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Transportation Funding & Financing

TEA-21

The Transportation Equity Act for the 21st Century

TEA-21 was enacted June 9, 1998 as Public Law 105-178. TEA-21 authorizes the Federal surface transportation programs for highways, highway safety, and transit for the 6-year period 1998-2003. The TEA 21 Restoration Act, enacted July 22, 1998, provided technical corrections to the original law.

By and large, the Act maintains the core surface transportation programs authorized under the Intermodal Surface Transportation Efficiency Act of 1991. However, the Act does effect several significant changes, including an increase in authorized funding to $175 billion for highways and $42 billion for transit over six years. It also substantially alters the budgetary treatment of the Federal-aid highway program and collapses all equity adjustment funding categories into a single program known as Minimum Guarantee. TEA 21 also provides new grants, management flexibilities, and project financing opportunities to state Departments of Transportation (DOTs) and other project sponsors. Major finance provisions include:

  • Enactment of a new pilot program to supplement the existing state infrastructure bank (SIB) pilot for four states;
  • Enactment of the Transportation Infrastructure Finance and Innovative Act (TIFIA), which enables the USDOT to provide up to $10.6 billion in credit assistance (through loans, loan guarantees, and standby lines of credit) to major projects of national significance;
  • Language offering new means for states to generate income for surface transportation projects through tolls; and,
  • Language offering more flexibility in non Federal matching share requirements

Before enactment of TEA-21, most of the Federal highway and transit programs were part of a broad budget category with other domestic discretionary programs (for which spending authority is typically provided through annual appropriations acts). As Congress annually weighed spending priorities in an effort to balance the budget, the surface transportation programs competed for budgetary resources with other discretionary programs like education, housing, environment, and energy.

Under TEA-21, new budget categories are established for highway and transit discretionary spending, effectively establishing a budgetary "firewall" between each of those programs and all other domestic discretionary programs. The new categories are still subject to budget constraints, but reductions in highway or transit spending will not automatically free up spending for other programs. This removes the principal incentive to limit highway or transit spending. The highway firewall "protects" the obligation limitation for Federal-aid highways plus the motor carrier and other highway safety programs (highway safety grants and National Highway Traffic Safety Administration operations and research) that have contract authority.

The highway program funding level protected by the firewall is the result of a negotiated process, including members of the Congressional transportation authorization committees, the budget committees, and the Administration. All the parties recognized the increasing disparity between the receipts from highway user taxes and highway spending, but they also shared a commitment to attaining a balanced Federal budget. The guaranteed funding levels reflect a compromise between those competing goals, but TEA-21 included a process for adjusting the firewall levels should Highway Trust Fund receipts be higher than projected at the time the firewall levels were set.

  Guaranteed Available for Obligation (in millions)
  19981 1999 2000 2001 2002 2003 Total
Highways              
Firewall1 $21,841 $25,883 $26,629 $27,158 $27,767 $28,233 $157,511
Exempt $739 $739 $739 $739 $739 $739 $4,434
Total $22,580 $26,622 $27,368 $27,897 $28,506 $28,972 $161,945
Transit              
Firewall1 $4,844 $5,365 $5,797 $6,271 $6,747 $7,226 $36,250
Total $27,424 $31,987 $33,165 $34,168 $35,253 $36,198 $198,195

1There is actually no firewall for FY 1998. The amount shown reflects the amounts made available either as contract authority or appropriated budget authority.

In setting the highway firewall levels, the Congress used conservative projections of Highway Account tax receipts and specified these projections in TEA-21. Each year, as part of the preparation of the President's budget submission to the Congress, new projections of tax receipts will be made. To the extent these revised projections are different from the initial projections used in setting the firewall amounts, the firewall levels will be adjusted by the amount of the difference. Corresponding adjustments will be made to the Federal-aid highway program authorization levels and the related obligation limitation. Thus, growth in highway spending is linked to growth in the receipts to the Highway Account (See Revenue Aligned Budget Authority below.)

The guaranteed amount for highways has two components: the amount behind the highway budgetary firewall and the authorizations for programs that are exempt from the annual obligation limitation - Emergency Relief and a portion ($639 million per year) of the Minimum Guarantee. The guaranteed funding for transit programs has a single component - the firewall amount - which is not keyed to HTF receipts. There is no provision for adjusting the transit firewall amount.

Beyond Guaranteed Funding - The Red Zone

Authorizations in TEA-21 for fiscal years 1998-2003 exceed the guaranteed funding levels by $5 billion for transit programs and $15 billion for highway and all other programs. The authorizations in excess of the guaranteed levels are in the so-called budgetary "red zone" and remain part of the general discretionary budget category. Red zone funds in excess of the firewall amounts may be made available through the annual budget and appropriations process and must compete with other discretionary spending priorities for their place in the budget each year.

