A History of the Secretary’s Ability to Approve (or Disapprove) Highway Projects

A History of the Secretary’s Ability to Approve (or Disapprove) Highway Projects

March 04, 2022  | Jeff Davis

The release of an unusual “policy statement” by the Federal Highway Administration in mid-December 2021 sparked a partisan row over whether or not the Department of Transportation was going to use criteria not specifically spelled out in law to force state highway departments to choose certain kinds of projects over others when selecting their formula funding. Transportation Secretary Buttigieg had to address the issue at length in a Senate hearing this week. While the Secretary’s formal approval is necessary for any federal-aid highway formula project to move forwards, the Secretary’s leeway to disapprove projects has always been carefully constrained by law.

The original, appropriated program

The requirement that the federal government sign off on every project financed with federal-aid road money was present from the very beginning. Section 6 of the original 1916 law creating the 50-50 matching aid program said “…the Secretary of Agriculture shall approve only such projects as may be substantial in character and the expenditure of funds hereby authorized shall be applied only to such improvements…No payment of any money apportioned under this Act shall be made on any project until such statement of the project, and the plans, specifications, and estimates therefore, shall have been submitted to and approved by the Secretary of Agriculture.”

On September 1, 1916, the Secretary of Agriculture issued the original regulations interpreting the terms of the Act as to the form that the documents, surveys, plans, specifications, and estimates of projects had to take, and their content. These regulations were worked out with the state DOTs in a meeting at a D.C. hotel shortly before publication. But they did leave the definition of terms like “adequate means…to insure the economic and practical expenditure of such money” and “suitable materials” up to the Secretary.

The central criticism of the program established by the 1916 law was that the federal money was spread too widely to be of much use – improving two miles here, three miles over there –without any central connectivity. Accordingly, the 1921 law provided that each state designate a system of highways totaling 7 percent of its total highway miles as being eligible for federal aid, and all future federal highway money would only be spent upgrading those roads. Section 6 of that law also provided that “The Secretary of Agriculture shall have authority to approve in whole or in part the systems as designated or to require modifications or revisions thereof.”

Mandatory funding (contract authority)

In order to fund the 1921 Act, Congress created, in a postal appropriations bill the following year, a new type of funding – “contract authority.” The idea was that states could start spending the federal aid authorized by law, despite the fact that no money had yet been appropriated by Congress for that purpose. This would create a “deficiency” and would then force Congress to make an appropriation to pay off the deficiency.

But the way they did it also appeared to take away some of the discretion of the Secretary when selecting projects: “the Secretary of Agriculture shall act upon projects submitted to him under his apportionment of this authorization, and his approval of any such project within three years shall be deemed a contractual obligation of the Federal Government for the payment of its proportional contribution thereto.” (Emphasis added.)

After the great stock market crash of 1929, the regular federal-aid highway program was allowed to lapse. Instead, in 1933 the new Roosevelt Administration provided massive amounts of general-purpose aid in the National Industrial Recovery Act, which established a general-purpose Public Works Administration. But Sen. Carl Hayden (D-AZ) was successful in getting $400 million of NIRA funding set aside specifically for roads in section 204, to be apportioned to states via the federal-aid formula, without the need for a federal matching share. And $350 million of that money was not subject to the Secretary’s approval for individual projects.

The following year, Hayden restarted the federal-aid highway program in the Hayden-Cartwright Act of 1934, which not only provided $125 million per year for the regular federal-aid matching highway program for fiscal years 1936 and 1937, but also gave an additional $200 million in contract authority up front for the NIRA relief road program. The contract authority for the NIRA program had the “the Secretary shall act” language attached, and the same language was applied later on to the regular program contract authority in the follow-up appropriations bills.

Then, in the 1936 reauthorization act, permanent language was added requiring all future apportionments to be made on or before January 1 of each year, and then adding the “the Secretary shall act” etc. language to that permanent law.

