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Funding Federal-aid Highways Cover

Funding Federal-aid Highways

Office of Policy and Governmental Affairs

Publication No. FHWA-PL-17-011
January 2017

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2. Authorization of Funding

Every Federal program or activity, including the Federal-aid Highway Program (FAHP), requires legal authority to operate. The authorization act provides that authority, along with related funding, as this chapter will discuss.

It is critical to understand the meaning of the word “program.” First, “program” is used as an umbrella term referring to activities administered by FHWA. When this report uses “program” in this all-encompassing sense, it will use the term “Federal-aid Highway Program,” or “FAHP.” Second, “program” also refers to any one of the separately funded categories that make up the overall FAHP. For example, the National Highway Performance Program (NHPP) and the Surface Transportation Block Grant Program (STBG) each have their own specific and separate funding; consequently, each is considered a program.

In addition to having its own distinct and separate funding, each program has associated with it certain activities for which that funding may be used. These are described in law and are referred to as eligible activities. These activities, often eligible under a number of programs, are not considered programs in the financial sense of the term as used in this report because the legislation does not single out these activities for specific funding.

Authorization act

Overview. The first and most crucial step in funding the Federal-Aid Highway Program is development of authorizing legislation. An authorization is a statutory provision that establishes or continues a Federal agency, activity, or program, and can be for either a fixed or indefinite period of time. A surface transportation authorization act also provides unique funding for the FAHP through a special type of Federal budget authority (contract authority) discussed later in this chapter. The funding of other Federal programs may be much more dependent on a second legislative act, known as an appropriations act, than on authorizing legislation. Chapter 4 discusses appropriations acts and their impact on the FAHP.

In addition to authorizing programs and funding, a surface transportation authorization act typically includes a “revenue title.” This is the portion of the law that enables the operation of the Highway Trust Fund (HTF) and provides the revenues to support the programs contained in the act.

History of authorization acts. Authorizing legislation for highways began with the Federal-Aid Road Act of 1916 and the Federal Highway Act of 1921. These acts provided the foundation for the FAHP as it exists today. A series of multi-year authorization acts have subsequently continued the FAHP. Since 1978, Congress has passed highway authorization legislation as part of larger, more comprehensive, multi-year surface transportation acts. For example, in 2015, Congress enacted the FAST Act. The FAST Act included titles related to Federal-aid highways, innovative project finance, public transportation, transportation safety, innovation, hazardous materials transportation, multimodal freight transportation, rail transportation, and a newly-established National Surface Transportation and Innovative Finance Bureau.

Surface transportation authorization acts vary in scope and duration. The most significant surface transportation acts are major multi-year laws. For example, ISTEA, enacted in 1991, TEA-21, enacted in 1998,[2] SAFETEA-LU, enacted in 2005, and the FAST Act, enacted in 2015, each covered a span of five or more fiscal years. In contrast, MAP-21, enacted in 2012, covered two years.

A surface transportation authorization act may also be enacted as a stop-gap funding bill, designed to extend the program and keep it operational while Congress debates more comprehensive authorizing legislation. Congress has passed a number of such “extension acts” during each of the previous several reauthorization cycles.

Recent extension acts. Following the expiration of ISTEA in 1996, Congress enacted a single extension of the program. Between TEA-21 and SAFETEA-LU, Congress passed a then-unprecedented total of 12 short-term extension acts, varying in duration from two days to eight months. Between SAFETEA-LU and MAP-21 Congress spent almost three years (and 10 extensions) struggling to reach agreement on proposed program changes and to find revenue sources. Finally, Congress employed five extensions, covering a cumulative 14 months, to bridge the gap between MAP-21 and the FAST Act.

Table 1 shows the number and duration of short-term extensions to the FAHP over each of these reauthorization cycles.

Table 1. Extensions to authorization acts.
  Expired on… Was extended… For a total of about… Before enactment of…
ISTEA 9/30/1996 Once 6 months TEA-21
TEA-21 9/30/2002 12 times 23 months SAFETEA-LU
SAFETEA-LU 9/30/2009 10 times 33 months MAP-21
MAP-21 9/30/2014 5 times 14 months FAST Act

Program changes. Authorization acts are the primary instruments Congress uses to shape and direct the FAHP—modifying existing programs, adding or eliminating programs, or changing program requirements.

