Federal Highway Funding by State: Formulas, Programs, and Penalties

Federal highway funding is distributed to states by formula, and in fiscal year 2026 that formula sent $56.8 billion to the 50 states and Washington, D.C.¹ Each state’s share is set primarily by what it received in fiscal year 2021, the last year of the previous authorization law, scaled up to reflect current national funding levels and then checked against three minimum guarantees. Once a state’s total is set, it gets divided among eight programs, with fixed dollar set-asides for three of them and fixed percentages for the other five.

How Each State’s Share Is Calculated

The formula relies less on road conditions or traffic volume than on historical funding patterns. Under the Infrastructure Investment and Jobs Act, enacted in November 2021, each state’s starting apportionment is calculated by multiplying its share of the fiscal year 2021 total by the national base apportionment for the current fiscal year.² The distribution pattern from the previous authorization carries forward, scaled to the IIJA’s higher totals.

After that starting figure is calculated, each state’s amount is checked against three floors:

A tax-payment floor. Every state must receive at least 95% of its estimated highway tax payments into the Highway Trust Fund, based on the most recent data available.
A baseline growth floor. Every state must receive at least 2% more than its fiscal year 2021 apportionment.
A year-over-year floor. Every state must receive at least 1% more than its apportionment from the prior fiscal year.

These guarantees function as a safety net rather than an active redistribution tool. The across-the-board increases under the IIJA have been large enough that no state has needed an upward adjustment to hit any of the three minimums so far.²

What States Actually Receive

The FY 2026 apportionments show how widely state totals vary. Texas receives the largest share at roughly $5.59 billion, followed by California at $5.26 billion. Florida ($2.72 billion), New York ($2.41 billion), and Pennsylvania ($2.35 billion) round out the top tier. At the other end, Vermont ($291 million), New Hampshire ($237 million), and the District of Columbia ($229 million) receive the smallest totals.³ These are pre-penalty, pre-sequestration figures.

The Eight Programs a State’s Total Is Divided Among

Once each state’s overall apportionment is determined, it gets split among eight formula programs. Three programs receive fixed national dollar amounts distributed to states before the remainder is divided; the other five split what’s left by fixed percentages.¹

The three set-asides for FY 2026 are:

Congestion Mitigation and Air Quality Improvement (CMAQ): $2.75 billion nationally, funding projects that reduce highway-related air pollution in areas that don’t meet federal air quality standards.
National Highway Freight Program (NHFP): $1.49 billion, targeting improvements to the freight transportation network.
Metropolitan Planning (PL): $470 million, supporting the planning work of metropolitan planning organizations.

After those set-asides, the remainder of each state’s apportionment is divided at these fixed percentages:

National Highway Performance Program (NHPP), 59.08%. The single largest program, focused on the condition and performance of the National Highway System.
Surface Transportation Block Grant (STBG), 28.74%. The most flexible program, usable on virtually any federal-aid highway project, bridge, or transit capital project.
Highway Safety Improvement Program (HSIP), 6.71%. Dedicated to reducing traffic fatalities and serious injuries on all public roads.
Promoting Resilient Operations for Transformative, Efficient, and Cost-saving Transportation (PROTECT), 2.91%. A newer program funding projects that improve infrastructure resilience against natural disasters and extreme weather.
Carbon Reduction Program (CRP), 2.56%. Supports projects that reduce carbon dioxide emissions from on-road transportation.

How STBG Funds Reach Local Areas

Most formula programs are administered by state departments of transportation, but the Surface Transportation Block Grant works differently. States must sub-allocate 55% of their STBG apportionment (after a separate Transportation Alternatives set-aside) to urbanized and rural areas in proportion to each area’s share of the state’s population.⁴ The sub-allocation reaches everywhere from large urbanized zones with more than 200,000 people down to rural areas with fewer than 5,000. The remaining 45% stays with the state DOT to obligate anywhere in the state.

This is one of the few mechanisms in federal highway funding that gives local governments and metropolitan planning organizations direct influence over how the money is spent in their communities.

