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

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.

19   Funding Transfer Among Federal-Aid Highway Program Categories This chapter documents the research findings on historical trends and driving factors with regard to use of FHWA fund transfers among FAHP categories. This provides baseline informa- tion about the scale of state actions. Stakeholder input through survey, workshops, and case studies reveals the motivations and factors that drove the funding transfer decisions. 4.1 Historical Trends of Funding Transfer Authority to transfer up to 50 percent of apportionment among FAHP categories is per- ceived by grantees as a major benefit for states in administering FAHP funds to meet their goals. The following analyses show how states have used this fund transfer authority since FFY2013, the first full fiscal year after MAP-21 was enacted. The relevant FAHP categories are: • CMAQ. • NHPP. • STBG, or STP under MAP-21. • TA. • HSIP. • NHFP. 4.1.1 National-Level Analysis The amount of FAHP funds transferred among program categories has steadily increased. Starting from approximately $2.5 billion in FFY2013, the total transferred amount peaked at around $4 billion in FFY2019 and dropped to $3.2 billion in FFY2020. See Figure 4-1. Funds have been transferred out of all FAHP categories, but the relative amount transferred out varies substantially. The percentage of total apportionment transferred out ranges from less than 1 percent (STBG) to over 20 percent (TA). The percentage transferred out of NHPP, CMAQ, and HSIP exceeds 10 percent. The percentage transferred out of NHFP is around 7 percent. Since NHPP is the largest program category, fund transfers out of NHPP (about $18 billion) are much greater than that of all the other program categories. See Figure 4-2 and Table 4-1. There is a tendency to transfer funds from the more restrictive FAHP categories to more flexible categories, e.g., STBG. Of the almost $25 billion transferred, over $21 billion was transferred to STBG. The next category in terms of funds transferred into is HSIP, which was about $2 billion. See Figure 4-3. C H A P T E R 4

20 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs FAHP Category Amount Transferred Funding Apportionment Percentage National Highway Performance Program $18,137,026,190 $172,821,110,890 10.49% Congestion Mitigation and Air Quality $2,332,187,163 $18,418,507,162 12.66% Highway Safety Improvement Program $1,860,183,045 $17,650,081,848 10.54% Transportation Alternatives $1,241,680,381 $6,007,825,752 20.67% Surface Transportation Block Grant (Surface Transportation Program FFY2013– FFY2016) $688,331,491 $82,037,442,031 0.84% National Highway Freight Program $425,905,068 $6,121,685,506 6.96% All FAHP Categories $24,685,313,338 $303,056,653,189 8.14% $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Bi lli on s 0% 5% 10% 15% 20% 25% $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 NATIONAL HIGHWAY PERFORMANCE PROGRAM CONGESTION MITIGATION AND AIR QUALITY HIGHWAY SAFETY IMPROVEMENT PROGRAM TRANSPORTATION ALTERNATIVES SURFACE TRANSPORTATION BLOCK GRANT (STP from FY2013 to FY2016) NATIONAL HIGHWAY FREIGHT PROGRAM Bi lli on s Amount Transferred Percentage Figure 4-1. Annual flexible funding transfers among highway program categories from FFY2013 to FFY2020. Figure 4-2. FFY2013–FFY2020 total amount transferred as a percentage of total FHWA funding apportioned by program category (transfer among highway program categories only). Table 4-1. Comparison of amount transferred and apportioned by FAHP category, FFY2013–FFY2020 total.