When an authorization act establishes a program, it sets certain ground rules under which the program operates, such as the following:

  1. The amount of funds available to the program for each fiscal year (or how an amount of funds available for the program is to be calculated);
  2. A description of how those funds are to be distributed;
  3. The length of time during which the funds may be used (termed a “period of availability”); and
  4. A listing of eligible activities.

Each of these can be changed by subsequent acts (authorization or otherwise).

In a major departure from previous reauthorization acts, MAP-21 streamlined the complex array of existing programs into a smaller number of broader core programs. Hence, MAP-21’s changes fell more heavily into the “adding or eliminating” category. The FAST Act took a more incremental approach, largely maintaining MAP-21’s program structure, with a few notable changes.

The following are some examples of program changes in the FAST Act:

Modifying an existing program. The FAST Act converted the long-standing Surface Transportation Program (STP) into the Surface Transportation Block Grant Program (STBG), acknowledging that this program has the most flexible eligibilities among all Federal-aid highway programs. The Act made other modifications to STBG as well, such as adding new eligible activities and increasing the share of the program that is suballocated to sub-State areas based on population. (See discussion in Chapter 3). The FAST Act also continued, with some program modifications, NHPP, the Highway Safety Improvement Program (HSIP), and the Congestion Mitigation and Air Quality Improvement Program (CMAQ).

Adding or eliminating a program. The FAST Act established a new National Highway Freight Program (NHFP) that provides States with highway-focused formula funding for use on freight-related projects.[3] It also established a new program (known as FASTLANE), which provides discretionary grants for nationally-significant freight and highway projects.[4]

Modifying requirements. The FAST Act made changes related to highway design standards to increase flexibility and provide for greater accommodation of all highway users. The Act also included a range of provisions designed to increase innovation and improve efficiency, effectiveness, and accountability throughout the process of delivering highway projects.

Beyond changes to program features, authorization acts often contain requirements for studies or reports to Congress. Congress typically requires these in one of two situations: when it is at an impasse regarding the best solution to a problem, or when it lacks sufficient information to formulate a policy. Most of these studies and reports are completed by the departmental agencies with primary oversight over the areas in question.

Authorization of funding. The other major purpose of authorization acts is to provide funding for programs. These funds are called “authorizations,” and are the upper limits of funding made available to a program. The FAST Act authorized a total of $305 billion for fiscal years (FY) 2016 through 2020 for surface transportation. Of the $305 billion, $226 billion (74 percent), or an average of $45 billion per year, was for highway programs.

Appendix B lists the funding amounts that the FAST Act authorized through FY 2020 for each Federal-aid highway program.

The remainder of this report explains how FHWA distributes FAHP authorizations, the requirements associated with their use, the controls that Congress places on spending, and the role of the HTF.

From bill to law

A surface transportation authorization proposal goes through many stages on its way to enactment. There is usually (but not always) an Administration (executive branch) proposal. Both the House and the Senate must weigh in, and the two chambers must resolve their differences on a compromise bill. Even then, only with the President’s signature—or a Congressional override of a President’s veto—does an authorization bill become an authorization act (law).

Figure 2 shows the steps to enactment of an authorization act, and the paragraphs that follow provide additional detail on each step. The recycling bins shown in the figure reflect the many opportunities for failure along the way.

Chart showing the stages in the enactment of an authorization act. This begins with the Administration offering a proposal, then continues through the U.S. House of Representatives and U.S. Senate debating and passing bills. It ends with the enactment of a bill into law, either via Presidential signature or a Congressional veto override.

Figure 2. Enactment of an authorization act.

(Optional) Step 0: The Administration proposal. The Administration (executive branch) is not required by law to propose legislation to reauthorize highway and other surface transportation programs. However, in order to present its position on the future of surface transportation, the Department of Transportation (DOT) normally prepares such a proposal, with affected operating administrations participating in its development. Alternatively, the Administration may provide Congress with less comprehensive input, such as policy papers or more narrowly-targeted legislative text. Regardless of the form of the proposal, as required by Office of Management and Budget (OMB) Circular A-19, the draft is reviewed and approved by OMB and other executive agencies to ensure consistency with Administration policy.

A comprehensive Administration bill prepared by the DOT may be introduced in Congress at the request of the Administration. At least one member of Congress must sponsor the bill and agree to introduce it. Introducing the bill as a courtesy does not necessarily mean that the sponsor endorses all provisions in the proposal. Congress will consider the Administration bill in formulating its own legislation, and may incorporate entire provisions verbatim, but rarely enacts an entire Administration bill without change.

