Highway Emergency Relief:

Reexamination Needed to Address Fiscal Imbalance and Long-term Sustainability

GAO-07-245: Published: Feb 23, 2007. Publicly Released: Feb 23, 2007.

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Since 1972, Congress has authorized $100 million a year for highway disaster recovery needs through the Federal Highway Administration's (FHWA) Emergency Relief (ER) program. Increasingly, the program's actual costs have exceeded this amount, and Congress has provided additional funding. Because of this fiscal imbalance between program funding and program needs, we reviewed ER under the Comptroller General's authority to determine the (1) total funding, distribution of funds among the states, and disaster events funded; (2) sources of funding provided and financial challenges facing the program; and (3) scope of activities eligible for funding and how the scope of eligible activities has changed in recent years. GAO's study is based on financial data, document analysis, stakeholder interviews, and site visits, among other methods.

During the 10-year period of 1997 to 2006, ER provided about $8 billion to states, the District of Columbia, Puerto Rico, American territories, and federal agencies, a total of 56 states and other jurisdictions. About 70 percent of these funds has gone to 5 states--California, Florida, Louisiana, Mississippi, and New York--that have been especially affected by major disaster events, such as Hurricane Katrina. Since 1990, 86 percent of the ER program has been funded through supplemental appropriations as the program's annual demands have exceeded the $100 million annual authorization. Even excluding extraordinary disasters, those exceeding $100 million in eligible damage per event, the program still needed $271 million per year for smaller eligible events. Meanwhile, the program has been authorized at a constant $100 million level since 1972, resulting in the current authorization being worth about one-fourth the authorization level of 1972. Until Hurricane Katrina, Congress funded extraordinary disasters through the Highway Trust Fund, but with Trust Fund balances dwindling, in 2005, Congress designated the General Fund as the source of future ER supplemental funding. But the nation faces a pending fiscal crisis, raising concerns about future use of the General Fund and financial sustainability of the ER program. Despite funding concerns, FHWA does not routinely recapture unused program funds by reviewing the program's state balances to identify potentially unneeded funds. GAO also identified $62 million in potentially unneeded statutory allocations from past disasters that could be recaptured. Activities eligible for ER funding include the repair or reconstruction of highways and roads that are supported by the Federal-aid Highway program, and of roads on federal lands that have suffered serious damage from natural disasters or catastrophic failures due to external causes. ER funds are not intended to replace other federal-aid, state, or local funds to increase capacity, correct nondisaster-related deficiencies, or make other improvements. However, contributing to future financial sustainability concerns is the fact that the scope of eligible activities funded by the ER program has expanded in recent years with congressional or FHWA waivers of eligibility criteria or changes in definitions. As a result, some projects have been funded that go beyond repairing or restoring highways to predisaster conditions--such as the $441 million Devil's Slide project and $811 million I-880 project in California--projects that grew in scope and cost to address environmental and community concerns. Also, Congress and FHWA have expanded eligibility to allow additional types of work, such as a gradual flooding of a lake basin, to be funded. Congress has also directed that in some cases the program fully fund projects rather than requiring a state match. Finally, varying interpretations of what constitutes a damage site have led to inconsistencies across states in FHWA's application of ER eligibility standards.

Matters for Congressional Consideration

  1. Status: Open

    Comments: Congress has not yet taken action on this recommendation. The Emergency Relief Program is due to be reauthorized in 2014.

    Matter: In order to put the Emergency Relief program on a sound financial footing, Congress may wish to consider the expected future demands on the program and reexamine the appropriate level and sources of funding--including whether to increase the $100 million annual authorized funding and whether the Highway Trust Fund, the General Fund, or some combination would allow the program to accomplish its purpose in a fiscally sustainable manner.

  2. Status: Open

    Comments: Congress has not yet taken action on this recommendation. The Emergency Relief Program is due to be reauthorized in 2014.

    Matter: Congress may also wish to consider tightening the eligibility criteria for Emergency Relief funding, either through amending the purpose of the Emergency Relief program, or by directing FHWA to revise its program regulations. Revised criteria could include limitations on the use of Emergency Relief funds to fully finance projects with scope and costs that have grown as a result of environmental and community concerns.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In January 2014, FHWA reported that it will not be taking further action on this matter. FHWA had earlier reported that it planned to conduct a regulatory proceeding that would address this recommendation after the enactment of the surface transportation program authorization, Moving Ahead for Progress in the 21st Century (MAP-21) in July 2012.

