Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs (2022)

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C-1   Summary of State Survey Responses A P P E N D I X C The research team conducted a survey to gain more qualitative information from the chief executive officers (CEOs)/chief financial officers (CFOs) of department of transportation (DOT) agencies about their approaches, actions, and decisions for use of funding from FHWA. The research team generated the survey questions, obtained review comments from the NCHRP panel, and disseminated the survey to the 50 state and District of Columbia DOT CEO/CFOs. The survey was distributed in mid-November with a deadline for responses of mid-December. Of the 51 agencies contacted, the response rate was 76 percent, with 38 agencies providing responses to the questions (Figure C-1). Figure C-1. Response rate. Question 1: Has your state used the transfer authority made available under MAP-21 and the FAST Act to transfer federal-aid highway funding between federal highway funding categories or to other modes? If so, to what extent does your state use the transfer authority? All of the DOTs responded “yes” to this question, with transfers occurring annually or multiple times per year. Approximately one-third of respondents specifically named FTA as an “other” mode that receives the transfer of federal highway funding. Total Responded 76% No Response 24%

C-2 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs Question 2: How does your organization determine how much to transfer, and from which funding category (CMAQ, STP, NHPP, etc.) to which funding category? Please briefly describe the institutional process of decision-making and identify the key personnel in the following three questions. The main objective for DOTs is to review the program of projects and schedules compared to the available apportionments to maximize the use of federal funding. The steps discussed in the responses included: • The DOTs develop a program of projects. • The DOTs compare the program to the available apportionments. • During the course of the year, adjustments may be made as project schedules either accelerate or are delayed by various reasons. • The DOTs continually assess the program of projects and the timing of authorizations, and request adjustments through transfers as appropriate. A few of the states appear to have set transfers each year for Transportation Alternatives (TA), Congestion Mitigation and Air Quality Improvement Program (CMAQ), and FTA funding, but for the majority of states, it appears that this occurs on a year-to-year and case-by-case basis. Questions 3, 4, and 5: 3. Who in your organization has a full understanding of transferability of rules and regulations? 4. Who determines how transfers are carried out? 5. Who in your organization approves the transfers? Generally, directors or administrators in a planning and programming office are responsible for the transfer practice. The recommendations are either approved at the planning and programming office level, the executive leadership level, or by the CFO. Question 6: What are the trade-offs, if any, of having the ability to transfer funds between programs and/or modes? The majority of respondents commented that the ability to transfer funds between programs or modes allows more flexibility with funding and helps manage priorities, particularly if a project gets delayed. While all states commented that

Summary of State Survey Responses C-3 they appreciate having the ability to transfer, 11 states offered comments regarding trade-offs. A synopsis of the trade-offs is as follows: • Priorities must be established to maximize the use of funds within the program constraints. • Negative impacts and perceptions outside the agency may occur for the program from which the funds are transferred. • One trade-off that could occur is when a federal rescission is pending. Some states take advantage of the ability to transfer funds to a program area that is held harmless from a rescission. This strategically shifts the financial burden to other states that have large balances in program areas that are subject to a rescission. • Last-minute transfer of funds causes an imbalance in future years’ programs and may require adjustments between metropolitan planning organization (MPO) programs affecting planned projects in their region. • The inability to transfer sources that are not suitable for the DOT’s project needs greatly limits the DOT’s ability to implement the federal-aid program. In turn, this forces the DOT to transfer sources that are useful as a budgeting exercise as opposed to a project need. • Inability to track funding usage once it has been transferred from FHWA’s control. Question 7: Do you find transfers useful in the following situations: 7-1: Fully obligating the federal program? Figure C-2. Transfer usefulness for fully obligating the federal program. Yes 94% Somewhat 3% Not Necessary 3%

C-4 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs 7-2: Facilitating meeting programmatic goals? Figure C-3. Transfer usefulness for facilitating meeting programmatic goals. 7-3: Facilitating collaboration with local or regional entities as it relates to set-asides and their priorities? Figure C-4. Transfer usefulness for facilitating collaboration with local or regional entities. 7-4: Preparing for rescission impacts? Figure C-5. Transfer usefulness for preparing for rescission impacts. Yes 84% Somewhat 2% No 11% Must comply with TE- 045 Waiver Program 3% 24 5 3 1 1 2 1 0 5 10 15 20 25 30 YES NO N/A MAYBE USUALLY SOMETIMES RARELY 33 1 1 1 1 0 5 10 15 20 25 30 35 YES NO POTENTIALLY NOT PREVIOUSLY N/A

