GAO-13-19R Flexible Funding 

United States Government Accountability Office 

Washington, DC 20548

November 15, 2012

The Honorable Patty Murray

Chairman

The Honorable Susan Collins

Ranking Member

Subcommittee on Transportation, Housing 

and Urban Development, and Related Agencies

Committee on Appropriations

United States Senate

The Honorable Tom Latham

Chairman

The Honorable John Olver

Ranking Member

Subcommittee on Transportation, Housing 

and Urban Development, and Related Agencies

Committee on Appropriations

House of Representatives

Subject: Flexible Funding Continues to Play a Role in Supporting State and Local 

Transportation Priorities

The nation’s surface transportation system is critical to the economy and affects the daily life 

of most Americans. However, the system is under growing strain, and the cost to repair and 

upgrade the system to safely and reliably meet current and future demands is estimated in 

the hundreds of billions of dollars. State and local governments must maintain existing 

systems while making efficient use of transportation dollars at a time when revenues to 

support the Highway Trust Fund—the major source of federal highway and transit funding—

are eroding.1 For this and other reasons, funding surface transportation remains on GAO’s 

High-Risk List.2

The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)3

 

1

According to the Congressional Budget Office’s August 2012 baseline projections for the Highway Trust Fund, 

the highway account of the Highway Trust Fund will end fiscal year 2012 with a balance of $8.7 billion and the 

transit account will end the fiscal year with a balance of $4.7 billion. Both accounts are estimated to be unable to 

meet obligations sometime in fiscal year 2015. 

introduced several 

Federal Highway Administration (FHWA) programs that provided states and urbanized areas 

2

GAO, High Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).

3

Pub. L. No. 102-240, 105 Stat. 1914 (Dec. 18, 1991).
Page 2 GAO-13-19R Flexible Funding 

flexibility in selecting projects to be funded with federal-aid highway funds.4 As federal dollars 

are often tied to a single mode of transportation, these programs are distinctive in the flexibility 

they grant to states and urbanized areas to implement a wide variety of transportation 

projects.5 In particular, states and metropolitan planning organizations (MPO) may use 

FHWA’s Surface Transportation Program (STP) and Congestion Mitigation and Air Quality 

Improvement Program (CMAQ) funds, which we refer to as flexible funding throughout this 

report, for transit projects.6 Subsequent reauthorization acts—including the most recent 

surface transportation reauthorization, Moving Ahead for Progress in the 21st Century (MAP21)—have continued to provide this flexibility.7

In 2007, we reported on trends in flexible-funding use since the enactment of ISTEA (1992 to 

2006).

This flexibility also extended to certain Federal 

Transit Administration (FTA) Urbanized Area Formula Program funds prior to the enactment of 

MAP-21.

8 The Consolidated and Further Continuing Appropriations Act of 2012 required us to 

review how states have used their authority to transfer federal funding between highway and 

transit programs.9 To respond to that mandate, this report examines the extent to which states 

have transferred flexible funding between highway and transit programs since 2007 and the 

factors that affected the decisions of selected states and urbanized areas to transfer flexible 

funding and the outcomes of those decisions.10 Similarities and differences to the previous 

flexible-funding report are noted, as appropriate.11

To determine the extent to which flexible funding has been transferred between highway 

and transit programs, we obtained data on STP and CMAQ funds transferred from FHWA’s 

Financial Management Information System to FTA’s Transportation Electronic Awards 

Management system from 2007 to 2011, including the amounts transferred, the programs to 

which the funds were transferred, and the state and urbanized areas that transferred the 

 

4

Title 23, as amended provides that title 23 funds made available for transit projects may be transferred to and 

administered under Chapter 53 of title 49. See 23 U.S.C. § 104(f). 

5

Urbanized areas are geographic areas with a population of 50,000 or more, as designated by the U.S. Census 

Bureau.

6

A number of federal-aid highway programs other than STP and CMAQ may be used on transit projects. See, for 

example, 23 U.S.C. §§ 103(b)(6), 147, and 204. However, STP and CMAQ funds account for the majority of the 

funds transferred, so we did not consider these other programs in our analysis. In addition, we limited our review 

to federal funds that can be used for capital projects and that require a state or local decision to transfer the 

funds from one mode to another. Therefore, we excluded planning funds and congressionally directed funds from 

our analysis. 

7

Pub. L. No. 112-141, 126 Stat. 405 (Jul. 6, 2012).

8

GAO, Highway and Transit Investments: Flexible Funding Supports State and Local Transportation Priorities 

and Multimodal Planning, GAO-07-772 (Washington, D.C.: July 26, 2007).

9

Pub. L. No. 112-55, div. C, title I, § 124, 125 Stat. 552, 654 (Nov. 18, 2011). 

10While FHWA and FTA actually transfer the funds, for purposes of this report, we attribute the transfer of flexible 

funding to the states since the funds are transferred at the request of state and MPO officials. 

11Although we report on similar trends in states’ use of flexible funding to those identified in GAO-07-772, we did 

not intend to fully replicate those trends for purposes of this review. In addition, the different time periods covered 

by the two reports could account for some of the variability in the trends identified. As a result, direct 

comparisons between the two reports may not be appropriate. 
Page 3 GAO-13-19R Flexible Funding 

funds.12 This data included funds transferred under the American Recovery and 

Reinvestment Act of 2009 (Recovery Act).13

We conducted this performance audit from January 2012 to November 2012 in accordance 

with generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis 

for our findings and conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions based on our audit 

objectives. See enclosure I for more detailed information about our scope and methodology.

In addition, we obtained data on the types of 

projects for which the funds were transferred. FHWA officials also provided us with data on 

STP and CMAQ funds used for transit projects administered by FHWA and Urbanized Area 

Formula Program funds transferred from FTA to FHWA. Based on interviews with FHWA 

and FTA officials on how the data were collected and corroborated, and interviews with state 

and local officials about the accuracy of the data provided, we determined that the data were 

sufficiently reliable for purposes of our review. To determine the factors that affected 

selected state and urbanized area decisions to transfer flexible funding and the outcomes of 

those decisions, we selected 5 states (Arkansas, California, Oregon, Pennsylvania, and 

Vermont) and 10 urbanized areas within those states for in-depth interviews. We selected 

states based on the amount of flexible funding transferred within the state, the portion of 

flexible funding transferred, the portion of their transit funding coming from flexible funding, 

and whether the state had transferred FTA Urbanized Area Formula Program funding to 

highway projects. We selected urbanized areas based on the amount of flexible funding they 

received relative to other urbanized areas in the state and population. We also selected 

states and urbanized areas based on whether they were included in the 2007 flexiblefunding report. Within each state, we interviewed officials from the state department of 

transportation, the FHWA division office, and the FTA region with jurisdiction over that state.

