Resource Allocation of Available Funding to Programs of Work (2017)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

23 chapter three Survey of the State of the Practice Although the literature makes it clear agencies have varied approaches to resource allocation among programs, a survey of the 50 states provides greater detail about how states are addressing this issue, the resources they have available, and their self-assessments of the adequacy and defensibility of their current processes and methods. Survey inStrument, DiStribution, anD reSPonSe A survey of state agencies was conducted between February and June 2016. Surveys were completed online, and participants also received follow-up phone calls and an opportunity to complete the survey by phone. The survey instrument was designed to ascertain the degree to which states employ pro- grammatic approaches to resource allocation (technical and other resources) and constraints affecting their ability to do so; how such strategies are developed; and the degree to which such strategies are seen as successful. The instrument was an online series of questions and is shown in Appendix B. The survey was distributed to the membership of the AASHTO Standing Committee on Finance and Administration. A complete series of tables and charts fully documenting all survey results can be found in Appendix C. Forty-two of 50 states submitted responses to the survey, for a response rate of 84%. Of the 42 states responding, 37 indicated they had a strategic process for allocating resources among programs. These 37 states’ officials answered questions about their strategies, whereas the other five respondents provided information about what prevented them from employing a strategy. reaSon for StrategieS (Survey Question 8) The most important reason for using a resource allocation strategy is to make progress toward long- term performance goals. Of the 37 agencies, 32 are using their programmatic resource allocation pro- cess to pursue long-term performance goals or targets. This exceeds the number of agencies concerned with meeting minimum core needs in each program (29), ensuring transparency (25), or maintaining objectivity/consistency (24). Lower priorities include satisfying state legislative or executive branch requirements (19 each, or only 51% of respondents). Figure 3 presents the relative importance of these factors. States also reported they use the resource allocation process to engage the public and local stakeholders, such as MPOs and regional planning commissions. Other states maintain their resource allocation strategy and process to support tracking of past investment efficacy and use in developing budget and funding requests. Strategy DeveloPment (Survey Questions 6 and 7) Another significant finding is that resource allocation strategies tend to originate from within transpor- tation agencies and usually are proposed and developed by agency staff who have direct knowledge of the data and information available to the agency as well as the day-to-day concerns of delivering the programs. For the agencies that report using strategies, nearly 50% (17 of 37) indicated the most important action in development of their resource allocation process was an internal proposal by DOT staff. This proposal was developed within the agency and later approved by leadership; quite often a long-range planning process helped to incubate the strategy (65% or 11 of 17 internal proposals). The next most common actions for initiating a resource allocation were direction by elected or appointed officials (six of 37) and creation during an LRTP (five of 37).

24 Only two DOTs began development of their strategies after legislative action. However, a sig- nificant number of resource allocation processes were later codified by state legislatures (ten of 37). Nine DOTs reported seeking additional public input to the development of their resource allocation process outside of an LRTP public engagement framework. Strategy coverage (Survey Questions 2 and 3) Consistent with the background presented in chapter one, the program areas most commonly included in state resource allocation strategies are the long-established and well-documented highway and bridge preservation programs covered by federal asset management requirements. Other highway programs are often included in program-level allocation schema; however, nonhighway programs are far less typically included and often are determined simply by federal matching requirements. Figure 4 shows the response frequency for the 37 respondents who reported strategies. Ensure objectivity and consistency Ensure minimum core needs are met Achieve long-term performance goals Ensure transparency of decisions Satisfy requirements of state statutes Satisfy executive policy objectives Other - Write in 65% 78% 87% 68% 51% 51% 11% Figure 3 responses to “Why does your agency use the resource allocation strategy that it does? Check all that apply.” Source : eDr group analysis of survey responses to question 8. Hi gh wa y P re se rv ati on Br idg e P re se rv ati on /R eh ab ilit ati on Hi gh wa y E xp an sio n Hi gh wa y S afe ty Br idg e E xp an sio n Hi gh wa y O ps an d R ou tin e M ain t Po rts /W at er wa ys Av iati on Tra ns it Ca pit al Tra ns it Op er ati on s Bic yc le & Pe de str ian Ot he r - W rit e i n Figure 4 responses to “What programs are addressed by your agency’s resource allocation strategy? Check all that apply.” Source : eDr group analysis of survey responses to question 2.