Roosevelt pushes back

In 1937, President Roosevelt tried to cut highway funding, and the way he did so recognized that the Secretary didn’t have any real discretion not to approve any eligible projects presented to him by a state. In a November 1937 message to Congress, FDR complained that:

The Secretary of Agriculture is required to apportion to the States the annual amount authorized for appropriation, and to approve projects of proposed State expenditures thereunder which shall constitute contractual obligations of the Federal Government regardless of the availability of appropriations for their payment and of the fiscal outlook of the Treasury. This mandatory provision completely ties the hands of the Executive as to the amount of road funds to be included in the Budget for any fiscal year. While I do not object to the apportionment among the States of such amounts as may be authorized for appropriation, I do most strenuously object to the mandatory incurrence of obligations by the Federal Government under such apportionments without regard to its ability to finance them from its revenues. I, therefore, recommend that the Congress take the necessary action permanently to eliminate this provision of our public roads law.

If Roosevelt (who certainly believed in an expansive executive) thought he had the authority to order the Secretary of Agriculture not to approve projects in excess of a certain amount per year (or per state per year), it is unlikely he would have just asked Congress to pass a law repealing contract authority.

As Richard Weingroff has explained at length, this request did not go over well in Congress, which took no action on Roosevelt’s request before adjourning the 1937 session. Accordingly, the Agriculture Secretary apportioned the fiscal 1939 contract authority to states on December 31, 1937. However, he included his own cover memo to state governors stating that the President still wanted that contract authority to be repealed and asking the states to give “your cooperation, and that of your state highway department, in deferring the submission of projects under the 1939 apportionment until this matter has received the further consideration of Congress.”

(Again, if the Secretary had the power to deny approval of projects that otherwise met the conditions of law, he wouldn’t have begged states not to send him any project approval requests.)

The 1938 reauthorization act reduced spending levels somewhat but maintained mandatory apportionments, contract authority, and the requirement for the Secretary to approve projects. The 1940 reauthorization act didn’t change anything, and then the whole highway program (along with the rest of the domestic role of the federal government) was largely sidelined by World War II. After the war, the regular relationship resumed.

Changes under Eisenhower

It wasn’t until the 1950s that Congress again addressed the mandatory nature of highway apportionments and highway approvals. As part of the law creating the Highway Trust Fund in 1956, Senate Finance Committee chairman Harry Byrd (D-VA) and Treasury Secretary George Humphrey devised a method to try and ensure that spending out of the Trust Fund would  “pay-as-you-build”. To do so, the “Byrd Test” provision of law provided that highway spending would be cut automatically if projected spending dipped too far below the combination of Trust Fund balances and projected revenues. But this was accomplished by the law ordering a reduction in apportionments to states, not by giving the Secretary (of Commerce by this point) any additional authority to jettison individual projects.

Congress then promptly waived the Byrd Test in 1958 in order to provide extra anti-recession highway stimulus spending. I noted in this 2019 article, that this spending pushed the Trust Fund towards insolvency in 1959. After a July 2 directive from President Eisenhower to the Commerce Secretary and the Bureau of the Budget Director to “develop a course of action…to assure that the level of Federal-aid expenditures is, to the maximum practical extent, kept within the estimated revenues anticipated for the Highway Trust Fund,” the two agencies agreed to undertake an “exhaustive legal study of whether contract authority can be curtailed under the legal authorizations, and the legal efforts of proposed cutbacks.”

This study recommended that to keep the Trust Fund solvent, states would be given a fixed amount of their apportionment each quarter and told that the Secretary would not approve any projects in the aggregate that exceeded that amount. The report added, “Based on information supplied by the General Counsel of Bureau of Public Roads there seems to be no doubt that the Secretary’s power to approve programs and projects may be exercised in a manner that will regulate the rate at which funds are obligated. His discretion cannot be used in a way that will impair or defeat the intent and requirements of the Highway Act…The Secretary would not be exercising an absolute Federal control over State programs since the effect of the proposed financial control system would be to determine the timing of Federal participation.” (Emphasis in original.)

These “contract controls” were carried out beginning in October 1959. (See this exchange of letters between Senator Albert Gore (D-TN) and Eisenhower on the legal justification for the contract controls.)

Impoundments and the Impoundment Control Act

While Eisenhower only used the contract controls to ensure the Trust Fund remained solvent, the system was later used by Presidents Johnson and Nixon to hold down outlays to help balance the federal budget or to fight inflation, depending on the year. Court cases were filed, and one federal district court decision (Missouri v. Volpe) held that because the Trust Fund had plenty of money on hand, the refusal of Secretary Volpe to allow Missouri to obligate all of its contract authority (by approving its project requests) on grounds “related to the prevention of inflation of wages and prices in the national economy” was illegal. (The decision was mooted when that year’s impoundments were released.)

