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Chapter 2.5

Improve Texas’ Share of Federal Discretionary Funds


Summary

Texas 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.


Background

TxDOT 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 Provision

The 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 Grants

TxDOT 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)

Program, Authorizing Legislation, Description,
And Eligibility
Federal
Fiscal Year
TEA-21 Funding -- National Pool
(1998 - 2003)*
Funds Applied for by Texas
(1998 - 2000)
Funds Granted (1998 - 2000)
Bridge
23 USC 144(g)(1)(2), TEA-21, Section 1109(b)
1998 - 1999**
$125.0
$37.7
$0.0
Replacement, rehabilitation, or seismic retrofit of major bridges. Provides funding for bridges in addition to apportioned HBRRP funds. Federal share is 80%.
2000
$100.0
$29.5
$0.0
State Transportation Departments
2001-2003
$300.0
TBD
TBD
Corridors and Borders
TEA-21, Sections 1118 and 1119
1999
$140.0
$222.0
$14.0
Corridor Program – improvements to high priority and selected other corridors.
2000
$140.0
$126.0
$18.2
Border Program – improvement of infrastructure and related purposes within the border region. Federal share is 80% on a sliding scale
2001-2003
$420.0
TBD
TBD
States and Metropolitan Planning Organizations




Ferry Boat
ISTEA, Section 1064, Tea-21, Sections 1101(a)(1) and 1207
1998-1999**
$68.0
$1.6
$1.6
Ferry boats and ferry terminal facilities that are publicly owned, majority publicly owned, or publicly operated. Federal share is 80%.
2000
$38.0
$3.1
$1.4
States and Metropolitan Planning Organizations
2001-2003
$114.0
TBD
TBD
Innovative Bridge Research and Construction
TEA-21, Section 503(b)
1998-1999**
$25.0
$5.0
$0.6
Program, Authorizing Legislation, Description,
and Eligibility
Federal
Fiscal Year
TEA-21 Funding -- National Pool
(1998 - 2003)*
Funds Applied for by Texas
(1998 - 2000)
Funds Granted (1998 - 2000)
Demonstrate the application of innovative material technology in the construction of bridges and other structures. Federal share is determined by the Secretary.
2000
$17.0
$2.7
$0.1
State Transportation Departments
2001-2003
$60.0
TBD
TBD
Intelligent Transportation Systems (ITS) Integration




TEA-21, Section 5208
1998-1999**
$149.0
$76.9
$5.7
Projects to accelerate the integration and interoperability of ITS across system, jurisdiction, and modal boundaries, in metropolitan and rural areas. Federal ITS share is 50% and total Federal funds cannot exceed 80%.
2000
$80.0
$82.3
$9.3
State and local transportation partnerships
2001-2003
$253.0
TBD
TBD
ITS Commercial Vehicle Infrastructure Deployment




TEA-21, Section 5209 and 5203(b)(6)
1998-1999**
$52.7
Texas is developing Phase I of the Commercial Vehicle Information System and Networks (CVISN) program, a State Intelligent Transportation Systems for Commercial Vehicle Operations Business Plan. This is required before the state can request federal CVISN funds.
Improve the safety and productivity of commercial vehicles and drivers with installation of the Commercial Vehicle Information System and Networks(CVISN). Federal ITS share is 50% and total Federal funds cannot exceed 80%.
2000
$30.2


States
2001-2003
$101.2


Interstate Maintenance




TEA-21, Section 1107(b)
1998-1999**
$150.0
$174.5
$0.0
Resurfacing, restoring, rehabilitating and reconstructing, including adding travel lanes, on most existing Interstate System routes. Federal share is 90% on sliding scale.
2000
$100.0
$351.2
$0.0
Program, Authorizing Legislation, Description,
and Eligibility
Federal
Fiscal Year
TEA-21 Funding -- National Pool
(1998 - 2003)*
Funds Applied for by Texas
(1998 - 2000)
Funds Granted (1998 - 2000)
State Transportation Departments
2001-2003
$300.0
TBD
TBD
Public Lands Highways




