FHWA Distributes $36.4 Billion in Highway Funding to States
April 18, 2018
On Monday evening, the Federal Highway Administration distributed $36.4 billion in fiscal year 2018 highway spending authority to states pursuant to the recently-enacted fiscal year 2018 omnibus appropriations law.
Together with $596.8 million in new formula highway contract authority that is exempt from the annual obligation limitation (reduced from $639.0 million by budget sequestration), states have now been given $37.0 billion in real, spendable formula highway funding in 2018. (Contract authority subject to the obligation limitation is more like potential money – it doesn’t matter how much contract authority you have, you can only spend as much of it as you have obligation limitation.)
And states should soon receive an additional $2.0 billion in extra formula funding from the general fund of the Treasury that was appropriated in the FY18 omnibus, to bring total spendable highway funding distributed to states to $39.0 billion. And at least $3 billion more should be distributed to states in the annual “August redistribution” in four-and-a-half months or so.
INFRA, TIFIA, etc. cut by 8.3 percent. As the step-by-step distribution shows, because $3.6 billion of new FY18 obligation limitation had to be set aside “off the top” to be available for “carryover” contract authority for allocated programs from prior years, the remaining obligation limitation to cover new FY 2018 contract authority for allocated programs was only equal to 91.7 percent of the new contract authority. Accordingly, those programs (TIFIA, INFRA grants, FHWA research, etc.) were cut by 8.3 percent. The $900 million for INFRA grants provided by the FAST Act was reduced to $825.3 million, and the $285 million for the TIFIA program was reduced to $261.3 million.
This means that the INFRA grant announcements that Secretary Chao has promised will be sent to Capitol Hill by the end of next month will total $1.535 billion – $709.9 million of FY 2017 funding and $825.3 million of FY 2018 funding. (The INFRA funding notice predicted that the FY 2018 amount would be between $810-855 million.)
NHS bridge penalty kicks in. Section 1106 of the 2012 MAP-21 law got rid of the old Interstate Maintenance, Highway Bridge, and National Highway System programs and consolidated them into a National Highway Performance Program. But to make sure that the Interstate and bridge programs weren’t ignored, the law required performance measures backed with penalties – if a state let more than 10 percent of its NHS bridge deck area fall into “structurally deficient” status, or a state’s Interstate roads fall below a condition metric set by the Secretary, then the states are required to spend a certain amount of their formula money just on NHS bridges or Interstate roads, as the case may be.
FHWA did not finalize the rule implementing this provision until January 2017, and the effective date was delayed until May 2017 during the Obama-Trump transition, so fiscal 2018 is the first year that the condition measures take effect. (For obligation limitation, that is – it took effect for contract authority last year.) As it turns out, six states (CT, IL, MA, NY, PA and WY) triggered the NHS bridge penalty, resulting in a total of $529 million of their NHPP contract authority and their overall formula obligation limitation being set aside just for NHS bridges. This was particularly big for New York – their penalty was $239 million, which is 15 percent of their overall total formula obligation limitation.
(The extra $1.98 billion in general fund formula money from the omnibus must be distributed to states by the ob limit distribution ratio, but we think FHWA will use the ob limit ratio before penalties, not post-penalty, so New York State will get 4.27 percent of the $1.98 billion, not $3.73 percent.)
More money to come in August. $6.8 billion in obligation limitation, an all-time high, was reserved for carryover and new contract authority for allocated (non-formula) programs. Every August, FHWA determines how much of that obligation limitation won’t be needed for those allocated programs prior to the end of the fiscal year on September 30 and asks state DOTs how much more limitation they could obligate before the September 30 deadline. The freed-up money is then given to states around Labor Day based on their ability to spend it before it lapses.
For the last three years, the August redistribution has been about half of the size of the initial reservation for allocated programs, so this year’s August redistribution could be close to $3.5 billion.
The table below shows how the annual August redistribution has tripled in size since the pre-MAP-21 days. This is largely to do with perpetually unspent TIFIA carryover balances as well as the large amounts of money for FASTLANE/INFRA grants where the recipients aren’t even announced (much less getting grant agreements negotiated and signed) by September 30 of the year the funding is made available.
|Initial Allocated Reserve||Redistributed to States in August|