Why It Matters

The federal public transportation program, funded at $21.4 billion annually under the Infrastructure Investment and Jobs Act (IIJA), expires September 30, 2026. A new Congressional Research Service report makes clear that surface transportation reauthorization will arrive at a moment of compounding crises: a structurally insolvent trust fund, transit agencies facing fiscal cliffs, a depleted federal workforce, and an administration that has already begun reshaping how transit dollars get distributed.

The central issue is that transit systems are still recovering from the pandemic, their funding backstop is running dry, and the political environment in Washington is skeptical of the very programs that keep buses and trains running.

The Big Picture

The Federal Transit Reauthorization Baseline

The IIJA represented a significant federal commitment to public transit, a 67% increase in nominal dollars over the prior authorization, the Fixing America's Surface Transportation (FAST) Act. But inflation, particularly in 2021 through 2023, eroded much of that purchasing power. And the ridership numbers that justify the investment haven't fully returned. As of the first quarter of 2025, bus ridership was approximately 85% of pre-pandemic levels, while rail ridership remained below 75%. Total fare revenue fell from roughly $20 billion in 2019 to $10 billion in 2023 (in inflation-adjusted 2024 dollars), as the average fare per trip dropped from about $2.00 to $1.50.

According to the American Public Transportation Association, transit agencies had obligated more than 99% of federal COVID-19 emergency relief funds by mid-2023. More than two-thirds of large agencies said they expected severe budget problems between fiscal years 2024 and 2028. The Southeastern Pennsylvania Transportation Authority drafted a budget in April 2025 that included 45% service cuts and 22% fare increases without additional funding. Bay Area Rapid Transit and Pittsburgh Regional Transit have flagged similar problems.

The Highway Trust Fund Problem

The mass transit account of the Highway Trust Fund has run deficits, spending more than it takes in and excluding general fund transfers, for more than two decades. The Congressional Budget Office (CBO) projects the gap between revenues and outlays will total $55.3 billion over fiscal years 2027 through 2031, an average of $11.1 billion annually.

The primary revenue source for the trust fund, motor fuel taxes, hasn't been raised since 1993. Of the 18.3 cents-per-gallon tax on gasoline that flows to the fund, only 2.86 cents reaches the mass transit account. CBO estimates the account balance will approach the $1 billion minimum threshold needed for the Federal Transit Administration (FTA) to make mandated payments to transit agencies at some point in fiscal year 2028, potentially forcing the agency to slow disbursements.

Since 2008, Congress has transferred $60 billion in general fund money to the mass transit account to paper over the shortfall, including $28 billion from the IIJA alone. That arrangement is not sustainable without a deliberate policy choice to continue it.

Transit Infrastructure and the Capital Investment Grants Program

The surface transportation bill Congress must write also confronts a $124 billion reinvestment backlog in transit infrastructure, as estimated by the Department of Transportation in its 2024 Conditions and Performance report. Eliminating that backlog by 2038 would require annual preservation spending of roughly $23 billion to $24.9 billion, compared to the $16.5 billion per year spent from 2014 through 2018.

The Capital Investment Grants program, which funds new rail lines, bus rapid transit, and corridor expansions, sits at the center of the reauthorization debate. As of August 2025, 49 projects were in various stages of consideration for CIG funding, with $28 billion in total requested federal assistance across 2 Core Capacity projects, 14 New Starts, and 33 Small Starts. Critics of the program argue that it steers communities toward expensive fixed-guideway infrastructure rather than improving bus service. One researcher summarized the academic literature by noting that "the dominant view of economists has been that rail transit investments generally have been ineffective and expensive, and the benefits do not justify the costs." Supporters counter that transit agencies could not finance major capital projects without federal support.

U.S. transit construction costs are among the highest in the world. Research from the Marron Institute's Transit Costs Project attributes this to overbuilding, lack of design standardization, labor costs, and procurement problems — including "a lack of internal capacity at agencies to manage contractors, insufficient competition, and a desire to privatize risk that leads private contractors to bid higher."

The Low-No Program and the EV Policy Reversal

The transit infrastructure legislation Congress is now writing will also need to address the Low or No Emission Vehicle program, which the IIJA funded at $1.1 billion annually, a dramatic increase from $55 million per year under the FAST Act. The Biden Administration used the program to prioritize zero-emission buses. The Trump Administration's fiscal year 2025 notice of funding opportunity, issued in May 2025, shifted that priority toward low-emission buses powered by compressed natural gas, propane, and diesel-electric hybrids.

The domestic bus manufacturing industry is under strain. According to the American Public Transit Association (APTA) Bus Manufacturing Task Force, the number of manufacturers producing more than 100 buses annually has fallen from 10 a decade ago to three today. Battery-electric buses carry a price premium of approximately 33 to 50% over diesel, though some researchers estimate that life-cycle costs can be competitive due to lower fuel and maintenance expenses.

Political Stakes

For the Administration

The Trump Administration's workforce restructuring has already affected FTA's capacity to administer the programs Congress is debating. According to a news report cited in the CRS analysis, approximately one-third of FTA staff accepted deferred resignation offers the largest share of any Department of Transportation administration or office. With roughly 700 full-time equivalents in fiscal year 2025, a one-third reduction would leave the agency with approximately 470 staff. The CRS report notes that reduced staffing would likely hit competitive programs like CIG hardest, since those require more administrative capacity and technical expertise than formula programs.

Separately, DOT Order 2100.7, signed by Secretary of Transportation Sean Duffy, directs FTA to give preference to "communities with marriage and birth rates higher than the national average," including in administering the CIG program. The CRS report notes roughly two-thirds of public transportation funding is distributed by formula, with limited discretion, and CIG is governed by statutory evaluation criteria that do not include family status.

For Congress

House Republicans introduced H.R. 8870 in May 2026 as a surface transportation reauthorization vehicle, and it addresses several of the issues the CRS report identifies. But the legislative path is complicated by disagreements over funding levels, the trust fund's solvency, and the scope of federal involvement in transit operations.

Democrats will push for maintaining or expanding funding, particularly for operating assistance, a historically contentious issue. Federal operating support was largely eliminated for large urban areas in 1998, and expanding it risks recreating the cost pressures that characterized the 1970s and early 1980s, when federal subsidies were associated with rising wages and service expansions on low-demand routes. Transit labor unions, including the Amalgamated Transit Union and the AFL-CIO's Transportation Trades Department, are pushing for stronger worker protections, physical barriers for operators, and binding safety standards for automated vehicles.

The Bottom Line

Congress has months to act before the federal public transit authorization lapses entirely. The CRS report makes clear that the choices ahead are about funding levels, whether the Highway Trust Fund's mass transit account gets a structural fix or another temporary patch, whether the federal government continues to prioritize zero-emission vehicles or retreats from that commitment, and whether an agency that has lost a third of its workforce can effectively administer the programs lawmakers fund.

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