Committees of jurisdiction. In each of its sessions, members of Congress introduce a vast number of bills and resolutions that cover a wide array of subjects. To manage this workload, Congress is organized around committees of jurisdiction. These committees vary in size, and each committee’s title usually indicates the general scope of its jurisdiction. They conduct investigations, make studies, issue reports and recommendations, and review and prepare legislative measures on their assigned areas. Most committees also divide their work among several subcommittees with narrower focus and jurisdiction. This committee framework is designed to consolidate decision-making on broad public policy areas.[5]

Responsibility for developing surface transportation legislation rests with specific congressional authorizing committees, and their appropriate subcommittees. Consequently, legislation involving surface transportation matters can occur simultaneously and independently in any of a number of committees in both the House of Representatives and the Senate. Table 2 shows the respective committees of jurisdiction for each surface transportation modal administration and for the HTF and other revenue matters.

Table 2. Jurisdiction over surface transportation authorization.
Committee Jurisdiction
Committee on Transportation and Infrastructure FHWA, FTA, FMCSA, NHTSA
Committee on Ways and Means Revenue
Committee Jurisdiction
Committee on Environment and Public Works FHWA
Committee on Commerce, Science, and Transportation FMCSA, NHTSA
Committee on Banking, Housing, and Urban Affairs FTA
Committee on Finance Revenue

In the House, the Highways and Transit Subcommittee of the Committee on Transportation and Infrastructure (the House T&I Committee) has primary jurisdiction over most aspects of the FAHP, including drafting highway authorizing legislation. The House T&I Committee also has jurisdiction over mass transit and highway safety. The HTF and other revenue matters fall under the purview of the House Ways and Means Committee.

In the Senate, the Subcommittee on Transportation and Infrastructure of the Committee on Environment and Public Works (EPW) has jurisdiction over highway programs and legislation, but not over highway safety or mass transit issues. The Senate Commerce, Science, and Transportation Committee has jurisdiction over safety, while the Banking, Housing, and Urban Affairs (“Banking”) Committee has jurisdiction over mass transit concerns. Finally, the Senate Finance Committee has jurisdiction over the HTF and other revenue matters.

Step 1: Committee hearings. Congress begins the authorization process by conducting hearings as a springboard for developing authorizing legislation. It normally holds such hearings about nine months to a year before expiration of the current authorization act. The purpose of these congressional hearings is to give interested organizations, citizens, Members of Congress, and the executive branch an opportunity to present their views on the future direction of Federal surface transportation programs, as well as for Congress to develop a record in support of future legislative action.

The House and the Senate work independently on their separate bills, and each body has its own schedule for hearings, committee meetings, and procedural votes. Although they may be developed concurrently, House and Senate surface transportation bills remain separate until brought together in conference committee, much later in the legislative process (see step 5, below).

Steps 2 and 3: Committee consideration. Once the hearings are complete, the committees begin preparation of draft surface transportation legislation, taking into consideration information obtained during the hearings. They may also include elements taken from other proposed surface transportation bills submitted during the current session of Congress and referred to the full authorizing committees. Such bills may be proposed by several groups, including the chairmen or ranking minority members of full authorizing committees or subcommittees, the Administration, or other Members of Congress who have an interest in surface transportation.

Member-introduced bills often concern a specific facet of the program, such as safety initiatives or bridges. In contrast, bills proposed by committee leadership are usually comprehensive, and represent an attempt to reconcile competing views from several sources. A committee leadership bill commonly takes on the name of its principal sponsor, and becomes the foundation for the committee’s draft legislation. It also frequently serves as the focus of additional committee hearings.

A committee considers a bill through a process known as a markup. Depending on a variety of factors, this markup process may begin at either the subcommittee or full committee level. In either case, members mark up (modify, or “amend”) the draft bill until a majority votes to send forward the amended version. The amendment process may involve voting to strike or revise existing language, or to add entire new sections, even to the point of preparing a completely different version (although this is uncommon).

Upon completion of a subcommittee markup, the subcommittee forwards the revised bill to the parent full committee, which in turn holds its own markup session. Once approved by a majority of the full committee, the bill goes to other committees having jurisdiction over some aspect of the program (e.g., for Trust Fund matters, the House Ways and Means and Senate Finance committees would have jurisdiction). The bill is then “reported out” to the full chamber of its respective body of Congress.[6]

When a full committee forwards a bill to its respective full chamber, it typically also provides an accompanying committee report. The report expands upon the legislative language in the bill by providing a plain language explanation of the legislative text and, sometimes, an explanation for the provision. The executive branch and the courts use this report to help determine congressional intent. There are usually separate committee reports for the Senate bill and the House bill. In some cases, though, a committee will not submit a report to accompany its bill.