Summary of State Survey Responses C-5 7-5: Other situations—please explain. • If there are funds within a category that may lapse, the transfer could protect those funds. • Transferring funds can be helpful to expand efforts where funding limitations exist. • Advanced planning for the use of funds is instrumental in making a robust application for additional obligation limitation during the August redistribution. • Supports FHWA’s pooled fund research programs. • Transfer funds from one funding type to another due to delay in projects. • De-obligation and cash management during COVID period. • Transfers are part of the strategy that takes advantage of advanced construction. • Overall flexibility. Question 8: Do you think the requirements to meet specific performance targets will impact how your agency transfers funds? Figure C-6. Impact of performance targets on funding transfer decisions. Some of the respondents also added comments such as: • Yes. Funds were transferred to facilitate bridge work to avoid the National Highway Performance Program (NHPP) bridge penalty. Bridge work is not eligible under the CMAQ or HSIP programs until transferred to NHPP or the Sensible Transportation Policy Act. 12 10 11 2 1 1 0 2 4 6 8 10 12 14 YES NO POSSIBLE LIMITED, IN SOME CASES DID NOT UNDERSTAND QUESTION NO RESPONSE

C-6 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs • Yes. Dealing with safety targets. • Performance targets (e.g., bridge condition) must be met before funds can be transferred to other programs. These restrictions limit complete discretion by states over fund transfers. • While the department has not yet experienced this situation, respondent is mindful of ensuring that transfer decisions do not negatively impact project delivery and funding needs, including meeting performance measures. Question 9: Has your state transferred federal-aid highway funds to a local or regional entity? If so, what is the policy goal for that? Was the goal achieved effectively through the transfer? . Figure C-7. States that transferred federal-aid highway funds to local or regional entities. The discussion from the respondents who answered “yes” to the second part of the questions included: • Transferred funds to FTA. • Transferred funds to a regional entity to support intermodal grant through the FTA. • Transferred funding as a participant in a mileage-based user fee pilot. It should be noted that some of the respondents who answered “no” also responded that they do not make a direct transfer of funds to a local/regional entity but provide oversight to the agencies using federal funds. No 70%N/A 8% Yes 22%

Summary of State Survey Responses C-7 Question 10: Please answer the following questions about your experience with using transfer provisions between FHWA funding categories: 10-1: Do you transfer funds between FHWA funding categories frequently or only in rare circumstances? Figure C-8. Frequency of funding transfer between FHWA funding categories. 10-2: If such transfer is rare or it has never occurred, why? Of the 37 respondents, 26 responded “N/A.” Responses included: • Typically carry out programs that utilize full funding. • Program projects to meet anticipated funding category distributions. • Only transfer funding when phases of projects are delayed, or other phases of projects can be advanced. • Only transfer funding for program needs or for earmark repurposing. • Align State Transportation Improvement Program (STIP) with available appropriations. Would likely transfer more if more flexibility. 10-3: From what programs has fund been transferred? Responses included the following: • NH • STBG • State planning and research (SPR) • CMAQ • Freight • RD&T • HSIP • NHPP • FBP A n n u a l l y 3 8 % R o u tin e l y / F r e q u e n t l y 24% 2- 5 T i m e s / Y e a r 11% R a r e l y 27 %

C-8 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs • Surface Transportation Program (STP)-Flex • STP Bridge • Off-System Bridge • TA-Flex • NHFP 10-4: To what programs has fund been transferred? While the majority of the respondents included STBG-Flex in their response, other programs listed in some of the responses included: • HSIP • TA-Flex • NHFP • HSIP • NHPP • CMAQ 10-5: Are there particular projects that benefited? Responses include some “yes” and “no” responses. Some of the specific types of projects mentioned included: • Maintenance. • Resurfacing. • Bridge replacements. • Safety projects. • Rural and small urban projects. 10-6: What kind of information/hurdles have you had to comply with in order to get approval? The majority of the respondents stated that the process is relatively free of major hurdles. Some of the respondents did note the following hurdles: • Software requirements for the form. • Tracking of end-of-year obligations versus planned obligations to determine final transfer amount by September. • Approval letter. • Multiple road condition reports required. • Extra time taken by FHWA headquarters to process.

