Chapter 2.5
Improve Texas’ Share of Federal Discretionary Funds
SummaryTexas receives federal transportation funds via a combination of formula-based apportionments and discretionary funding programs. The Texas Department of Transportation (TxDOT) maximizes its draw of apportioned formula funds and has never lapsed (or returned) any apportioned funds. Unfortunately, in recent years, Texas has not fared particularly well in discretionary funding from the federal government.
BackgroundTxDOT does well maximizing federal formula funds and, historically, has taken advantage of resources made available by other states’ periodic underutilization of their highway funds. A recent Texas State Auditor’s report confirms this finding and notes that Texas has been apportioned approximately 7.5 percent of all highway planning and construction funds nationwide for fiscal years 2001, 2002, and 2003, second only to California’s 9.2 percent.[1] Texas’ apportioned funding averages an estimated $2.02 billion for the period 1998 - 2003.[2]
Minimum Guarantee ProvisionThe Transportation Equity Act for the 21st Century (TEA-21) includes a Minimum Guarantee provision whereby states are guaranteed a minimum return on their contributions to the highway account of the Highway Trust Fund. The account was established by law to hold Federal Highway user taxes dedicated for highway purposes. TEA-21 specifies for each state a share of the aggregate annual funding for specific programs:
- Interstate Maintenance (IM);
- National Highway System (NHS);
- Bridge;
- Congestion Mitigation and Air Quality Improvement (CMAQ);
- Surface Transportation Program (STP);
- Metropolitan Planning;
- High Priority Projects;
- Appalachian Development Highway System;
- Recreational Trails; and
- the Minimum Guarantee.
A limited amount of High Priority Projects funding and all discretionary funding are excluded from the Minimum Guarantee calculation. The percentage shares for each program are adjusted each year to ensure that each state’s share of apportionments for the specified programs is at least 90.5 percent of its percentage contributions to the highway account based on the latest data available at the time of the apportionment.[3] Texas will receive about $278.6 million in Minimum Guarantee funding, after adjustment for the TEA-21 Restoration Act.[4]
Discretionary Programs and Incentive GrantsTxDOT is eligible for a number of discretionary programs administered by the Federal Highway Administration (FHWA). Each program has its own eligibility and selection criteria established by law, regulation, or administrative rule. Exhibits 1 and 2 provide summaries of the active federal discretionary and incentive grant programs and funds available under TEA-21, and information on Texas’ applications and funding under each program. Exhibit 2 includes a number of safety-related programs, funding from which is granted in part to state agencies other than TxDOT.[5]
Exhibit 1.
Federal Aid Discretionary Programs and Texas' Share ($ in millions)
TBD=to be determined
Source: Texas Department of Transportation.
Exhibit 2
Highway Safety Grant and Transfer Programs in the Transportation Equity Act for the 21st Century
Of the programs enumerated in Exhibit 1, Texas submitted applications for about $1.16 billion in 1998-2000 and received only $48.7 million, or less than five percent of requested funds. This follows similar experiences in the few preceding years and the final years of Intermodal Surface Transportation Efficiency Act (ISTEA) (1996 and 1997).
TxDOT has actively supported its discretionary funding applications.
- The Assistant Executive Director for Border Trade Transportation made repeated visits to FHWA in Washington, D.C. on behalf of border and corridor submissions.
- TxDOT routinely meets with FHWA and members of Congress when discretionary funds applications are submitted and advises all Texas members of Congress about Texas’ applications.
- The Texas Transportation Commission (TTC) and TxDOT have worked with Senator Phil Gramm and Congressman Tom DeLay and brought FHWA staff to Texas twice to conduct public hearings on discretionary programs.
- TxDOT worked with Senator Phil Gramm to create the federal Borders and Corridors Program.
- The commission worked with House Transportation and Infrastructure Chairman Bud Shuster to build support for targeting funds to the border.
Despite these efforts, TxDOT’s applications for discretionary grants have not been particularly successful. In 1999 and 2000, TxDOT submitted applications for $348 million under the Borders and Corridors program and received $32.2 million of a national pool of $280 million. Despite applications in 1998-2000 for $525.7 million, TxDOT received no money in Interstate Maintenance funding. Despite $67.2 million in applications under the Bridge Discretionary program in 1999 and 2000, TxDOT received no funding.
Finally, TxDOT recently submitted an application for more than $18 million under the Borders and Corridors Program to fund construction of one-stop border inspection stations but received only $1 million. According to TxDOT, Texas border crossings handle approximately 80 percent of truck traffic between the US and Mexico. Texas shares the largest land border (1,200 miles) with Mexico and has the highest number of border crossings in the nation.[6]
High Priority Project FundingThe High Priority Projects (HPP) Program provides designated funding for specific projects (commonly called demonstration projects) identified by Congress. TEA-21 includes 1,850 of these projects, each with a specified amount of funding over TEA-21’s six-year authorization period. The federal share for these projects is generally 80 percent.[7]
For the period 1998-2000, Texas has been granted $217.6 million in HPP funding out of a national pool of $4.1 billion, or approximately 5.3 percent of the total. Because of the Minimum Guarantee provision described earlier, Texas actually does not lose out on funds not received via HPP awards. Instead, it receives this funding via the Minimum Guarantee provision and can use the funds for its own specified purposes rather than the more narrowly defined projects specified by HPP funding.