Revenue Aligned Budget Authority (RABA)

Beginning with fiscal year 2000, authorizations for Federal-aid highway and highway safety construction programs funded from the Highway Account of the HTF will be adjusted (increased or decreased) whenever the highway firewall amount is adjusted to reflect changed estimates of Highway Account revenue - that is, the budget authority will be aligned with the revenue.

In the case of an increase, a portion of the increase in authorizations is reserved for the Federal-aid highway and highway safety construction programs allocated by the Secretary of Transportation - programs that are not apportioned to the states by statutory formula. The amount reserved is determined by calculating the ratio of the authorizations for the allocated programs to total authorizations from the Highway Account for Federal-aid highway and highway safety construction programs and applying this ratio to the additional authorizations. The resulting amount is divided among the various allocated programs in the same proportion that those programs receive authorizations exclusive of RABA. The remainder of the increased funding is distributed to the states proportional to their shares of Federal-aid highway and highway safety construction apportionments from the Highway Account. Each state's share is then divided proportionally among the following programs: Interstate Maintenance, National Highway System, Bridge Replacement and Rehabilitation, Surface Transportation Program, and Congestion Mitigation and Air Quality Improvement.

Should a decrease be necessary, the reductions in authorizations would be made in the succeeding fiscal year and applied proportionally to all Highway Account authorizations for Federal-aid highway and highway safety construction programs except Emergency Relief.

The table displays the legislative outcome for key financial provisions.

TEA 21 Box Score: Key Innovative Finance Provisions
Category/Provision Purpose TEA 21 Sections
State Infrastructure Banks Establishes a new SIB pilot program for four states. 1511
Direct Federal Credit    
Surface Transportation Credit Program Provides direct Federal loans, loan guarantees, and lines of credit for large surface transportation projects of national significance. 1501-1504
Rail Credit Pilot Provides direct Federal loans and loan guarantees for rail and intermodal projects. 7203
Tolls and Other Income    
Interstate Highways: Conversions to Toll Up to three Interstate highway segments may be converted from free to toll as part of a reconstruction project. 1216(b)
Right-of Way-Income Allows income from right-of-way sales and leases to be used for Title 23 purposes, as currently allowed for airspace income. 1303
Matching Share Provisions    
Tapered (Variable) Match Allows non federal share to vary over project life, so long as the ultimate matching share is preserved over time. 1302
Program Level Match For Surface Transportation Program projects, allows for Federal STP projects funds to be matched across full program, not on a project-by-project basis. 1108
Flexible Match: Federal Land Management Agency Funds Funds from other Federal agencies may count toward the non federal matching share for recreational trails and transportation enhancement projects. 1115(j)
Flexible Match: Federal Lands Highway Program Funds from the USDOT's Federal Lands Highway Program may count towards non federal match for projects within or providing access to Federal or Indian lands. 1115(k)
Flexible Match: Publicly-Owned Land Permits donations of publicly-owned property to count towards non federal match on all Federal-aid highway projects. 1301
Soft Match: Toll Credits Permits certain toll revenues to be used as a credit toward the non federal share of another highway project. 1111(j)
Tax-Exempt Status for Private Activity Highway Bonds Would have permitted up to 15 privately-owned and/or operated highway projects to gain eligibility for tax-exempt financing. none

Source: FHWA

Resources

The material presented on this web site reflects the combined effect of these two laws and refers to this combination as TEA-21. The contents of the TEA-21 web site are organized as follows:

Cross Reference
Includes each section of TEA-21, the legislative language, links to related guidance (policy memoranda, Federal Register notices, regulatory actions), fact sheets, questions and answers, and other resources.

Summary Information
Summaries of TEA-21 content, progress reports, etc.

Fact Sheets
Fact sheets on the programs and provisions in TEA-21.

Funding Tables
Tables showing TEA-21 authorizations, apportionments, allocations, obligation limitations.

Information Exchange
Information about the TEA-21 outreach sessions, including session summaries.

Publications
TEA-21 related publications available on -line and instructions for ordering paper copies.

Legislation

http://www.fhwa.dot.gov/legsregs/title23.pdf (596 KB)
Title 23, United States Code, updated 2/17/00

Compilation of Selected Surface Transportation Laws
Includes Title 23 USC, available from the Government Printing Office, posted 7/14/99

http://www.fhwa.dot.gov/tea21/tea21.pdf (1 MB)
TEA-21 (PL 105-178) as amended by the TEA 21 Restoration Act (PL 105-206), posted 3/10/99

Transportation Equity Act for the 21st Century
Full text of PL 105-178, Transportation Equity Act for the 21st Century, as enacted. Note: the legislation is currently available as one document for viewing online and in PDF file format, posted 7/21/98.

Conference Report for HR 2400, the Transportation Equity Act for the 21st Century, as printed in Congressional Record of 5/22/98, posted 5/26/98.
Part 1
Part 2
Part 3
Download a zip file of all three parts: http://www.fhwa.dot.gov/tea21/conf2400.zip (441 KB)

TEA-21 Restoration Act (Title IX of H.R. 2676)

Summary of the TEA-21 legislation