The director may receive and expend any funds within the limits of legislative appropriations made available by the Congress of the United States to be applied on the county road system, and other roads or streets not on the state highway system and to assist in the development and improvement of surface transportation systems in rural and small urban areas, including projects and programs for the construction of public roads not on any federal-aid system, correction of safety hazards and replacement of bridges, development of parking facilities to serve buses and other means of public transportation of passengers, and for the purchase of buses used in public transportation service. The director may carry out the intent and purpose of rural transportation assistance programs authorized by Congress to the same extent that the director now may cooperate legally with federal-aid highway construction and maintenance programs, except as hereinafter provided. The director may not engage in or provide state funds for the operation of any public bus transportation system except by contract with a local governmental entity or a private operator and may expend no revenue derived from gas tax or motor vehicle licensing in the establishment or operation of such public bus transportation system.