Within each urbanized area, we interviewed officials from the MPO and a transit operator.

We asked these officials about decisions to use flexible funding and the impact of this 

funding on highway and transit projects.

Results in Brief

From 2007 to 2011, FHWA apportioned about $53 billion in flexible funding to states, which 

is about 29 percent of total federal-aid highway funding apportioned to the states during that 

time. States transferred about $5 billion, or 10 percent of their apportioned flexible funding, 

to FTA for transit projects.14

 

12Data from FHWA and FTA regarding amounts transferred for highway or transit projects reflect fiscal year 

values throughout this report. Additionally, for purposes of this report, we use the term “transfer” to refer to 

FHWA funds transferred to FTA or FTA funds transferred to FHWA.

Four states—California, New Jersey, New York, and Virginia—

accounted for the majority of flexible funding transferred to FTA for transit projects. The 

portion of flexible funding transferred and the impact of the transferred funding on the total 

transit funding available in the states varied considerably. For example, while four states 

transferred more than 25 percent of their apportioned flexible funding to FTA for transit 

projects from 2007 to 2011, 16 states transferred less than 2 percent of their apportioned 

flexible funding over this period. In addition, transferred flexible funding accounted for over 

13Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

14For purposes of this report, we analyzed the total flexible funding transferred to FTA for transit projects from 

2007 to 2011.
Page 4 GAO-13-19R Flexible Funding 

50 percent of the available federal transit funding in Vermont compared to New York, where 

flexible funding accounted for about 5 percent of the total federal transit funding available to 

the state. Urbanized areas over 1 million in population received most (more than 75 percent) 

of the transferred flexible funding.

Officials from our selected states and urbanized areas told us that they based their 

decisions on whether to use flexible funding for transit projects on state and local priorities, 

available funding sources, and state and local policies. In particular, the decision to use 

flexible funding for transit projects stems from state and metropolitan planning processes 

that identify priority transportation projects. Additionally, the availability of other funding 

sources for transit projects and state and local policies, such as those setting aside flexible 

funding for transit projects, affect these decisions. State and local officials told us that 

although flexible funding generally has not made up a large portion of overall transit funding 

provided to a region, the funds have had a large impact on the ability of these selected 

states and localities to meet their transportation needs. Agency officials also told us that 

they appreciate the flexibility in how these funds can be used. Officials in the states and 

urbanized areas told us that although flexible funding transferred to transit resulted in fewer 

dollars for highways, the overall impact on their ability to implement highway projects is not 

significant.

Background

State departments of transportation and local governments are responsible for building and 

maintaining highways and other roadway-related infrastructure in the United States. The 

federal-aid highway program, which is administered by FHWA, provides funding for this 

purpose from the highway account of the Highway Trust Fund. FHWA distributes highway 

funds to the states through annual apportionments established by statutory formulas and 

through the award of discretionary grants; in 2011, about $40 billion in federal-aid highway 

funding was made available to states.15 Funds come through several different programs, 

each with specific uses and eligibility requirements. States generally have broad discretion 

to choose the projects that will be funded with these moneys. After determining that a 

project meets federal requirements and that sufficient funds are available, FHWA approves 

the project and incurs an obligation for the project selected by the states.16

Constructing, maintaining, and operating public transit systems are generally the 

responsibilities of local agencies, such as transit operators, city governments, or county 

After states 

make expenditures on the projects, they request reimbursement from FHWA for the federal 

share of eligible costs. States supplement federal funds for highway programs—and provide 

required matching funding—with non-federal revenues such as taxes and user fees.

 

15Under MAP-21, FHWA will provide each state with a lump sum formula apportionment based on the amount of 

formula funds that the state received under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 

Legacy for Users (SAFETEA-LU), then will divide this lump sum among individual programs pursuant to a 

formula provided in MAP-21. This differs from SAFETEA-LU’s approach to apportionment, which relied on a 

separate formula for each program, overlaid by an adjustment to address equity concerns. 

16An obligation is a commitment that creates a legal liability of the government for the payment of goods and 

services ordered and received. Payment may be made immediately or in the future. An agency incurs an 

obligation, for example, when it awards a grant or enters into a contract. 
Page 5 GAO-13-19R Flexible Funding 

governments.17 Federal funds for public transportation are generally administered by FTA 

and are funded through a combination of general fund revenues and the mass transit 

account of the Highway Trust Fund. States and urbanized areas are apportioned formula 

funding on an annual basis, and this funding can be used by transit operators for capital 

expenses and, in the case of transit operators located in urbanized areas with populations 

under 200,000, for operating expenses. Transit operators and other recipients may also 

receive discretionary grants for capital expenditures such as vehicle purchases and system 

construction or expansion. One such discretionary program is FTA’s Capital Investment 

Grant program, which, among other things, provides capital funds to help many states, 

cities, and localities plan and build new or expand existing fixed-guideway systems,18 often 

called New Starts projects. Since the early 1970s, a significant portion of the federal 

government’s share of new capital investment in mass transportation has come through the 

New Starts program.19

In the early 1990s, Congress decided that a flexible, intermodal approach to transportation 

programs was needed to address growing transportation needs in the face of budgetary 

constraints and the diversity of transportation priorities in different parts of the country. 

Enacted in December 1991, ISTEA sought to provide flexible, comprehensive solutions to 

transportation problems and expanded modal choice options by including substantial flexibility 

to transfer funds between FHWA and FTA-formula program funding categories. Subsequent 

reauthorizations, including MAP-21, as well as the Recovery Act, continued this flexibility.

In 2011, FTA provided about $10 billion in funding to transit agencies 

and states through its formula and discretionary grant programs. Recipients of FTA funds 

request reimbursement from FTA as costs are incurred. Additional funding for transit comes 

from state or local taxes and operating revenue such as passenger fares and parking fees.

