Federal Funding Trends

Before considering the additional needs it is important to point out that federal “authorization” funding for surface transportation was recently increased significantly. This funding was made available as part of the August 2005 five-year federal surface transportation funding program, called the Safe, Accountable, Flexible and Efficient Transportation Equity Act – A Legacy for Users (SAFETEA-LU), the source of about 40 percent of all U.S. highway investment.[43] The act provides authorization for $286.4 billion in surface transportation funding, with $193.2 billion for highways and $45.3 billion for transit. This authorization level represents a $68.0 billion increase over the prior 1998 act; however it is far less than the $375 billion that the U.S. House passed in its version of the bill.[44]

However, even though spending authorization levels were increased, it is unlikely that this spending level can be implemented. The Highway Trust Fund, which collects fuel taxes and is the source of all this funding, is running out of money and will be in deficit by 2009 unless fuel taxes are increased. The Trust Fund is running out of money because fuel taxes have not been increased since 1993 and have lost 30 percent of their purchasing power to inflation. As a result of these issues, Congress seldom appropriates each year all the money that has been authorized in the transportation authorization act. For instance, for 2005, only about 85 percent of approved levels were made available under the so-called “obligation limit” set annually by Congress.[45] Allocation levels were further reduced for 2006 and 2007, and are likely to be reduced even further in 2008-2009.

For Michigan, the act authorizes an average five year increase in funding of $239 million, or about 27 percent.[46] For 2007, the act authorizes $1,137.5 billion. However, the funding includes $643.3 million in five year total funding that is “earmarked” or dictated specifically by Congress. These earmarks represent 11 percent of total SAFETEA-LU funding for Michigan, up from 6 percent in the prior six-year act.[47] Some $314.3 million of that total is above line and reduces our regular formula funding dollar for dollar. Just $120 million is over and above what our normal formula funding would have been. More importantly, just $15.9 million of the earmarked dollars were in Michigan’s 2005 five-year plan of priority projects.

As with the nation as whole, it is important to point out that Michigan is not seeing annual appropriation levels at the authorized levels because of the shortfalls in the Highway Trust Fund. For instance, over the prior five-year TEA-21 federal authorization act, Michigan received obligation authority averaging $834.5 million per year, with levels of $928.2 million in FY 2004, $888.1 million in FY 2005, and $919.1 million in FY 2006.[48] Since FY 2005, we have received obligation limits averaging just $903.6 million, or a $69 million increase over the prior five-year period. These increases are nowhere near the $239 million increase for Michigan that was authorized under the act and trumpeted to the media. Going forward it appears federal funding levels will be further curtailed, with MDOT now estimating it will receive $157 million less in federal funds over the state five-year plan than what it had previously conservatively estimated.[49]

In conclusion, federal funding to Michigan is up somewhat from the early part of the decade but not by as much as had been initially approved, and funding over the next five years is likely to be further curtailed absent new federal fuel taxes.