Highway Emergency Relief: Reexamination Needed to Address Fiscal Imbalance and Long-term Sustainability
Published: 2007-02-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: Natural disasters can claim thousands of lives, cost billions of dollars,  cross state lines, and overwhelm the capacity of state and local  governments to respond and recover. Consequently, there is a continuing  need for a federal role in responding to and recovering from natural  disasters, including those affecting the nation’s highway system. The  Federal Highway Administration’s (FHWA) Emergency Relief program  provides funding for states to repair or reconstruct federal-aid highways  and roads on federal lands that have been damaged or destroyed by  natural disasters or catastrophic failures from an external source. In  addition, the program provides emergency assistance to other federal  agencies—such as the Bureau of Land Management in the Department of  the Interior—for damage to roadways owned by the federal government.  FHWA administers the program through its 52 division offices located in  each state, the District of Columbia, and Puerto Rico.
The Emergency Relief program has been funded through the Highway  Trust Fund since the fund was created in 1956. The fund—which is  financed through motor fuel taxes and other user fees—has provided $100  million annually in contract authority to the program each year since  1972. For many years the fund held substantial surplus balances, but those  balances are steadily declining, and current estimates show that the  Highway Trust Fund could have a negative balance as early as 2009. Such  a development would adversely affect not only the Emergency Relief  program, but also the broader Federal-aid Highway program, which  provides over $30 billion annually to state and local governments to  support the 1 million miles of federal-aid roads and highways, including  the 160,000-mile National Highway System, of which the Interstate  Highway System is a part. To address concerns about the future solvency  of the Highway Trust Fund, Congress has created the National Surface  Transportation Policy and Revenue Commission. The commission is  examining alternatives to replace or supplement the motor fuel taxes as  the principal revenue source to support the Highway Trust Fund, and it  plans on reporting in July 2007.
Disasters may cost FHWA significantly more than Congress provides  annually. When a series of hurricanes devastated the southeastern United  States in 2005, Congress responded by providing more than $2.7 billion in  supplemental appropriations to the Emergency Relief program. In past  years supplemental appropriations were drawn from the Highway Trust  Fund, but given the financial condition of the fund, in August 2005  Congress passed the Safe, Accountable, Flexible, Efficient Transportation  Equity Act: A Legacy for Users (SAFETEA-LU) authorizing additional  necessary funding for the Emergency Relief program to come from the  General Fund, in excess of the permanent $100 million that comes from  the Highway Trust Fund. Congress provided the 2005 supplemental  appropriations for the Gulf hurricanes from the General Fund. However,  looking forward, the nation faces a long-term funding crisis. As we have  reported, this pending fiscal crisis is affecting our economy and quality of  life, and requires a fundamental reexamination of all federal programs, to  assess the relevance and purpose of the federal role and the effectiveness  of federal programs. The reexamination should raise questions such as  whether a federal role is still needed, whether the current mission is fully  consistent with the initial or updated statutory mission, or whether  significant “mission creep” has occurred. It should also assess whether  programs encourage efficient and cost-effective decision making from  state and local governments. Finally, in light of the pending fiscal crisis, a  reexamination should ask whether a program is affordable and financially  sustainable over the long term, given known cost trends, risks, and future  fiscal imbalances.
We have prepared this report under the Comptroller General’s authority to  conduct evaluations on his own initiative as part of a continued effort to  assist Congress in reviewing federal activities. Specifically, we reviewed  (1) the total amount of funding allocated to the states in recent years for  emergency relief, how this allocated funding was distributed among the  states, and the events for which funding was allocated; (2) sources of  funding used to finance these Emergency Relief allocations and the  financial challenges facing the program; and (3) the scope of activities  eligible for funding and how the scope of eligible activities has changed in  recent years.
To review the amounts of Emergency Relief funding allocated to states in  recent years, we obtained data from the FHWA Office of Infrastructure  and the FHWA Financial Management Division and from Emergency Relief  program officials. We performed a limited data reliability assessment of  the financial data and found them sufficiently reliable for our purposes.  However, FHWA’s Fiscal Management Information System’s (FMIS)  allocation data are only available cumulatively since program inception or  for the last 10 years and do not provide a simple way to calculate total  obligations by event. Therefore, we chose to use program allocations,  rather than obligations, to document funding. To review the sources of  funding used to finance Emergency Relief allocations, we reviewed  program legislative history to identify annual authorizations and  supplemental appropriations. We judgmentally defined disasters needing  repairs costing over $100 million as “extraordinary events” because each  of them exceeded the Emergency Relief program’s $100 million per state  annual allocation limit and the program’s $100 million annual program  authorization. To determine how and to what extent program eligibility  has changed in recent years, we reviewed program guidance and relevant  legislation and interviewed FHWA headquarters Emergency Relief  program and Federal Lands Highway Division officials. We also selected  five states to visit (California, Florida, Mississippi, North Dakota, and  Ohio) based on factors such as the amount of their allocations, occurrence  of recent disasters eligible for the program, presence of large Emergency  Relief projects, and geographical dispersion. During these visits we  interviewed FHWA division office and state department of transportation  officials, obtained information on the program oversight, application of  program criteria, and the approval of projects. We performed our work  from May 2006 to December 2006 in accordance with generally accepted  government auditing standards. Appendix I provides a more detailed  description of our scope and methodology.