Funding Transfer Among Federal-Aid Highway Program Categories 21   However, funds have been transferred out of STBG, despite it being the most flexible FAHP category; $711 million was transferred out of STBG from FFY2013 to FFY2020. See Table 4-2 for a breakdown of the funds transferred out of STBG. Compared to the amount transferred into STBG during the study period, the amount transferred out of STBG is relatively limited. 4.1.2 State-Level Analysis States transferred funds among FAHP categories to meet their needs. The states vary signi- ficantly in terms of how much FAHP funding they transferred among the funding categories. See Figures 4-4 and 4-5. Key observations include: • Pennsylvania is the only state that did not transfer any funding among FAHP categories, though FAHP funds were transferred to FTA. • Delaware, Kansas, and Wyoming transferred less than 1 percent of their apportioned funds and used about 1 percent of their transfer authority. • District of Columbia, Maine, Mississippi, Nebraska, New Hampshire, Oregon, Utah, and Virginia transferred over 20 percent of their apportioned funds; Maine, Mississippi, and Utah used over 50 percent of their transfer authority. As shown in the national-level analysis, the amount transferred out of each FAHP category varies significantly. Similarly, the percentage of the fund transfer authority used by states also From To Amount Transferred STBG HSIP $429,322,331 STBG NHPP $166,867,824 STBG CMAQ $101,036,559 STBG TA $13,463,124 Total $710,689,838 $0 $5 $10 $15 $20 $25 TRANSPORTATION ALTERNATIVES NATIONAL HIGHWAY FREIGHT PROGRAM CONGESTION MITIGATION AND AIR QUALITY NATIONAL HIGHWAY PERFORMANCE PROGRAM HIGHWAY SAFETY IMPROVEMENT PROGRAM SURFACE TRANSPORTATION BLOCK GRANT (STP from FY2013 to FY2016) Billions Figure 4-3. FFY2013–FFY2020 total amount transferred to program category (transfer among highway program categories only). Table 4-2. Funds transferred out of STBG, FFY2013–FFY2020.

22 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs varies significantly across FAHP categories. See Figures 4-6 and 4-7. With the exception of STBG, at least one state used over 90 percent of its transfer limits for the other FAHP categories. Typically, funding transfer activity from the STBG is limited, but Rhode Island, Utah, and Washington used over 15 percent of their fund transfer authority (including funding transfer from the Off-System Bridge subcategory to the general, flexible STBG subcategory) to transfer funds from STBG, substantially higher than the other states. More than 30 states did not transfer funds out of the STBG between FFY2013 and FFY2020. See Figure 4-8. TA is the FAHP category with the highest percentage of funds being transferred out. Seven states used over 90 percent of their transfer authority for TA between FFY2013 and FFY2020, 0% 5% 10% 15% 20% 25% 30% M IS SI SS IP PI M AI N E U TA H VI RG IN IA N EB RA SK A O RE G O N DI ST RI CT O F CO LU M BI A N EW H AM PS H IR E W AS H IN G TO N O KL AH O M A VE RM O N T LO U IS IA N A AL AB AM A M IC HI G AN HA W AI I N O RT H D AK O TA CA LI FO RN IA SO U TH C AR O LI N A G EO RG IA N EW JE RS EY IN DI AN A M O N TA N A W ES T VI RG IN IA N O RT H C AR O LI N A M AR YL AN D SO U TH D AK O TA RH O DE IS LA N D N EW Y O RK CO N N EC TI CU T M IN N ES O TA TE XA S O HI O AL AS KA W IS CO N SI N IL LI N O IS M AS SA CH U SE TT S CO LO RA DO N EW M EX IC O ID AH O AR KA N SA S M IS SO U RI FL O RI DA TE N N ES SE E KE N TU CK Y N EV AD A AR IZ O N A IO W A KA N SA S W YO M IN G DE LA W AR E PE N N SY LV AN IA 0% 10% 20% 30% 40% 50% 60% M IS SI SS IP PI M AI N E U TA H VI RG IN IA N EB RA SK A O RE G O N DI ST RI CT O F CO LU M BI A N EW H AM PS H IR E W AS H IN G TO N O KL AH O M A VE RM O N T LO U IS IA N A AL AB AM A M IC HI G AN HA W AI I N O RT H D AK O TA CA LI FO RN IA SO U TH C AR O LI N A G EO RG IA N EW JE RS EY IN DI AN A M O N TA N A W ES T VI RG IN IA N O RT H C AR O LI N A M AR YL AN D SO U TH D AK O TA RH O DE IS LA N D N EW Y O RK CO N N EC TI CU T M IN N ES O TA TE XA S O HI O AL AS KA W IS CO N SI N IL LI N O IS M AS SA CH U SE TT S CO LO RA DO N EW M EX IC O ID AH O AR KA N SA S M IS SO U RI FL O RI DA TE N N ES SE E KE N TU CK Y N EV AD A AR IZ O N A IO W A KA N SA S W YO M IN G DE LA W AR E PE N N SY LV AN IA Figure 4-4. Funds transferred among highway program categories as a percentage of total FHWA funding apportioned, FFY2013–FFY2020. Figure 4-5. Percentage of transfer authority used (transfer out of all FAHP categories) by state, FFY2013–FFY2020.

