State lawmakers may consider using general fund revenues for transportation projects. The general fund-a large pool of money allocated at the discretion of the state legislature and the governor-seems to be an appealing source of new transportation revenue. In theory, if a majority of lawmakers were convinced that transportation is a primary need, the amount of general fund revenue allocated to transportation could be increased.
In fact, many states already provide money for transportation through their general funds. The state general fund is a particularly important source of revenue for public transportation and other nonhighway transportation projects. In many jurisdictions, gas taxes are dedicated by law only to highway purposes and cannot be used for other transportation projects, so general fund revenue helps fill the gaps for transit and other nonhighway transportation. In 2004, the general fund was the most used source of funding for transit in 19 states.16
Although it is a seemingly appealing source of revenue, in practice, the general fund cannot be used for much new funding in most states. Although legislative control of the general fund allows states to allocate more revenue to certain projects, it also makes transportation funding more susceptible to politics.
In the 1990s, the United States experienced an economic downturn that reduced many state general funds. More significantly, since 1995, several major areas-most notably Medicaid and K-12 education-have consumed significant portions of the general fund, reducing the amount available for transportation projects. In 1995, 59 percent of state general funds were dedicated to Medicaid, K-12 education, higher education and corrections, leaving only 41 percent for all other items. In 2005, only 68 percent of state general funds were dedicated to the four major areas, leaving only 32 percent for transportation and all other competing issues.