AASHTO Journal - FHWA Issues Revised IIJA Guidance Memo

The Federal Highway Administration issued an updated policy memo on February 24 that supersedes a controversial December 2021 memo that sought to influence how states spent funds issued via the $1.2 trillion Infrastructure Investment and Jobs Act or IIJA enacted in November 2021.

[Above image by FHWA]

A decision issued by the Government Accountability Office in December 2022 said that original memo instructed FHWA staff to “encourage” states and decision-makers to select certain projects for funding based on the agency’s stated preferences.

GAO noted that such a request from senior agency leadership “proscribes policy” as defined under the Congressional Review Act or CRA and is thus considered a rule.

“The memo sets out FHWA’s preferred projects for funding under the IIJA,” GAO explained at the time. “When an agency rule has the effect of inducing changes to the internal policy or operations choices of the regulated community, that rule has a substantial impact on the rights and obligations of non-agency parties.”

Consequently, the new memo reiterates that states and not the FHWA retain the ultimately control and responsibility for IIJA funding.

“States determine which of their projects shall be federally financed by federal-aid highway formula dollars,” Shailen Bhatt, FHWA administrator, reiterated in the new memo.

“Different states have different needs when it comes to transportation assets that must be reconfigured and modernized, expanded and added, or retired and replaced,” he added. “FHWA recognizes and values the authority and role of the states in deciding how to prioritize the use of their federal-aid highway dollars and will continue to administer funds and programs consistent with all requisite statutory requirements and considerations.”

Bhatt noted that states are “ultimately responsible” for deciding how to prioritize their formula and allocated funding and acknowledged that, “Except for the statutes and regulations cited, the contents of this internal agency document do not have the force and effect of law. This document is intended only to provide information to Federal agency officials regarding existing requirements under the law or agency policies and does not affect the rights or obligations of states or the public in any way.”

The American Association of State Highway and Transportation Officials alluded to that issue in a January 2022 letter sent to FHWA in response to its memo.

“While the legislative process that led to the IIJA was certainly unconventional, the enacted legislation – and the Congressional intent regarding the Federal-aid Highway Program over the next five years – provides state DOTs with flexibility in how investment decisions are made with formula dollars to meet each state’s unique mobility and accessibility needs,” the organization said. “At the end of the day, collective efforts of states will go a long way in achieving the outcomes that are fundamentally agreed upon between FHWA and state DOTs.”

[Editor’s note: AASHTO reiterated those points in a 30-page paper sent to the U.S. Department of Transportation in April 2022; a paper that outlined a host of IIJA implementation recommendations.]