Funding Transfer Among Federal-Aid Highway Program Categories 23   0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% M IS SI SS IP PI M AI N E DI ST RI CT O F CO LU M BI A VI RG IN IA N EB RA SK A N EW H AM PS H IR E O RE G O N U TA H VE RM O N T LO U IS IA N A O KL AH O M A W AS H IN G TO N M IC HI G AN AL AB AM A HA W AI I CA LI FO RN IA N O RT H D AK O TA SO U TH C AR O LI N A W ES T VI RG IN IA M O N TA N A G EO RG IA SO U TH D AK O TA O HI O N O RT H C AR O LI N A IN DI AN A N EW JE RS EY M AR YL AN D TE XA S M IN N ES O TA IL LI N O IS N EW Y O RK ID AH O FL O RI DA M IS SO U RI CO N N EC TI CU T M AS SA CH U SE TT S AL AS KA AR KA N SA S N EW M EX IC O AR IZ O N A CO LO RA DO DE LA W AR E IO W A KA N SA S KE N TU CK Y N EV AD A PE N N SY LV AN IA RH O DE IS L A N D TE N N ES SE E W IS CO N SI N W YO M IN G 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% AL AS KA G EO RG IA TE N N ES SE E W IS CO N SI N RH O DE IS LA N D IN DI AN A M AI N E CO N N EC TI CU T N O RT H C AR O LI N A KE N TU CK Y M IN N ES O TA N EW H AM PS H IR E TE XA S HA W AI I N EW JE RS EY CO LO RA DO AL AB AM A M O N TA N A LO U IS IA N A N EW Y O RK N EW M EX IC O U TA H M AR YL AN D ID AH O IL LI N O IS VI RG IN IA M IS SI SS IP PI O RE G O N W ES T VI RG IN IA AR KA N SA S M AS SA CH U SE TT S DE LA W AR E N EV AD A M IC HI G AN CA LI FO RN IA AR IZ O N A DI ST RI CT O F CO LU M BI A FL O RI DA IO W A KA N SA S M IS SO U RI N EB RA SK A N O RT H D AK O TA O HI O O KL AH O M A PE N N SY LV AN IA SO U TH C AR O LI N A SO U TH D AK O TA VE RM O N T W AS H IN G TO N W YO M IN G Figure 4-6. Percentage of transfer authority used to transfer funds out of NHPP by state, FFY2013–FFY2020. Figure 4-7. Percentage of transfer authority used to transfer funds out of CMAQ by state, FFY2013–FFY2020. including three states (Georgia, North Dakota, and South Carolina) that used 100 percent and two states (Oklahoma and Texas) that exceeded their fund transfer authority. See Figure 4-9. For HSIP, two states (Maryland and Wisconsin) used more than 80 percent of their transfer authority between FFY2013 and FFY2020. Wisconsin used 100 percent of its transfer authority for HSIP during that period of time. See Figure 4-10. NHFP has a relatively low percentage of funds transferred out. Only 13 states transferred funds out of NHFP between FFY2016 and FFY2020 (NHFP is a new category under the FAST Act, so data are only available from FFY2016 and onward). Colorado used the highest percent- age (over 90 percent) of its transfer authority out of NHFP. See Figure 4-11.

