Furthermore, the funds are outlayed over a number of years. Comparing Unobligated Highway Balances With Previous Obligations

At the beginning of fiscal year 1998, the total unobligated federal highway fund balance for all states was $12.1 billion. From a national perspective, the total unobligated highway balance of $12.1 billion at the beginning of fiscal year 1998 (including program funds exempt from obligation limits) is nearly 1.5 times the $8.1 billion that all states obligated during the first 6 months of fiscal year 1997. For example, Indiana’s total unobligated balance is over $80 million less than its total highway obligations during the first 6 months of fiscal year 1997. I provides a state-by-state comparison of the fiscal year 1998 unobligated balance of $9.6 billion (from highway programs subject to the obligation limit) to actual state obligations during the first 4 through 7 months of fiscal year 1997. It is important to note that these comparisons imply that the state’s obligation rates for fiscal year 1997 correspond to those for fiscal year 1998, which may or may not be the case for individual states. Strategies That Could Help the States in the Short-Term

A number of strategies could help the states get through a short period without a new highway funding authorization. At the federal level, the Congress could provide the states with the flexibility to use their unobligated balances across the range of federal highway programs, rather than keeping the balances generally tied to specific highway programs and demonstration projects. Because of the variances in the unobligated balances remaining across federal highway programs, these balances may not be consistent with state funding priorities or projects that the states planned for this year. To identify any problems that the states might have in using their unobligated balances and to identify strategies that the states may use to help them respond to the absence of new federal highway funds in the short term, we contacted nine states—Arkansas, Connecticut, Indiana, Iowa, Missouri, New York, North Carolina, North Dakota, and South Dakota. States May Have to Rely More on State Funding for Highways

Federal highway funding represents one of the many financial sources used to support the nation’s highways. To compensate for the lack of new federal highway funds being available for part of fiscal year 1998, some states may be able to fund a proportionately larger share of their planned highway projects in early fiscal year 1998 with state funds. A few of the nine states we contacted noted that they would be postponing highway projects if new federal funds are not available within the next few months. The states also differ in their ability to provide greater funding in fiscal year 1998. However, if the states draw on their own resources, they may have to delay other planned projects. Under advance construction, a state can begin a highway project by obtaining capital from a variety of sources, including its own funds and private capital, and later receive reimbursement through federal highway obligations. Many states reported to AASHTO that they would use advance construction to continue operations and project schedules.
Why GAO Did This Study

GAO discussed the status of federal surface transportation programs in the absence of funding from a new federal highway reauthorization act, focusing on a comparison of unobligated federal highway fund balances at the beginning of fiscal year (FY) 1998 with the highway funds that the states obligated during the first part of FY 1997.

What GAO Found

GAO noted that: (1) the total unobligated highway fund balance available at the beginning of FY 1998 equals $12.1 billion and exceeds the total actual obligations of $8.1 billion, made by the states during the first 6 months of FY 1997; (2) a comparison of the unobligated balances of individual states with their actual FY 1997 obligations reveals that some state highway programs may experience financial difficulties by the middle of FY 1998 if their obligation rates for this year are comparable to those for FY 1997; (3) while most states have unobligated balances that are greater than their actual federal highway obligations in the first 6 months of FY 1997, 14 states have an unobligated balance that is lower than their actual obligations during the same period; (4) the nine states that GAO contacted identified various strategies that they would use to try to continue their highway operations, such as relying more extensively on state funds; (5) some of these states also noted that they would soon be postponing highway projects if new federal funds are not available within the next few months; (6) the rates at which states obligated funds in FY 1997 may not correspond to their plans for obligating federal highway funds in FY 1998; (7) some states may be limited in their ability to use available unobligated balances because of restrictions on the specific types of highway programs that the funds can be used for; (8) the comparisons indicate that while many states may be able to continue financing highway projects for some time, some states may have difficulty dealing even in the short term with the absence of new federal highway funds; (9) a number of strategies could help the states respond to the absence of new federal funds in the short term; (10) for example, Congress could provide the states with the flexibility to use their unobligated balances across the range of federal highway programs, rather than keeping the balances tied to specific highway funding categories and demonstration projects; (11) Congress could then reimburse appropriate funding categories after reauthorization; (12) individual states could also consider a number of strategies, such as temporarily substituting state funds for federal highway funds; (13) states could also begin highway projects by using advance construction, which enables a state to access capital from a variety of sources and later receive reimbursements through federal highway obligations; (14) such strategies, however, may delay other planned projects within individual states; and (15) these strategies may not be feasible for some states or for an extended period of time.