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Tuesday 23 October 2012

How is federal transportation funding provided to states and metropolitan areas?



The funding for transportation plans and projects comes from a variety of sources including the federal government, state governments, special authorities, public or private tolls, local assessment districts, local government general fund contributions (such as local property and sales taxes) and impact fees.
However, federal funding—transferred to the state and later distributed to metropolitan areas—is typically the primary funding source for major plans and projects. (See appendix for a description of important federally aided transportation programs.) Federal transportation funding is made available through the Federal Highway Trust Fund and is supplemented by general funds. It is important to remember that most FHWA sources of funding are administered by the state DOTs. The state DOT then allocates the money to urban and rural areas based on state and local priorities and needs. Most transit funds for urban areas are sent directly from the FTA to the transit operator. Transit funds for rural areas are administered by the state DOT.
Federal funds are made available through a specific process:
  • Authorizing Legislation: Congress enacts legislation that establishes or continues the existing operation of a federal program or agency, including the amount of money it anticipates to be available to spend or grant to states, MPOs, and transit operators. Congress generally reauthorizes federal surface transportation programs over multiple years. The amount authorized, however, is not always the amount that ends up actually being available to spend.
  • Appropriations: Each year, Congress decides on the federal budget for the next fiscal year. As a result of the appropriation process, the amount appropriated to a federal program is often less than the amount authorized for a given year and is the actual amount available to federal agencies to spend or grant.
  • Apportionment: The distribution of program funds among states and metropolitan areas (for most transit funds) using a formula provided in law is called an apportionment. An apportionment is usually made on the first day of the federal fiscal year (October 1) for which the funds are authorized. At that time, the funds are available for obligation (spending) by a state, in accordance with an approved STIP. In many cases, the state is the designated recipient for federal transportation funds; in some cases, transit operators are the recipient.
  • Determining Eligibility: Only certain projects and activities are eligible to receive federal transportation funding. Criteria depend on the funding source.
  • Match: Most federal transportation programs require a non-federal match. State or local governments must contribute some portion of the project cost. This matching level is established by legislation. For many programs, the amount the state or local governments have to contribute is 20 percent of the capital cost for most highway and transit projects.
How is federal funding used?
There are many federal-aid transportation programs that support transportation activities in states and metropolitan areas, each having different requirements and program characteristics. These programs are not "cash up front" programs; rather, eligible expenditures are reimbursed. That is, even though the authorized amounts are "distributed" to the states, no cash is actually disbursed at this point. Instead, states are notified that they have federal funds available for their use. Projects are approved and work is started; then the federal government reimburses the states, MPOs, and transit operators for costs as they are incurred, reimbursing up to the limit of the federal share.
The federal government holds funding recipients accountable for complying with all applicable federal laws. When local governments directly oversee a federally funded project, the state DOTs are responsible for monitoring local governments’ compliance with federal laws.
What are flexible funds?
One important provision in federal transportation legislation allows for the use of certain federal-aid highway program and federal transit program funds for either highway or transit projects. This is referred to as flexible funding. "Flexible funding" provisions were a radical departure from traditional transportation policy; federal transit, highway, and safety programs formerly had very strict eligibility requirements, and funds could not be transferred between the programs. The ability to transfer funds (with certain restrictions) between highway and transit programs was introduced so metropolitan areas could apply federal transportation funds to their highest priority transportation projects.
The funds are not actually transferred from one bank account to another; rather, FHWA and FTA confirm program-eligible expenditures and reimburse accordingly. In urbanized areas (UAs) with populations greater than 200,000, MPOs are responsible for considering “flexing” funds to meet local planning priorities. In areas with populations less than 200,000, flexible funding decisions are made jointly by the MPO and the state DOT, and the state DOT makes the flexible funding decisions in rural areas. Flexible funding is most commonly used for FHWA’s Surface Transportation Program (STP) and Congestion Mitigation and Air Quality Improvement (CMAQ) program, and FTA’s Urbanized Area Formula Funds, though flexing in other programs is possible


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