Transportation funds are generated from a number of sources, including income tax, sales tax, tolls, bonds, and state, local, and federal excise taxes on various fuels, state infrastructure banks (SIBs), and credit assistance sources. Each state decides which mix of funds is best suited to carry out particular projects.
Federal funds are authorized by Congress for the U.S. Department of Transportation (DOT), which allocates funds into various programs before redirecting those funds to the states. Some primary examples of these programs include the Surface Transportation Program (STP) (which includes enhancement and safety funds), the Federal Lands Highway Program and the Congestion Mitigation and Air Quality Improvement (CMAQ) Program. FTA oversees the allocation of federal transit funds, which generally fall into two major categories: capital grants for transit operators that are apportioned to areas by national formula, and transit capital investment grants that are awarded on a "discretionary" basis, as determined by DOT on the basis of a series of evaluation criteria. Each of these programs has specific eligibility requirements, although there is quite a bit of flexibility in legislation that allows funds to be shifted among some programs, or expands eligibility requirements (see Part I for more information).
Federal legislation also provides formula funds to support planning studies and report preparation for the transportation planning process through FHWA’s State Planning and Research Funds (SPR) and Metropolitan Planning Funds (PL), and through FTA’s Section 5305. These planning funds generally make up a large portion of the state or MPO budget for conducting necessary studies and for developing transportation plans, STIPs, TIPs and other planning documents.
Financial planning takes a long-range look at how transportation investments are funded, and at the possible sources of funds. State DOTs, MPOs, and public transportation operators must consider funding needs over both the 20-year period of the long-range transportation plan and the 4-year period of TIPs and STIPs. In the LRSTP and the MTP, state DOTs may and MPOs must develop a financial plan that identifies funding sources for needed investments, and demonstrates the reasonably reliable means to maintain and operate the existing federally funded transportation system.