Matching Funds and Obligation Limits

Apportionment is not the same as spendable money. States must put up matching funds for every project, typically 20% of costs against the federal government’s 80%.⁵ Projects on the Interstate System can qualify for a 90% federal share, dropping the state’s contribution to 10%.⁶ The non-federal share can come from state transportation budgets, local government contributions, toll revenue, or other non-federal sources. A state that can’t come up with matching funds effectively leaves federal dollars on the table.

Even after apportionment is set, a state cannot spend freely. Congress caps how much federal funding each state can commit to approved projects each year through “obligation limitation,” which keeps spending from running ahead of actual Highway Trust Fund revenue. Each state gets an annual obligation limit distributed proportionally to its share of total formula apportionments.⁷

Unused obligation authority doesn’t just vanish. The Federal Highway Administration runs an annual August Redistribution, shifting unused authority from states that won’t use it to states ready to put it to work before the fiscal year closes.⁷ States with a deep pipeline of approved, ready-to-go projects can pick up significant additional funding through this process. Having designs on the shelf matters as much as the initial apportionment.

Compliance Penalties That Cut a State’s Share

Congress uses highway funding as leverage to enforce policy goals that have nothing to do with roads. The best-known example is the National Minimum Drinking Age Act. Any state that lets anyone under 21 purchase alcohol faces an 8% reduction in its apportionments under the two largest formula programs, NHPP and STBG.⁸ The penalty was originally 10% when enacted in 1984 and dropped to 8% starting in fiscal year 2012. Every state currently complies.

Open container laws work differently. States without enacted or enforced open container laws don’t lose funding outright, but 2.5% of their NHPP and STBG apportionments are reserved and can only be used for highway safety or hazard elimination projects once the state certifies how it will spend the money.⁹ The dollars aren’t forfeited; the state loses flexibility.

Donor States and Donee States

Because the formula runs on historical shares rather than a dollar-for-dollar return of each state’s fuel tax contributions, some states consistently receive more from the Highway Trust Fund than their drivers pay in, and others get back less. States that pay more than they receive are called donor states, and they’ve been making the fairness argument for decades. Their taxpayers, they say, are subsidizing infrastructure in other states.

States on the receiving end counter that raw tax contributions don’t capture the full picture. States with aging infrastructure, harsh climates, or vast rural highway networks argue need should drive allocation, not just who paid the most in fuel taxes. Western states point to the cost of maintaining highways across sparsely populated territory; Northeastern states point to the expense of working on congested urban corridors built generations ago. The IIJA’s 95% minimum return guarantee was designed to keep any state from falling too far below its contributions, but the debate hasn’t gone away.

What Changes After September 2026

The IIJA’s authorization covers fiscal years 2022 through 2026, expiring September 30, 2026.¹⁰ Congress has never let the federal highway program simply lapse; every prior expiration has produced either a new multi-year authorization or a short-term extension. The next authorization will set the formula, the minimum guarantees, the program percentages, and the overall funding levels that govern each state’s share after FY 2026. If it lands late or without addressing the trust fund’s revenue gap, the Department of Transportation could slow reimbursement payments to states for completed work and reduce future apportionments.¹¹ Until then, the calculation described above is the one that determines what each state gets.

1
Federal Highway Administration. Apportionment
2
Congress.gov. The Highway Funding Formula: History and Current Status
3
Federal Highway Administration. FY 2026 Apportionments Notice
4
Federal Highway Administration. Surface Transportation Block Grant (STBG)
5
U.S. Department of Transportation. Understanding Non-Federal Match Requirements
6
Office of the Law Revision Counsel. 23 USC 120 – Federal Share Payable
7
Federal Highway Administration. N 4520.292 – FY 2026 Obligation Limitation
8
Office of the Law Revision Counsel. 23 USC 158 – National Minimum Drinking Age
9
Office of the Law Revision Counsel. 23 USC 154 – Open Container Requirements
10
U.S. Department of Transportation. DOT Infrastructure Investment and Jobs Act Authorization Table
11
Congress.gov. Surface Transportation Reauthorization: Federal Highway Programs