A review was conducted of recent trends in state and federal highway financing, the effects of these trends on state highway programs, and the actions taken or proposed to obtain additional financing. The condition of U.S. highways has been deteriorated. The interstate system has seen the most serious decline with its percentage of miles in poor condition doubling from 1975 to 1978. Billions of dollars will be needed to preserve these roads and, unless timely action is taken, even more money will be needed for reconstruction. Additional billions will be required to complete the interstate system. Increased costs and lagging state and federal revenues have compounded the problem. The states have taken various actions to increase highway revenues, but there has been little action to increase federal highway taxes.