25 Almost all states (36 of 37) consider highway and bridge preservations to be covered. These are the programs that have the most effective asset management systems available for strategic setting of funding levels to meet needs and prioritize projects. The next most likely programs to be included are other common highway programs, such as high- way expansion (32), bridge expansion (29), highway safety (33), and highway operations and main- tenance (26). Programs not related to highways were less likely to be included in resource allocation programs, a finding that reflects several findings from the literature review and review of agency prac- tices regarding difficulties in making cross-modal program comparisons, as well as inflexible funding formulas that prevent allocations to be assigned to less traditional programs. Bicycle and pedestrian programs were included in 21 resource allocation strategies, perhaps because they are housed within highway divisions at many DOTs and are packaged together with road projects. Only 15 states reported a strategy that included transit capital along with highway programs, and only five of 37 respondents considered ports and waterways. Several respondents used the write-in fields for this question, with five respondents suggesting at least three programs other than those suggested by the survey. One-quarter of respondents provided at least one program that is not included in the default list. However, there is no common theme among the total of 21 programs suggested, which indicates that the default list captures most of the major programs. factorS Determining reSource allocationS (Survey Questions 5 and 9) The survey findings bear out the literature and practice review findings from chapter two, noting the statewide transportation planning process as a common context for programmatic allocation strate- gies. The survey finds that asset management systems and models play a large role in determining the size of highway and bridge preservation programs, with nearly three-quarters of responding states pointing to the importance of quantitative measures overall as playing a very important role in their processes. Although states have some interest in ex post evaluations, better benchmarking data and predictive models for use at the time of decision making are the highest priorities for states seeking to improve their programmatic investment allocation decisions. The most important means of allocating resources are program needs, as defined by models or analysis, with all respondents indicating these methods are at least somewhat important, and 32 of 37 respondents saying they are very important. In addition, 27 of the 37 respondents considered perfor- mance measures, whether developed as part of an LRTP or independently, to be very important. The long-range planning process (36 of 37 report somewhat or very important) is slightly more likely to provide performance or investment targets to agencies than are external stakeholders, such as a transportation board (32 of 37 report somewhat or very important). However, when performance measures are set by an oversight body, they are more likely to be very important among the responders (18 versus 16 for LRTP targets). For just under half of respondents (18 of 37), legislative targets were a very important factor. Special studies were used by the fewest states to make resource allocation decisions (only seven of 37 consider them very important). Write-in responses indicated the role of local partners and prioritization schemes in allocation of resources. The improvements most needed to better carry out their strategies are better performance bench- marking data and better predictive models of transportation impacts (26 of 37 and 25 of 37 responses, respectively). These desired improvements closely align with the tools that are in use, indicating that most agencies are not entirely satisfied with their current processes. Twenty (of 37) states also reported better predictive economic models would be useful. Agencies are using the tools available to them but report better methods would allow them to improve the success of their strategies. Case studies or ex post evaluations are the least important input to agencies (13 of 37 find them unimportant, compared with only six who said information of this nature would be very useful). DOTs also indicate that they are reasonably satisfied with the amount of discretion they have over their programs (ten very important, ten unimportant) and their stakeholder engagement processes (nine very important, eight unimportant). Other write-in responses indicate the need for better

26 communication tools, better predictive models of asset condition, and tools of multiobjective analysis, or cross-program comparisons. tranSParency anD ProceSS (Survey Questions 3, 10, 11, 15, and 16) The processes by which agencies allocate resources to programs of work are generally well received, with few agencies reporting highly controversial or unsatisfactory outcomes. Two of 35 respondents suggested that their process is controversial or scrutinized more than occasionally. Eleven (of 35) respondents said they receive broad support across their department and from external stakeholders. The largest number of respondents (22 of 35) indicated their policy generally is accepted but recog- nized that resource allocation outcomes are important to stakeholders, who occasionally scrutinize the process. This scrutiny does not necessarily threaten the resource allocation process but does encourage agencies to be as transparent as possible with the process. Respondents were asked whether they thought four factors are important to securing their level of support: demonstrating needs are met, being consistent and transparent, involving stakeholders, and demonstrating outcomes. The most important factor for garnering support of their strategy is con- sistency and transparency with regard to the decision-making process (very important to 30 of 37). Many respondents considered stakeholder involvement in strategy development to be the least impor- tant of the four categories (very important to 14 of 37). All four aspects were considered at least somewhat important, but four respondents consider stakeholder support in strategy development unimportant. Despite considering consistency/transparency as more important, more respondents con- sider the ability to demonstrate outcomes (24 versus 11) and having data and models (20 versus 15) very important compared with somewhat important. For each of these, two respondents indicated the category was unimportant. Although there is a wide range in the level of discretion that agencies report (see Figure 5), most (27 of 37) said there has not been a significant change in their level of discretion over time. However, Figure 5 responses to “indicate what percentage of your agency’s annual resources the agency has discretion over in the resource strategy.” Source : eDr group analysis of survey responses to question 3.

