States will divide up $8.7 billion in unobligated federal highway funds to spend on highway and bridge projects this year, thanks to the Federal Highway Administration’s latest annual August reallocation of uncommitted federal funds. 

The redistribution, which FHWA Administrator Shailen Bhatt announced in an Aug. 26 memo, set a new record, following 2023’s $7.9 billion and 2022’s $6.2 billion.  Bhatt's memo directs FHWA divisional administrators to make sure all of the additional funds, which are obligation limitations, are obligated by Sept. 25. Bhatt also said the redistributed funds expire on Sept. 30, the end of the fiscal year.

Allocations By the Numbers

All 50 states, and the District of Columbia, receive a portion of the reallocated funds. Texas got the largest share, with $1.17 billion, followed by California, with $622.1 million.

Ranking third is New York, with $423 million; followed by by Pennsylvania, with $400.1 million.

Tied for fifth place at $400 million are Florida and New Jersey. 

Susan Howard, American Association of State Highway and Transportation Officials director of policy and government relations, says she expects that the states as a group will be able to commit all $8.7 billion by Sept. 25. In the past, some states have had to push to meet FHWA's late-September deadlines. 

But Howard said in an interview that this year, DOTs "had a lot of advanced notice” from FHWA about the expected total and since early this year were anticipating  "a very large August redistribution."

That allowed them time to prepare spending plans.

The funds that are being reallocated are in the form of an obligation limit. According to Howard, an obligation is a "marker" for having funds assigned to a particular project, but the money has yet to be transferred. 

The obligation limit is an annual cap set by Congress in appropriations legislation. 

The redistributed funds come from "allocated" or nonformula, programs. They do not have to be obligated for four years, allowing the programs to carry over balances from year to year, according to AASHTO.

As the year goes on and the allocated programs become unable to obligate their full obligation level, states are asked to absorb those unused funds.

The Infrastructure Investment and Jobs Act (IIJA) created many new allocated programs, notably those providing grants that U.S. DOT awards through competitions among the states. 

But some non-IIJA programs also fall into the allocated category and have contributed to the growth in the size of the redistributions. 

Howard says that historically the largest source of allocated and unspent funds has been FHWA's Transportation Infrastructure Finance and Innovation Act (TIFIA) program. TIFIA, created in 1998, provides loans and other credit assistance.

But IIJA's funding is in the form of grants and direct funding. Grants make loans, which require. repayment, less attractive to state transportation officials, Sen. Shelley Moore Capito (R-W.Va.) said in a July 25 Senate transportation subcommittee session. 

Pursuing a Legislative Solution

With further, perhaps larger, redistributions likely in coming years, Bhatt and AASHTO want to see Congress make changes in the way distributions work.

AASHTO welcomed a provision in the fiscal 2025 spending bill cleared Aug. 1 by the Senate subcommittee covering DOT. 

AASHTO said that the proposal targets the programs that obligate funds slowly. It basically would establish a four-year obligation timeline for such programs. That would provide more certainty than the current system, in which, Howard said, states essentially have "an unlimited window in which to obligate." 

This story was updated on 9/5/2024 to accurately describe the redistribution program and AASHTO's legislative program.