Eventually, Congress passed the Impoundment Control Act of 1974 which makes it illegal for a President to withhold funds provided by Congress from obligation or expenditure.

When this law took effect in 1976 it allowed states to spend down several years’ worth of accumulated highway contract authority and caused Trust Fund outlays to skyrocket. Congress started enacting annual obligation limitations in the annual appropriations bills so that wouldn’t happen again. But those were only aggregate state-by-state ceilings and did not give the Secretary any additional authority to reject specific projects on any grounds.

A 1980 federal district court decision (Arkansas v. Goldschmidt) held that the President had no power to withhold federal-aid funds for obligation other than that written in the annual obligation limitation or other specific law, and it is believed that USDOT has internal legal opinions citing that decision that restrict the Secretary’s ability to do so. These opinions were referred to by Secretary Mary Peters when the Highway Account of the Highway Trust Fund went broke in 2008 – because of the Impoundment Control Act, as interpreted by the courts under Goldschmidt, USDOT was powerless to take administrative action to stop states from obligating their contract authority, even if the Trust Fund was below a zero balance and thus had no money to pay off those obligations.

Section 4(f) changes things

However, even though the Impoundment Control Act ended the Administration’s ability to withhold project approvals in general, the Secretary still has the right to withhold approval for a project if it violates specific restrictions in law. These are mostly spelled out in title 23, U.S.C., and many are specific to the “flavor” of money being used (some formula programs have different legal eligibilities than others). But states know these rules well, and they are usually pretty clear.

The 1966 law creating the Department of Transportation was written by Congress in the midst of the great “highway revolt.” Section 4(f) of that law gave the Secretary new authority: “the Secretary shall not approve any program or project which requires the use of any land from a public park, recreation area, wildlife and waterfowl refuge, or historic site unless (1) there is no feasible and prudent alternative to the use of such land, and (2) such program includes all possible planning to minimize harm to such park, recreational area, wildlife and waterfowl refuge, or historic site resulting from such use.”

The highway lobby pushed back, and the 1968 highway bill sent to President Johnson amended section 4(f) to limit its applicability to “publicly owned” land from a park or other protected area “of national, State, or local significance as determined by the Federal, State or local officials having jurisdiction thereof.” (LBJ almost vetoed that bill, and that was one of the reasons, but he finally decided to sign it into law.)

Even with the 1968 amendment, this was a significant power to give to the Secretary. Its chief claim to fame actually came when the Secretary failed to use section 4(f) to stop a project. The U.S. Supreme Court in the 1971 Overton Park decision declared that the Secretary had erred when giving 4(f) approval to a plan to build Interstate 40 through Overton Park in Memphis, Tennessee. The decision is quite a big one in administrative procedure law – the Court held that because the Secretary had not issued any formal findings or other detailed “administrative record” of why he had granted the 4(f) approval for the project, the whole thing was remanded back to the district court in Memphis for retrial.

(This tied things up for 10 years. In 1981, the state gave up on building I-40 through downtown Memphis and redesignated the northern part of what had been the I-240 bypass north of downtown as I-40.)

It was the Overton Park case that established the principle of judicial review of infrastructure project approvals by federal officials in the U.S. (NEPA came along shortly thereafter, so some early NEPA cases relied on the principle established in Overton Park.)

Fair housing approvals

A major feature of the “freeway revolt” was protesting private homes being demolished to build freeways without adequate compensation. Section 30 of the 1968 highway law established a new program for highway relocation assistance which included a provision based on section 4(f): “The Secretary shall not approve any project…which will cause the displacement of any person, business, or farm operation unless he receives satisfactory assurances from the State highway department that” the relocation assistance authorized by the act was being offered and that “within a reasonable time prior to displacement there will be available, to the extent that can reasonably be accomplished,” comparable replacement housing “as defined by the Secretary.”

Four months earlier in 1968, Congress enacted the Fair Housing Act, which applied anti-discrimination provisions that applied to “dwellings provided in whole or in part with the aid of loans, advances, grants, or contributions made by the Federal Government.”