24 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs 4.2 Considerations That Drive Funding Transfer Decisions Among FAHP Categories From the survey, case studies, and industry group workshops, there are common consider- ations driving transfer decisions. This section documents and analyzes how these considerations affect fund transfer decisions by states and MPOs. In studying the trends at a national level, the amount of FAHP funds transferred among pro- gram categories has steadily increased. Starting from approximately $2.5 billion in FFY2013, the total transferred amount peaked at around $4 billion in FFY2019 and dropped to $3.2 billion in FFY2020. See Figure 4-12. 0% 20% 40% 60% 80% 100% 120% O KL AH O M A TE XA S G EO RG IA N O RT H D AK O TA SO U TH C AR O LI N A CO N N EC TI CU T IO W A SO U TH D AK O TA M IS SO U RI N EW Y O RK U TA H AR IZ O N A KE N TU CK Y AR KA N SA S W IS CO N SI N N O RT H C AR O LI N A LO U IS IA N A N EW H AM PS H IR E AL AS KA N EV AD A N EW M EX IC O TE N N ES SE E HA W AI I M AR YL AN D M O N TA N A M IS SI SS IP PI CO LO RA DO N EW JE RS EY O HI O IL LI N O IS VE RM O N T VI RG IN IA AL AB AM A N EB RA SK A M IN N ES O TA ID AH O RH O DE IS LA N D O RE G O N W ES T VI RG IN IA KA N SA S M AS SA CH U SE TT S CA LI FO RN IA DE LA W AR E DI ST RI CT O F CO LU M BI A FL O RI DA IN DI AN A M AI N E M IC HI G AN PE N N SY LV AN IA W AS H IN G TO N W YO M IN G 0% 5% 10% 15% 20% 25% 30% RH O DE IS LA N D W AS H IN G TO N U TA H VI RG IN IA M AS SA CH U SE TT S CA LI FO RN IA AL AB AM A O RE G O N M IC HI G AN N O RT H D AK O TA IO W A N EW M EX IC O SO U TH D AK O TA TE XA S AR KA N SA S LO U IS IA N A IL LI N O IS FL O RI DA O KL AH O M A N O RT H C AR O LI N A AL AS KA AR IZ O N A CO LO RA DO CO N N EC TI CU T DE LA W AR E DI ST RI CT O F CO LU M BI A G EO RG IA HA W AI I ID AH O IN DI AN A KA N SA S KE N TU CK Y M AI N E M AR YL AN D M IN N ES O TA M IS SI SS IP PI M IS SO U RI M O N TA N A N EB RA SK A N EV AD A N EW H AM PS H IR E N EW JE RS EY N EW Y O RK O HI O PE N N SY LV AN IA SO U TH C AR O LI N A TE N N ES SE E VE RM O N T W ES T VI RG IN IA W IS CO N SI N W YO M IN G Figure 4-8. Percentage of transfer authority used to transfer funds out of STBG by state, FFY2013–FFY2020. Figure 4-9. Percentage of transfer authority used to transfer funds out of TA by state, FFY2013–FFY2020.

Funding Transfer Among Federal-Aid Highway Program Categories 25   0% 20% 40% 60% 80% 100% 120% W IS CO N SI N M AR YL AN D N EW JE RS EY IN DI AN A AL AB AM A M IN N ES O TA U TA H N EW M EX IC O O RE G O N CO N N EC TI CU T AR KA N SA S N EW Y O RK KE N TU CK Y N EV AD A CO LO RA DO RH O DE IS LA N D SO U TH D AK O TA VE RM O N T ID AH O W AS H IN G TO N VI RG IN IA N O RT H C AR O LI N A TE XA S FL O RI DA N O RT H D AK O TA AL AS KA W YO M IN G TE N N ES SE E KA N SA S M AS SA CH U SE TT S M O N TA N A AR IZ O N A CA LI FO RN IA DE LA W AR E DI ST RI CT O F CO LU M BI A G EO RG IA HA W AI I IL LI N O IS IO W A LO U IS IA N A M AI N E M IC HI G AN M IS SI SS IP PI M IS SO U RI N EB RA SK A N EW H AM PS H IR E O HI O O KL AH O M A PE N N SY LV AN IA SO U TH C AR O LI N A W ES T VI RG IN IA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CO LO RA DO N EV AD A M AS SA CH U SE TT S AR IZ O N A N EW Y O RK U TA H IL LI N O IS DI ST RI CT O F CO LU M BI A CA LI FO RN IA M IN N ES O TA AL AS KA M O N TA N A KA N SA S AL AB AM A AR KA N SA S CO N N EC TI CU T DE LA W AR E FL O RI DA G EO RG IA HA W AI I ID AH O IN DI AN A IO W A KE N TU CK Y LO U IS IA N A M AI N E M AR YL AN D M IC HI G AN M IS SI SS IP PI M IS SO U RI N EB RA SK A N EW H AM PS H IR E N EW JE RS EY N EW M EX IC O N O RT H C AR O LI N A N O RT H D AK O TA O HI O O KL AH O M A O RE G O N PE N N SY LV AN IA RH O DE IS LA N D SO U TH C AR O LI N A SO U TH D AK O TA TE N N ES SE E TE XA S VE RM O N T VI RG IN IA W AS H IN G TO N W ES T VI RG IN IA W IS CO N SI N W YO M IN G $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Bi lli on s Figure 4-10. Percentage of transfer authority used to transfer funds out of HSIP by state, FFY2013–FFY2020. Figure 4-11. Percentage of transfer authority used to transfer funds out of NHFP by state, FFY2016–FFY2020. Figure 4-12. Annual flexible funding transfers among highway program categories from FFY2013 to FFY2020.