20

In particular, STP and CMAQ funds administered by FHWA may be used on a range of 

projects, including transit and highways, and are collectively referred to as flexible funding 

for purposes of this report. When these funds are spent directly on transit or transferred to 

FTA from FHWA, they are primarily used for transit capital projects, such as vehicle 

purchases, transit infrastructure construction, and finance costs for eligible capital projects.

In addition, CMAQ funds transferred to FTA may be used for operating costs for new or 

expanded services.

A portion of STP flexible funding is allocated for use in localities rather than states, allowing 

local authorities to determine how these funds will be used. In particular, MPOs—which are 

 

17Public transportation is regular and continuing general or special transportation service provided to the public.

It includes service by buses, subways, rail, trolleys, and ferryboats. It also includes paratransit services for 

seniors and persons with disabilities as well as vanpool and taxi services operated under contract to a public 

transportation agency. 

18Fixed-guideway systems use and occupy a separate right-of-way for the exclusive use of public transportation 

services, such as fixed rail and exclusive lanes for buses and other high-occupancy vehicles.

19GAO, Public Transit: Funding for New Starts and Small Starts Projects, October 2004 through June 2012, 

GAO-13-40 (Washington, D.C.: Nov. 14, 2012). 

20The Recovery Act provided more than $48 billion for transportation investments in early 2009. FHWA 

administered $27.5 billion of these Recovery Act funds, $26.6 billion of which was apportioned to states for 

highway infrastructure investments. These funds were distributed to states under rules governing STP and as 

such were eligible to be transferred to FTA for transit projects. See, GAO, Recovery Act: Funding Used for 

Transportation Infrastructure Projects, but Some Requirements Proved Challenging, GAO-11-600 (Washington, 

D.C.: June 2011).
Page 6 GAO-13-19R Flexible Funding 

composed of representatives of local elected officials, state transportation officials, other 

transportation stakeholders, and, under certain circumstances, transit operators—in 

urbanized areas over 200,000 in population have the authority to select projects for funding.

Some states have chosen to further allocate flexible funding to these areas. In addition to 

highway program funds that have transit eligibility, Urbanized Area Formula Program funds 

administered by FTA can be transferred to FHWA for use on highway projects under certain 

circumstances. 21

Table 1: Eligible Uses and Apportionment Guidelines for STP, CMAQ, and Urbanized Area Formula 

Program Funds 

Table 1 provides details on eligible uses for STP, CMAQ, and Urbanized 

Area Formula Program funds as well as guidelines on how these funds may be transferred.

Program (2011 

funding levels) Eligible uses Apportionment guidelines Transfer guidelines a

FHWA programs

Surface 

Transportation 

Program 

($9.2 billion)

A wide range of projects, 

including construction, 

reconstruction, resurfacing, 

operational improvements 

for highways and bridges, 

and bike and pedestrian 

projects.

Capital costs for transit 

projects, including vehicles 

and facilities.

STP funds are apportioned 

to states based on a state’s 

number of lane miles and 

vehicle miles traveled on 

federal-aid highways and 

payments into the highway 

account of the Highway 

Trust Fund.

Projects that are eligible 

under the original program 

may be administered by 

FHWA or transferred to FTA.

To transfer the funds, the 

state department of 

transportation sends a 

request that the funds be 

transferred, with the 

concurrence of the MPO if 

the project is within a 

metropolitan planning area, 

to the FHWA Division Office.

Congestion 

Mitigation and Air 

Quality 

Improvement 

Program

($2.4 billion)

CMAQ funds may only be 

used in areas that do not 

meet, or have not met, 

federal air quality 

standards.

May be used for transit 

operating assistance for new 

or expanded service for 

three years. 

b

CMAQ funds are 

apportioned to states based 

on the severity of their air 

quality problem and 

population in areas that fail 

to meet air quality 

standards.b

FTA program

Urbanized Area 

Formula Program

($4.5 billion)

Transit capital, planning, and 

operating assistance to 

urbanized areas with 

populations over 50,000 and 

capital and planning 

assistance only for 

urbanized areas over 

200,000.

c

Apportioned based on 

formulas. Urbanized areas 

with populations 50,000 to 

199,999 receive funds based 

on population and population 

density; those with 

populations of 200,000 and 

more receive funds based on 

a combination of transit 

measures, population, and 

population density.

May transfer funds to 

highway projects if: (1) the 

MPO approves and has 

provided notice to affected 

transit providers, (2) the 

MPO determines all local 

transit needs are being 

addressed, (3) FTA 

determines the funds are not 

needed for investments 

required by the Americans 

with Disabilities Act.

Source: GAO analysis of FHWA and FTA data.

d

 

21Prior to the enactment of MAP-21, urbanized areas over 200,000 in population, known as Transportation 

Management Areas, could transfer Urbanized Area Formula Program funds to FHWA for highway projects if they 

could not be used for operating assistance. Other areas lacked this transfer authority. Under MAP-21, FTA’s 

Urbanized Area Formula Program funds can no longer be transferred to FHWA. 
Page 7 GAO-13-19R Flexible Funding 

a

The apportionment calculation methodology was changed under MAP-21. Rather than providing individual authorizations for the 

STP and CMAQ programs, a single lump sum was authorized for all apportioned programs under 23 U.S.C. § 104. The authorized 

lump sum is first distributed among the states based on each state’s fiscal year 2012 combined apportionments. The amount 

determined for each state is then distributed within that state among its apportioned programs.

b

Under SAFETEA-LU, each state is guaranteed a minimum apportionment of 0.5 percent of the year’s total program funding. 

These funds can be used anywhere in the state for projects eligible under either CMAQ or STP. 

c

The Urbanized Area Formula Program grant funds also include Growing States and High Density States formula funds in the 

total. 

d

Under MAP-21, FTA’s Urbanized Area Formula Program funds can no longer be transferred to FHWA. 

