Federal DOT Proposes Eliminating Highway Trust Fund's Mass Transit Account in Shift Toward Road Expansion

With the Infrastructure Investment and Jobs Act (IIJA) set to expire on September 30, 2026, the debate over how the United States funds its surface transportation network has entered a critical phase. On July 22, Department of Transportation Secretary Sean Duffy sent a formal letter to key Senate committees outlining the administration's priorities for the upcoming reauthorization. The directive signals a major policy pivot, proposing a sharp turn toward highway expansion and the elimination of dedicated federal funding accounts for mass transit.[1]

The centerpiece of the DOT's legislative wish list is the elimination of the Highway Trust Fund's Mass Transit Account. Under the proposal, all federal fuel tax revenues would be consolidated exclusively into the trust fund's highway account. This move would effectively end a decades-old federal partnership that guarantees a portion of gas tax receipts for public transportation infrastructure, shifting the financial burden of transit capital projects heavily onto state and local governments.

To understand the magnitude of this shift, it requires looking at the architecture of federal infrastructure spending. The Highway Trust Fund was established in 1956 to finance the construction of the Interstate Highway System, relying on a federal motor fuels tax. In 1982, under President Ronald Reagan, Congress created the Mass Transit Account within the fund, dedicating a fixed percentage of those fuel tax revenues to support capital expenditures for buses, subways, and commuter rail systems.

For over forty years, that structure has provided transit agencies with a predictable baseline for long-term planning. The American Public Transportation Association (APTA) strongly condemned the proposed elimination, stating that the move would put more than 85 percent of federal public transit and passenger rail funding at risk. The organization noted that stripping guaranteed funding from transit formula grants would have an outsized impact on rural and smaller communities that rely heavily on federal support to maintain basic services.

Beyond the Mass Transit Account, the DOT letter also calls for an end to "advance appropriations" in any surface bill extension. Advance appropriations were a mechanism used heavily in the IIJA to guarantee multi-year funding outside the annual congressional budget battles. According to the American Road and Transportation Builders Association (ARTBA), ending this practice would equate to a $4 billion cut for public transit, a $13 billion cut for rail programs, and a $9.5 billion reduction in highway investment over the lifespan of an extension.

While transit faces proposed reductions, the administration is pushing to accelerate roadway capacity. The DOT has requested a new discretionary grant program specifically designed to complete unfinished portions of the Interstate Highway System and expand existing corridors to three lanes in each direction. A parallel grant program would be established to target and relieve nationally significant freight bottlenecks, prioritizing the efficient movement of commercial goods and passenger vehicles.

The department's focus on vehicle throughput extends to local street design. Secretary Duffy's letter urges Congress to restrict competitive and formula grant funding for bicycle lanes and other active transportation infrastructure if those projects reduce the travel throughput for motor vehicles. The proposal also supports the removal of existing bike lanes that are deemed to contribute to traffic congestion, and would end requirements that "Complete Streets" safety projects automatically include sidewalks and bikeways.[2]

Technological deregulation forms another major pillar of the DOT's framework. The administration is asking Congress to establish a voluntary autonomous vehicle (AV) pilot program that would grant federal preemption over state laws, effectively preventing a patchwork of local regulations from governing driverless cars. The proposal would also lift the current statutory cap that limits manufacturers to deploying 2,500 exempted autonomous vehicles annually, paving the way for wider commercialization of robotaxis.[1]

The DOT's priorities arrive as the House of Representatives has already begun advancing its own vision for surface transportation. In May 2026, the House Transportation and Infrastructure Committee overwhelmingly passed the BUILD America 250 Act. While the House bill does not go as far as eliminating the Mass Transit Account, it represents a significant contraction in transit spending compared to the IIJA baseline.[1]

According to analyses of the BUILD America 250 Act, the legislation would authorize $87.6 billion in guaranteed funding for public transit over five years. Adjusted for inflation, this represents a roughly 14 to 15 percent cut to public transit investment and a 43 percent reduction in passenger rail investment compared to current levels. Conversely, the House bill provides a healthy bump in guaranteed funding for highway formula programs.

Both the DOT's proposals and the House legislation are attempting to navigate a looming fiscal cliff. The Highway Trust Fund faces recurring and increasingly severe funding shortfalls because federal fuel taxes—which have not been raised since 1993—no longer generate enough revenue to cover authorized spending. Improvements in vehicle fuel efficiency and the rising adoption of electric vehicles have steadily eroded the fund's primary revenue stream.

The Congressional Budget Office projects that the Highway Trust Fund will be entirely depleted by 2028. Without a structural fix, the cumulative shortfall is expected to reach approximately $295 billion by 2036. To inject new revenue, the House's BUILD Act proposes a novel federal registration fee of $130 annually for electric vehicles and $35 for plug-in hybrids, though analysts note this would only generate a fraction of the capital needed to avert insolvency.

The Senate has yet to release its comprehensive counter-proposal, and the stark differences between the administration's requests, the House's passed committee bill, and Senate priorities make a swift resolution unlikely. Infrastructure industry groups, including ARTBA, have indicated that a temporary extension of the current transportation law will almost certainly be required to keep federal funds flowing to states and localities past the September 30 deadline.[3]

As the deadline approaches, the debate highlights a fundamental philosophical divide over the future of American mobility. While the administration argues that prioritizing interstate expansion and autonomous vehicle deployment will relieve congestion and modernize the network, transit advocates warn that dismantling dedicated funding structures will strand billions of dollars in local capital projects and limit transportation alternatives for decades to come.[2]