subsections: section_title: Background
paragraphs: Congress authorized the Emergency Relief program in Title 23, United  States Code, Section 125, to provide for the repair or reconstruction of  federal-aid highways and roads on federal lands that have sustained  serious damage resulting from natural disasters or catastrophic failures  from an external cause. Natural disasters such as floods, hurricanes,  earthquakes, tornadoes, tsunamis, severe storms, or landslides all  potentially qualify under the program. Catastrophic failure refers to the  sudden and complete failure of a major element or segment of the highway  system that causes a disastrous impact on transportation. This is a long- established federal function—Congress has provided funds for this  purpose since at least 1928, and an Emergency Relief program has existed  since 1956.
The program supplements the resources of states and federal agencies to  help pay for unusually heavy expenses that result from extraordinary  conditions. The program provides states, and Puerto Rico, the District of  Columbia, and territories, with funding above and beyond their regular  federal-aid highway funding. FHWA’s division offices in each state  administer the program, and states implement the projects. The division  offices process state highway agencies’ applications for funding and make  decisions on the eligibility of specific projects. Regulations currently  define eligible disasters as those where the cost of damage would exceed  $700,000 in program assistance in any state for a given disaster. The  $700,000 threshold includes the damage cost for all damage sites resulting  from the disaster. According to FHWA guidance, each prospective damage  site must have at least $5,000 of repair costs to qualify for funding—-a  threshold intended to distinguish emergency relief work from  maintenance.
By law, FHWA can provide a state with up to $100 million in Emergency  Relief funding for each natural disaster found eligible for funding.  However, Congress has passed special legislation lifting this cap for  specific disasters. The Emergency Relief program is currently authorized  at $100 million annually out of the Highway Trust Fund, and FHWA  allocates these funds to states based on the states’ proportion of the total  costs of all eligible projects. For example, if a state had 10 percent of the  total estimated reimbursable costs for all Emergency Relief projects  nationwide, that state would receive 10 percent of the available  Emergency Relief funds. As with other FHWA programs, funding is  provided to the states on a reimbursable basis. If Emergency Relief funds  are not available, states may use other appropriate federal-aid program  funds to initially pay for projects while awaiting reimbursement from the  Emergency Relief program.
The program’s regulations make a distinction between emergency and  permanent repairs. Emergency repairs are to quickly restore essential  highway traffic service and protect remaining facilities, and include such  things as debris removal, construction of detours, regrading, and  temporary structures. Permanent repairs restore seriously damaged  highway facilities to predisaster conditions. In some instances, such as the  destruction of a bridge, the complete replacement of the facility may be  needed. In these cases the facility would be rebuilt to current design  standards. By statute, the Emergency Relief program may fund up to 100  percent of emergency repair project costs within the first 180 days  following the disaster. The program funds permanent repair projects, and  emergency repair project costs after the first 180 days, at the percentage  normally provided for work on that type of federal-aid highway. For  example, the federal share for interstate highway projects is 90 percent of  the cost, and the federal share for most other federal projects is 80  percent.
Emergency Relief program regulations state that the program is not  intended to fund the correction of preexisting nondisaster-related  deficiencies. Additionally, the program is not intended to pay for  “betterments” that change the function or character of the highway  facility, such as expanding the capacity of roads. However, betterments  are eligible for program funding if they pass a benefit-cost test that weighs  their cost against the prospective cost to the Emergency Relief program  for future repairs. Additionally, where it is not feasible to repair or replace  an existing highway facility at its existing location, an alternative selected  through the National Environmental Policy Act (NEPA) process, if  comparable to the destroyed facility, is eligible for Emergency Relief  funding. Except when betterments are justified, or when a relocation  results from the NEPA process, program regulations state the cost of a  project eligible for Emergency Relief may not exceed the cost of repair or  reconstruction of a comparable facility.
In addition to providing funds to the states, the Emergency Relief program  also provides funding for the repair of roads on federal lands through the  Emergency Relief for Federally-Owned Roads program. This program is  intended for unusually heavy expenses associated with the repair and  reconstruction of federal roads and bridges seriously damaged by a  natural disaster or a catastrophic failure. FHWA’s Federal Lands Highway  Division maintains, through interagency agreements, oversight of the  Emergency Relief funds for projects administered by various federal  agencies, including the Department of Defense, Army Corps of Engineers,  U.S. Forest Service, National Park Service, Fish and Wildlife Service,  Bureau of Reclamation, Bureau of Land Management, and Bureau of  Indian Affairs. The program may fund 100 percent of the cost of repairs to  federal roads.
