banner

Highway finance

Information on this Web page was last updated in March 2013.

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.

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 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
Ethanol-blended gasoline2
(Fuel that has been blended with alcohol distilled from cereal grants, the end product containing at least 10 percent alcohol)
19.0 1/1/89

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

19.0 7/1/07
Aviation gasoline 8.0  
 
Special fuel    
Diesel 22.5 1/1/89
Aviation jet fuel 3.0  
Liquefied petroleum gas (LPG) 20.0 1/1/89
Compressed natural gas (CNG) 16.0/100  
  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 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.

2In 2001, the General Assembly of Iowa enacted HF 716 (FY 2002 Ethanol Sales Promotion Act). The Act provided for changes in tax rates based on the gallons of ethanol-blended gasoline sold during the previous calendar year.  Prior to the enactment of FH 716, the state taxes gasoline at 20 cents per gallon and ethanol at 19 cents.


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 $1.30 billion, comprised of $440 million in fuel taxes, $780 million in various registration fees, plus $80 million from miscellaneous other sources.

Allocation: 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. 


Federal funding/allocation

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 2012, more than $40 billion was collected for the HTF. Revenue from motor fuel taxes totaled $34.2 billion or 85 percent of the total collected, with heavy vehicle user fees and tax on tires and trailers contributing $6 billion or 14.9 percent. Iowa’s contribution to the HTF totaled $565 million. The Highway Account and the Mass Transit Account were credited $499.2 million and $65.8 million respectively from Iowa contributions.

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
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 – 2012 (latest available) In thousands of dollars

  Highway account Mass transit account Total  
Gasoline/Gasohol 21,161 3,937 25,098 62 percent
Diesel 8,010 1,066 9,076 23 percent

Other user fees

5,994   5,994 15 percent
Total 35,165 5,003 40,169  
  87.5% 12.5%    

Apportionments: The federal funds are apportioned (returned) to the states per provisions in Moving Ahead for Progress in the 21st Century (MAP-21) which was passed by Congress on June 29, 2012, and signed on July 6, 2012 (PL 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 2012, Iowa received about $460.9 million in federal aid highway funding for improvement and maintenance of Iowa’s roadways and bridges and other federal-aid eligible projects.