Highway financeInformation on this Web page was last updated in August 2012.
State highways maintained by the Iowa DOT are financed with funds that are principally derived from vehicle fuel taxes and registration fees collected and allocated by the state and federal governments.
Road Use Tax Fund (RUTF): Dedicated highway user revenue, collected through a state excise tax on fuels, is deposited into the Iowa Road Use Tax Fund. No state general fund (i.e., general tax) revenue is used for highway projects in Iowa. Established in 1949 by the 53rd Iowa General Assembly, the RUTF has provided a stable and reliable source for investing in the state's primary, secondary and municipal roadway systems. After some off-the-top diversions, receipts into the RUTF are distributed according to a formula of 47.5 percent for the Primary Road System, 24.5 percent for secondary county roads, 8 percent for farm-to-market county roads, and 20 percent for city streets. Legislation that went into effect in 2003, which involved the transfer of jurisdiction of some roadways from the state to either a city or county government, requires a share (1.75 percent) of the Primary Road System funds be paid to local governments.
State Excise Tax on Fuels – 2012 (cents per gallon)1
|Motor fuel||Tax||Effective date|
|Gasoline||21.0||7/1/10 - 6/30/11|
(Fuel that has been blended with alcohol distilled from cereal grants, the end product containing at least 10 percent alcohol)
|Aviation jet fuel||3.0|
|Liquefied petroleum gas (LPG)||20.0||1/1/89|
|Compressed natural gas (CNG)||16.0/100|
|Per gallon rate is the same as the Motor Fuel Tax|
1Rates as of Jan. 1, 2012, unless otherwise noted. Excise taxes are governed by Iowa Code section 452A.3. Only dyed diesel fuel used for off-highway purposes and fuel exported outside of Iowa is sold tax-free.
TIME-21: In 2008, an additional source of state revenue was established through legislation creating a separate “TIME-21” funding stream. This revenue is dedicated primarily to maintenance and construction of certain primary highways in the state (60 percent), but also of secondary roads (20 percent) and municipal streets (20 percent).
TIME-21 was a response to a “perfect storm” of factors threatening to create an estimated $267 million per year funding shortfall, hindering the state’s ability to adequately maintain and improve public roadways in Iowa. Those factors include a large and aging public roadway system, increasing demands on that system, flattening revenue, and increased construction costs.
The new revenue stream, which helps to address the projected shortfall, was created by changing certain vehicle registration fees and schedules, and by increasing trailer and title fees.
Total state funding: For state fiscal year 2013, receipts into the RUTF and the TIME-21 Fund are estimated to be $1.298 billion, comprised of $443.8 million in fuel taxes, $779 million in various registration fees, plus $75.5 million from miscellaneous other sources.
Allocation: Iowa's Five Year Transportation Improvement Program is developed yearly by the Iowa Transportation Commission with input from DOT staff and the public. The program describes planned investments in Iowa’s multimodal transportation system, including aviation, transit, railroads, trails and highways. For fiscal years 2013-2017, approximately $6 billion is forecast to be available for highway right of way and construction.
Highway Trust Fund: In addition to state revenue, highway projects in Iowa are funded with revenue from federal taxes on motor fuel and other user fees. These funds are collected by the federal government and placed in the Federal Highway Trust Fund (HTF). The HTF was created through enactment of the Highway Revenue Act of 1956. For federal fiscal year 2010, nearly $35 billion was collected for the HTF. Revenue from motor fuel taxes totaled $32.2 billion or 92 percent of the total collected, with heavy vehicle user fees and tax on tires and trailers contributing $2.8 billion or 8 percent. Iowa’s contribution to the HTF totaled $461 million. The Highway Account and the Mass Transit Account were credited 86 percent and 14 percent, respectively.
A small percentage of federal general fund dollars have been added to the HTF In recent years to supplement the revenue since a combination of factors have made the revenue stream inadequate to fund the programs and projects the HTF was intended to cover. These factors include inflation, higher gas mileage, and use of vehicles powered by electricity.
Federal Tax on motor fuel – 2012 (cents per gallon)
|Tax||Highway account||Mass transit account||LUST fund|
|Compressed Natural Gas (NG)||18.3||17.07||1.23|
Federal Highway Trust Fund Receipts – 2010 (latest available) In thousands of dollars
|Highway account||Mass transit account||Total|
Other user fees
Allocation: The federal funds are apportioned (returned) to the states per provisions in Moving Ahead for Progress in the 21st Century that was passed by Congress on June 29, 2012, and signed on July 6, 2012 (Pub. Law 112-141). MAP-21 reauthorizes surface transportation programs through Sept. 30, 2014. Most federal transportation taxes, including those on gasoline and diesel fuel, are authorized through Sept. 30, 2016. Also, 0.1 cents per gallon of the gasoline, gasohol and diesel tax is credited to the Leaking Underground Storage Tax (LUST) Trust Fund.
Federal funds are available only as reimbursement of expenditures on approved projects. Most projects require a 10/20 percent non federal match.
During FY 2011, Iowa received nearly $500 million in federal-aid highway funds for improvement and maintenance of Iowa's roadways and bridges and other federal-aid eligible projects.