The Highway Formula Fairness Act (HB7776) amends 23 U.S.C. 104(c) to change how the Department of Transportation calculates each State’s combined apportionments for a set of Federal highway programs. For fiscal year 2026 and thereafter it requires the Secretary to start each State’s share using the proportion of apportionments that State received in fiscal year 2012, then adjust that figure so no State’s combined apportionments fall below 95% of a contribution-based percentage.
That “applicable percentage” is defined as the State’s share of estimated tax payments by highway users into the Highway Trust Fund (excluding the Mass Transit Account) for the most recent fiscal year with available data. The bill therefore anchors distribution to a historical baseline while adding a floors mechanism tied to current Highway Trust Fund receipts — a change likely to shift funding among States and alter predictability for State DOT budget planning.
At a Glance
What It Does
The bill requires the Secretary to compute initial apportionments by multiplying total apportionable funds by each State’s 2012 share of specified program apportionments, then adjust those initial amounts so no State receives less than 95% of its contribution-based share of total apportionable funds. It applies to combined apportionments for sections 119, 133, 148, 149, 167, 175, 176(c), and funds to carry out section 134.
Who It Affects
State departments of transportation, metropolitan planning organizations, and local project sponsors that receive formula funds under the listed sections will see their annual Federal apportionments recalculated under this new two-step method. The Federal Highway Administration must implement the new calculation and estimate state-level Highway Trust Fund tax receipts annually.
Why It Matters
The formula blends a fixed historical baseline (FY2012) with a floor tied to recent Highway Trust Fund contributions, favoring States whose current tax payments are strong relative to their 2012 shares while protecting most States from steep year-to-year declines. That blend changes distributional incentives and raises operational questions about data, estimates, and year-of-apportionment volatility.
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What This Bill Actually Does
HB7776 replaces the current subsection (c) of 23 U.S.C. 104 with a two-step apportionment method that applies beginning in fiscal year 2026. First, the bill directs the Secretary to compute an "initial amount" for each State by taking the total pot of money that must be apportioned among the listed programs and allocating it according to each State’s share of those same apportionments in fiscal year 2012.
That anchors the distribution to a historical snapshot rather than current population, mileage, or other contemporaneous metrics.
Second, the statute imposes a downward protection: the initial amounts are then adjusted so that no State’s combined apportionments for the enumerated programs are less than 95% of an "applicable percentage" of total apportionable funds. The applicable percentage is calculated each year as the State’s share of estimated Highway Trust Fund tax payments attributable to highway users (excluding the Mass Transit Account) in the most recent fiscal year for which data exist.
In short, the bill blends a 2012 baseline with a contribution-based safety net.Practically, the Department of Transportation must assemble two inputs every year: (1) the FY2012 apportionment shares for each State for the listed programs, and (2) an estimate of each State’s share of HTF tax receipts for the most recent available year. The statute also prescribes the annual timing: the Secretary will apportion the funds on October 1 of each fiscal year.
States whose HTF tax payments have risen relative to their 2012 shares will likely benefit from the contribution floor; States that have declined since 2012 risk reduced shares unless the 95% floor cushions the drop.Because the bill excludes the Mass Transit Account when computing the applicable percentage, the change specifically ties the floor to highway-user tax receipts rather than all motor-fuel–related receipts. That choice narrows the revenue base used for the contribution comparison and preserves the separation between highway-focused receipts and transit-accounted funds.
The Five Things You Need to Know
The statute takes effect for fiscal year 2026 and each fiscal year thereafter.
Initial state shares are computed using each State’s proportion of apportionments for the listed programs in fiscal year 2012.
The bill creates a floor so a State’s combined apportionments cannot be less than 95% of its applicable percentage of total apportionable funds.
The applicable percentage equals the State’s share of estimated tax payments by highway users into the Highway Trust Fund (excluding the Mass Transit Account) for the most recent fiscal year with available data.
The Secretary must apportion the specified funds on October 1 of each fiscal year using the new calculation.
Section-by-Section Breakdown
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Short title
Designates the act as the "Highway Formula Fairness Act." This is purely nominal, but it signals legislative intent that the change is about perceived fairness of formula distribution rather than a technical reorganization.
