Aldous Huxley’s maxim, “Facts do not cease to exist because they are ignored” may be disproven in the next highway reauthorization.[1] Over the course of my career, champions for ever greater federal highway funding have consistently ignored three key facts: (1) federal highway funding is not additive (it all comes from state and local taxpayers), (2) federal funds impose significant additional costs on projects, and (3) if increased excessively, as it was through the Infrastructure Investment and Jobs Act (IIJA), federal funding can trigger highway construction cost inflation exceeding the increase in spending, resulting in spending reduction in real dollars. The good news – a simple fix exists to dramatically reduce the inefficiencies involved in federalizing what is in essence state funding.

Federal funding is not additive

Since the facts threatened with nonexistence are somewhat counterintuitive, let me address them in order and explain how reality departs from conventional wisdom. Policy makers will proclaim the need for additional federal funding because states and localities cannot afford their infrastructure. But all federal spending derives from state and local taxpayers. Yes, the federal government can redistribute funds from one state to another, but it cannot collectively give back to states more than is collected from their taxpayers (nor can it incur debt that is not ultimately the responsibility of those same taxpayers).

Not only is federal funding non-additive, there is a rational argument to be made that the prospect of federal funding reduces overall funding because it creates a disincentive for state and local governments (where most infrastructure funding is collected) to fill the infrastructure funding gap. Like a purchaser of a new suit delaying the purchase because of a potential coupon in the mail, state and local governments will defer the hard decision of raising infrastructure funding hoping that decision will be made at the federal level. IIJA aside, waiting on federal funding has historically not been a particularly efficacious strategy. Even with once-in-a-generation funding, our nation is littered with projects awaiting federal funds, and federal funds remain the least reliable form of transportation funding.

Federal funding imposes significant additional costs

No one remotely familiar with federal highway policy will be surprised by the fact that federalizing a project significantly increases the cost, complexity, and schedule of that project. These project impediments are driven by a variety of factors, the most obvious of which is the sheer number of laws, regulations, executive orders, and policies that attach to every federal dollar. The current Trump Administration is working aggressively to reduce these regulations, particularly those put in place by the last administration. Yet, there are still almost 100 elements of guidance touching on the environment, procurement, labor, and performance.[2] Analyzing 36 major building projects from 2014-2018, the Government Accountability Office (GAO) found that factors specific to the construction of federal buildings resulted in projects costing roughly 15-25% more than comparable private sector projects.[3] No similar analysis has been performed on federal transportation expenditures, but estimates exceed 25%.

Increased costs, however, are frequently less of an obstacle than project delays. In a recent comparison of Georgia’s transportation projects over the past 5 years, federally funded road widenings requiring NEPA approval took 4 times longer than their locally funded counterparts (18.2 years vs. 4.5 years). Bridge replacements took 1.5 times as long (4.9 years vs. 3.3 years).[4]

The most nettlesome impact of federal funding, however, may be in poor project selection. Throughout my time at USDOT and in the White House, I encountered officials who prioritized project types based on the project’s eligibility for federal funding, even if that project failed to best address a locality’s top priorities.

Increased federal funding can result in fewer federal funds

The fact hardest to ignore is the impact IIJA funding had on real highway spending. Although I anticipated that dramatically increasing spending in a labor- and equipment-constrained market would trigger inflation, I never imagined it would trigger inflation that would exceed the increase in spending. Jeff Davis’ analysis for Eno highlighted that construction inflation dramatically outpaced the Consumer Price Index (CPI), consuming ~$57 billion of the IIJA’s spending increases.[5] As a percentage, the buying power of the federal-aid highway program dropped by 10% from 2021-2024.

A simple fix

Fortunately, a modest change in law can alleviate most of the federal costs imposed on infrastructure funding. Under federal law, every state is guaranteed to receive at least 95% of the highway funding they send to Washington, DC. In other words, for every dollar of motor fuel and trucking taxes that a state sends to Washington D.C. for highway purposes, that state is guaranteed by law to receive at least 95 cents of that dollar back in the form of federal highway formula funding. From a policy perspective, it is not too much of a leap to crystalize that legal right in the form of a complete property right to the tax and fee revenues that by law must return to the state. And since that 95% is essentially the property of a state, it is logical that those funds be considered state, and not federal, funds.

Adding a provision to Title 23 deeming minimum guarantee funds “non-federal” would free projects on which those funds are spent from 100 federal requirements. States would then have access to all the funds that would otherwise flow to them through the Highway Trust Fund (HTF) distribution formula, but no federal requirements would be attached to the funds, thereby reducing project costs, speeding project delivery, and creating additional incentives for states and localities to innovate.

Some may lament the impact this change will have on Congressional Members’ ability to earmark projects, direct funds to federal priorities, and ensure federal policies are carried out. But that need not be the case as general fund transfers into the HTF amounted to 35% of highway spending last year.[6] In fact, nine general fund transfers to the HTF since 2008 have totaled $275 billion – a seemingly adequate sum for Congress to express its will while leaving to the states and localities discretion on how to spend the funds that are theirs by law.

[1] Aldous Huxley, Complete Essays Volume II, 1926-1929, 248.

[2] U.S. Department of Transportation, “General Terms and Conditions Under the Fiscal Year 2023 Raise Program: FHWA Projects,” 2023, https:// www.transportation.gov/sites/dot.gov/files/2023-06/ raise-fy2023-fhwa-general-terms-and-conditions-20230623.pdf.

[3] Government Accountability Office, “GSA Can Improve Its Communication about and Assessment of Major Construction Projects,” 2019, https://www.gao.gov/assets/gao-20-144.pdf.

[4] Proprietary data from Georgia Department of Transportation, June 23, 2025.

[5] Jeff Davis, Eno Center for Transportation, “Highway Construction Costs Dropped Slightly in Spring 2024,” https://enotrans.org/article/highway-construction-costs-dropped-slightly-in-spring-2024/, January 2, 2025.

[6] Jeff Davis, Eno Transportation, “Highway Trust Fund Ran $26.7 Billion User-Pay Deficit in FY 2024,” https://enotrans.org/article/highway-trust-fund-ran-26-7-billion-user-pay-deficit-in-fy-2024/.