banner

Highway funding in Iowa

Information on this Web page was last updated July 2016.

State highways maintained by the Iowa Department of Transportation (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.

State funding/allocation

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 (RUTF). No State of Iowa 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 – 2016 (cents per gallon)1

Motor fuel Tax
Gasoline 30.7
Ethanol-blended gasoline2
(Fuel that has been blended with alcohol distilled from cereal grants, the end product containing at least 10 percent alcohol)
29.0

E85 gasoline
(Ethanol-blended gasoline that contains a minimum percentage of between 70 and 80 percent by volume of ethanol)

29.0
Aviation gasoline 8.0
 
Special fuel  
Diesel 32.5
Diesel B11 29.5
Aviation jet fuel 5.0
Liquefied petroleum gas (LPG) 30.0
Compressed natural gas (CNG) 31.0
  Cubic feet

Biofuel
(Defined as any oxygenated product derived from soybean oil, vegetable oil or animal fats that can be used in diesel engines or aircraft. Biofuel may be a blend of diesel fuel or it may be 100 percent soybean oil, vegetable oil or animal fats. Any biofuel product is taxed as special fuel.)

Per gallon rate is the same as the Motor Fuel Tax
 

1Rates as of July 1, 2016.  Excise taxes are governed by Iowa Code 452A.3.  Only dyed diesel fuel used for off-highway purposes and fuel exported outside of Iowa is sold tax-free.

2On Jan. 1, 2016, the rates for gasoline and ethanol-blended gasoline changed – from 31 cents per gallon and 29 cents per gallon, respectively, to the rates shown above.  This change is due to the ethanol usage rate in Iowa rising above 75 percent, as provided in law.


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 FY 2017, receipts into the RUTF and the TIME-21 fund are estimated to be $1.635 billion, comprised of $671 million in fuel taxes, $890 million in various registration fees, plus $74 million from miscellaneous other sources. 

Allocation: Iowa's Five Year Transportation Improvement Program is developed yearly by the Iowa Transportation Commission with input from Iowa DOT staff and the public. It describes planned investments in Iowa’s multimodal transportation system, including aviation, transit, railroads, trails and highways.  For FY 2017-2021, approximately $3.5 billion is forecast to be available for highway right of way and construction.

Current five-year program:
2017-2021 Iowa Transportation Improvement Program

Federal funding sources

Overview - In addition to state revenue, highway projects in Iowa are funded via federal programs as well.  The primary funding source for these federal programs is revenue from federal taxes on motor fuel and other user fees which flow into the federal Highway Trust Fund (HTF). The HTF was created through enactment of the Highway Revenue Act of 1956.  The taxes are collected by the federal government and placed in the HTF which consists of two accounts: the Highway Account, and the Mass Transit Account.  

Federal Tax on motor fuel – 2016 (cents per gallon)

  Tax Highway account Mass transit account LUST fund
Gasoline/Gasohol 18.4 15.44 2.86 0.1
Diesel 24.4 21.44 2.86 0.1

Liquid propane

18.3 16.17 2.13  
Compressed natural gas (NG) 18.3 17.07 1.23  

Federal Highway Trust Fund receipts – 2014 (latest available)

  National from Iowa % contributed by Iowa
Highway account $34 B $468 M 1.37%
Mass transit account $6 B $77 M 1.4%

TOTAL

$40 B $544 M 1.4%

Federal dollars back to Iowa

The federal funds are apportioned (returned) to the states per provisions in the FAST Act which was passed by Congress on Dec. 3, 2015, and signed the following day (PL 114-94). The FAST Act reauthorized surface transportation programs through Sept. 30, 2020. Most federal transportation taxes, including those on gasoline and diesel fuel, are authorized through Sept. 30, 2022.

States’ apportionment and allocation totals now exceed their contributions because federal general fund dollars have been added to the HTF In recent years to supplement the revenue. A combination of factors has 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.



Funds paid out from the Highway Trust Fund – formula and allocation FY 2014 (latest available comprehensive data)

  National to Iowa % returned Iowa
Highway account $40 B $505 M 1.27%
Mass transit account $11 B $40 M .38%

TOTAL

$51 B $545 M 1.1%

Federal funds are available only as reimbursement of expenditures on approved projects. Most projects require a 20 percent non-federal match.

Allocation of federal funds
In FY 2014, $504.7 million of the Highway Account funding was returned to Iowa in the form of formula apportionments and allocations for the improvement and maintenance of roadways and bridges and other federal-aid eligible projects around the state.