NCPA - National Center for Policy Analysis


August 19, 2004

The Federal Highway Program was intended to collect federal fuel tax revenue from all states and disperse funds to each state based on need. Yet, many southern states are subsidizing northern states through the program, says Heritage Foundation researcher Ronald D. Utt.

According to Federal Highway Administration data for 2003:

  • Out of 50 states, 23 received smaller shares of highway money than what they paid into the fund.
  • Of the 23 states receiving smaller shares, 17 of them have consistently received less than what they pay into the fund since the program's inception in 1956.
  • Arizona, Florida, Georgia and Texas were among states receiving the lowest share of highway funds, from 81 cents to 86 cents per dollar paid.
  • Alaska, D.C., Rhode Island and North Dakota were among the highest "recipient" states of highway funds, getting back $2.11 to $5.38 for each dollar paid.

Congress has attempted to equalize the distribution of funds in 1998 by guaranteeing that each state must receive at least 90.5 percent of what they pay into the fund. Congress met this not by changing the formula for allocation, but by simply giving some states more money, including "recipient" states such as New York and Pennsylvania, which were already receiving more than what they paid into the fund.

Moreover, during years where highway trust fund spending exceeds tax receipts, it gives the appearance that every state is getting an above-average share of funds, says Utt.

The simple solution, says Utt, is to allow states to collect, keep and allocate their own federal fuel taxes and keep them out of Washington, D.C.

Source: Ronald D. Utt, "The Federal Highway Program Shifts Money from South to North," Executive Memorandum 938, The Heritage Foundation, July 7, 2004.

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