When states or urbanized areas use flexible funding on transit projects, they may leave the 

funds in the state’s FHWA account, in which case the state receives reimbursement from 

FHWA as costs are incurred. Alternatively, the state—usually in conjunction with the MPO or 

the local agency implementing the project—may request that these funds be transferred to 

FTA to be administered through one of several eligible FTA programs.22 Once funds are 

transferred to FTA for a project, the funds are awarded to a transit operator or other 

recipient.23 The recipient will receive reimbursement from FTA as costs are incurred. The 

states and localities are required to make the same non-federal matching share they would 

have made if the funds were used for highway purposes and administered by FHWA.24

Federal laws and regulations require that projects proposed for highway and transit funding 

be based on comprehensive metropolitan and statewide transportation-planning 

processes.

FTA’s Urbanized Area Formula Program funds had to be transferred to FHWA if they were 

to be used for highway projects.

25

Amounts of Flexible-Funding Transfers Have Been Small Nationwide and Have Varied 

Impact on Transit Funding in States and Urbanized Areas

State, regional, and local government agencies and transit operators must 

operate within these requirements to receive federal funds. For example, to receive federal 

funding, projects must be included in a state transportation improvement program that 

demonstrates sufficient funds are available to implement the program.

Over the last 5 years, states transferred a small portion of federal-aid highway program and 

available flexible funding to FTA for transit projects. FHWA apportioned about $53 billion in 

flexible funding to states from 2007 to 2011. This figure represents about 29 percent of total 

federal-aid highway funding apportioned to the states during that time.26

 

22Funds transferred from FHWA to FTA are transferred to one of three FTA programs—Urbanized Area Formula 

Program, Nonurbanized Area Formula Program, or Elderly and Persons with Disabilities Program. These funds 

are transferred from the highway account to the mass transit account of the Highway Trust Fund.

Although states 

2377 Fed. Reg. 1786, 1810 (Jan. 11, 2012). Once the funds are transferred to FTA they must be obligated within 

the period of availability of the formula program to which they were transferred. In the event that the funds are 

not obligated for the intended purpose within the period of availability, they become available to the governor for 

any eligible capital transit project. 

24With few exceptions, federal funds for highways must be matched by funds from other sources—usually state 

and local governments. The matching requirement on most projects is 80 percent federal and 20 percent state or 

local funding. 

2523 U.S.C. §§ 134-135, 49 U.S.C. §§ 5303-5304, 23 C.F.R. Part 450, and 49 C.F.R. Part 613. 

26The total amount of flexible funding apportioned to the states eligible to be transferred includes the 

programmatic distribution of Equity Bonus funds. Under SAFETEA-LU, a portion of Equity Bonus funds are 

added to the apportionments of the six “core” federal-aid highway formula programs, of which the STP and 

CMAQ programs are included. 
Page 8 GAO-13-19R Flexible Funding 

could have transferred all of the flexible funding to FTA to use on transit projects, states 

instead transferred about $5 billion (almost 10 percent) of these funds to FTA. The flexible 

funding that was not transferred to FTA, about $48 billion, remained at FHWA to be used 

mostly for other highway projects.27 The portion of funds transferred to FTA for transit 

projects is similar to the portion identified in our 2007 report. From 1992 to 2006, states 

used about 3 percent of their total federal-aid highway funding for transit projects. This figure 

amounted to 13 percent of available flexible funding.28

Figure 1: Flexible Funding: Portion of the Total Federal-Aid Highway Program and Portions Transferred 

to FTA and Remaining at FHWA, 2007 to 2011

Figure 1 shows the amount of flexible 

funding transferred to FTA from 2007 to 2011 in relation to overall federal-aid highway 

program and available flexible funding.

Note: Totals do not include Recovery Act funds transferred from FHWA to FTA for transit projects. 

a

About $281 million of the flexible funding remaining at FHWA was obligated to projects with a transit component. 

 

27In addition, about $281 million in flexible funding was obligated for transit projects administered by FHWA. For 

example, flexible funds used for park and ride facilities are primarily highway projects, but also have a transit 

component.

28Our 2007 report analyzed the amount of funds used, or obligated, for transit projects from 1992 to 2006, 

including funds that were transferred to FTA and those that were administered directly by FHWA. For purposes 

of this report, we analyzed the total flexible funding transferred to FTA for transit projects.
Page 9 GAO-13-19R Flexible Funding 

Overall, from 2007 to 2011, an average of $1 billion a year in flexible funding was 

transferred to FTA for transit projects. Although the total amount transferred has varied from 

year to year, it has averaged about $1 billion a year in inflation-adjusted 2011 dollars since 

the passage of the Transportation Equity Act for the 21st Century (TEA-21) in 1998 to the 

end of the SAFETEA-LU authorization period in 2011 (see fig. 2). According to FHWA and 

FTA officials, the variability in flexible-funding transfers is primarily because of state and 

local priorities, which may include more transit projects in one year than the next. For 

example, New Jersey transferred about $272 million in flexible funding to FTA in 2010 

compared to $130 million in 2009, an increase of almost 110 percent.

Figure 2: Annual Flexible-Funding Transfers to FTA for Transit Projects across Authorization Periods, 

1992 to 2011

Note: the totals in 2009 and 2010 do not include Recovery Act funds transferred to 

FTA for transit projects. 
Page 10 GAO-13-19R Flexible Funding 

In addition to the $5 billion transferred to FTA for transit projects from 2007 to 2011, states 

also transferred about $89 million in FTA Urbanized Area Formula Program funds to FHWA 

for highway projects. This represents less than 1 percent of FTA Urbanized Area Formula 

Program funds29 apportioned to urbanized areas over 200,000 in population from 2007 to 

2011. About 86 percent, or $76 million, of the funds transferred from FTA to FHWA were in 

Los Angeles, California, for its congestion demonstration project to convert high-occupancy 

vehicle lanes to high-occupancy toll lanes.30

The Amounts and Portions of Flexible Funding Transferred Varied by State

Although the total amount of flexible funding transferred was a small portion of available 

flexible funding, the amount transferred varied considerably from state to state. In particular, 

four states—California, New Jersey, New York, and Virginia—collectively accounted for 

more than half of the total amount of flexible funding transferred to FTA from 2007 to 2011.