Initial amount based on FY2012 apportionments
This provision instructs the Secretary to compute an "initial amount" for each State by multiplying total apportioned funds by each State’s share of apportionments for the enumerated programs in fiscal year 2012. Practically, FHWA will need to retrieve or reconstruct each State’s FY2012 apportionment totals for sections 119, 133, 148, 149, 167, 175, 176(c), and funds to carry out section 134 and use those ratios as the starting point for current allocations.
Contribution-based floor and definition of applicable percentage
This subsection creates an adjustment that prevents any State’s combined apportionments from falling below 95% of a contribution-determined share of total apportionable funds. It defines the "applicable percentage" as the State’s share of estimated Highway Trust Fund tax payments attributable to highway users (explicitly excluding the Mass Transit Account) for the most recent fiscal year with available data. The drafting requires FHWA to estimate tax-payment shares annually and to apply that percentage to the pool of funds to compute the statutory floor.
Timing of apportionment
The bill adds an explicit timing rule: on October 1 of each fiscal year the Secretary must apportion the sums authorized for the listed programs in accordance with the new calculation. That imposes a hard annual deadline tied to the start of the federal fiscal year and requires FHWA to have the necessary data and estimates ready by that date.
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Explore Transportation in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- State departments of transportation in States whose highway-user tax payments have risen relative to their FY2012 apportionment shares — they gain protection or a higher floor tied to current contributions, reducing downside risk to Federal formula receipts.
- State budget and capital planners who prefer predictability — the 95% floor limits sudden drops in Federal formula funds year-to-year, making short-term budgeting less volatile for many jurisdictions.
- Highway project sponsors (local governments and MPOs) in States that maintain or increase HTF contributions — those sponsors are less likely to see deep cuts to formula funding that would delay or cancel projects funded through the affected programs.
- FHWA divisions and regional staff tasked with distribution — they gain a clear statutory method to resolve minimum apportionment disputes because the statute prescribes both baseline and floor calculations.
Who Bears the Cost
- States that relied on a relatively large share of apportionments in 2012 but whose current Highway Trust Fund tax payments have declined — those States risk losing a portion of their historical share because the initial baseline is coupled to a contribution-based floor.
- Metropolitan planning organizations and local sponsors in States with declining HTF contributions — reduced Federal apportionments could force local cost-sharing increases or project deferrals.
- Federal Highway Administration — FHWA must develop and publicly justify annual estimates of state-level HTF tax payments, implement the two-step calculation each October 1, and respond to technical questions or disputes, increasing administrative workload.
- Programs or priorities funded outside the listed sections — any shift within the covered apportionments can indirectly pressure State budgets and reallocate political leverage among intra-state programs.
Key Issues
The Core Tension
The bill tries to reconcile two legitimate goals—stability rooted in historical apportionments and fairness tied to current highway-user contributions—but doing both at once forces trade-offs: a FY2012 baseline preserves historical shares, while a contribution-based floor seeks to align money with current taxpayers; achieving one reduces the purity of the other and ensures some States win while others lose.
The statute anchors initial allocations to a single historical year (FY2012) while using a contemporaneous, contribution-based floor. That mix creates two tensions: it preserves legacy distribution patterns even where demographic or travel patterns have changed, and it ties protection to a potentially volatile annual estimate of HTF tax payments.
Using FY2012 as the baseline privileges the distribution picture from more than a decade earlier; states that have grown in population, lane miles, or freight traffic since 2012 may find their real-world needs underrepresented unless their HTF contributions have increased enough to trigger the floor.
Operationally, the bill pushes significant weight onto the methodology for estimating "tax payments attributable to highway users." The statute does not specify data sources, allocation methods (for multi-jurisdiction taxpayers), or how to handle anomalies such as tax law changes or temporary shifts in fuel consumption. FHWA will need to choose an estimation approach, document it, and defend it against state challenges.
The exclusion of the Mass Transit Account narrows the revenue base but also means the floor compares only to highway-dedicated receipts — a logical choice for highway funding but one that further complicates intermodal equity questions. Finally, the 95% floor is arbitrary: it softens large declines but does not prevent reallocation, creating winners and losers without an obvious compensating mechanism.
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