Other States ExperienceDiscretionary Programs are targeted and varying circumstances among states make comparisons difficult; therefore, in a few program areas, Texas fares poorly relative to peer states. In the aggregate, states receiving more discretionary funds than Texas include California ($81.5 million), Colorado ($42.8 million), Utah ($94.0 million), and Washington ($33.5 million). (see Exhibit 3 for more detail).
Exhibit 3.
Ratio of Discretionary Funding to Apportioned Funding (1998 and 1999)
Source: Calculated from FHWA, HABF-30, December 1, 1999.
States that seem most successful in securing discretionary funding tend to have highly centralized structures for tracking and applying for discretionary program funds, very effective lobbying operations, and high-profile showcase projects. For instance, Colorado, Arizona, and Montana each have a central clearinghouse for all discretionary funding applications. Consequently, a central staff is aware of and involved in all applications, and can set priorities among project applications. Colorado, like some other states, does a strong job of identifying the most appealing projects to highlight in their applications and thus gain the necessary political support.
RecommendationsA. TxDOT should designate a staff person as the discretionary funding coordinator with the responsibility to maximize the state’s receipt of federal discretionary funds.
The coordinator should be a senior staff member involved in all decisions related to program funding applications. The coordinator should work closely with the agency’s Legislative Affairs staff and other agency staff who work closely with the Federal Highway Administration, Congress, and the Texas Congressional delegation.
B. TxDOT should increase the amount of discretionary funding it receives from 0.75 percent of apportioned funds to 3 percent of apportioned funds.
Texas fares poorly relative to peer states in the amount of discretionary funding it obtains. For the years 1998-99, Texas received discretionary funding equivalent to 0.75 percent of its apportioned funding of $2.1 billion. Texas ranks 34th among all states in the ratio of discretionary funding to apportioned funding.
During the same period, Utah received $94 million in discretionary Funding to help build highway infrastructure for the Winter Olympics which was identified as a critical transportation need for Utah. Providing highways to handle border traffic generated by North American Free Trade Agreement (NAFTA) trade with Mexico is a critical transportation need for Texas.
C. TxDOT should provide an annual report to the Texas Legislature on the status of attaining the 3 percent goal, including the status of applications for the discretionary funding.
C1. If TxDOT does not attain the 3 percent goal, then TxDOT’s administrative funding should be reduced by the amount needed to reach 3 percent and that amount should be applied to highway construction.
An annual report would provide the legislature with a summary of how TxDOT fares in the competition for discretionary program funding. Just as importantly, an annual report would educate legislators and their staffs regarding TxDOT’s federal funding priorities.
Fiscal ImpactIf TxDOT were to improve its discretionary funding to 3 percent of apportioned funding (i.e., if it were to receive discretionary funding equivalent to 3 percent of its apportioned funding of $2.1 billion rather than the 0.75 percent it has received to date through TEA-21), this would translate into $48 million in additional program funds per year. The changes in TxDOT's organization described in these recommendations could be achieved within existing resources.
Gain to the State Highway Fund The fiscal impact of those proposals, however, cannot be estimated with certainty.
Endnotes
[1] Texas State Auditor’s Office, A Review of the Use of Federal Funds at the Department of Transportation, SAO Report No. 00-029 (Austin, Texas, May 10, 2000), p. 1.
[2] Federal Highway Administration, HABF-30, Average 1998-2003 Apportionment Estimates Pursuant to TEA-21 as Amended by the TEA-21 Restoration Act After Programmatic Distribution of Minimum Guarantee Funds (Exclusive of 2% for Statewide Planning and Research), Washington, D.C., December 1, 1999.
[3] Federal Highway Administration, “TEA-21 Fact Sheet: Minimum Guarantee,” Washington, D.C., September 14, 1998 (http://www.fhwa.dot.gov/tea21/factsheets/minguar.htm). (Internet document.)
[4] Federal Highway Administration, HABF-30, Average 1998-2003 Apportionment Estimates Pursuant to TEA-21 as Amended by the TEA-21 Restoration Act After Programmatic Distribution of Minimum Guarantee Funds (Exclusive of 2% for Statewide Planning and Research), Washington, D.C., December 1, 1999.
[5] Federal Highway Administration Discretionary Programs, “Program Summaries and Contacts,” Washington, D.C., November 1999 (http://www.fhwa.dot.gov/discretionary/progsumm.htm). (Internet document.)
[6] Texas Department of Transportation, “Border and Corridor Funds,” Austin, Texas, June 12, 2000. (Press release.)
[7] Federal Highway Administration, “Fact Sheet: High Priority (Demonstration) Projects,” Washington, D.C., September 14, 1998 (http://www.fhwa.dot.gov/tea21/factsheets/demos.htm). (Internet document.)