Step 4: Floor action. The next step is for House and Senate leaders to package together the respective chamber’s committee-reported component bills (the Senate EPW Committee’s highway bill, the Senate Banking Committee’s transit bill, etc.) into a single, comprehensive surface transportation bill. Each chamber then moves its combined product to the floor for further debate and amendment, then final votes.

Step 5: Resolution of differences and final passage. Once the Senate and House pass their respective bills, they work to reconcile differences between the two bills and arrive at a mutually acceptable compromise. This reconciliation process takes one of two forms:

  1. Amendment exchange. For a variety of reasons, the once-rare process of amendment exchange has become much more common in recent sessions of Congress. In an amendment exchange, one chamber (e.g., the House) takes up the other chamber’s bill, amends it, and then passes the amended version. If the amended version is acceptable to the other chamber, then that chamber passes it as well. Otherwise, the second chamber amends the bill further, passes that newly-amended bill, and returns it to the original chamber. The process continues until both chambers agree to sign-off on an identical bill—usually after substantial back-channel negotiations.
  1. Conference committee. Rather than exchanging amendments, the House and Senate may resolve their differences through a conference committee. In a conference committee, members of both chambers meet to formally negotiate a compromise version of the two bills. Such a committee is usually composed of members that represent the relevant committees of jurisdiction. Normally, there are many similarities between the two bills, and the members spend the conference working out the differences.

Upon agreement by the conference committee, a single bill with its attendant report is returned to each body of Congress for final passage. Conference bills must be voted on in their entirety exactly as presented by the conferees; neither the House nor Senate may amend the bill further.

Step 6: Presidential signature or veto. When the conference bill has passed both the House and Senate, it is transmitted to the President for signature. The President may either sign the bill into law or veto (reject) it. Only one surface transportation bill—the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA)—has ever been vetoed by the President.

(Optional) Step 7: Veto override. The House and the Senate may vote to over-ride the President’s veto and enact the bill into law. A two-thirds majority vote in each chamber is required to override a presidential veto. Congress met this threshold for STURAA of 1987, overriding President Reagan’s veto of that bill.

Budget authority

Once Congress has authorized funding, the question arises of when it becomes available for obligation. The authority provided by Federal law to enter into financial obligations that will result in immediate or future outlays involving Federal government funds is called “budget authority.” There are two main types of budget authority: appropriated budget authority (ABA) and contract authority (CA).[7]

Figure 3 shows the procedural steps in the “lifecycles” of ABA and CA, highlighting the differences between the two.

Figure that compares, side-by-side, the five major stages in the lifecycles of appropriated budget authority and contract authority, respectively. The processes have many similarities. However, for appropriated budget authority, the Federal government doesn’t distribute funds until Congress has appropriated those funds. In contrast, contract authority may be distributed without need for an appropriation. Another difference is that Congress places a limitation on the obligation of contract authority, but does not place a similar limitation on the obligation of appropriated budget authority.

Figure 3. Comparative lifecycles of appropriated budget authority and contract authority.

Appropriated budget authority. Most Federal programs operate using appropriated budget authority, which requires two acts of Congress to implement. The congressional passage of an authorizations act is only the initial step. The authorization act, in itself, does not permit the program to begin, but only establishes the program structure and sets an upper limit on program funding. The program may start (i.e., the funds may be distributed and used) only after passage of a second piece of legislation: the appropriations act.

In the appropriations act, Congress appropriates (makes available) the funding amount that can actually be used for the program. It is at this point that the program can proceed. Under Congress’s budgetary rules, the appropriated amount may be equal to, or lower than, the original amount authorized in the authorization act.

One example of an ABA program in the FAST Act is the Nationally Significant Federal Lands and Tribal Project Program. The FAST Act authorized $100 million for each of FY 2016-2020 for the program, but this funding is subject to appropriation from the General Fund. Accordingly, FHWA may only distribute funding for this program if Congress subsequently appropriates those funds in an appropriations act.

