FHWA Releases FY17 Highway Obligation Authority

FHWA Releases FY17 Highway Obligation Authority

June 01, 2017  | Jeff Davis

June 1, 2017

On May 24, the Federal Highway Administration issued a formal notice (N4520.245) distributing the full $44.266 billion in obligation limitation on the federal-aid highways program provided by the FY 2017 omnibus appropriations bill (Public Law 115-31). But even though the 2017 “ob lim” total amount is $905 million higher than 2016, almost all states received less money in the initial redistribution than they did last year.

The reason is that the law requires that unobligated contract authority for non-formula programs (called “allocated” programs has to have obligation limitation taken “off the top” each year, on a dollar-for-dollar basis, before the remaining obligation is distributed to states so the states in turn can obligated contract authority apportioned via formula. And the unobligated carryover of non-formula money has sharply increased this year.

The primary culprit is the new FASTLANE grant program, which gets over $800 million in new contract authority each year starting in 2016. The FY 2016 FASTLANE grants were not announced until late summer 2016 which meant that almost none of that money could be legally obligated before September 30 – and then, on October 1, money for both the 2016 and 2017 installments of FASTLANE had to be taken off the top. Unobligated balances of TIFIA credit subsidy funding are also a major contributor.

States will get most of this money back in the annual “August redistribution,” where limitation that will not be needed before September 30 is taken away from the allocated programs and given to states that can use it before the end of the fiscal year. The 2016 redistribution was almost 50 percent larger than the 2015 redistribution, and the 2017 redistribution should be even bigger.

The annual amount taken off the top of the ob limit at the start of the process started growing under the 2012 MAP-21 law after several years of stability, in part because MAP-21 increased annual funding for the TIFIA program from less than $150 million per year to $1.0 billion per year. And, as this 2015 article in ETW documented, there just weren’t enough eligible projects for FHWA to obligate $1 billion per year in TIFIA credit subsidy money.

The percentages of the formula obligation limitation total distributed to each state mirror the state shares of total new contract authority apportioned via formula for the new fiscal year. So, when the total obligation limitation distributed to states for such formula money goes down, as it did this year (the initial formula distribution is $970 million below 2016’s level), this serves to magnify the changes in each state’s share of total contract authority.

The full amount of FAST Act contract authority for 2017 was apportioned to states at the start of the fiscal year in FHWA notice N4510.807 and then amended slightly three months later in N4510.810 when a few states changed their DUI laws to avoid penalties. Because each state’s share of total funding has to be increased to at least the amount of real tax dollars the state was estimate to contribute to the Highway Account of the Highway Trust Fund two fiscal years prior, Texas saw its share of total contract authority increase substantially in 2017, going from 8.81% to 9.40%.

Because of that, even though total initial formula obligation distribution in 2017 was $970 million below the 2016 level, Texas’s actual dollar amount went up by $217 million (once each state’s share of the $639 million per year of new contract authority exempt from the obligation limitation, minus the sequestered amount, is added for the “real money” total). For reasons we cannot discern, North Dakota also showed a slight increase in the initial take of obligation limitation. All other states showed an initial loss – though, we must emphasize, several billion dollars of extra money will be given to states in late August or early September for speedy obligation by September 30.

The table below shows each state’s share of the fiscal 2017 highway obligation limitation and the exempt money, compared with the comparable (pre-August) total from last year.

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