular needs. These include:
Minimum Allocation (MA). Guarantees a state an amount of federal-aid highway
funds that its percentage of the total apportionments and prior-year allocations
from certain categories is not less than 90 percent of its estimated percentage
of contributions to the Highway Trust Fund's Highway Account.
Ninety Percent of Payments Adjustment. Ensures that each state receives
at least a 90 percent rate of return on its contributions to the Highway
Trust Fund.
Donor State Bonus. Compares each state's projected contribution to the
Highway Trust Fund in a fiscal year and the apportionments that each state
will receive. Starting with the state having the lowest return of apportionments
vs. contributions, each state is brought up to the level of return for
the states with the next highest level of return. This calculation is repeated
successively until all funds authorized for this program are exhausted.
Hold Harmless. Guarantees each state a minimum percentage of overall program
funds as legislatively set forth in Section 1015 of ISTEA.
Interstate Reimbursement. This program, which began in fiscal year 1996,
distributes funds to states by fixed percentages based on the states investment
prior to the Federal-Aid Highway program for costs incurred in the construction
of roads later incorporated into the interstate system. Each state is guaranteed
at least 0.5 percent of the program.
Challenges to the formulas
One of the major issues of ISTEA reauthorization is whether the formula
by which federal-aid highway funds are distributed should be revised, and
if so, on what factors a new formula should be based.
Critics of the current method of distributing funds claim that the existing
formula is based on irrelevant and outdated factors. For example, they
claim historic averages are still determined in part on postal road mileage
and land area which were originally included as formula factors in 1916.
In addition, population data underlying states' historic shares for ISTEA
are based on 1980 population data.
So-called "donor" states (those states which claim to contribute more
into the Trust Fund than they receive back in federal-aid highway funds)
have also raised questions regarding the equity of the existing formulas.
These donor states argue that the ISTEA formula for the basic program perpetuates
the donor state situation since the formula is based on 1987-91 historic
shares. Many donor states also cite their cumulative rate of return since
the Trust Fund was created in 1956, which may be less than the return experienced
in recent years.
Several proposals have been advanced by donor state interests in this
regard:
H.R. 3195, introduced by Reps. Sanford, Brewster and Largent, would amend
the Minimum Allocation program (section 157 of title 23) to provide that,
as of fiscal year 1998, each state would receive in total apportionments
for the current fiscal year and allocations from the prior fiscal year
not less than 100 percent (from the current 90 percent) of estimated tax
payments attributable to highway users in the state. A similar revision
would be made to the current 90 percent of payments program as of fiscal
year 1998 and the hold harmless program would be repealed.
STEP 21, developed by various state Departments of Transportation and soon
to be introduced by Reps. DeLay and Condit, would revise the current program
into two basic programs. An NHS program would provide funding distributed
by a formula based on urban and rural state lane miles, urban and rural
vehicle miles traveled, and diesel fuel consumption. And a flexible Streamlined
Surface Transportation Program (SSTP) would provide apportionments in a
percentage equal to the percentage of tax payments attributable to the
highway users in the state (basically one dollar back for every dollar
contributed).
Turnback proposals, including the Transportation Empowerment Act, would
substantially decrease the federal program, with federal involvement limited
only to the Interstate System and possibly the NHS. The federal gas tax
would be decreased accordingly, with states having the option of raising
their own gas tax to compensate.
Critics of donor state concerns state that, in order to preserve a
national system of roads to facilitate Interstate commerce, it is necessary
that certain states will receive more federal funding compared to the state
contribution of taxes to the Trust Fund while other states will receive
less. Some have also raised the issue of transit funding and whether federal
funds received from the Transit Account of the Highway Trust Fund should
be included in "rate of return" calculations.
Surface Transportation Program
The Surface Transportation Program (STP) is a block grant program created
by ISTEA. The STP replaced programs used to fund primary system highways
in urban areas, urban and all secondary system highways.
Funds may be used by states and localities for many activities, including
any roads that are not classified as local or rural also elect to use the
funds for the capital costs of transit projects.
To date, states have obligated $642 million of STP funds for transit
projects. Bridge, carpool/vanpool, and safety improvement projects may
be on any public road. Eligible STP activities include:
Construction, reconstruction, resurfacing, restoration and rehabilitation
and operational improvements for highways (including Interstate highways
and bridges)
Capital costs for transit projects and publicly owned intracity or intercity
bus terminals and facilities
Highway and transit safety improvements and programs, hazard eliminations,
projects to mitigate hazards caused by wildlife, and railway-highway grade
crossings
Surface transportation planning, highway and transit technology transfer
activities, and research and development
Capital and operating costs for traffic monitorin ites and programs
Carpool projects, fringe and corridor parking facilities, and bicycle transportation
and pedestrian walkways
Most transportation control measures in the Clean Air Act
Development and establishment of management systems
Transportation enhancement activities, and
Participation in wetlands mitigation and wetland banking.
A number of "set-asides" for favored purposes restricts how the
STP money may be spent. These include
Safety Improvements Set-Aside: 10 percent of STP funds received by a state
must be used for safety improvements, including rail/highway crossing protective
devices, elimination of hazards at rail-highway grade crossings, and highway
hazard elimination.
Transportation Enhancements Set-Aside: 10 percent of STP funds received
by a state must be used for transportation enhancements. Transportation
enhancement activities include: pedestrian and bicycle facilities; acquisition
of scenic and historic sites; scenic and historic highway programs; landscaping;
rehabilitation of historic transportation facilities; preservation of abandoned
transportation corridors; archeological planning and research; control
and removal of outdoor advertising; and mitigation of water quality impacts
from roadway runoff.
Urban Suballocation. Of the remaining 80 percent following the two set-asides
described above, 62.5 percent of STP funds must be divided between urban
areas and other areas of the state based on the relative share of population
living in those areas.
The suballocation is based on the percent of the population living
in urbanized areas exceeding 200,000 people and all other areas using 1990
Census information. In areas exceeding 200,000 population, Metropolitan
Planning Organizations (MPOs) manage funds suballocated to them.
Areas with populations of less than 5,000 are guaranteed at least 110
percent of the amount of rural secondary highway funds received in fiscal
year 1991. In areas between 50,000 and 200,000 population, the state retains
control over the funds, but the state must consult with the designated
MPO. In areas with less than 50,000 people, the state must consult with
local officials.
Transferability. A state may choose to transfer up to 50 percent of NHS
program funds to the STP and, if the secretary of transportation approves,
up to 100 percent. Additionally, up to 50 percent of Bridge Program funds
and 20 percent of Interstate Maintenance funds may be transferred to the
STP. The 20 percent may be increased to 100 percent if Interstate maintenance
needs are met.
Funding. Authorized STP funding totals $23.9 billion over six years (FY
1991-1997). The formula for distribution of STP funds is based on each
state's historic share (FY 1987-1991) of total federal-aid highway funding.
The federal share of STP projects is 80 percent and can be 90 percent for
projects on the Interstate. Certain safety and traffic operations may have
a 100 percent federal share. Additional funding from a state's Interstate
Reimbursement, Apportionment Adjustments, Hold Harmless, and 90 percent
of payments is eligible for the STP.
States that do not have Clean Air Act non-attainment areas may use
their Congestion Mitigation and Air Quality Improvement Program funds as
if they were STP funds. Also, Minimum Allocation, and Donor state Bonus
funds can be spent on eligible STP activities. Certain portions of some
of these other programs which are transferred into the STP program are
subject to the set-asides and urban suballocation.
-- Adapted from analysis by the Senate Committee on Transportation &
Infrastructure, Subcommittee on Surface Transportation
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