26 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs e survey results from the DOTs provide some context regarding transfers. DOTs have all employed transfer provisions to achieve key objectives: • Ninety-four percent of the respondents reported that transfers are used to fully obligate the federal program. • Eighty-four percent responded that transfers are useful for facilitating meeting programmatic goals. • Eighty-nine  percent responded that transfers were useful in preparation for potential rescissions. ese results are shown in Figures 4-13, 4-14, and 4-15. Slightly more than 50 percent of the states surveyed expressed the desire for increased ex- ibility to transfer funds to use the federal funding more eectively. Yes 94% Somewhat 3% Not Necessary 3% Do you find transfers useful for fully obligating the federal program? Yes 84% Somewhat 2% No 11% Must comply with TE- 045 Waiver Program 3% Do you find transfers useful for facilitating meeting programmatic goals? Figure 4-13. Transfer usefulness for fully obligating the federal program. Figure 4-14. Transfer usefulness for facilitating meeting programmatic goals (TE 5 FHWA’s Innovative Finance Program—Test and Evaluation Project).

Funding Transfer Among Federal-Aid Highway Program Categories 27   4.2.1 Balancing National and State Policy Goals Federal formula programs are formulated to promote national policy goals for the country as a whole, but the application of those programs by states is specic to the state’s goals. e exibility to transfer a portion of federal funds allows states to allocate resources where they deem funding is most needed. For example, a state may supplement formula funds for a major project like a bridge. Historical trends in fund transfers show that states tend to transfer funds from the more restrictive FAHP categories (e.g., CMAQ, TA) to the most exible STBG category, as the STBG allows states to program funds where they deem funding is most needed. Of the almost $25 billion transferred among FAHP categories between 2013 and 2020, over $21 billion was transferred to STBG. From a state’s perspective, the exibility enables programming based primarily on the types of project needs rather than developing projects solely to match the available types of federal funds. Nevertheless, it appears that the transfer authority does not provide exibility at the expense of sacricing the national policy goals. Transfer authority is capped at 50 percent of the total funds available in each FAHP category. e funds not transferred are used by states for projects eligible under the FAHP categories for which the funds were originally appropriated. Furthermore, most states nd that the requirement to set and meet performance targets in safety, bridge and pavement condition, and other aspects of highway performance and environmental impacts has limited their ability and reduced their desire to transfer funds before they have achieved certain federal policy goals. 4.2.2 Fully Utilize Federal Funds States reported that transfer authority is an eective tool to fully utilize federal funds. is fund transfer authority allows states to transfer unobligated funds from program categories to other categories to fund states’ prioritized transportation needs or to avoid lapsing of funds and rescissions. Such motivation is evident in the DOT case studies of Kansas, Oregon, Pennsylvania, South Carolina, and Utah, described below. A summary and comparison of the states that were surveyed, with regard to their funding transfer practices and motivations, are shown in Table 4-3. Kansas Kansas DOT (KDOT) transfers less than 5 percent of its FAHP funds among FAHP authorities. e state has many needs and transferring funds to other purposes/categories would raise issues 33 1 1 1 1 0 5 10 15 20 25 30 35 YES NO POTENTIALLY NOT PREVIOUSLY N/A Do you find transfers useful for preparing for rescission impacts? Figure 4-15. Transfer usefulness for preparing for rescission impacts.