FHWA’s Emergency Relief program is one of a number of federal  programs and activities that provide major disaster and emergency  assistance to states and local governments. The Robert T. Stafford  Disaster Relief and Emergency Assistance Act primarily establishes the  programs and processes for the federal government to provide major  disaster and emergency assistance—upon a governor’s request, the  President can declare an “emergency” or a “major disaster” under the  Stafford Act, triggering various emergency response activities such as  debris removal, temporary housing assistance, and the distribution of  medicine, food, and other consumables. The Federal Emergency  Management Agency (FEMA), an agency of the Department of Homeland  Security (DHS), is the agency responsible for administering the Stafford  Act. As part of its responsibilities, FEMA provides funds to state and local  governments to repair and replace roads damaged as a result of disasters  that are not on the federal-aid highway system. Funding for FEMA  disaster relief is drawn from the General Fund of the Treasury.
section_title: Extraordinary Events Determine Which States Receive Most Emergency Relief Allocations
paragraphs: During the 10-year period 1997 through 2006, FHWA has allocated over $8  billion to the states, the District of Columbia, Puerto Rico, U.S. territories,  and other federal agencies to repair or replace highway facilities damaged  by natural or man-made events. Of this total, 70 percent has gone to five  especially hard-hit states that have experienced extraordinary or multiple  disasters—California, Florida, Louisiana, Mississippi, and New York. For  the 9-year period from 1998 through 2006, the time frame for which FHWA  has data on individual disaster events, these very large events account for  most of the financial demands on the program, a total of about $4.1 billion  of the $6.6 billion allocated in that time frame. In addition, the large  number of smaller events that occurred each year accounted for about  $2.4 billion in demands since 1998.
subsections: section_title: States Experiencing Extraordinary Disasters Received Majority of Emergency Relief Funds
paragraphs: For some states that have experienced major or repeated disasters, the  Emergency Relief program has provided a significant amount of funding.  This funding has been generally concentrated in a small number of states.  During the 10-year period 1997 through 2006, FHWA has allocated over $8  billion to states. (See app. II for a detailed list of state Emergency Relief  allocations). Of this amount, about 70 percent of all Emergency Relief  allocations went to five states—California (about $1.4 billion, or 18  percent), Florida (about $1.6 billion, or 20 percent), Louisiana (about $1.2  billion, or 15 percent), Mississippi (about $1 billion, or 13 percent) and  New York (about $352 million, or 4 percent).  (See fig. 1.)  Since the  beginning of the program, all 50 states, the District of Columbia, Puerto  Rico, and U.S. territories all have received some FHWA Emergency Relief  funds.
section_title: The Emergency Relief Program Has Experienced Increased Demand due to Extraordinary Events.
paragraphs: The majority of Emergency Relief program funding for the 9-year period of  1998 through 2006, the time frame for which FHWA had data on individual  disaster events, has gone to 5 states as a result of series of extraordinary  disasters including the World Trade Center terrorist attacks, Florida’s 2004  hurricanes, and Hurricanes Katrina and Rita, among others. These very  large events have each totaled from over $100 million to over $1 billion, as  figure 2 illustrates.
These very large disasters can be considered extraordinary events in the  context of the Emergency Relief program because each of them exceeded  the $100 million annual program authorization. Also, individual events  exceeding $100 million in Emergency Relief allocations to a state require  congressional legislation that exempts the state from the statutory  limitation that no state may receive more than $100 million in Emergency  Relief funds in 1 year for any single event.
Over time, these individual extraordinary disasters have placed greater  financial demands on the Emergency Relief program than the numerous  smaller eligible events that occur each year. During the 9-year period 1998  through 2006 extraordinary events resulted in about $4.14 billion in  allocations to states (see table 1). Over the same period, smaller events,  those requiring less than $100 million, required about $2.44 billion in  emergency relief funding, or an average of $271 million per year. The  allocations needed for smaller events may be thought of as a baseline cost  for the program, the amount that was needed assuming no extraordinary  event occurred. Because the program’s annual authorization was set at  $100 million during this period, the annual funding covered about 37  percent of what may be considered the baseline costs of the program  during this period.