An appropriations bill may sometimes include a provision to appropriate funds for a program or project for which there is no supporting authorization, or in an amount that exceeds the original authorized funding limits. Such actions are against the budgetary rules set by Congress and can be contested by a single member of Congress raising an objection (called a point of order) against the measure. If no member raises this sort of objection (or if Congress votes to waive the point of order), and Congress passes the legislation, the measure stands.

An example of this is U.S. DOT’s Transportation Investments Generating Economic Returns (TIGER) program, which offers capital grants for a wide range of surface transportation projects. Congress has never authorized the TIGER program within an authorization act. Nonetheless, it has appropriated a cumulative $5.1 billion through eight rounds of TIGER funding in appropriations acts. These appropriations have served as the legal basis for DOT’s implementation of TIGER.

See Chapter 4 for additional detail on appropriations acts.

Contract authority. Most of FHWA’s programs operate with a special type of budget authority called contract authority (CA). Congress has provided CA for the highway program for almost a century, beginning with the FY 1923 appropriations act for the Post Office Department.[8] Through CA, authorized amounts are available for obligation according to the provisions of the authorization act without further legislative action. The use of CA gives the States advance notice of the size of the Federal-aid program at the time an authorization act is enacted. This eliminates much of the uncertainty contained in the authorization/appropriation sequence that applies to ABA.

In 1974, the Congressional Budget and Impoundment Control Act of 1974 (Budget Act) was enacted. One of the main purposes of that act was to give Congress more effective control over Federal spending. As described in Chapter 4, Congress annually meters spending through appropriations acts. Therefore, the Budget Act sought to reduce the number of programs that received budget authority outside the control of appropriations acts. To do this, the Budget Act made it “out of order” (against the rules of the House and the Senate) to consider a bill that would authorize such spending.

However, Congress also realized that there were certain programs, such as the FAHP, that required advance knowledge of the size of future funding commitments to do long-range planning and to operate smoothly from year-to-year. Thus, the Budget Act permits several exceptions to the standard two-step, authorization/appropriation process. One of these is for programs for which new budget authority is derived from a trust fund that receives 90 percent or more of its receipts from user-related taxes.[9] The HTF qualified under this exception, and Congress continued to authorize contract authority for the FAHP.[10]

The law that governs the majority of Federal-aid highway programs is located in title 23 (the highway title) of the United States Code. A provision in that title (23 U.S.C. 118(a)) makes all funds that are authorized from the HTF under chapter 1 of title 23 “available for obligation on the date of their apportionment or allocation or on October 1 of the fiscal year for which they are authorized, whichever occurs first.” This provision indicates that any such funds are contract authority. And as most Federal-aid highway programs located outside of chapter 1 incorporate 23 U.S.C. 118(a) by reference, [11] it gives those programs contract authority as well.

(Chapter 3 of this report discusses apportionments and allocations in more detail.)

As with other types of budget authority, CA is not cash; it is “funding” that the Federal government, on behalf of a State or other grant recipient, obligates (commits) to a given project. Once the Federal government makes an obligation, it is legally bound to liquidate (pay) that obligation once the bill comes due. However, the authorization act does not appropriate the cash to liquidate an obligation made under contract authority. Chapter 4 describes the piece of legislation that does this (the appropriations act), and Chapter 6 describes the process through which the HTF outlays that cash to pay States’ bills.

Homes for Federal highway law

Title 23, United States Code. New surface transportation authorization acts amend title 23 of the United States Code (U.S.C.). Title 23, U.S.C., is titled “Highways” and includes a systematic—or “codified”—arrangement of most of the laws that govern the FAHP. Generally, title 23 embodies those substantive provisions of highway law that Congress considers to be continuing, and which need not be reenacted each time the FAHP is reauthorized. Each new surface transportation act specifies which sections of title 23 Congress wishes to repeal (eliminate), add, or amend.

Uncodified provisions of law. Some provisions of surface transportation law—for example, authorization amounts or certain pilot programs—are not incorporated into title 23. These provisions “live” within the confines of the act that authorized them, but they have the same legal standing as those located in title 23. Furthermore, highway projects and activities also must comply with provisions in other laws outside of title 23 (the Uniform Relocation Act, and the Americans with Disabilities Act, etc.).

The FAST Act included a number of uncodified provisions. Examples include the newly-authorized Nationally Significant Federal Lands and Tribal Projects Program,[12] as well as the authority for a Governor of an international land border State to reserve a portion of his or her State’s STBG funding for border infrastructure projects.[13]

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