DOT Percent of FHWA Apportionment Transferred Extent State Uses Transfer Authority and Purpose Delivery of Program To Fully Obligate Federal Program To Meet Programmatic Goals High Medium Low Kansas DOT <5% Rarely if any. Cash management, advanced construction, good amount of state-funded construction, distribution of funding among FAHP categories is about right. Yes. No. Oregon DOT >20% Extremely helpful. Use transfer authority to create easiest and most flexible ways to fund projects with the most flexible funding available to the state. Review done at the beginning of the year to determine which projects are slated for obligation and type of funding eligible to be used. Yes, extremely helpful. Yes, higher reimbursement percentages depending on programs being used. Pennsylvania DOT ~0% Rarely if any; avoids funds lapsing. Perception from outside the agency that PennDOT does not support the program from which funds are being transferred out. Yes. Yes. South Carolina DOT <10% Rarely used; transfers help avoid lapsing funds and ensure investment and TAMP goals are met. Agency plans projects based on expected annual appropriations and delivers based on plan. Yes. Yes. Utah DOT >25% Transfer close to the limit (50%) of NHPP and TA to STBG and program the resulting larger STBG category for projects that the state prioritizes and deems most cost-effective. Transfer is considered at the beginning of programming cycles. Yes. Programs funds, including transfers, well in advance of lapsing or rescission risk. Yes. Table 4-3. Summary of fund transfer practices by selected states interviewed for case studies.

Funding Transfer Among Federal-Aid Highway Program Categories 29   in terms of its long-term programming and commitments. KDOT uses advanced construction to help manage its program. In addition, KDOT has a substantial amount of “state-only” funding for construction, preservation, and operating activities. Oregon Oregon DOT (ODOT) is among several states on the high end of the transfer authority, transferring over 20 percent of its FAHP funds among FAHP authorities. ODOT used the transfer authority early and used it to create the easiest and most flexible ways to fund projects. At the beginning of each year, a review is made of the projects slated for obligation and the type of funding eligible to be used. Based on this analysis, funding is shifted from one program to another to provide the state with the most flexible options to fund projects. Pennsylvania Pennsylvania DOT (PennDOT) did not transfer any of its FAHP funds among FAHP authori- ties. PennDOT transferred FAHP funds entirely to FTA from 1997 through 2020. Transfer to FTA was driven by a policy set by the Financial Guidance Working Group, which directed $45 million/year of FAHP funds be transferred to FTA. The Southeastern Pennsylvania Trans- portation Authority and the Port Authority receive 95 percent of those funds. The remaining 5 percent is distributed to the Pennsylvania Public Transit Association for local transit support. However, in 2021, PennDOT transferred $38 million of CMAQ funds to STBG because they were at risk of lapsing. Consistent with other states, PennDOT prepared a program of FAHP transfers to avoid the most recent rescission threat. Although the transfers were identified, they were not initiated, as the rescission did not occur. South Carolina South Carolina DOT (SCDOT) transferred approximately 10 percent of its FAHP funds among FAHP authorities. SCDOT reported that the fund transfer authority is rarely used. SCDOT’s policy objectives are to use appropriated funds effectively based on planned projects by using the flexibility allowed by FHWA to transfer to certain funds. These transfers help SCDOT avoid lapsing funds and ensure that SCDOT investment and Transportation Asset Management Plan (TAMP) objectives are met. SCDOT has a 10-year investment plan that includes federal and state revenues that coincide with their TAMP goals and objectives. Projects are planned and executed based on budgeted investment for each program. SCDOT’s transfer of FAHP funds to other categories is the result of a consistent process for keeping the planned program of projects on schedule for authorization of the federal funds. Utah Utah DOT (UDOT) begins its programming cycles with the intention of transferring FAHP funds, in particular transferring NHPP and TA funds to STBG. UDOT regularly transfers up to 50 percent of NHPP and TA funds to STBG and then programs the larger STBG category for projects that the state prioritizes and deems to be most cost-effective. 4.3 Trade-Offs, Barriers, and Opportunities of the Authority to Transfer Funds Among FAHP Categories Several trade-offs were identified and documented related to transfer authority and related barriers.

