Federal Funding Uncertainty in State, Local, and Regional Departments of Transportation: Impacts, Responses, and Adaptations (2022)

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2022 N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP RESEARCH REPORT 1004 Federal Funding Uncertainty in State, Local, and Regional Departments of Transportation IMPACTS, RESPONSES, AND ADAPTATIONS WSP USA Inc. New York City, NY SK Solutions LLC Fairfax, VA EBP US Boston, MA Subscriber Categories Highways • Finance Research sponsored by the American Association of State Highway and Transportation Ofcials in cooperation with the Federal Highway Administration

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed, and implementable research is the most effective way to solve many problems facing state departments of transportation (DOTs) administrators and engineers. Often, highway problems are of local or regional interest and can best be studied by state DOTs individually or in cooperation with their state universities and others. However, the accelerating growth of highway transporta- tion results in increasingly complex problems of wide interest to high- way authorities. These problems are best studied through a coordinated program of cooperative research. Recognizing this need, the leadership of the American Association of State Highway and Transportation Officials (AASHTO) in 1962 ini- tiated an objective national highway research program using modern scientific techniques—the National Cooperative Highway Research Program (NCHRP). NCHRP is supported on a continuing basis by funds from participating member states of AASHTO and receives the full cooperation and support of the Federal Highway Administration (FHWA), United States Department of Transportation, under Agree- ment No. 693JJ31950003. The Transportation Research Board (TRB) of the National Academies of Sciences, Engineering, and Medicine was requested by AASHTO to administer the research program because of TRB’s recognized objectivity and understanding of modern research practices. TRB is uniquely suited for this purpose for many reasons: TRB maintains an extensive com- mittee structure from which authorities on any highway transportation subject may be drawn; TRB possesses avenues of communications and cooperation with federal, state, and local governmental agencies, univer- sities, and industry; TRB’s relationship to the National Academies is an insurance of objectivity; and TRB maintains a full-time staff of special- ists in highway transportation matters to bring the findings of research directly to those in a position to use them. The program is developed on the basis of research needs iden- tified by chief administrators and other staff of the highway and transportation departments, by committees of AASHTO, and by the FHWA. Topics of the highest merit are selected by the AASHTO Special Committee on Research and Innovation (R&I), and each year R&I’s recommendations are proposed to the AASHTO Board of Direc- tors and the National Academies. Research projects to address these topics are defined by NCHRP, and qualified research agencies are selected from submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Academies and TRB. The needs for highway research are many, and NCHRP can make significant contributions to solving highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement, rather than to substitute for or duplicate, other highway research programs. Published research reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet by going to https://www.mytrb.org/MyTRB/Store/default.aspx Printed in the United States of America NCHRP RESEARCH REPORT 1004 Project 19-16 ISSN 2572-3766 (Print) ISSN 2572-3774 (Online) ISBN 978-0-309-68733-1 Library of Congress Control Number 2022944702 © 2022 by the National Academy of Sciences. National Academies of Sciences, Engineering, and Medicine and the graphical logo are trade- marks of the National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FTA, GHSA, NHTSA, or TDC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. Cover figure: Outcomes of federal funding uncertainty. NOTICE The research report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the National Academies of Sciences, Engineering, and Medicine. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; the FHWA; or the program sponsors. The Transportation Research Board does not develop, issue, or publish standards or speci- fications. The Transportation Research Board manages applied research projects which provide the scientific foundation that may be used by Transportation Research Board sponsors, industry associations, or other organizations as the basis for revised practices, procedures, or specifications. The Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturers’ names or logos appear herein solely because they are considered essential to the object of the report.

e National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, non- governmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. e National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. John L. Anderson is president. e National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. e three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. e National Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.nationalacademies.org. e Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. e mission of the Transportation Research Board is to provide leadership in transportation improvements and innovation through trusted, timely, impartial, and evidence-based information exchange, research, and advice regarding all modes of transportation. e Board’s varied activities annually engage about 8,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. e program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. Learn more about the Transportation Research Board at www.TRB.org.

C O O P E R A T I V E R E S E A R C H P R O G R A M S CRP STAFF FOR NCHRP RESEARCH REPORT 1004 Christopher J. Hedges, Director, Cooperative Research Programs Waseem Dekelbab, Deputy Director, Cooperative Research Programs, and Manager, National Cooperative Highway Research Program Sid Mohan, Associate Program Manager, Implementation and Technology Transfer, National Cooperative Highway Research Program Dianne S. Schwager, Senior Program Officer Dajaih Bias-Johnson, Senior Program Assistant Natalie Barnes, Director of Publications Heather DiAngelis, Associate Director of Publications Claire Aelion-Moss, Editor NCHRP PROJECT 19-16 PANEL Field of Administration—Area of Finance Brian Keith Gage, Minnesota Department of Transportation, Saint Paul, MN (Chair) James Bryan Gibson, Kentucky Transportation Cabinet, Lexington, KY Lynsee R. Gibson, South Carolina Department of Transportation, Irmo, SC Laura J. Mester, Michigan Department of Transportation, Lansing, MI Ben T. Orsbon, South Dakota Department of Transportation, Pierre, SD (retired) Haley Peckett, District Department of Transportation, Washington, DC Humberto Adolfo Tasaico, North Carolina Department of Transportation, Raleigh, NC Mark Tobin, Pennsylvania Department of Transportation, Harrisburg, PA Dave Tolman, Idaho Transportation Department, Boise, ID Richard Y. Woo, Maryland State Highway Administration, Baltimore, MD Ben Hawkinson, FHWA Liaison Susan Howard, AASHTO Liaison