Summary of State Survey Responses C-9 Question 11: Question 11 is divided into six parts. 11-1: Do you transfer funds between FHWA funding categories and other modes frequently or only in rare circumstances? Figure C-9. Frequency of funding transfer between FHWA funding categories and other modes. 11-2: If such transfer is rare or it has never occurred, why? Twenty-eight respondents replied “N/A.” Some comments included: • The transfer was part of an MPO’s attributable funding that was transferred to FTA for transit projects. • There are annual transfers of local dollars to transit. 11-3: From what federal highway funding categories has fund been transferred to other modes? The majority of the responses were “STBG” and “CMAQ.” Other funding categories listed once or twice were “TA,” “NHPP,” and “STP.” 11-4: To what modes has fund been transferred? Note: Respondents provided multiple agencies. 5 5 1 1 1 24 0 5 10 15 20 25 30 FTA RARELY INFREQUENTLY N/A NO YES

C-10 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs Figure C-10. Modes to which funding has been transferred. 11-5: Are there particular projects that benefited? The responses were varied as shown in Figure C-11, with the majority being “bus purchases” and “transit.” Note: Respondents provided multiple projects. Figure C-11. Types of projects that benefited from funding transfers. 11-6: What kind of information/hurdles have you had to comply with in order to get approval? More than 75 percent of the respondents responded either “no hurdles” or “N/A.” Of the remaining 25 percent, the hurdles mentioned included: • Significant time and/or significant time at the FTA Regional Office. • Software. • STIP approvals. 24 1 2 14 2 2 1 2 2 0 5 10 15 20 25 30 FTA OTHER STATE DOTS FEDERAL LANDS TRANSIT FHWA FRA CORPS NATIONAL PARK N/A 3 6 2 10 8 3 1 1 3 1 1 1 1 0 2 4 6 8 10 12 UNKNOWN YES MASS TRANSPORTATION BUS PURCHASE TRANSIT N/A BUS STOP/SHELTER BIKE SHARE LIGHT RAIL FERRY OPERATIONS POOLED FUND STUDIES MPOS RAPID TRANSIT

Summary of State Survey Responses C-11 Question 12: Have the existing constraints on funding transferability limited your agency’s ability to utilize federal-aid highway funds effectively and efficiently? If so, please describe the limitation. The respondents were split on their responses, with 21 respondents (slightly more than 50 percent) expressing the desire for increased flexibility to transfer funds to utilize the federal funding. Fifteen responded “no” and one respondent did not offer a response. A sampling of the specific comments from the 21 respondents expressing the desire for more flexibility includes: • More flexibility between what can be transferred and what would allow us to avoid lapsing. • More flexibility to transfer suballocated funds, such as STP <5,000 and 5,000–200,000 pop, would be helpful if projects were not available that year to use those funds. • Categories with highest balance are most restrictive with regard to transfer authority, requiring the use of more flexible funds to obligate all our funds each year. Question 13: If existing rules of funding transferability are to change in the upcoming reauthorization, what opportunities and/or risks do you perceive? States would like to have more flexibility with transfers to meet their goals and maximize federal funding. One respondent stated that if rules remain the same, there is a risk that some states may be strategically transferring funds to a funding category that is held harmless from federal rescission. The risks of potential changes to transferability include: • Creating new categories that do not allow transferability. • Not having flexibility. • Limiting flexibility impacts the ability to maximize funding for areas of most need. • More restrictions could lead to lapsing of funds or play a role in the inability to meet performance targets.

C-12 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs The risks of potential changes to transferability include: • Creating new categories that do not allow transferability. • Not having flexibility. • Limiting flexibility impacts the ability to maximize funding for areas of most need. • More restrictions could lead to lapsing of funds or play a role in the inability to meet performance targets.