Texas Tax Adjustment Will Cause All Other States to Lose Money Under FY21 Extension

The pending one-year extension of FAST Act funding and programs (H.R. 8319) is the “cleanest” we have ever seen, in terms of the fewest changes to existing law and the least convoluted legislative language. In essence, for Highway Trust Fund programs, it just says, do everything that you did in 2020 all over again in 2021. (9/23/2020 addition: The version of the legislation passed by the House last night was H.R. 8337; the surface transportation extension portion was unchanged from H.R. 8319.)

Because of this, it appears that, if enacted, H.R. 8337 will require the calculations for the apportionment of fiscal 2021 federal-aid highway funding to be run anew, using the same amount of money as in fiscal 2020. (The same thing happened in fiscal year 2015 under the extensions of MAP-21.)

However, as the Eno Center noted at length in its 2019 report Refreshing the Status Quo: Federal Highway Programs and Funding Distribution, under the FAST Act (as under MAP-21), there is only one variable in each year’s apportionment of highway formula funding – the estimated amount of excise taxes paid in each state into the Highway Account of the Highway Trust Fund during most recent for which estimates are available. All other variables that used to be in the “formula” for highway funding are still frozen at their 2007 levels. (See this article for more information.)

The state Highway Account tax payments are used to enforce subsection (c)(1)(B) of 23 U.S.C. §104, which guarantees that “each State receives an aggregate apportionment equal to at least 95 percent of the estimated tax payments attributable to highway users in the State” deposited in the Highway Account in the most recent year.

That requirement was first effective for fiscal year 2014 apportionments (the final year of MAP-21) and has been effective in every year since. In all those years, the only state that has periodically triggered this 95 percent adjustment has been Texas. Its frozen-in-time formula entitlement is 8.8142 percent of total annual highway apportionments, but that has to be translated into dollar amounts, because the calculation of the 95 percent minimum is based on dollars, not percentages. (FWIW, the Lone Star State pays around 10 percent of annual gasoline taxes and around 13 percent of annual diesel and trucking excise taxes, according to the FHWA model).

For fiscal year 2020, the final year of the FAST Act, the total amount available for apportionment was $43,369,794,311. Per the FHWA computation tables, Texas’s initial base apportionment was 8.8142 percent of that, or $3.823 billion. But for the most recent year available (fiscal 2018 tax payments, available in summer 2019 when the fiscal 2020 calculations were being made), Texas’s Highway Account tax payments were $4.244 billion, and 95 percent of that came out to $4.032 billion, which was $209 million more than their base apportionment of $3.823 billion. So every other state, and the District of Columbia, saw its initial apportionment reduced by their pro-rated share of $209 million (about a half-percent haircut, or -0.53 percent) so that Texas’s final apportionment could be increased to $4.032 billion, as in the final apportionment notice (N4510.844).

Under H.R. 8337, the 2021 apportionment calculation should be run with the same total amount of money ($43,369,794,311), but against the fiscal 2019 Highway Account tax payments, not 2018. And, wouldn’t you know it, Texas’s estimated tax payments went up, again, so their 95 percent of that causes their minimum dollar amount to go up, again:

HTF-HA Tax
Receipts Times Equals
FY 2018 4,243.7 95.0% 4,031.5
FY 2019 4,495.5 95.0% 4,270.7

The fact that the total dollar amount of each year’s apportionments went up under the FAST Act was able to mitigate the dollar amount of the Texas adjustment each year, but now that overall dollar amounts of funding are frozen, the size of the Texas adjustment leaps from $209 million to $448 million:

Base Plus 95%
Apportionment Adjust. Equals
FY 2020 3,823.0 +208.5 4,031.5
FY 2021 3,823.0 +447.7 4,270.7

To put it in perspective, Texas’s upward adjustment of $448 million will be greater than the total annual apportionment of any of fifteen states (NH, HI, DE, ME, VT, RI, ND, WY, SD, ID, NE, UT, NV NM, KS) or the District of Columbia, and is larger than the total highway apportionments of Maine and Rhode Island combined. (The latter is why their Senators work so hard to bring home BUILD grants and other money out of the general fund.)