23 USC 202, 203, and 204, TEA-21 Section 1101(a)(8)(B)
1998
$66.6
$3.1
$0.0
Any kind of transportation project eligible for assistance under Title 23, USC, that is within, adjacent to, or provides access to Federal public land areas. Federal share is 100%.
1999
$83.6
$22.3
$0.0
State Transportation Departments
2000
$83.6
$25.7
$0.0

2001-2003
$250.8
TBD
TBD
Scenic Byways




TEA-21, Section 1219
1998-1999**
$47.0
TxDOT has chosen not to participate in this program due to associated federal requirements (e.g., billboard removal and private land use restrictions).
Provides funding for eligible scenic byway projects along All-American Roads or designated scenic byways and for the planning, design, and development of State scenic byway programs. Federal share is 80%. Federal Land Management agencies can provide match for projects on Federal or Indian lands.
2000
$24.5


State Scenic Byway Agency
2001-2003
$76.5
TBD
TBD
Transportation and Community and System Preservation (TCSP)




TEA-21, Section 1221
1999
$20.0
TxDOT routinely provides information to local communities concerning the TCSP program. Because of the nature of the program, TxDOT has deemed it more appropriate for local communities to apply. Texas communities have submitted 22 applications during FY2000 and received 3 awards.
Comprehensive initiative for planning, implementation and research of transportation and community and system preservation practices. Federal share is 100% (selection priority given to projects with local match).
2000
$25.0


States, MPOs, and, local governments
2001-2003
$75.0


Transportation Infrastructure Finance and Innovation Act Program (TIFIA) Credit Limits




TEA-21, Sections 1501-1504 and TEA-21 Restoration Act, Section 9007
1999
$1,600.0
TxDOT did not apply in the first round (1999). TTA submitted an application in the second round (2000) and it is expected that TxDOT will submit additional applications in later rounds.
Provides loans, lines of credit, and loan guarantees to certain surface transportation projects of national or regional significant. Assistance is limited to 1/3 of project costs.
2000
$1,800.0


Any transportation project sponsor
2001-2003
$7,200.0


Value Pricing




ISTEA, Section 1012(b), TEA-21, Section 1101(a)(12) and 1216(a) and TEA-21 Restoration Act, Section 9006(b)
1999
$7.0
TxDOT has one project funded under this section operating on I-10 in Houston. TxDOT does not provide funding for the project, but rather provides authorization for Houston METRO to operate the program on the state highway system.
Funds up to 15 pilot programs which include a variable pricing component to encourage shifts in time, route, or mode of travel. Also funds pre-implementation studies. Federal share is 80%.
2000
$11.0


State or Local Governments or Public Authorities
2001-2003
$33.0


* Amounts are as authorized in TEA-21. Actual amounts available for allocation are limited to the obligation limitation percent pursuant to TEA-21, Section 1102(f). In addition, beginning in FY2000, the authorized amounts may increase or decrease based on estimated receipts to the Highway Trust Fund in accordance with the Revenue Aligned Budget Authority (RABA) provisions of TEA-21.
**1998 and 1999 combined due to lack of highway legislation in 1998.

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

Program, Authorizing Legislation, Description and Eligibility
Federal
Fiscal Year
TEA-21 Funding -- National Pool
Funds Applied for or Allocated to Texas
Funds Granted
to Texas
State and Community Grants




23 USC Section 402 (formula-based)




Identify highway safety problems, set goals and performance measures, provide start-up money for new programs, give new direction and support to existing safety programs, and fund analyses to determine progress in improving safety (non-construction only)
FY 1998
$133.6 million
$9,544,121
$9,544,121

FY 1999
$142.5 million
$9,523,028
$9,523,028
State Offices of Highway Safety
FY 2000
$145.0 million
$9,702,014
$9,702,014