It was up to Nixon’s Transportation Secretary, John Volpe, to combine the policies of the two laws. In early 1970, he announced that USDOT would no longer approve projects unless three conditions were met:

  1. Specific written assurance that adequate replacement housing will be available (built, if necessary) before the initial approval or endorsement of any project.

  2. Construction will be authorized only upon verification that replacement housing is in place and has been made available to all affected persons.

  3. All replacement housing must be fair housing – open to all persons regardless of race, color, religion, sex or national origin. This is in addition to the requirement that replacement housing must be offered all affected persons regardless of their race, color, religion, sex, or national origin.

The announcement, and an explanatory letter to Pat Moynihan at the White House, are here.

(Earlier in 1969, Volpe had also ordered the implementation of federal equal opportunity requirements on FHWA construction contracts as part of the project approval process, putting in charge former Knoxville, Tennessee motel owner Alexander Gaither, whose establishment had been torn down to build what is now the James White Parkway through downtown and who gotten so mad about it that he rejoined the federal government, where Gaither had worked during WWII.)

At first, Volpe’s announcement didn’t get that much public pushback from Capitol Hill. During the 1970 House hearings (pp. 1028-1029), FHWA Administrator Frank Turner was pressed about FHWA’s expansive interpretation of the 1968 relocation language. Turner said that FHWA interpreted the “to the extent that [providing replacement housing] can reasonably be accomplished” part as meaning that “housing can reasonably be provided in every case.” Turner said that “times have changed, and there is a clear recognition by the highway program managers that this is an equitable, proper thing for us to do, and so based on the legislation which this committee gave us in 1968, we are applying it in such a way that there has to be housing, a place for people to move before construction proceeds.”

Congress pushes back

When the House Public Works Committee reported the 1972 highway reauthorization bill, section 124 of the bill (H.R. 16656, 92nd Congress) proposed a new amendment to title 23:

§145. Federal-State relationship. The authorization of the appropriation of Federal funds or their availability for expenditure under this chapter shall in no way infringe on the sovereign rights of the States to determine which projects shall be federally financed. The provisions of this chapter provide for a federally-assisted state program.

There was nothing in the legislative history of the bill to explain why the provision was being added. In a letter to the House chairman in September 1972, Volpe said “We do not believe this alters in any way the provisions of law which give the Secretary, through the various approval powers, discretion to establish priorities and achieve long-range federal objectives. However, if it is the intention of this provision to strip the Department of its authority to manage the program, we would then strongly recommend the deletion of section 124.”

No such provision was in the Senate companion bill, and a month later, the conference report on the final bill dropped it. However, the conference report was never adopted because of the larger dispute over opening up the Highway Trust Fund to mass transit spending, so Congress had to start over in 1973.

Again, the House version of the bill contained the provision (this time as section 125 of the bill), and the Senate version did not. And, again, there was nothing in the formal legislative history explaining the provision. The new Secretary, Claude Brinegar, did not object to the provision in his April 4, 1973 letter to the House chairman.

The provision was included in the 1973 conference report, and this time, the conference report was passed by Congress and sent to the President. OMB’s summary memo for President Nixon said that the bill would “minimize Federal involvement and red tape in highway programs through substantial delegation of project approval to States” but it is not clear if the memo was referring to this specific provision. The bill was signed into law, and the provision remains, word for word, on the books to this date as 23 U.S.C. §145(a).

(It wasn’t made public until 30 years later, but House committee members had been told by staff in a closed-door briefing in early 1973 that the reason for the provision was a decision by a state court in California ordering the state DOT to use federal-aid highway money instead of state money to build a specific project just because the project was located on the federal-aid system. And that’s not the kind of thing that even a legislative history-oriented court would rely on, much less a textualist court.)

Conclusion

While the Secretary of Transportation’s formal approval is still as necessary for a federal-aid highway project to move forward as it was when the program began 106 years ago, the combination of the Impoundment Control Act, section 145 of title 23, and other related statutes and precedents effectively prevent him from rejecting a state’s proposed project using its federal-aid highway formula money unless the Secretary determines that the project is not in compliance with a federal law.

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