In contrast, seven states—Arkansas, Delaware, Hawaii, Mississippi, North Dakota, South 

Dakota, and Wyoming—did not transfer any flexible funding to FTA for transit projects during 

this period. The states that transferred the largest amounts of flexible funding over the last 5 

years changed somewhat since we last reported on flexible funding in 2007. At that time, 

three states—California, New York, and Pennsylvania—accounted for over half of the funds 

transferred from 1992 to 2006, and three states had not transferred any funds.31

 

29The Urbanized Area Formula Program funds also include Growing States and High Density States formula 

funds. 

30In 2007, we reported that according to FHWA data, about $55 million of FTA funding had been transferred to 

FHWA for use on highway projects since ISTEA was enacted through 2006. 

31Delaware, North Dakota, and South Dakota have not transferred any flexible funding to FTA for use on transit 

projects since ISTEA was enacted.
Page 11 GAO-13-19R Flexible Funding 

In 2009 and 2010, states also transferred to FTA $443 million in flexible funding made 

available through the Recovery Act. New York accounted for 40 percent of the Recovery Act 

flexible funding transferred.32

Figure 3: Flexible Funding Transferred to FTA for Transit Projects, by State, 2007 to 2011 

(in Nominal Dollars)

Figure 3 shows the total flexible funding, including Recovery 

Act flexible funding, transferred by state from 2007 to 2011.

 

32We reported in September and December 2009 that New York transferred $175 million in Recovery Act flexible 

funding to FTA for a project to rehabilitate eight vehicular ramps, one pedestrian bridge, and one parking lot to 

provide access to the St. George Ferry Terminal on Staten Island. The project is being administered by the New 

York City Department of Transportation. This project is the single largest use of Recovery Act funds for an 

individual project in New York State. See GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to States 

and Localities, While Accountability and Reporting Challenges Need to be Fully Addressed (New York), 

GAO-09-1017SP (Washington, D.C.: Sept. 23, 2009) and GAO, Recovery Act: Status of States’ and Localities’ 

Use of Funds and Efforts to Ensure Accountability (New York), GAO-10-232SP (Washington, D.C.: 

Dec. 10, 2009).
Page 12 GAO-13-19R Flexible Funding 

Although a few states accounted for over half of the total amount of flexible funding 

transferred to FTA, the portion of flexible funding transferred varied among the states. For 

example, New Jersey transferred over half of its apportioned flexible funding to FTA for 

transit projects from 2007 to 2011. Three other states also transferred at least 25 percent of 

their apportioned flexible funding during this period, whereas 16 states transferred less than 

2 percent. Our 2007 report showed similar variation in the portion of flexible funding 

transferred among the states. Specifically, from 1992 to 2006, California transferred nearly 

40 percent of its apportioned flexible funding for transit projects and 3 other states and 

Washington, D.C., transferred at least 25 percent. Over the last 5 years, Washington, D.C. 

has transferred less than 1 percent of its flexible funding to FTA. Figure 4 illustrates the 

state-by-state proportion of flexible funding transferred to FTA for transit projects.

Figure 4: Percentage of Apportioned Flexible Funding Transferred to FTA for Transit Projects, by 

State, 2007 to 2011

Notes: The amount of flexible funding available to be transferred may be greater 

than the apportioned amount because states may have transferred other federal-aid 

highway funding to their STP or CMAQ apportionments prior to transferring the 

funds to FTA. 

Totals do not include Recovery Act funds transferred to FTA for transit projects. 
Page 13 GAO-13-19R Flexible Funding 

The flexible funding also had a varying impact on the availability of transit funding across the 

states. For example, flexible funding accounts for over 50 percent of the available federal 

transit funding in Vermont compared to New York, where flexible funding accounted for 

about 5 percent of the total federal transit funding available to the state. Similarly, we 

reported in 2007 that over 40 percent of the FTA funding used in Vermont from 1992 to 

2006 was from flexible funding.33

Figure 5: Percentage of Total FTA Funding from Flexible Funding, 2007 to 2011

According to officials from the state transportation 

department in Vermont, the transit dollars available to Vermont are inadequate to meet their 

identified transportation goals. In particular, fewer transit dollars are available to Vermont 

due to its small population and its lack of urbanized areas over 200,000 in population. As a 

result, the state uses flexible funding to help meet its transit needs. Figure 5 shows the 

portion of FTA funding in each state that came from flexible funds.

Note: Totals do not include Recovery Act funds transferred to FTA for transit 

projects and exclude planning, research, and oversight funds. 

 

33In 2007, we reported on the total transit funds used, or obligated, as a proportion of all FTA funds used, or 

obligated. For purposes of this report, we analyzed flexible funding transferred in the state as a portion of total 

transit funding apportioned to the states. 
Page 14 GAO-13-19R Flexible Funding 

Flexible Funding Transfers Are Concentrated in Large Urbanized Areas and Used for 

Various Purposes

From 2007 to 2011, about 77 percent of flexible funding transferred to FTA for transit 

projects was to urbanized areas with populations of over 1 million (see fig. 6). Almost 30 

percent of this funding was transferred to the New York-Newark urbanized area. When we 

reported on flexible funding in 2007, about 79 percent of flexible funding transferred to FTA 

had been used in urbanized areas.34

Figure 6: Flexible-Funding Transfers by Population, 2007 to 2011

Notes: Totals exclude about $29 million in flexible funding transferred to the Elderly and Persons with Disabilities Program, 

which is less than 1 percent of all flexible funding transferred from 2007 to 2011. 

Values may not total to 100 percent because of rounding. 

 

34In 2007, we reported on the population of the area in which flexible funding was used, or obligated. For 

purposes of this report, we analyzed the population of the areas in which flexible funding was transferred to FTA 

for transit projects. 
Page 15 GAO-13-19R Flexible Funding 

Of the flexible funding transferred to FTA for transit projects from 2007 to 2011, almost a 

third was awarded for vehicle purchases, including rail cars and motor vehicles, such as 

buses and vans (see fig. 7). Other capital expenses, such as leases and finance costs, 

accounted for a quarter of the funds transferred. Transit infrastructure construction—which 

includes engineering and design, acquisition, construction, and rehabilitation and renovation 

costs—accounted for 22 percent of the funds transferred. The remaining transferred funds 

were awarded for preventive maintenance activities (11 percent) and operating expenses 

(10 percent). Our 2007 report also showed that from 1992 to 2006, the majority of flexible 

funding was used for vehicle purchases.

