Maximizing State Transportation Investments: How Redirecting Spending from Highway Expansion to Public Transit Supports Economies and Communities

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Costs to deliver transportation projects have risen drastically in recent years. To avoid wasteful spending, each new dollar invested in transportation infrastructure should be directed to the kinds of projects that deliver the most positive impact for the lowest cost. A wide body of research, including retrospective analyses of completed projects, shows that the costs of highway expansion projects often outweigh their benefits while the opposite is true for investments in public transit. Despite these findings, highways still receive more than double the total investment of public transit programs across all levels of government.

This mismatch between policy goals and investment strategies could be driven, in part, by an inaccurate understanding of the potential return on investment from new spending on each mode. To address this issue, this paper provides a side-by-side comparison of what new spending on public transit versus highways can mean across a variety of different metrics, including overall macroeconomic impacts, investment performance, jobs, household-level impacts, and land use and development. We describe how the underlying assumptions and miscalculated inputs used in economic impact analysis and benefit/cost assessments often result in a bias toward highway expansion.

With the understanding that new spending on public transit services is a smarter investment than new spending on highway expansion, we close by recommending that states take five key actions to better invest their limited transportation dollars:

Direct more of their existing transportation dollars toward transit programs through a process known as “flexing” funds.
Include lump sums to expedite the programming of urban transit projects in transportation improvement programs.
Dedicate state funds to support transit operations.
Enact transit-oriented development policies that complement transit investments.
Support small urban and rural transit with both funding and technical assistance.

Key findings

Across all levels of government, $249 billion annually flows to highway programs while less than $100 billion flows to transit programs.
Direct and measurable outcomes such as job growth, household savings, and real estate development all indicate that, in both rural and urban areas, public transit spending is generally a better investment for the public sector than highway expansion.
About 80% of highway projects reported congestion mitigation as their purpose, but highway widening is an ineffective strategy for meeting this goal in the long run: Congestion tends to return to pre-widening levels within five years of project completion.
Highway expansion projects continue to be justified based on a benefit/cost model that overvalues travel time savings by at least double and fails to account for the opportunity costs of valuable land.
Investing in transit service frequency and reliability delivers strong performance results: Akron, Ohio, grew ridership by 40% over just two years and Richmond, Virginia, saw double the initial ridership projections on a corridor improved with bus rapid transit (BRT).
Public transit and highway maintenance projects both deliver more direct jobs per dollar of spending than highway expansion projects. The public transit industry directly employs 8% more workers than the highway, street, and bridge construction industry, despite receiving half as much overall funding.
Households can cut annual transportation costs up to 10-fold from $12,000 to $1,200 when new public transit investments make service convenient enough to replace a car with an annual transit pass.
New transit spending spurs real estate development and supports infill housing opportunities. In Minneapolis, every $1 spent on upgrading a corridor to BRT service has translated to around $12 in new development value.

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Suggested Citation

Daigle, Caroline. 2026. Maximizing State Transportation Investments: How Redirecting Spending from Highway Expansion to Public Transit Supports Economies and Communities. Washington, DC: ACEEE. https://www.aceee.org/white-paper/2026/05/maximizing-state-transportation-investments