Every non-Texas state’s fiscal 2021 highway formula funding will be reduced by 0.625 percent, from 2020 levels, so that Texas’s apportionment can be increased by 5.93 percent over 2020 levels.

We should note that having all of the real-world formula factors (VMT, lane-miles, air quality, population, etc.) frozen in 2007, while Highway Account tax payments remain the only real-world variable, makes absolutely zero sense from a policy perspective. But the politics of writing a sane formula are so difficult that both the House and Senate FAST Act reauthorization bills (H.R. 2 and S. 2302) left the existing “formula” in place and would have kept on using the 2007 population, VMT, lane-miles, air quality, safety, etc. numbers through fiscal year 2025. (Ed. Note: On the bright side, at least a messed-up 2020 Census won’t affect federal highway funding.)

The following table shows Eno’s unofficial estimates for the fiscal 2021 year-long highway apportionments under H.R. 8337 with the actual fiscal 2020 apportionments contained in FHWA Notice 4510.844. (9/23/2020 addition: An alert reader pointed out last night that Colorado would be almost completely exempt from the across-the-board reduction that makes room for Texas’s 95 percent adjustment because Colorado’s initial apportionment was only $118,224 over its own 95 percent minimum. The table below has been updated so that Colorado also receives its 95 percent guaranteed minimum apportionment. This changes every other non-Texas state’s final 2021 apportionment slightly (California’s apportionment changes by $687 thousand; Delaware’s by less than $32 thousand).

An Excel spreadsheet showing the methodology behind this table can be downloaded here.

ETW Estimate – FY 2021 Highway Apportionments Under H.R. 8319 vs Actual FY 2020 Apportionments

