States will dole out $8.7 billion in unobligated federal highway funds to spend on highway and bridge projects this year, thanks to the Federal Highway Administration’s latest annual reallocation of unobligated federal funds.
The reallocation, which FHWA Administrator Shailen Bhatt announced in an Aug. 26 memo, set a new record, following $7.9 billion in 2023 and $6.2 billion in 2022. The memo de Bhatt directs FHWA Divisional Administrators to ensure that all additional funds, which are obligation limitations, are obligated by September 25. Bhatt also said the redistributed funds expire on September 30, the end of the fiscal year.
Allocations by numbers
All 50 states and the District of Columbia receive a portion of the reallocated funds. Texas earned the largest share at $1.17 billion, followed by California at $622.1 million.
The third place is New York, with 423 million dollars; followed by Pennsylvania, with $400.1 million.
Tied for fifth place with $400 million are Florida and New Jersey.
Susan Howard, director of policy and government relations for the American Association of State Highway and Transportation Officials, says she hopes states as a group can commit to all $8.7 billion by Sept. 25. In the past, some states have had to push to meet the FHWA’s late September deadlines.
But Howard said in an interview that this year, DOTs “had very advanced notice” from the FHWA about the expected total and were anticipating “a very large August redistribution” from the beginning of the year.
This gave them time to prepare spending plans.
The funds being reallocated are in the form of an obligation limit. According to Howard, an obligation is a “marker” to have funds allocated to a particular project, but the money has not yet been transferred.
The obligation limit is an annual limit set by Congress in appropriations legislation.
Redistributed funds come from “earmarked” or non-formula programs. According to AASHTO, they do not have to be obligated for four years, which allows programs to carry over balances from one year to the next.
As the year goes on and earmarked programs become unable to obligate their full obligation level, states are asked to absorb these unused funds.
The Infrastructure Investment and Jobs Act (IIJA) created many new earmarked programs, particularly those that provide grants that the US DOT awards through state competitions.
But some non-IIJA programs also fall into the allocated category and have contributed to the growth in the size of redistributions.
Howard says that historically the largest source of appropriated and unspent funds has been the FHWA’s Transportation Infrastructure Innovation and Financing Act (TIFIA) program. TIFIA, created in 1998, offers loans and other credit assistance.
But IIJA’s funding is in the form of grants and direct funding. Grants make loans, which require. reimbursement, less attractive to state transportation officials, Sen. Shelley Moore Capito (RW.Va.) said at a July 25 Senate Transportation Subcommittee hearing.
Looking for a legislative solution
With more redistributions, perhaps larger ones, likely in the coming years, Bhatt and AASHTO want Congress to make changes to how distributions work.
AASHTO welcomed a provision of the FY 2025 spending bill passed on August 1 by the Senate subcommittee covering DOT.
AASHTO said the proposal targets programs that obligate funds slowly. It would essentially establish a four-year mandatory term for these programs. That would provide more certainty than the current system, in which, Howard said, states essentially have “an unlimited window to compel.”
This story was updated on 5/9/2024 to accurately describe AASHTO’s redistribution program and legislative agenda.