FY 2001-2003
TBD
TBD
TBD
Seat Belt Use Incentive Grants
FY 1998



TEA-21, Section 157(a)
FY 1999
$82 million
$7,407,200
$7,407,200

FY 2000
$92 million
$5,325,700
$5,325,700
Highway safety and highway construction programs
FY 2001-2003
$326 million
TBD
TBD



(Grant amount equal to savings in medical costs.)
State Transportation Departments




Seat Belt Use Innovative Grants

(Funding based on amount of unallocated funds after 157(a) funds are allocated.)
TEA-21, Section 157(b)
FY 2000 (1st yr.)

$3,854,345
$1,607,608

FY 2001-2002

$1,914,541
TBD
Innovative projects to promote increased seat belt use rates




State Offices of Highway Safety




Occupant Protection Incentive Grants
FY 1998



TEA-21, Section 405
FY 1999
$10 million
$741,620
$741,620

FY 2000
$10 million
TBD
TBD
Implementation and enforcement of occupant protection programs
FY 2001-2003
$48 million
TBD
TBD
Child Passenger Protection Education Grants
FY 1998
0


TEA-21, Section 2003(b)
FY 1999
0



FY 2000
$7.5 million
$521,422
$521,422
Implementation of a new child passenger protection program to educate the public concerning the proper installation of child restraints and train child passenger safety personnel
FY 2001-2003
$7.5 million
TBD
TBD
Incentives to Prevent Operation of Vehicles by Intoxicated Persons
FY 1998
$55 million
(did not qualify)

TEA-21, Section 163
FY 1999
$65 million
$9,428,358
$9,428,358

FY 2000
$80 million
11,400,000
TBD
Highway safety and highway construction programs
FY 2001-2003
$300 million
TBD
TBD
State Transportation Departments and State Offices of Highway Safety




Alcohol-impaired Driving Countermeasures
FY 1998
$34.5 million
(State does not qualify)
(State does not qualify)
TEA-21, Section 410
FY 1999
$35 million



FY 2000
$36 million


Implement and enforce impaired driving programs
FY 2001-2003
$114 million


State Offices of Highway Safety




Demonstration Program




TEA-21, Section 403
FY 2000–
FY 2002
(36 months)
$5 million
$999,772
$999,772
Develop and implement statewide DWI enforcement in conjunction with planned media

($ 1 million each for 5 states)

State Highway Safety Data Improvement Incentive Grants
FY 1998
0


TEA-21, Section 411
FY 1999
$5 million
$0
$0

FY 2000
$8 million
$0
$0
Improve the timeliness, accuracy, completeness, uniformity, and accessibility of highway safety data
FY 2001-2003
$19 million
TBD
TBD
Source: Provided by Texas Department of Transportation, September 29, 1999.

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 Funding

The 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 Experience

Discretionary 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)

Top 10 States ($ in thousands)

Total
Discretionary
Funding
(1998-1999)
Discretionary Funding
as Percent
All States
Apportioned
Funds
(1998-1999)
Ratio of Discretionary Funding: Apportioned Funding
Utah
$94,035
13.87%
$381,739
24.63%
California
81,524
12.02%
4,489,503
1.82%
Colorado
42,767
6.31%
570,297
7.50%
Washington
33,506
4.94%
880,813
3.80%
Texas
27,100
4.00%
3,606,818
0.75%
Missouri
25,361
3.74%
1,177,916
2.15%
Illinois
24,483
3.61%
1,648,526
1.49%
Nevada
22,702
3.35%
353,314
6.43%
Arizona
22,666
3.34%
779,691
2.91%
Alaska
22,134
3.26%
580,805
3.81%

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.


Recommendations

A. 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 Impact

If 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.

Fiscal Year
Gain to the State Highway Fund
2002
$48,000,000
2003
$48,000,000
2004
$48,000,000
2005
$48,000,000
2006
$48,000,000

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.)