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Obligation Limitation Questions & Answers

Posted: 4/22/2016

Question 1: How do the obligation limitation distribution calculations work under the FAST Act?

Answer 1: Overall, the methodology for the obligation limitation distribution calculations under the FAST Act is very similar to the methodology under MAP-21. Section 1102 of the FAST Act contains provisions related to the distribution of obligation limitation. Note, however, that the obligation limitation levels and distribution methodology in section 1102 of the FAST Act are subject to the obligation limitation provisions in an appropriations act or continuing appropriations resolution that is enacted1.

In section 1102(a), the FAST Act sets the overall obligation limitation for each fiscal year as follows:

Section 1102(b) of the FAST Act lists the funding that is exempt from the obligation limitation. Of new contract authority, funding for the Emergency Relief Program in the amount of $100 million and a portion of the National Highway Performance Program (NHPP) funding are exempt from the obligation limitation. A national total of $639 million in NHPP funds is exempt from the obligation limitation for each fiscal year, with each State's share of the exempt NHPP funds proportional to that State's overall share of NHPP funds.

Under the distribution process in section 1102(c) of the FAST Act, limitation is first provided for administrative expenses and programs authorized under section 104(a) of title 23, the Bureau of Transportation Statistics, and unobligated balances of funding for allocated programs (or for the apportioned Tribal Transportation Program and Federal Lands Access Program) carried over from previous fiscal years for which obligation limitation was provided in a previous fiscal year.

The remaining limitation is then compared to the total remaining new authorizations of contract authority subject to the limitation for the fiscal year. This is known as the limitation ratio. The limitation ratio is used to distribute obligation limitation for each of the allocated programs (other than those allocated programs for which obligation limitation has already been provided) and for the Tribal Transportation Program and the Federal Lands Access Program. The amount of obligation limitation provided and set aside for each program is determined by multiplying the amount of contract authority authorized for the program for the fiscal year by the limitation ratio.

The remaining balance of the limitation is then distributed among the States as formula obligation limitation with each State's portion of the limitation being based on the State's relative share of the total apportioned funds (subject to limitation) for the fiscal year.

All of the obligation limitation under section 1102 of the FAST Act is available for one fiscal year (i.e., annual obligation limitation), except that the limitation distributed for transportation research programs is available for four fiscal years, unless amended by an appropriations act.

Question 2: How does the redistribution of obligation limitation after August 1 (August Redistribution) work under the FAST Act?

Answer 2: The redistribution of obligation limitation after August 1 (August Redistribution) under the FAST Act works in the same manner as August Redistribution under MAP-21. The August Redistribution process ensures that all one-year (annual) obligation limitation for a fiscal year will be utilized prior to its expiration at the end of the fiscal year.

After August 1 of each fiscal year, the Secretary will revise the distribution of obligation authority made available if a State does not plan to obligate the amount distributed during that fiscal year. This includes obligation limitation reserved for carryover and allocated programs discussed in question 1. The amount returned will be redistributed as formula obligation limitation to those States able to obligate amounts in addition to those previously distributed during the fiscal year.

1 The Department of Transportation Appropriations Act, 2016, controls the obligation limitation level and distribution methodology for obligation limitation in FY 2016 since it was enacted subsequent to the FAST Act. However, the FY 2016 obligation limitation level and distribution methodology under the Department of Transportation Appropriations Act, 2016, for FY 2016 are equivalent to those under the FAST Act.

Page last modified on August 24, 2017
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