Federal Funding Flexibility: - PowerPoint Presentation

1. Federal Funding Flexibility: Use of Federal Aid Highway Fund Transfers by State DOTsNCHRP 19-17June 30, 2022WEBINAR

2. NCHRP 19-17Panel Members and Consultant Team2Michell Ho, MassDOT, ChairConnie Betts, LADOTDTravis Brouwer, Oregon DOTRyan Brumfield, ARCBrian Gage, Minnesota DOTIvan Hartle, Utah DOTLisa Hurley, Montana DOTCatherine Reddick, Mercator AdvisorsStephen Steward, Texas DOTLucia Olivera, FHWASusan Howard, AASHTOPanel MembersCo-Principal Investigators Jim Redeker Scott Baker, AECOMSusan Binder, Cambridge SystematicsSherri LeBas, G.E.C.Eric PetersonSarah SiwekViktor Zhong, AECOMTRB Senior Program OfficerDianne SchwagerConsultant Team

3. 3Study Approach Research approachLiterature ReviewAnalysis of FHWA FMIS data from FFY2013 – FFY2020Survey of state DOT CEO/CFOsCase studies of states and MPOsWorkshops with AASHTO, APTA, and AMPOProducts Final Report – Available at: www.trb.org/publicationsWebinar Dissemination Plan

4. 4Goals of the ResearchDocument current understanding of how and why FAHP flexibility features are being usedExplore use of features that allow shifts between FAHP categories and with other programs/modes, specifically FTA.Quantify the diversity in experience Identify the decision participants and their motivations Identify benefits, challenges, and barriers Explore factual and institutional questions to build better understanding of the use and effectiveness of flexibility features contained in statute.

5. 5Annual Transfers Among Highway Programs

6. 6Transfers by Funding Sourcein dollar amount and as % of each FHWA Program Category

7. 7Funds Transferred Among Highway Programs by State as % of FHWA Apportionment

8. 8Annual Transfers from FHWA to FTA in dollar amount and as % of FHWA Apportionment

9. 9Funds Transferred to FTA by State as % of FHWA Apportionment

10. 10State DOT Case StudiesState DOTPercent of FHWA Funds Transferred (FFY2013-2020)Major Reasons for (Not) TransferAdditional NotesState DOTAmong FAHP CategoriesTo FTAMajor Reasons for (Not) TransferAdditional NotesKansas<2%Approx. 1%To fully obligate federal programFAHP funds mainly used for highway maintenance; state funds mainly used for capital improvementOregon>20%>8%To create most flexible ways to fund projects with available fundingReview done at the beginning of a fiscal year to determine the projects for obligation and type of funding eligiblePennsylvania0%Approx. 2%To avoid perception of insufficient support for programs where funds are transferred outTo allow transit funds and projects to be administered by the modal agency most familiar with the project typePennDOT transferred CMAQ funds to STBG in 2021South CarolinaApprox. 9%0%To help avoid lapsing funds, ensure investment and Transportation Asset Management Plan goals are met, keep planned projects on scheduleLimited role of non-federal highway funds in transfer decisionsUtah>25%<2%Transfer close to 50% of NHPP and TA to STBG and program the resulting larger STBG category for projects that the state prioritizes and deems most cost effectiveFAHP funds mainly used for highway maintenance; state funds mainly used for capital improvement

11. 11MPO Case StudiesMPORole in Transfer Decision-MakingAdditional NotesCapital District Transportation Committee (Albany, NY)No direct role; the State makes transfer decisions, with consideration of MPO policy prioritiesUsed to transfer CMAQ funds for to FTA program for transit projects; now funds the gap with STBG Flex funds and NHPP fundsMemphis Urban Area MPOThe State makes most transfer decisions; MPO has direct role in transfer decisions of FHWA funds to FTAMPO programs projects under STBG-Metropolitan and TA; the State programs projects for other FAHP categories.

12. Key FindingsThe use of transfers is widespread, though a relatively small proportion of total funds are actually transferredTransfer practices are unique to each state – reflecting mission, scope, goals, financial management, and program needsTwo main drivers for employing transfers to optimize formula fundingAddressing policy goals – matching national program structure with local needsEffective financial management – to avoid lapse of individual balances and overall obligation authority Transit agencies are significant beneficiaries of highway fund transfers, receiving over $13.3 billion during the study period (FFY2013 – FFY2020), mostly from the CMAQ programOver time, broadened eligibility under existing funding categories has reduced the pressure for transfers. Pressure caused by rescissions is limited to periods where that is written into law. 12

13. Additional FindingsProcess for executing transfers is unique by state in large part based on local conditions and dynamicsCapacity and capability of local funding recipients to obligate funds and complete projects on schedule can introduce uncertainty in account management. Creative approaches such as “swapping” funding between Federal and state programs to facilitate use have been adopted by several statesAvailability of local and matching funds may limit transfer flexibilityRelationships with MPOs can be critical to optimize state-wide fund managementProgramming commitments are strong influence on prioritiesMinimum suballocations are statutorily based. Others reflect state and local priorities.Some programs are designed to satisfy specific constituencies and thus are viewed as commitments exclusively for specific purposes. This can build resistance to transfers. These have included components, for example, of CMAQ, TA, Safety, Bridge programs.13

14. Considerations Impacting TransfersSetting and achieving performance targets may introduce complexity.For example, transfer of safety funds has been restricted in some places when targets have not been achieved Special consequences related to Interstate pavement and bridge conditionStrategies that impact whether there is a pipeline of Federal projects ready to accept funding can impact overall account managementTransit related uses are not limited to transfersEligibility is broad within highway programs themselvesTransfer from “highway” categories to transit purposes for FTA administration closely associated with past execution experience and interagency relationships Some states may prefer to manage some transit-related projects with FHWA. All do not require transfers to FTA. 14

15. Looking Ahead Future Research Under IIJASome of what we know:States utilize flexibility of transfers to fully obligate federal fundingSignificant increase in formula funding for transportation may exacerbate pressures to optimize within the program structureNew funding categories, priorities and requirements have yet to fully play out and may introduce more account management challengesExpansion of eligible recipients throughout to include more local agencies may add complexity should states be responsibleWhat we don’t know:Specific interpretations that might impact transfer rules and limitations15

16. Thank you