AASHTO Journal - FHWA Unveils August Redistribution for State DOTs

The Federal Highway Administration recently issued its much-anticipated “August Redistribution” of federal-aid highway program obligation limitation to state departments of transportation for fiscal year 2024.

[Above photo via PixBay]

According to FHWA, $8.7 billion in obligation limitation has been made available from the Highway Trust Fund or HTF for distribution for FY 2024; money that state DOTs plan to “obligate” for transportation projects by September 25.

This “redistribution” occurs late in the federal fiscal year when HTF’s “allocated programs” – federal programs for national purposes separate from formula dollars to states – do not fully use their share of funding during the year, which is subsequently redistributed to state transportation agencies.

The American Association of State Highway and Transportation Officials has previously expressed growing concern regarding “increasingly large” annual redistributions of HTF obligation limitation to state DOTs each August due to the “narrow timeframe” allowed for allocating that funding.

“Such a large redistribution created significant difficulty due to the very narrow timeframe of about a month for state DOTs to effectively program these dollars before the end of the federal fiscal year,” AASHTO noted in a letter to FHWA in January 2023.

In addition, AASHTO pointed out that “carryover balances” from allocated programs have grown larger due to increased funding from the $1.2 trillion Infrastructure Investment and Jobs Act or IIJA enacted in November 2021 and the significant growth in discretionary programs engendered by the IIJA as well.

“These developments have led to state DOTs seeing a corresponding and relative decrease in their amount of formula obligation limitation at the beginning of the fiscal year, which deprives them of the time window which would otherwise better enable them to strategically deploy IIJA dollars throughout the full fiscal year,” the organization said in its letter.

“In order to make the most out of the historic transportation investment made under the IIJA, we request that FHWA inform state DOTs at the beginning of each federal fiscal year regarding the amount of carryover balance for every allocated program, and provide a monthly update of these balances for the remainder of the fiscal year,” AASHTO noted.

The organization also pointed out that the Senate’s FY 2025 Transportation, Housing and Urban Development, and Related Agencies Appropriations or THUD bill, passed by the Senate Committee on Appropriations by a vote of 28 to 1 in July, contains an update to Section 120 that provides a legislative fix to August Redistribution starting the summer of 2025.

As recommended by AASHTO in a letter sent this June to Congressional leadership, the bill assigns four-year obligation limitation to all allocated HTF programs, including allocated programs that receive four-year contract authority and allocated programs that receive “no-year” or “never expiring” contract authority.

According to an earlier U.S. Department of Transportation estimate, that move is expected to gradually reduce August Redistribution from the $8.7 billion expected this year to about $2.5 billion three years from now in FY 2027, while correspondingly increasing obligation limitation provided to state formula programs at the beginning of the fiscal year by a similar amount.