Figure 7: Flexible Funding Administered by FTA by Project Type, 2007 to 2011

Note: The data do not include flexible funding obligated in grants in which flexible funding was commingled with other funding 

in the same grant. 

a

Vehicle purchases: purchase and rehabilitation of both bus (all bus, van, and station wagons) and rail (light, heavy, and 

commuter rail) vehicles. Does not include ferry boats or spare parts. 

b

Transit infrastructure construction: engineering and design, acquisition, construction, rehabilitation and renovation. 

c

Preventive maintenance: All maintenance costs related to vehicles and non-vehicles such as the activities, supplies, labor, 

services, and associated costs to preserve or extend the functionality of the asset. 

d

Operating expenses: Costs of providing new transportation services, including, but not limited to, labor, fuel, administrative 

costs, and maintenance. 

e

Other capital expenses: all other items such as leases, training, finance costs, and mobility management. 

Three Primary Factors Affect Decisions to Use Flexible Funding, and Flexible Funding 

Can Have an Important Role in Transit Operations

States’ and Urbanized Areas’ Decisions to Use Flexible Funding Are Based on 

Transportation Priorities, Availability of Other Funding Sources, and State and Local Policies

In general, the decision to use flexible funding for transit projects stems from state and local 

planning processes that identify priority transportation projects, including highway and transit 

projects, for the state and regions. Officials in the states and localities we selected to 

interview told us that the decision to use flexible funding for transportation projects is 

generally made after the state identifies its priority transportation projects and determines
Page 16 GAO-13-19R Flexible Funding 

the amount and type of funding available for those projects. States try to maximize the 

available funds to the priority projects identified in their transportation plans, and as such, 

focus on whether projects meet the eligibility requirements for the use of the funds. Flexible 

funding programmed at the state level is often used for roads, including construction of 

roadways and related projects to manage road usage, such as traffic-signal coordination 

projects. For example, Caltrans, the state transportation department for California, uses 

most of its STP funds for highway projects. According to Caltrans officials, the STP funds 

they control are combined with state funds and allocated to the State Highway Operation 

and Protection Program, which is used to maintain the integrity of the state’s highways and 

bridges. Similarly, according to officials at the Arkansas Highway and Transportation 

Department, the state spent over two-thirds of the CMAQ funds they received from 2007 to 

2011 for a major interstate interchange construction project. In contrast, officials at the 

Vermont Agency of Transportation told us they spend the majority of their CMAQ funds on 

projects that support transit because the state places a priority on reducing congestion, 

improving air quality, and meeting the transportation needs of its residents, many of whom 

are elderly and rely on transit to meet their basic mobility needs.

In the urbanized areas, officials with whom we spoke also told us that they base the 

decisions to use flexible funding on the transportation priorities in their regions. For example, 

officials at the Southwestern Pennsylvania Commission, the MPO in Pittsburgh, told us that 

they are currently primarily focusing on funding a backlog of highway and bridge projects 

because of their long list of structurally deficient bridges and highways in need of capital 

maintenance in the metropolitan area from which funds would have to be transferred.

Similarly, according to officials from the Metropolitan Transportation Commission, the MPO 

in San Francisco, funding decisions are based on the prioritization of projects stemming 

from the region’s long-range plan, such as the rehabilitation of transit and local roads and 

bike and pedestrian improvements. These officials noted the long-range plan is the 

culmination of a significant planning effort, including local stakeholder input and outreach.

The availability of other federal, state, and local funding for transit also plays a role in state 

decisions to use flexible funding for transit projects. For example, officials at the Vermont 

Agency of Transportation said that since Vermont is a sparsely populated state, it receives 

fewer FTA formula funds relative to other states, as these funds are distributed largely 

based on population. Therefore, the state relies on flexible funding to support its priority of 

providing alternative transportation choices to its residents, which according to Vermont 

Agency of Transportation officials, is different from some other states that choose to use the 

funds for highway projects. The availability of state- and local-funding sources also plays a 

role in states’ decisions to use flexible funds for transit projects. For example, Caltrans 

officials told us that restrictions on the use of state gas tax revenues for transit has led them 

to use flexible funding to purchase buses.

At the regional level, the availability of other funding also factors into urbanized areas’ 

decisions to use flexible funding for transit projects. For example, officials from a Los Angeles 

transit operator stated that matching transportation priorities with available funding is “like a 

big puzzle.” In addition, according to an official with Metroplan, the MPO in Little Rock, 

Arkansas, it has not transferred flexible funding to transit in the past 7 years because the 

transit operator has not requested it, in part because of their difficulty securing local funding. 

This local funding is needed to match the federal funding, as well as for support to operate any 

new transit equipment such as buses. In other cases, urbanized areas may use flexible 

funding to leverage other funds, including other federal funds. For example, an official with 
Page 17 GAO-13-19R Flexible Funding 

Metro, the MPO in Portland, Oregon, told us the transit operator uses flexible funding to 

leverage other federal funds by using them to service bonds that the region holds in 

anticipation of future New Starts funds. This official also said the transit operator would be 

unable to leverage state and local contributions for New Starts projects without flexible funds.

Various state and local policies also affect state and urbanized areas’ decisions to use 

flexible funding. Some states and urbanized areas have policies for setting aside flexible 

funding for transit projects. For example, the Pennsylvania Department of Transportation’s 

financial guidance designates that $25 million of the state’s flexible funding be set aside 

each year for transit. The state’s two largest transit operators, Philadelphia’s Southeast 

Pennsylvania Transportation Authority and Pittsburgh’s Port Authority of Allegheny County, 

receive the majority of these funds. Oregon also sets aside a portion of its STP funds to be 

used for non-highway purposes and recently implemented a new competitive program to 

use these funds for transit projects for elderly and disabled residents. Some urbanized areas 

also have policies or agreements regarding flexible funding. For example, officials with the 

Harrisburg Area Transportation Study, the MPO, told us they have had an agreement since 

2001 that they have renewed every 2 years to provide half of their CMAQ funding to the 

city’s transit operator.

