Members of Congress are in the early stages of crafting a surface transportation reauthorization bill that will set funding levels and priorities for highway and transit infrastructure projects for years. Lawmakers still have more than one year to pass the legislation before the prior authorization expires, but they also face big questions on how to fund projects as the Highway Trust Fund nears projected insolvency as soon as 2028.
For now, the U.S. Dept. of Transportation and key lawmakers appear to be aligned with construction industry groups on at least some issues for the upcoming bill. Groups including the American Association of State Highway and Transportation Officials, American Road & Transportation Builders Association, American Society of Civil Engineers and Associated General Contractors of America have called for officials to prioritize formula funding over discretionary grant programs.
Rep. Sam Graves (R-Mo.), who chairs the House Committee on Transportation & Infrastructure, shared a similar preference during a DOT event in July, calling formula programs “the most efficient way to get the money to the states.”
The last surface transportation bill was the 2021 Infrastructure Investment and Jobs Act, which expires on Sept. 30, 2026. It included more than $560 billion for DOT— including a $305-billion, five-year surface transportation reauthorization plus more than $100 billion for various discretionary programs such as the Infrastructure for Rebuilding America grants and the Bridge Investment Program. However, data from the nonpartisan Congressional Budget Office show that discretionary grant dollars take longer to be spent than formula funds, says Joung Lee, deputy director and chief policy officer at the state transportation officials group. But discretionary awards still have a place to help fund some projects, he adds.
“If we’re talking about uniquely large and complex projects—the Brent Spence bridges of the world, the Gateway tunnel, the Columbia River crossings—no state can squirrel away their formula dollars even for 10-20 years to be able to fund those types of projects,” Lee says. “But outside of what we’d call projects of national significance or of utmost federal interest, the formula approach is much more efficient for all other forms of projects that we’re trying to get funded.”
Besides the emphasis on formula funds, Graves’ four main priorities for the bill also include permitting reform aimed to shorten project timelines, give states more flexibility and find new revenue sources for the Highway Trust Fund, he said.
Hastening Regulatory Processes
Permit reform is also a focus among industry groups, and some have also proposed giving more authority to states to help speed regulatory processes. A big part of that is expanding use of NEPA Assignment, the program that allows participating states to assume responsibility for reviews under the National Environmental Policy Act. But only eight states have taken on NEPA Assignment so far.
Dave Bauer, president and CEO of the transportation builders group, says those states “have seen very significant results” saving money and delivering projects faster. To get more states onboard, Bauer said NEPA Assignment contracts should be standardized, with assignment terms permanent and some federal highway formula dollars available to help participating states pay for expedited reviews.
DOT has been moving to expand partnerships with states. Officials recently signed an agreement with the Texas Dept. of Transportation enabling it to hold NEPA Assignment responsibilities longer, a 10-year term, and make other adjustments that state agency officials said would expedite projects and reduce costs. DOT also signed a programmatic agreement this year with the Connecticut Dept. of Transportation aiming to hasten historic preservation reviews without going through the whole NEPA Assignment process.
“States have the capacity and longstanding experience to carry those reviews out and deliver projects a lot more quickly,” Lee says.
Lee also suggests co-locating staff from federal resource agencies such as the U.S. Fish and Wildlife Service with state DOT offices so those dedicated federal staff can review projects more quickly.
Industry leaders also hope to see an expansion of the One Federal Decision policy, which President Donald Trump issued as an executive order in his first term to expedite environmental reviews, and Congress codified in 2021 through the federal infrastructure act. It set a goal to complete reviews within two years and limit most environmental impact statements to 200 pages.
“Unfortunately, it hasn’t been used as much as we would have liked to have seen,” Bauer says.
Groups also want expanded categorical exclusions for projects that do not require an environmental impact statement or environmental assessment. Bauer says the maximum threshold of projects receiving $6 million in federal funds should be raised to $10 million to reflect increased labor and material prices, and ambiguity around what projects qualify for the less intensive process should be removed.
Funding Projects
The question of how to continue funding critical transportation projects looms over the reauthorization process. Currently, the Highway Trust Fund, used to provide money to highway and other transit infrastructure, is projected for insolvency by 2028, according to Congressional Budget Office numbers and an analysis by the group Transportation for America.
At the same time, industry groups say Congress should increase funding. The state transportation officials group and American Society of Civil Engineers say lawmakers should maintain current funding levels from the infrastructure bill and then account for inflation as the baseline funding level. The transportation builders group has called for a highway investment increase to $84.6 billion and a transit funding boost to $26.3 billion in fiscal 2027, with further upward adjustments each year over the bill’s life. The American Public Transit Association proposes that Congress provide $138 billion for public transit in the trust fund and $130 billion for passenger rail over five years, says Ward McCarragher, the group’s vice president of government affairs.
Lawmakers such as Graves, as well as industry groups, have so far voiced support for adhering to a “user pays” principle to raise money for the Highway Trust Fund. Currently, its revenue mostly comes from the federal gas tax, but Congress has not raised the tax since 1993, while vehicle fuel efficiency improvements have resulted in less revenue while inflation and construction cost escalations mean that each dollar collected does not go quite as far as it used to.
Graves has proposed registration fees on electric and hybrid vehicles as a new source of revenue for the fund—”the first new money in the Highway Trust Fund in 30 years,” he said.
But fees on EVs and hybrid vehicles likely won’t be enough on their own to close the trust fund’s growing financial gap. McCarragher says the transit association and other groups supported increasing the gas tax during the last reauthorization. While that effort was unsuccessful, and Ward says “there seems to be less discussion of that” in Congress this time, it’s something that at least some in industry remain open to.
”We’re not going to pay for the whole next bill with people who are driving Teslas or Priuses,” Bauer says. “But we think that the gas tax, despite its political shortcomings, remains an incredibly valid and viable mechanism to generate revenue, as evidenced by the fact that states are still increasing their gas taxes.”
The civil engineers’ group has proposed indexing transportation user fees to inflationary measures, such as the National Highway Construction Cost Index or Consumer Price Index, to ensure no purchasing power decline. The state transportation officials group has looked at dozens of possible revenue sources, but many, such as a bicycle tire tax, would likely not yield meaningful revenue, Lee says. Some who are watching the reauthorization process have looked at vehicle-miles-traveled fees in addition to the gas tax and EV/hybrid fees, he adds.
“That is going to be, I think, perhaps the hardest question to answer, to make sure that we’re well resourced in the next bill,” Lee says.
