Federal Transportation Funding in Iowa

Transportation programs in Iowa are funded with a combination of local, state and federal dollars. This funding pays for a wide range of transportation improvements and operations for all transportation modes. Examples include: constructing, maintaining and improving highways; improving airports, waterways and railroads; enhancing aviation, rail and transit services; and supporting motor carrier safety and enforcement activities.

Most federal funds returned to state and local governments come from modal trust funds made up of various federal user fees. Many programs also receive a small percentage from the federal general fund.

The largest of the transportation trust funds was established in 1956 to ensure a steady flow of money to support the construction of the nation's interstate system. The Highway Trust Fund (HTF) and user fees have been continued and now support a wide range of transportation programs. User fees include fuel taxes, heavy vehicle use taxes, and retail taxes on purchases of trucks and truck tires. More than 88 percent of the revenue to the HTF comes from fuel taxes. HTF receipts are credited to two accounts, the highway account and the mass transit account. In 2006 (latest available), Iowa contributed $429.6 million to the highway account and $58.7 million to the mass transit account. This represents 1.27 percent and 1.21 percent, respectively, of the total receipts.

In addition to the construction, maintenance and improvement of the system of federal-aid highways, the highway account funds a wide range of motor carrier safety and enforcement programs, along with highway-railroad grade crossing programs. The mass transit account provides funds for the construction and operation of bus and rail transit systems.

Revenue to support FAA programs comes from the Airport and Airways Trust Fund. This fund is generated by passenger ticket taxes, segment taxes, freight taxes, and fuel taxes. Taxes paid by passengers account for 70 percent of revenues, aviation fuel tax contributes 10 percent, freight waybills account for 5 percent, and the international enplanement tax contributes 13 percent.

The smallest of the transportation trust funds is the Inland Waterway Trust Fund. A tax on barge diesel fuel is the only revenue source for this fund. These funds provide 50 percent of the cost of major capital improvements on the inland waterway system.

Congress must give permission for federal funds to be expended. Transportation authorization legislation is the mechanism by which this permission is granted. Authorization legislation establishes transportation policy and areas of emphasis for spending by creating and defining programs and authorizing funding. The funding mechanism, including the various user fees, is established. Authorization legislation covers multiple years since transportation projects require a long time from planning through construction.

The current surface transportation authorization act is the “Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users” (SAFETEA-LU) signed into law Aug. 10, 2005. This legislation follows nearly two years of apportionment extensions to the previous reauthorization act, TEA-21 (12 extensions in all). Fiscal year 2004 was completed during the extensions; therefore, the final act is a five-year bill covering fiscal years 2005 through 2009.

SAFETEA-LU continues the TEA-21 concepts of intermodalism, an equitable rate of return for receipts into the trust fund, and firewalls which protect the trust fund from being used to fund non-transportation programs. SAFETEA-LU is also notable for the number of projects specified for funding called “earmarks”.

On December 12, 2003, President Bush signed into law a four-year, $62 billion reauthorization of federal aviation programs. The legislation “Vision 100 – Century of Aviation Reauthorization Act,” provides $14.2 billion for the Airport Improvement Program, $140 million to assist small communities with attracting and retaining air service, $308 million for Essential Air Service activities and $2 billion for security screening at airports. The act reflects the profound impact of the Sept. 11, 2001, terrorist attacks, placing a great deal of emphasis on security.

With the upcoming expiration of VISION 100, aviation programs are due to be reauthorized in 2007, including those that set spending levels for the Airport Improvement Program (AIP), Essential Air Service, Small Community Development Grants, the Facilities and Equipment Program, and other programs that develop and maintain facilities at airports around the country. Also due to expire is the funding mechanism for the Airway and Airport Trust Fund, so reauthorization discussions have also included a debate over funding mechanisms for the trust fund.

The federal-aid highway program receives contract authority in the authorization act, meaning that no further congressional action is required before the program funds are distributed. However, the annual appropriations legislation places yearly limits on the amount of the funds that can be spent. Other transportation programs, especially those that receive money from the federal general fund, require the appropriations act to identify the amount of money that is available for the year. In addition to funding authorized programs, appropriation legislation usually provides the opportunity for a certain number of earmarks selected by Congress. The appropriations legislation also provides an opportunity for Congress to address changes in policy direction or funding priorities without waiting for the next authorization act.

Most federal funds are distributed to state and local officials based on formulas. For example, Iowa receives funds to maintain the interstate system based on our share of the nation's interstate vehicle miles and interstate lane miles, while we receive funds for urban planning based on our share of the nation's urban population. Funds for improving our airports are based on the number of passengers, population, and geographic area of the state; and a portion of the five-year capital improvement plan for general aviation airports. Transit funding is based in part on transit ridership. These formula funds are called entitlements or apportionments. Other programs have no mandatory distribution formula, so distribution is based on competitive applications or another project selection process. These funds are called allocations. In general, as a condition of receiving federal funding, the state or local jurisdiction is required to provide matching dollars. The most common matching requirement is 20 percent, but it can be as low as 0 percent or as high as 50 percent.

The following table identifies the level of FY 2008 funding received by Iowa for state and local projects and activities.

For additional information, please contact the Iowa Department of Transportation's Office of Policy and Legislative Services at 515-233-7964 or review the DOT's Funding Guide.