The Donor-Donee State Issue in Highway Finance (CRS Report for Congress)
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| Release Date |
June 13, 2011 |
| Report Number |
R41869 |
| Report Type |
Report |
| Authors |
Robert S. Kirk, Specialist in Transportation Policy |
| Source Agency |
Congressional Research Service |
Summary:
Few issues in federal highway finance have raised such heated debate as how closely each state's federal highway grants should match its highway users' payments to the Highway Trust Fund (HTF). This "donor-donee" state issue has been contentious during every reauthorization of federal surface transportation programs since 1982. It has again emerged during the congressional debate over reauthorization of the current highway funding program, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA; P.L. 109-59), which has been extended through December 31, 2011.
"Donor states" are states whose highway users are estimated to pay more to the highway account of the Highway Trust Fund than they receive. "Donee states" receive more than they pay.
Traditionally, the donor states, located mainly in the South and Midwest, have asserted that they have been subsidizing the repair and improvement of infrastructure in other parts of the country, especially in the Northeast. Donee state advocates have responded that some transportation needs are inherently federal rather than state, and that a national highway network cannot be based solely on state or regional boundaries. Although the argument continues, the facts on the ground have changed: Federal Highway Administration figures indicate that for FY2007-FY2009 all 50 states were donee states, because outlays from the Highway Trust Fund exceeded federal highway tax receipts in each year.
This report examines the donor-donee issue in the context of the effort to reauthorize federal surface transportation programs. The main questions facing Congress are the following:
How can the donor-donee controversy be resolved amid efforts to reduce the federal deficit, given that the solution in the past was to give all states more money?
How might the donor-donee issue be resolved if highway program spending were limited to the annual revenues flowing into the highway account of the HTF?
How can the donor-donee issue be resolved if highway spending over the next several years is restricted to the SAFETEA baseline level?
Has the "user pays" principle, under which highway infrastructure is funded by taxes paid by the highway users who benefit from it, been violated and, if so, what are the implications for the "equity" of the distribution of federal highway spending?
In recent years, Congress has provided three transfers from the general fund totaling $29.7 billion to shore up the highway account. These general fund transfers to the HTF are unrelated to highway taxes and thereby weaken the arguments for a guaranteed rate of return on each state's highway tax payments to the HTF. If highway user taxes were to be increased or the highway program budget cut to bring the revenues flowing into the HTF into alignment with the funding flowing out, the case for a guaranteed rate of return would be strengthened.
