Feds Send Billions to States for Highways. Locals Want a Bigger Share.

Congress returns to work this fall with the clock ticking on surface transportation funding. Cities and states have a lot to gain — or lose — as they work to maintain roads, bridges and other transportation infrastructure.

When the Infrastructure Investment and Jobs Act expires in September next year, it takes with it $350 billion in federal highway funding, largely distributed to states according to a preset formula based on population and roadway miles.

Traditionally transportation funding has been a bipartisan effort. But it’s not without conflicts.

This year, as members of Congress and the White House begin compiling their priorities, there’s an emerging tension between states, which generally receive almost all of the federal highway funding, and cities and counties, which typically receive very little directly, despite controlling a large share of roads and bridges.

Earlier this year, the National League of Cities released a set of priorities for the next reauthorization. It led with a request for Congress to allocate more road funding directly to regions and metropolitan planning organizations, without being routed first through state departments of transportation.

The requests followed a pair of reports from the Brookings Metropolitan Policy Program that showed state DOTs share little of the federal highway funding they receive with local governments. In effect, local road users subsidize state departments by generating more than their share of gas-tax revenue.

Cities and regions are asking for a bigger share of the pie. “The data right now shows that states have needs, absolutely, but local roads are in way worse condition than state-owned roads,” says Brittney Kohler, a legislative director for the National League of Cities.

Formula Funding

The Infrastructure Investment and Jobs Act (IIJA), enacted in 2021, included billions for competitive grant programs with novel goals, but the bulk of its transportation funds were simply an extension of existing highway formula spending. The extension and expansion of that funding is known as surface transportation reauthorization, or sometimes simply “reauth,” a process that’s occurred in fits and starts in recent decades. Several one-year extensions have punctuated multiyear spending deals when Congress hasn't met the original deadlines.

The state-led model of federal highway funding dates back to the early 20th century. Starting in the 1950s, funds were distributed to states according to formulas based on population and land area, but also the needs of the new interstate highway system. Congress largely maintained those formulas even after that network was officially completed in the early 1990s.

Over the last few decades, surface transportation bills have gradually incorporated some funds that go directly to cities, primarily through competitive grant programs. The IIJA drastically expanded the amount of funding that cities could apply for directly, through programs such as Safe Streets and Roads for All.

Administering those competitive grant programs has proven to be “an enormous administrative burden” for both cities and the federal government, says Adie Tomer, a senior fellow at Brookings Metro. But it’s also highlighted cities’ vast unmet infrastructure needs. “You can’t unsee the enormous demand from locals for projects,” Tomer says.

But states aren’t willing to give up anything. The American Association of State Highway and Transportation Officials (AASHTO) issued a memo in June calling on Congress to “protect what works” by maintaining formula funding to states. The next bill should “reject proposals to provide federal highway funds directly to local governments that do not have the capacity to administer these funds,” the memo said.

Jim Tymon, AASHTO’s executive director, says that cities aren’t accustomed or equipped to efficiently handle the red tape involved in spending federal money. He notes that cities’ existing share of federal transportation funding is more likely to be unspent than states’.

“We want to see a bill done on time. We’d love to see funding levels at the IIJA levels plus inflation,” Tymon says. “And we really want to see Congress prioritize what’s been proven to work, which is the formula funding that goes directly into the state DOTs.”

Back to Basics?

The push and pull between cities and states is happening as Congress and the White House are beginning to signal their own priorities for reauthorization. Already, some of the IIJA funding for local communities has been clawed back, including money for projects meant to address past harms done to communities by the interstate highway program.

Republicans, including Sam Graves of Missouri, who chairs the House Committee on Transportation and Infrastructure, are championing a “back-to-basics” approach to transportation that would seem to involve eliminating some competitive programs incorporated in the IIJA. The White House is emphasizing similar goals.

“We really want to fund those projects that are important for the nation, for our economy, that have national importance, and we don’t want to see distracting social-justice requirements,” said Steven Bradbury, deputy secretary of the U.S. Department of Transportation, at a July event marking the beginning of the reauthorization process. “We don’t want to use infrastructure funding and programs to try to force an artificial transition in energy that is going to ruin the economy of the United States. Instead, back to basics.”

Graves says the House intends to pass a reauthorization bill by the end of the year. But there are reasons to suspect the negotiations might drag on past that deadline. Historically, they often do.

Raising more money and expanding the types of funding that are available to cities and states could be one way for Congress to sidestep the tension between the differing levels of government. But city and state officials both acknowledge that doesn’t seem to be the way the reauthorization process is headed.

“Ultimately it would not be very difficult to execute some very strategic and transformative programs in transportation,” Kohler says. “Until we do that, we have to fight over the limited dollars that are available.”