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Federal highway funds in the United States are primarily distributed to states through a structured process managed by the Federal Highway Administration (FHWA), an agency within the U.S. Department of Transportation. Here's how it generally works:

1. Source of Funding

The bulk of federal highway funding comes from the Highway Trust Fund (HTF), established in 1956. The HTF is financed mainly through federal taxes on gasoline (currently 18.4 cents per gallon), diesel fuel (24.4 cents per gallon), and other motor fuels, as well as taxes on truck sales, tires, and heavy vehicle use.

Occasionally, Congress supplements the HTF with general fund appropriations when its revenues fall short, as fuel tax rates haven't been adjusted since 1993 and vehicle fuel efficiency has reduced per-vehicle tax contributions.

2. Legislative Authorization

Federal highway funding is authorized through multi-year transportation bills passed by Congress, such as the Infrastructure Investment and Jobs Act (IIJA) signed into law in November 2021. These bills outline funding levels, programs, and policies for several years (e.g., IIJA covers 2022–2026).

The legislation specifies how much money is available and how it's allocated across various programs.

3. Apportionment to States

Funds are distributed to states annually via a process called apportionment. The FHWA allocates money based on formulas set by Congress in the authorizing legislation. These formulas typically consider factors like:

Road mileage: The extent of a state's public road network, including the National Highway System (NHS).

Vehicle miles traveled (VMT): The amount of traffic on a state's roads.

Population: Particularly for urbanized areas.

Fuel tax contributions: How much a state pays into the HTF.

Special needs: Such as bridge conditions or safety priorities.

For example, under the IIJA, programs like the National Highway Performance Program (NHPP) and the Surface Transportation Block Grant Program (STBG) use tailored formulas to distribute billions annually.

4. State Role and Matching Funds

Once apportioned, states receive funds as reimbursements. States typically plan and initiate highway projects, then submit costs to the FHWA for reimbursement from their allocated federal funds.

Most programs require states to provide matching funds, often 20% of the project cost (i.e., an 80/20 federal-to-state split), though this can vary. Some emergency or discretionary programs may cover 100% of costs.

States have flexibility within federal guidelines to prioritize projects, whether for interstate highways, bridges, or local roads.

5. Specific Programs

Funds are channeled through various FHWA programs, each with a distinct purpose:

National Highway Performance Program (NHPP): Supports major highways and bridges.

Surface Transportation Block Grant Program (STBG): Flexible funding for a range of road, bridge, and transit projects.

Highway Safety Improvement Program (HSIP): Focuses on reducing fatalities and serious injuries.

Congestion Mitigation and Air Quality Improvement Program (CMAQ): Targets traffic congestion and emissions in polluted areas.

Discretionary grants (e.g., INFRA or RAISE grants) are also awarded competitively for specific projects, bypassing the formula process.

6. Obligation and Spending

States don't receive cash upfront. Instead, they're given obligation authority, a limit on how much they can commit to projects each year. This ensures spending aligns with available HTF revenue.

States must use funds within a certain timeframe (often 4 years) or risk losing them, though some programs allow carryover.

7. Oversight and Compliance

The FHWA oversees state spending to ensure compliance with federal standards (e.g., environmental regulations, engineering requirements). States submit plans and reports to justify expenditures.

Example in Practice

In fiscal year 2023, the IIJA apportioned over $52 billion to states for highway programs. California, with its vast road network and population, might receive several billion, while a smaller state like Wyoming gets less, adjusted by the formula factors. Texas, with high VMT and fuel tax contributions, also sees a large share.

This system balances national priorities—like maintaining the Interstate Highway System—with state-specific needs, though debates persist over funding levels, formula fairness, and the HTF's long-term solvency. If you'd like details on a specific state or program, let me know!

Henry McClure  
785.383.9994
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