Federal Highway Programs

The Intermodal Surface Transportation Efficiency Act of 1991 authorized more than $122 billion in federal funds for highway programs for fiscal years 1992 through 1997. The authorization expired on September 30, 1997, and no new federal money has been authorized for fiscal year 1998. The states can, however, use their unobligated balances that remain from the act's authorization period. For all 50 states, these federal-aid highway balances totaled $12.1 billion at the beginning of fiscal year 1998. This testimony compares unobligated federal highway fund balances at the start of fiscal year 1998 with the highway funds that the states obligated during the first part of fiscal year 1997. GAO also discusses strategies that could temporarily help the states continue to fund highway programs in the absence of a federal highway authorization act.

GAO noted that: (1) the total unobligated highway fund balance available at the beginning of FY 1998 equals $12.1 billion and exceeds the total actual obligations of $8.1 billion, made by the states during the first 6 months of FY 1997; (2) a comparison of the unobligated balances of individual states with their actual FY 1997 obligations reveals that some state highway programs may experience financial difficulties by the middle of FY 1998 if their obligation rates for this year are comparable to those for FY 1997; (3) while most states have unobligated balances that are greater than their actual federal highway obligations in the first 6 months of FY 1997, 14 states have an unobligated balance that is lower than their actual obligations during the same period; (4) the nine states that GAO contacted identified various strategies that they would use to try to continue their highway operations, such as relying more extensively on state funds; (5) some of these states also noted that they would soon be postponing highway projects if new federal funds are not available within the next few months; (6) the rates at which states obligated funds in FY 1997 may not correspond to their plans for obligating federal highway funds in FY 1998; (7) some states may be limited in their ability to use available unobligated balances because of restrictions on the specific types of highway programs that the funds can be used for; (8) the comparisons indicate that while many states may be able to continue financing highway projects for some time, some states may have difficulty dealing even in the short term with the absence of new federal highway funds; (9) a number of strategies could help the states respond to the absence of new federal funds in the short term; (10) for example, Congress could provide the states with the flexibility to use their unobligated balances across the range of federal highway programs, rather than keeping the balances tied to specific highway funding categories and demonstration projects; (11) Congress could then reimburse appropriate funding categories after reauthorization; (12) individual states could also consider a number of strategies, such as temporarily substituting state funds for federal highway funds; (13) states could also begin highway projects by using advance construction, which enables a state to access capital from a variety of sources and later receive reimbursements through federal highway obligations; (14) such strategies, however, may delay other planned projects within individual states; and (15) these strategies may not be feasible for some states or for an extended period of time.