Concomitant with increasing state support of public transit has been a growing concern in state houses over the operation of "empty" buses and trains and the desirability of tying state transit allocations to transit performance. Despite the popularity of performance-based transit subsidy programs among legislators and voters, performance-based programs have not worked well. In general these programs have either been unpopular and short-lived or politically popular and ineffectual. This occurs because of a conflict in all state transit subsidy programs between the political measures of subsidy program performance and operational measures of transit system performance. State funding of public transportation tends to be structured by programmatic concerns with distributional equity. Legislatures seek to ensure that citizens in all parts of the state benefit from public transportation subsidies. If the rewards and penalties in a performance-based program are large enough to motivate improved transit system performance, they will likely result in an uneven geographical distribution of funds, which is usually politically unpopular and creates pressure to weaken or abandon the performance-based allocation program. A study of the operating subsidy programs in 16 states is summarized and programs in three states are described to indicate that the programmatic goals of distributional equity supersede efforts to motivate improved transit performance. Reviewed are the rationale for linking transit performance to funding allocations, the political constraints on performance-based allocations, a survey of 16 state transit subsidy programs, and the distributional equity requirements that might be redefined to be more consistent with performance-based programs.