Recent work in the private sector and current policy debates have refocused attention on Federal subsidies to passenger transportation modes. To provide the Department of Transportation with an independent analysis of this issue, BTS developed data on federal transportation revenues, expenditures, and net subsidies, by mode. We have also included discussions of cost allocation formulas with respect to federal trust funds, and of normalization metrics, both of which are important issues for such calculations. In addition we have discussed the role of social costs and benefits analysis of modal subsidies.
Subsidy, for the purpose of this analysis, represents a simple accounting calculation of the net flow of funds to or from the federal government for individual transportation modes. We calculate federal government transportation expenditures for each mode, including direct payments to carriers (both private companies and public agencies) and government expenditures on supporting infrastructure, minus revenues the federal government collects from that mode. These revenues include fuel taxes, fees, and other payments to the federal government specific to transportation, paid by companies, public agencies, or individual transportation system users. The fuel tax revenues dedicated to mass transit, to the extent they derive from non-transit vehicles, are considered highway revenues . We do not include such items as corporate income taxes paid by transportation companies to support general government functioning, because such taxes are paid by all companies. The excess of expenditures over revenues is the net subsidy.
Many federal government transportation expenditures are not direct payments to transportation carriers, but instead involve funding repairs, improvements, and expansions of infrastructure shared by multiple modes. These expenditures are allocated among the modes sharing the infrastructure in question. Section IV discusses the allocation formulas used and issues surrounding their use.
While net subsidy is of interest to policymakers and others, additional insight may be gained by normalizing the subsidy, dividing it by an indicator of the size of the passenger transportation activity being subsidized (for example per passenger-mile). This makes it easier to directly compare levels of subsidy among modes that vary dramatically in their extent and utilization. The issues involved with different normalization measures such as passengers and passenger-miles are discussed in Section V.
The current analysis reflects federal revenue and expenditure data only. An analysis including state and local revenue and expenditure data may show different results and would raise different issues of revenue and expenditure definition.
The result of the above calculations is a net federal subsidy (reflecting allocations of common infrastructure among modes) per unit (such as per passenger-mile). While this is useful information, it incorporates only the amount of cash subsidies it does not reflect other aspects of full social costs and benefits, such as externalities, for example environmental pollution and excessive energy use. The issues involved in full social cost calculation are considered in Section VI.
 These funds represent highway user fuel taxes that are transferred to the Mass Transit Account by Congressional mandate. Though originating with highway users, they are dedicated to supporting mass transit for public policy reasons. If they were considered mass transit revenues, a different set of results would be generated.