Flexible Funding Can Play an Important Role in Selected States’ and Urbanized Areas’

Transit Operations

State and local officials we spoke with noted that, although flexible funding does not make 

up a large portion of overall transit funding provided to a region and is a small portion of a 

transit operator’s budget, the funding has a large impact on the ability of states and localities 

to meet their transportation needs. Many of the state and local officials we spoke with, 

including those who have not used flexible funding, told us they appreciate the flexibility 

these funds provide, which allows them to use a multi-modal approach in funding their 

transportation systems. The following examples illustrate how flexible funding has been 

used in selected states and urbanized areas and the impact the funding has had, according 

to the officials with whom we spoke.

• Purchasing new vehicles. In Harrisburg, Pennsylvania, flexible funding allowed the 

transit operator to upgrade its aging bus fleet from one of the oldest fleets in the state to 

one of the newest. Similarly, in the San Francisco area, Bay Area Rapid Transit is using 

flexible funding, along with other FTA funding, to replace 40-year old railcars on its 

system.

• Starting new service. Burlington, Vermont, and Harrisburg, Pennsylvania, used flexible 

funding to provide new commuter bus routes using CMAQ funds.35

• Financing rail projects. In Portland, Oregon, the transit operator relies on flexible funding 

to pay the debt service on bonds issued to partially fund the local share of several New 

Specifically, in 

Burlington, the transit operator started three new suburban commuter bus routes in the 

past 5 years and expanded service on its interregional bus route between Burlington and 

Montpelier, a route that has experienced significantly increased ridership since it began 

service in 2003.

 

35CMAQ funds can be used to fund operations for 3 years of new transit service or the expansion of existing 

service. This flexibility allows the transit agencies to grow ridership on the new route for 3 years while it secures 

new revenue sources to fund operations.
Page 18 GAO-13-19R Flexible Funding 

Starts projects. Transit officials there told us the ability to use flexible funding as part of 

an overall funding package for large capital investments has been instrumental in 

meeting the region’s rail priorities.

• Improving bike and pedestrian access. In Pittsburgh, Pennsylvania, flexible funding has 

been used to, among other things, install bike racks on buses. Additionally, in Portland, 

Oregon, flexible funding provided by the Recovery Act was used for bike and pedestrian 

improvements along an interstate.

• Avoiding service cuts. In Pennsylvania, flexible funding has been used as an emergency 

measure on a few occasions to sustain transit operations and avoid service cuts.36

Officials from the states and urbanized areas we spoke with noted that although highway 

dollars transferred to transit projects result in fewer dollars for highway projects, the overall 

impact on highway spending is not significant. State and local officials also noted that the 

decision to transfer flexible funding is based on states’ transportation spending priorities and 

that there is not enough funding for the highway or transit project needs identified.

Specifically, the state transferred $7 million in flexible funding to Philadelphia’s 

Southeastern Pennsylvania Transportation Authority in fiscal year 2010 and $45 million 

to Pittsburgh’s Port Authority in fiscal year 2011. These funds were used on eligible 

capital expenses, such as preventive maintenance, allowing other state funds to be used 

for operating expenses. According to a Port Authority official, these emergency stop-gap 

funds allowed the agency to stay financially solvent and avoid service cuts and fare 

hikes. However, officials at the Southwestern Pennsylvania Commission emphasized 

that these emergency transfers were increasingly controversial because of the region’s 

many existing high-priority transportation needs, which must compete for limited funds.

The flexibility provided by these federal funds also allows states and urbanized areas to 

make decisions that often benefit both highways and transit purposes. For example, flexible 

funding can be transferred to FTA for transit projects when highway projects are delayed, 

ensuring that the funds are spent. Transit officials in Harrisburg, Pennsylvania, told us they 

received flexible funding when a road replacement project fell through because they could 

get the funds under contract quickly. In these situations, flexible funding allows states and 

urbanized areas to best match the funds with the most pressing and highest priorities.

 

36As we reported in 2007, at the end of 2004, Pennsylvania’s governor proposed that more than $400 million of 

FHWA funds be transferred to transit to address transit agencies’ operating-budget shortfalls and avoid service 

cuts and fare increases. 
Page 19 GAO-13-19R Flexible Funding 

Agency Comments

We provided the Department of Transportation with a draft of this report for its review and 

comment. The Department of Transportation provided technical comments, which we 

incorporated as appropriate. 

We are sending copies of this report to the Secretary of Transportation and other interested 

congressional committees. In addition, the report is available at no charge on the GAO 

website at http://www.gao.gov. 

If you or your staff have questions about this report, please contact me at 

(202) 512-2834 or wised@gao.gov. Contact points for our Office of Congressional Relations 

and Public Affairs may be found on the last page of this report. Key contributors to this 

report are listed in enclosure II.

David J. Wise

Director

Physical Infrastructure Issues
Page 20 GAO-13-19R Flexible Funding 

Enclosure I: Scope and Methodology

To determine the extent to which states have transferred flexible funding between highway 

and transit programs from 2007 to 2011, we obtained data on Surface Transportation 

Program (STP) and Congestion Mitigation and Air Quality Improvement Program (CMAQ) 

funds transferred from the Federal Highway Administration’s (FHWA) Financial Management 

Information System (FMIS) to the Federal Transit Administration’s (FTA) Transportation 

Electronic Awards Management system, including the amounts transferred, the FTA 

programs to which the funds were transferred, and the states and urbanized areas that 

transferred the funds. These data also separately identified American Recovery and 

Reinvestment Act of 2009 funding transferred from FHWA to FTA for transit projects. We 

obtained additional information from FTA on the types of projects for which the funds were 

transferred as well as the total FTA funding apportioned to the states, and from FHWA on 

the total federal-aid highway program, STP, and CMAQ funds apportioned to the states.

These data were provided on an annual basis from fiscal year 2007 to fiscal year 2011. We 

used these data to calculate the total amount of flexible funding transferred in each state, 

the portion of available flexible funding transferred, and flexible funding transferred as a 

portion of a state’s available transit funding. Using the information on the programs to which 

the flexible funding was transferred, along with 2000 U.S. Census Bureau data, we 

calculated the population of the areas to which the flexible funding was transferred.37

 

37According to FTA officials, flexible funding transferred to the Nonurbanized Area Formula Program is 

transferred to areas under 50,000 in population. Funds transferred to the Urbanized Area Formula Program 

under state administration are transferred to areas between 50,000 and 199,999 in population, whereas those 

under urbanized area administration are transferred to areas over 200,000 in population. Funds transferred to 

the Elderly and Persons with Disabilities Program can be transferred to any area of the state. FTA officials 

provided us with additional data on the population of the flexible funding transferred to this program in California 

and Oregon, which accounted for the majority of the funding transferred. We used 2000 U.S. Census Bureau 

data to identify the urbanized areas over 1 million in population. 