NCHRP Research Report 1004 presents research that explores the impacts of federal transportation funding uncertainty on state, regional, and local DOTs, and strategies to mitigate these impacts. Increasing structural deficits in the federal Highway Trust Fund and delays in reauthorization of the transportation program, beginning in the 1990s, have led federal transportation funding predictability to be replaced by uncertainty. This report will be of immediate use to state DOT and other transportation agency executives and technical staff engaged in planning, programming, financing, asset management, and project delivery. Historically, federal funding for surface transportation investment in the United States was provided through multiyear authorization acts that provided predictable levels of funding from the Highway Trust Fund. Since the federal motor fuel tax—the primary source of federal transportation revenue—has not been increased in nearly 30 years and a broader array of expenditures have been made eligible for federal transportation fund- ing, the Highway Trust Fund no longer has adequate funds to support surface transpor- tation needs. Under NCHRP Project 19-16, “Federal Funding Uncertainty in State, Local, and Regional Departments of Transportation: Impacts, Responses, and Adaptations,” WSP USA Inc. conducted this research in three phases. The first phase provided the historical back- ground needed to understand the origins of federal transportation funding uncertainty and how this dynamic evolved into the current context. The second and most intensive phase involved interviews with staff from 17 state DOTs, MPOs, and regional planning organizations (RPOs) to understand the effects of federal transportation funding uncertainty on their work and the strategies they use to mitigate and manage the uncertainty. The final phase involved distilling the research into the findings conveyed in this report. This report (1) provides transportation agencies useful knowledge of the effects of federal funding uncertainty on seven key functions (transportation planning, asset manage- ment, system operational management, design and construction, financial management, economic impacts, and meeting federal performance requirements), and (2) presents mitigation strategies in four categories (project programming, revenue generation, project development and delivery, and financial management). The report documents the following points: • The recent history of federal funding, summarizing how federal funding certainty has changed, including the number of continuing resolutions, the resolution time frames, and the relationship between funding apportionment and obligation levels. F O R E W O R D By Dianne S. Schwager Staff Officer Transportation Research Board

• The nature and extent to which funding uncertainty affects a state DOT’s capital priorities. • The immediate and long-term consequences for states and regions of the requirements associated with the use of federal transportation funding, including financial planning, asset management, performance management, fund distribution, and planning and programming. • The nature and extent of the impacts of federal transportation funding uncertainty on other sectors of the economy and stakeholders, including the public. The report is accompanied by a PowerPoint summary of the research that can be used for presentations. The PowerPoint is available on the National Academies Press website (www.nap.edu) by searching for NCHRP Research Report 1004: Federal Funding Uncertainty in State, Local, and Regional Departments of Transportation.

C O N T E N T S 1 Summary 9 Chapter 1 Introduction 9 1.1 Objective of the Research 10 1.2 Structure of the Research 14 Chapter 2 The History of Federal Transportation Funding Uncertainty 14 2.1 The 20th-Century Federal-Aid Highway Program, Funding, and Structure 14 2.2 The Interstate Era and the Highway Trust Fund: 1956–1985 16 2.3 The Pre-ISTEA Transition: 1985–1991 18 2.4 ISTEA: Program Reform, 1991–1998 18 2.5 Post-ISTEA: An Era of Uncertainty, 1998–2007 21 2.6 The Trust Fund Crisis: 2007–Present 23 2.7 Additional Challenges Facing States Moving Forward 25 Chapter 3 Federal Transportation Funding Uncertainty and Its Areas of Impact on Transportation Agencies and the Economy 25 3.1 Parsing Federal Transportation Funding Uncertainty 28 3.2 Functional Areas Affected by Federal Funding Uncertainty 29 3.3 Broader Economic Impacts 32 3.4 Case Study Summaries 39 Chapter 4 Mitigation Strategies 39 4.1 Mitigation Strategies by Functional Area 39 4.2 Categorization of Mitigation Strategies 53 Chapter 5 The Outcomes of Federal Funding Uncertainty 53 5.1 The Outcomes of Federal Funding Uncertainty 56 5.2 Sensitivity to Federal Funding Uncertainty 61 5.3 Key Findings of this Research 63 5.4 Conclusions 66 Glossary 68 Acronyms and Abbreviations A-1 Appendix A Case Study Questionnaires B-1 Appendix B Case Studies C-1 Appendix C Economic Impacts Study R-1 References E-1 Endnotes Note: Photographs, figures, and tables in this report may have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.nap.edu) retains the color versions.