The Transportation Funding Loophole

1. The Transportation Funding Loophole A funding loophole lets states shift federal money into some federal transportation programs at the expense of others without reporting on the transfers. It can also allow states to neglect to spend the federal funds earmarked for certain programs. These unspent funds eventually expire. The loophole lies in the discrepancy between “contract authority” and “obligation limitation”

2. Contract Authority vs. Obligation Limitation Contract authority is the funding level set in law for each of the core highway programs, like glasses of different sizes Obligation limitation is the total amount of funding available in a given fiscal year, like a pitcher full of ice tea to fill the glasses

3. $15 $10 $20 $15 $5 IM CMAQ BRIDGE NHS STP $50 States Control Federal Dollars The amount of obligation limitation in the "pitcher" is never sufficient to fully fill all the program “glasses” States choose to underfund certain programs or distribute the shortfall evenly among all the programs

4. Loophole Undermines Federal Priorities The funding loophole allows certain important programs to be chronically underfunded, and therefore undermines key federal priorities, such as safety and air quality * The Surface Transportation Program (STP) has been broken into subcategories Source: FMIS

5. Fix the Loophole • Recommendations • Eliminate the discrepancy between contract authority and obligation limitation • Establish a target obligation rate for all programs in order to prevent the undermining of federal transportation priorities