    Recommendation: In order to help put the Emergency Relief program on a more sound financial footing, the Secretary of Transportation should direct the Administrator, FHWA, to revise its emergency relief regulations to tighten the eligibility criteria for Emergency Relief funding, to the extent possible within the scope of FHWA's authority. Revised criteria could include limitations on the use of Emergency Relief funds to fully finance projects with scope and costs that have grown as a result of environmental and community concerns.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In 2007, GAO reported that annual demands on the Federal Highway Administration's (FHWA) Emergency Relief program have exceeded the $100 million annual authorization, resulting in long-term fiscal imbalance and reliance on supplemental appropriations. Despite the program's fiscal imbalance and the depleting Highway Trust Fund, FHWA does not annually review the program's existing obligated and unobligated balances to identify potentially unneeded funds. We estimated that the balance of inactive obligated funds to be close to $158 million. We also identified potentially unneeded allocations from specific past disasters that could be recaptured for the Highway Trust Fund. The Emergency Relief Manual states that FHWA headquarters officials should coordinate with FHWA division officials to identify unobligated Emergency Relief balances that states will not use by the end of the following fiscal year and reallocate these funds to states with immediate Emergency Relief funding needs. Therefore, we recommended that FHWA require division offices to annually coordinate with states to identify unexpended obligated and unused unobligated Emergency Relief funds that states will not use by the end of the following fiscal year and reallocate these funds to states with immediate Emergency Relief funding needs. In fiscal year 2010, FHWA began an annual process of working with states to identify and withdraw unused Emergency Relief funding. As a result, FHWA has recaptured $367,367,073.32 over fiscal years 2010 and 2011 (net present value of $368,701,522). This has led to FHWA more consistently identifying and withdrawing unused Emergency Relief funding and subsequently reallocating a majority of the withdrawn funding to states with immediate disaster needs. This has also led to improved FHWA financial oversight of Emergency Relief funds.

    Recommendation: In order to improve FHWA's financial oversight of Emergency Relief funds, FHWA should require division offices to annually coordinate with states to identify unexpended obligated and unused unobligated Emergency Relief funds that will not be needed for projects, withdraw the unneeded amounts, and determine if they are needed for other eligible projects. In the event these funds are not needed for other eligible projects, FHWA should identify these funds to Congress for rescission or to offset future appropriations. FHWA also should identify for rescission unexpended funds that have been directed to specific disasters when those funds are no longer needed.

    Agency Affected: Department of Transportation: Federal Highway Administration

  3. Status: Closed - Implemented

    Comments: In 2007, we reported that FHWA offices have inconsistently applied the minimum eligibility threshold defined in its Emergency Relief Manual. Specifically, while FHWA has a criterion of $5,000 damage per site to meet the minimum eligibility threshold, we found that different FHWA offices had different interpretations of what constituted a site. For example, some FHWA offices designated entire counties as sites, while others did not. Thus damage sites that were eligible for Emergency Relief in one state may have not been eligible in another, potentially affecting whether or not the state qualified for Emergency Relief program funding, as well as the cost to the program. We recommended that FHWA clarify its Emergency Relief Manual to better specify the definition of a site, and whether under certain circumstances variations from the basic definition are permitted. In response, FHWA updated its Emergency Relief Manual in November 2009. The updated manual included language that made it unacceptable to group damages for the sole purpose of forming a site based solely on a political subdivision (i.e., county or city boundaries). As a result, FHWA has better assurance that its offices are consistent across states in FHWA's definition of a site, which may prevent many smaller costs from being charged against the program, and may result in higher federal reimbursements.

    Recommendation: In order to ensure that similar types of events result n consistent determination of eligibility, FHWA should clarify its Emergency Relief Manual to better specify the definition of a site, and whether under certain circumstances variations from the basic definition are permitted.

    Agency Affected: Department of Transportation: Federal Highway Administration

 

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