Public Transit Program Funding Issues in Surface Transportation Reauthorization

As enacted in the Safe, Accountable, Flexible, Efficient Transportation Equity Act -A Legacy for Users (SAFETEA), federal public transit programs are currently authorized through September 2009.Decisions about reauthorization will likely hinge on the amount of funds available from the Mass Transit Account of the Highway Trust Fund, the source of about 80% of federal transit funding.Without an increase in the federal fuels tax, the use of other dedicated revenue mechanisms, or more money from the general fund, federal funding available to support both highways and transit will slow in the short term, and may decline in the medium term.Because of the growth in authorized spending in SAFETEA and the spending down of unexpended balances over the last few years, however, the transit account is expected to go into deficit in FY2011 or FY2012.At the spending level provided for in SAFETEA in FY2009, the fuels tax dedicated to the transit account would need to be raised by approximately 1 cent per gallon to remedy the current deficit in transit funding.This would allow for no growth in the program to deal with growing needs or inflation.The U.S. Department of Transportation, however, estimates that the country needs to spend 25% more annually over the next 20 years than is currently being spent to maintain the current conditions and performance of transit systems, and 73% more to make substantial improvements.At the current federal share of overall transit finances, this translates to an additional 0.6 cents per gallon in the federal fuels tax for transit to maintain the system and 1.8 cents per gallon to improve the system.Without new revenue, Congress may have to modify transit program priorities or, alternatively, may want to reexamine the federal role in the financing of transit systems.Some of the options that may be considered include reducing the federal matching share, encouraging more private-sector involvement, including the use of public-private partnerships and innovative financing, encouraging improvements in transit system productivity, and the broad restructuring of current federal transit programs.The report outlines several ways of restructuring federal public transit programs, each an alternative to the possibility of leaving the existing system unchanged.First, Congress might decide to focus more resources on major capital expenses for the rehabilitation and expansion of transit service in places that are best served by this mode, primarily the densely populated parts of large cities that are often severely congested.Second, Congress might focus on supporting and rehabilitating existing services rather than major capital expansion.Third, Congress might eliminate the capital improvement programs altogether, to be replaced with a simple "block grant" that could be distributed based on transit ridership or population.This would allow state and local governments to decide how best to allocate transit funding support among existing and new services.1 Revenues deposited in the Highway Trust Fund come from taxes on several fuels (gasoline, diesel, gasohol, and special fuels) as well as taxes on tires, sales of trucks and trailers, and heavy vehicle use. 2 Although not named in law, the part of the Highway Trust Fund outside of the Mass Transit Account is typically called the highway account, a convention followed in this report.3