We 

also used the data to make comparisons to trends identified in the previous flexible-funding 

report, as appropriate. Although we did not independently verify the data provided, we 

interviewed FHWA and FTA officials about how the data were collected, limitations of the 

data, and how the data were corroborated between the modal administrations. We also 

obtained additional data from FHWA and FTA on flexible funding transferred and highway 

and transit funding apportioned to the states in fiscal year 2006. We compared the 2006 

data provided for our current review to the 2006 data provided for the previous flexiblefunding report for data reliability purposes. In addition, we asked officials at the FHWA 

division offices, FTA regions, and state departments of transportation and metropolitan 

planning organizations (MPO) in selected states and urbanized areas to corroborate the 

amount of flexible funding transferred in the selected states. In addition to the flexible 

funding transferred from FHWA to FTA, FHWA officials also provided data from FMIS on 

flexible funding that was used for transit projects under FHWA administration. FHWA 

officials told us that state officials code these projects as having a transit component in 

FMIS, but we did not independently verify that the states correctly coded these projects.

FHWA officials also provided us with information about the Urbanized Area Formula 

Program funds transferred from FTA to FHWA for highway projects. FTA officials verified the 

amounts transferred and also provided supporting documentation on the transfers. Based 

on our verifications, we determined that the data were sufficiently reliable for purposes of 

this report.
Page 21 GAO-13-19R Flexible Funding 

To determine the factors that affected selected state and urbanized area decisions to 

transfer flexible funding and the outcomes of those decisions, we selected 5 states and 10 

urbanized areas for in-depth interviews. To select states, we used four measures: (1) the 

amount of flexible funding transferred from highways to transit, (2) the proportion of a state’s 

flexible-funding apportionment transferred to transit, (3) the proportion of the state’s transit 

funding coming from flexible funding, and (4) the amount of states’ Urbanized Area Formula 

Program funding transferred to highway projects. We selected four states that ranked in the 

top 10 for at least two of these measures—California, Pennsylvania, Oregon, and Vermont.

Three of these states—California, Vermont, and Pennsylvania—had been included in our 

2007 report. California was the only state we selected that had transferred Urbanized Area 

Formula Program funds to highways from 2007 to 2011.38 We also selected one state—

Arkansas—that had not transferred flexible funding to FTA for transit projects during this 

period. We chose Arkansas in particular because Arkansas had previously transferred 

flexible funding for transit projects.39

Table 2: States and Urbanized Areas Selected for In-depth Interviews

Within these selected states, we chose at least one 

urbanized area to include in our in-depth interviews. In the states that used a relatively high 

amount of transferred flexible funding on transit, we selected urbanized areas that were 

included in the 2007 report, as well as those that received the largest portion of the state’s 

flexible funding for transit. Additionally, in Pennsylvania we spoke with officials in Harrisburg 

to obtain the perspective of a relatively smaller urbanized area. In Arkansas—because there 

was not an urbanized area that had used a significant amount of transferred flexible funding 

on transit—we selected the largest urbanized area in the state. We also selected two other 

areas within Arkansas—one city below 200,000 in population, and one that was recently 

designated as above 200,000 and as such will soon be allocated flexible funding directly.

We selected the states and urbanized areas using a nonprobability sample, and, 

consequently, the results cannot be used to make inferences about the entire population.

Table 2 shows the states and urbanized areas included in our review.

State Urbanized areas

States using relatively more flexible funding on transit California Los Angeles

San Francisco

Pennsylvania Philadelphia

Pittsburgh

Harrisburg 

Vermont Burlington

Oregon Portland

State using no flexible funding on transit Arkansas Little Rock

Fayetteville

Pine Bluff

Source: GAO.

 

38California accounted for 86 percent of the Urbanized Area Formula Program funds transferred to FHWA for 

highway projects from 2007 to 2011.

39From 1992 to 2006, Arkansas had transferred about $9.6 million in flexible funding to FTA for transit projects, 

according to data obtained for our 2007 flexible funding report. 
Page 22 GAO-13-19R Flexible Funding 

In each state we interviewed officials from the state department of transportation, the FHWA 

division office, and the FTA region with jurisdiction over the state. Within each urbanized 

area, we interviewed officials from the MPO and a transit operator. Specifically, the transit 

operators we spoke to were:

• Los Angeles County Metropolitan Transportation Authority;

• Bay Area Rapid Transit (San Francisco);

• Southeastern Pennsylvania Transportation Authority (Philadelphia);

• Port Authority of Allegheny County (Pittsburgh);

• Capital Area Transit (Harrisburg);

• Chittenden County Transportation Authority (Burlington);

• TriMet (Portland); 

• Central Arkansas Transit Authority (Little Rock);

• Ozark Regional Transit (Fayetteville); and

• Pine Bluff Transit.

We asked these officials about how they make decisions to use flexible funds, including 

what factors play a role in this decision, and the impact of this funding on highway and 

transit projects. We also collected and reviewed documentation from the states and 

urbanized areas, including projects funded using flexible funding, and prior reports on the 

use of flexible funding by states and urbanizes areas. We also interviewed representatives 

of the following associations to obtain their views on flexible funding: the American 

Association of State Highway and Transportation Officials, the American Public 

Transportation Association, the Association of Metropolitan Planning Organizations, the 

National Association of Regional Councils, and the Community Transportation Association 

of America.
Page 23 GAO-13-19R Flexible Funding 

Enclosure II: GAO Contact and Staff Acknowledgments

GAO Contact

David J. Wise, (202) 512-2834 or wised@gao.gov

Staff Acknowledgments

In addition to the contact above, Susan Zimmerman, Assistant Director; Colin Fallon; 

Kathleen Gilhooly; Terence Lam; Emily Larson; Hannah Laufe; Nancy Lueke; and Elizabeth 

Wood made key contributions to this report.

(542198)
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