27 more agencies have reported they have less discretion now than in the past regarding how to allocate resources, citing state laws as the most constraining factors (even more so than federal laws). Agen- cies with more discretion (six of 37) report that responding to changes in federal law and the need to justify their use of funds have had the most significant effect on their discretion (four states for each factor). Agencies that have lost discretion (eight of 37) reported that they have been responding to these two factors (four states each), but the most common significant factor is new constraints attrib- utable to state laws (five of eight states). The survey appears to indicate that despite additional flex- ibility from federal funding programs (provided under MAP-21 and the FAST Act), resource scarcity and uncertainty have caused state legislatures and other stakeholders to become more involved in the resource allocation process. Because so many different factors trending in different directions are involved in determining levels of discretion, most states do not report that they have observed significant changes in one direction or the other overall. reaSonS for not emPloying a Strategy (Survey Questions 12 and 13) One of the most significant findings of the survey is that to utilize a strategy for allocating resources among programs, two essential ingredients are (1) a sufficient level of agency discretion over resources to be allocated and (2) available staff resources and technology to carry out such a process. The sur- vey shows that when these ingredients are absent, agencies do not undertake formalized processes to deliberately allocate resources. Beginning with the five agencies that do not use a resource allocation strategy, the survey provides some useful insight into the state of practice for resource allocation. The most common reason for not utilizing a strategic process is a limit on staff or technical resources. Agencies also do not establish consistent strategies because of lack of control over their funding stream, either because of political or policy constraints on discretion or unpredictability of funding availability. One agency indicated that internal departmental culture prevented implementation of a more strategic resource alloca- tion approach. In that state, current program offices are resistant to any change that might affect their funding levels. For these five agencies, the most important factors that might allow them to improve their resource allocation practices are better predictive models for transportation and economic impacts. They also considered performance benchmarking data, case study or ex post examples, and stakeholder inputs as somewhat important factors for improving allocation. One of the five agencies experienced a decrease in resource allocation discretion as the agency was challenged to justify its use of scarce funds and was subject to additional constraints from the state’s governor or executive team. Two of the responding agencies that lack an allocation strategy indicated they are developing strategies and expect to begin using them within several years. One of these states is beginning a long-range planning process they think will facilitate the development of a strategic process. Survey takeawayS Overall, the survey findings describe a state of the practice in resource allocation among programs of work that builds from the foundation of highway and bridge asset management systems and require- ments often used in the statewide long-range planning process. Despite increasing federal require- ments to incorporate wider performance measures across modes, most states have not yet integrated allocations of highway and nonhighway modes into the same process and are struggling to do so. State laws are shown to provide some contexts for states to consider resource allocation in new ways (outside of statewide LRTP or STIP processes) but in many cases are shown to impose constraints that limit a state’s discretion over how to allocate resources in the long term. There is general agree- ment among state agencies that better benchmarking data and predictive models are the most critical needs for improving the quality and defensibility of their resource allocation regimens. Table 3 exam- ines what the survey responses describe regarding the seven aspects of resource allocation examined throughout this synthesis.

28 TABLE 3 FINDINgS FROM THE SuRvEy REgARDINg SEvEN ASPECTS OF RESOuRCE ALLOCATION Aspect Survey Findings 1. Preservation versus improvement balance Many more agencies consider preservation programs to be covered by a strategic resource allocation process than expansion programs, for which project-level considerations and political input often play a larger role. 2. Modal balance Few agencies report having a strategy that covers many different modes. This is partly because of lack of discretion over spending on other modes and less developed tools for analyzing needs and investment outcomes for those modes. 3. Geographic balance Specific information on this aspect was not solicited by the survey or received via write-in replies. 4. Accountability (transparency versus complexity) Most agencies acknowledge their resource allocation practices will be scrutinized and transparency is one of the most important factors to their decisions being accepted. Ensuring transparency is one of the top reasons for having a strategic process that can produce consistent outcomes. 5. Top-down versus bottom-up The survey does not provide significant insight into this aspect of resource allocation strategies. 6. Agency discretion/flexibility versus policy/model-driven consistency Agencies report being generally satisfied with their level of discretion and that consistency is the most important factor for gaining and maintaining support for the agencies’ processes. Many agencies report they can secure more control over their resources by giving up some flexibility and relying more on consistent procedures. 7. Objectivity versus subjectivity Additional discretion over investment levels is the second least important factor to respondents in terms of improving resource allocation strategies and processes. Agencies are much more focused on increasing objectivity.