FY 2020 Actual Apportionments Estimated FY 2021 Apport. FY 2021 Estimated
per FHWA Notice N4510.844 Under H.R. 8337 vs. FY 2020 Actual
Dollars Share Dollars Share ∆ (Dollars) ∆ (Pct.)
Alabama $835,773,498 1.9271% $830,552,389 1.9150% -$5,221,109 -0.625%
Alaska $552,367,435 1.2736% $548,914,789 1.2657% -$3,452,646 -0.625%
Arizona $806,010,109 1.8585% $800,970,642 1.8468% -$5,039,467 -0.625%
Arkansas $570,352,636 1.3151% $566,789,214 1.3069% -$3,563,422 -0.625%
California $4,043,264,681 9.3228% $4,017,962,711 9.2644% -$25,301,970 -0.626%
Colorado $589,072,823 1.3583% $592,075,400 1.3652% $3,002,577 0.510%
Connecticut $553,300,279 1.2758% $549,839,939 1.2678% -$3,460,340 -0.625%
Delaware $186,348,026 0.4297% $185,182,902 0.4270% -$1,165,124 -0.625%
Dist. of Col. $175,772,928 0.4053% $174,674,003 0.4028% -$1,098,925 -0.625%
Florida $2,087,186,638 4.8125% $2,074,148,127 4.7825% -$13,038,511 -0.625%
Georgia $1,422,408,300 3.2797% $1,413,517,450 3.2592% -$8,890,850 -0.625%
Hawaii $186,320,764 0.4296% $185,155,942 0.4269% -$1,164,822 -0.625%
Idaho $315,085,357 0.7265% $313,116,126 0.7220% -$1,969,231 -0.625%
Illinois $1,566,215,656 3.6113% $1,556,421,650 3.5887% -$9,794,006 -0.625%
Indiana $1,049,673,875 2.4203% $1,043,113,169 2.4052% -$6,560,706 -0.625%
Iowa $541,397,851 1.2483% $538,015,335 1.2405% -$3,382,516 -0.625%
Kansas $416,296,079 0.9599% $413,695,045 0.9539% -$2,601,034 -0.625%
Kentucky $731,943,941 1.6877% $727,371,111 1.6771% -$4,572,830 -0.625%
Louisiana $773,170,264 1.7827% $768,340,014 1.7716% -$4,830,250 -0.625%
Maine $203,351,344 0.4689% $202,080,158 0.4659% -$1,271,186 -0.625%
Maryland $662,000,198 1.5264% $657,859,840 1.5169% -$4,140,358 -0.625%
Massachusetts $669,060,028 1.5427% $664,874,426 1.5330% -$4,185,602 -0.626%
Michigan $1,159,861,954 2.6744% $1,152,609,955 2.6576% -$7,251,999 -0.625%
Minnesota $718,341,491 1.6563% $713,851,596 1.6460% -$4,489,895 -0.625%
Mississippi $532,790,130 1.2285% $529,461,407 1.2208% -$3,328,723 -0.625%
Missouri $1,042,881,411 2.4046% $1,036,365,444 2.3896% -$6,515,967 -0.625%
Montana $451,986,737 1.0422% $449,162,290 1.0357% -$2,824,447 -0.625%
Nebraska $318,412,580 0.7342% $316,422,815 0.7296% -$1,989,765 -0.625%
Nevada $400,017,124 0.9223% $397,515,364 0.9166% -$2,501,760 -0.625%
New Hampshire $182,012,876 0.4197% $180,874,974 0.4171% -$1,137,902 -0.625%
New Jersey $1,099,915,502 2.5361% $1,093,034,732 2.5203% -$6,880,770 -0.626%
New Mexico $404,542,676 0.9328% $402,014,892 0.9269% -$2,527,784 -0.625%
New York $1,849,116,555 4.2636% $1,837,547,796 4.2369% -$11,568,759 -0.626%
North Carolina $1,148,928,308 2.6491% $1,141,747,263 2.6326% -$7,181,045 -0.625%
North Dakota $273,494,740 0.6306% $271,785,476 0.6267% -$1,709,264 -0.625%
Ohio $1,476,626,048 3.4047% $1,467,393,492 3.3834% -$9,232,556 -0.625%
Oklahoma $698,656,538 1.6109% $694,291,784 1.6009% -$4,364,754 -0.625%
Oregon $550,618,730 1.2696% $547,177,673 1.2617% -$3,441,057 -0.625%
Pennsylvania $1,807,465,072 4.1676% $1,796,165,320 4.1415% -$11,299,752 -0.625%
Rhode Island $240,920,619 0.5555% $239,414,785 0.5520% -$1,505,834 -0.625%
South Carolina $737,667,142 1.7009% $733,058,569 1.6903% -$4,608,573 -0.625%
South Dakota $310,667,712 0.7163% $308,726,110 0.7118% -$1,941,602 -0.625%
Tennessee $930,899,296 2.1464% $925,081,409 2.1330% -$5,817,887 -0.625%
Texas $4,031,150,868 9.2948% $4,270,388,924 9.8465% +$239,238,056 5.935%
Utah $382,525,114 0.8820% $380,134,534 0.8765% -$2,390,580 -0.625%
Vermont $223,577,785 0.5155% $222,180,100 0.5123% -$1,397,685 -0.625%
Virginia $1,121,022,241 2.5848% $1,114,014,952 2.5686% -$7,007,289 -0.625%
Washington $746,798,588 1.7219% $742,130,243 1.7112% -$4,668,345 -0.625%
West Virginia $481,422,307 1.1100% $478,414,088 1.1031% -$3,008,219 -0.625%
Wisconsin $828,885,848 1.9112% $823,706,043 1.8993% -$5,179,805 -0.625%
Wyoming $282,215,609 0.6507% $280,451,901 0.6467% -$1,763,708 -0.625%
Total $43,369,794,311 100.0000% $43,369,794,311 100.0000% $0 0.000%

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