30 Federal Funding Flexibility: Use of Federal-Aid Highway Fund Transfers by State DOTs 4.3.1 Trade-Offs: National Versus State Priorities The fund transfer authority provides the flexibility for states to decide whether they need to reallocate funds originally programmed for specific policy goals to fund other priorities. The need for flexibility is based on the recognition that one size does not fit all; each state has unique transportation needs and priorities. The ability to transfer funds between programs or modes allows more flexibility with funding and helps manage federal funding to meet state priorities. Some of the challenges faced by states with regard to transfers include: • Negative perceptions may occur for the program category from which funds are transferred. For example, if funds are transferred from HSIP, the DOT may face questions (e.g., from the state office of inspector general or advocacy groups) about whether it has diligently and sufficiently funded safety-related projects. Transfers from TA may raise concerns about state commitments to bicycle/pedestrian projects. • Last-minute transfers may cause an imbalance in future years’ programs and may require adjustments between MPO programs, affecting planned projects in their region. Overall, states appreciate the flexibility so that they can program funds to match projects planned for needs, rather than being limited to developing projects to match the categories of federal funds available. 4.3.2 Alignment with Performance-Based Planning and Programming Under MAP-21 and the FAST Act, states are required to track performance of their trans- portation systems related to safety, pavement condition, and bridge condition. MPOs are also required to develop performance targets and track progress related to on-road emission reduc- tions and promote non-single-occupant vehicle travel. Performance targets are set by states and failure to meet those targets results in penalties in the form of restrictions and requirements regarding how the states may invest their apportioned funds. Specifically: • If a state fails to meet the performance targets for safety, it must use obligation authority equal to the apportionment of the state for the prior year under HSIP only for highway safety improvement projects until it is determined that the state has met or made significant progress toward meeting the safety performance targets of the state (23 U.S.C. § 148). • If a state fails to meet the performance target for Interstate pavement condition, it must set aside an amount from NHPP that is not less than the amount of funds apportioned to the state for fiscal year 2009 under the Interstate Maintenance program and transfer from STBG to NHPP an amount equal to 10 percent of the amount of funds apportioned to the state for fiscal year 2009 under the Interstate Maintenance program for improving pavement condi- tion until it meets the target (23 CFR § 490.317). • If a state fails to meet the performance target for Interstate bridge condition, it must set aside an amount equal to 50 percent of 2009’s apportionment for bridge condition improvement projects from its NHPP apportionment of that year until less than 10 percent of the total deck area of bridges in the state on the National Highway System is located on bridges that have been classified as structurally deficient as determined by FHWA (23 CFR § 490.413). About one-third of the respondents to the state survey (10 out of 35) indicated the performance requirements did not affect their fund transfer decisions (Figure 4-16). Two-thirds of states acknowledged that the performance management requirements could become constraints that deter states from transferring federal funds before they have achieved certain federal policy goals. Meanwhile, some states find that fund transfer authority helped them achieve performance targets as the flexibility allows states to allocate resources more effectively.

Funding Transfer Among Federal-Aid Highway Program Categories 31   4.3.3 Administrative Efciency Federal funding programs tend to have more sophisticated compliance requirements and need more resources for administration than state and local funds. States, particularly those with signicant non-federal transportation funding, have used local funding in some circumstances to avoid administrative burdens without compromising investments in local projects. When state highway funding is available, states (e.g., Oregon and Kansas) have used federal funds to rst meet the needs for regular maintenance and preservation to streamline the pro- gramming and administrative process, while using state funds for more complex projects. e administrative burden is particularly challenging for local governments that do not regu- larly administer federal highway funds. Projects eligible for TA funds tend to be smaller in scale, but compliance with federal requirements may be challenging for the local sponsors of those projects, and the administrative and compliance costs may be disproportionally high relative to the total project costs. Some states (i.e., Utah, Maryland, and Connecticut) have swapped state funds with TA funds for projects of a smaller scale to help alleviate the administrative burden on the local sponsors. 4.3.4 Greater Flexibility in Transfer Authority States and MPOs appreciate that greater exibility in federal highway funding could allow more eective programming and promote more productive use of federal funds. Several states also indicated a desire for more exibility related to the transfer of suballocated funds (e.g., STBG suballocations for large urbanized areas, small urbanized areas, and rural areas), espe- cially when eligible projects are not available in a certain year to use those funds. 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 Figure 4-16. State DOTs’ opinions on whether the requirement to meet performance targets affects their funds transfer decisions.