Flexible Funds/Transfers

The 1991 ISTEA legislation contained provisions that provided flexible funding opportunities to state and local governments, allowing them the option of using some Federal Highway Administration (FHWA) funds for transit projects and vice versa. These provisions were contained and continued with the passage of TEA-21, during FY 1998. However, beginning in FY 2000, FHWA and FTA implemented new procedures that provided for the transfer of obligation authority to the receiving agency. Such transactions are referred to as "transfers". Funds can be transferred from FHWA to Sections 5307, 5310, 5311, 5313(b) and the Interstate Substitute Program to support transit projects, and from FTA to FHWA to support highway projects. During the past nine years, a cumulative total of $6.5 billion was transferred from FHWA; $6.0 billion was obligated by FTA for transit projects. Flexible funds / transfers accounted for 13.3% of the total FTA obligations (programs covered in this report) during FY 1992-2000. In addition, FTA transferred $20.2 million of Section 5307 funds to FHWA during this same period.

The funds transferred from FHWA are drawn from the following sources:

Surface Transportation Program (STP). STP is the largest source of funds from FHWA. Funding is at 80 percent Federal share and may be used for all projects eligible for funds under current FTA programs excluding Section 5307 operating assistance.

Congestion Mitigation and Air Quality Improvement (CMAQ) Program. CMAQ funds are used to support transportation projects in air quality nonattainment areas. A CMAQ project must contribute to the attainment of the national ambient air quality standards by reducing pollutant emissions from transportation sources.

Interstate Substitute Funds. While these Highway funds are eligible for transit use, they are limited to the construction and improvements of fixed guideways, the purchase of rolling stock (buses) and other transportation equipment, and any other project eligible under FTA's Section 5309 capital grant program.

FHWA Earmark. Several transit projects are earmarked under TEA-21 as high-priority projects. FHWA asked that they be administered by FTA. FHWA earmarked funds through FY 1999 were transferred into the Section 5309 program. Beginning in FY 2000, these earmarks were transferred to FTA’s formula programs only.

In FY 2000, $2,013.7 million flexible funds / transfers were available to FTA for obligation. Of that total, $1,599.2 million (79.4%) was transferred in FY 2000; the remaining available $414.5 million (20.6%) was the unobligated carryover or recovery of prior year transfers. Transfers during FY 2000 were the highest for any year during the 9-year authorization, and account for 24.5% of the total (FY92-00) flex fund transfers. The breakdown of FY 2000 transfers by type is: CMAQ - $864.0M (54.0%), STP - $708.4M (44.3%), and earmarks - $26.7M (1.7%). Forty-three states transferred flex funds during FY 2000. The ten states with the highest transfers accounted for about 84% of the total; California (the state with the highest level of transfers) transferred 56% of the total for FY 2000. More information is shown in the chart below. Obligations in FY 2000 totaled $1,478.8 million, the highest year total. By program, obligations in FY 2000 were: Urbanized Area Formula - $1,367.5 million (92.5%); Capital - $16.8 million (1.1%); Elderly and Persons with Disabilities - $72.1 million (4.9%); and Non-urbanized Area Formula - $22.4 million (1.5%). The FY 2000 obligations represented 275 projects in 42 states compared to 208 in 39 states last year.

Cumulatively (FY 1992 - 2000), flex fund transfers total $6,514.3 million. Throughout the 9-year authorization, CMAQ led in the requests for transfers of flexible funds, with a cumulative percentage of 54.3%. The remainder of the transfers are composed of STP funds (37.2%), Interstate Substitution program funds (5.3%), and FHWA earmarks (3.1%). Cumulative obligations total $5,955.1 million.

FTA Funds Transferred for Highway Projects. One transfer of FTA funds ($0.2 million) to FHWA occurred during FY 2000. Cumulatively, $20.2 million in urbanized area formula capital funds has been transferred to FHWA for highway-related activities.