Finally, another measure of the program’s funding need is the average  allocation per individual disaster event. Under FHWA’s classification,  events are defined as disasters causing a federal share of at least $700,000  damage to a state, with each state counted separately. Thus, Hurricane  Katrina, which reached this level of damage for four states, counts as four  events for the program, one each for Alabama, Florida, Louisiana, and  Mississippi. From 1998 through 2006, the number of events per year varied  from 13 to 47, and the median allocation per event was about $3.7 million.  Appendix III provides a detailed list of event allocations from fiscal years  1998 through 2006.
section_title: Annual Emergency Relief Authorizations Do Not Reflect Total Program Demands
paragraphs: In recent years, annual demands on the Emergency Relief program have  exceeded the $100 million annual authorization, resulting in a long-term  fiscal imbalance and reliance on supplemental appropriations. More  specifically, on average the program’s needed allocations for ordinary  events—disaster events requiring under $100 million in federal funding— are 2.7 times the annual authorization. One reason for this funding  shortfall is the program’s static funding level, which has remained the  same since 1972. Since 1990, the program has often relied on supplemental  appropriations to make up for the funding shortfall, but because these  supplemental funds are not provided on an annual basis, the program has  experienced a fiscal imbalance, resulting in funding reimbursement  backlogs that have placed a burden on some states. Furthermore, demands  for Emergency Relief program funding may place a burden on the Highway  Trust Fund, unless alternative funding is used. Despite the program’s long- term fiscal imbalance and a depleting Highway Trust Fund, FHWA is not  recapturing unused program funds.
subsections: section_title: The Program’s Annual Demands Have Exceeded Annual Authorizations
paragraphs: FHWA has allocated over $8 billion between fiscal years 1997 and 2006 to  meet annual demand for the Emergency Relief program. This is an average  of over $800 million a year for all events, which is significantly more than  the program’s $100 million annual authorization. Funding needs for  extraordinary events—those events needing more than $100 million in  funding—have averaged about $460 million annually since 1998, the  earliest year for which FHWA has data on individual disaster events.  Furthermore, annual demand for ordinary events—those events totaling  less than $100 million—is also more than the $100 million annual  authorization. As mentioned earlier, for fiscal years 1998 through 2006 the  average annual funding need for ordinary events was $271 million (see fig.  3). This has resulted in an annual deficit between program demands and  program funding.
section_title: The Program’s Annual Authorization Has Remained Level for More than 30 Years
paragraphs: One reason for the shortfall between program funding and demand is the  program’s static annual authorization. The Emergency Relief program has  been funded with an annual authorization of $100 million through contract  authority from the Highway Trust Fund, with a $100 million per event  obligation limit imposed since 1972. However, after adjusting for inflation,  the value of the annual authorization has decreased significantly over time,  resulting in program demands exceeding annual program funding. The  fiscal year 2005 authorization of $100 million is the equivalent of $26.4  million in 1972 dollars (see fig. 4). Stated differently, the $100 million  annual authorization initiated in 1972 would need to be increased to over  $378 million to have the same value in real (2005) dollars. Funding at the  $378 million level would be more than sufficient to pay for the average  annual cost of ordinary events from fiscal years 1998 through 2006—about  $271 million in real (2005) dollars.
section_title: Emergency Relief Program Has Primarily Relied on Supplemental Appropriations
paragraphs: Since 1990, the Emergency Relief program has frequently relied on  supplemental appropriations to make up for the fiscal imbalance created  by a static authorization coupled with additional program demand from  extraordinary events (see fig. 5). In total, from fiscal years 1990 through  2006, Congress provided about $12.3 billion for the Emergency Relief  program when including both annual authorizations and supplemental  appropriations. As a result, a large majority of the funds—$10.6 billion, or  86 percent of the total during this period—have come through  supplemental appropriations.
There has been a consistent shortfall between the static $100 million  annual authorization and the actual amounts needed for the Emergency  Relief program (see fig. 6). As a result, between fiscal years 1990 and 2006,  Congress passed supplemental appropriations for the Emergency Relief  program 15 times. Historically the supplemental funds were drawn from  the Highway Trust Fund which at the time had accumulated large  balances. However, the Highway Trust Fund authorization is limited to  $100 million, and under SAFETEA-LU, additional supplemental funds are  to be appropriated from the General Fund. The fiscal year 2006 Emergency  Relief program supplemental appropriations were taken from the General  Fund as the Highway Trust Fund balances have diminished. Appendix IV  provides a detailed list of supplemental appropriations from fiscal year  1990 through 2006.
section_title: Reimbursement Backlogs Result from Fiscal Imbalance
paragraphs: The Emergency Relief program has experienced reimbursement backlogs  in recent years—-reaching as high as $741 million dollars in 2004—as a  result of program demands from extraordinary events, declining real  funding, and periodic supplemental appropriations. When nationwide  Emergency Relief needs exceed available Emergency Relief funding,  FHWA allocates the $100 million annual authorization proportionally to  the states based on the ratio of the total available Emergency Relief  funding to the total Emergency Relief needs. For example, if there are  sufficient funds to pay for half of the approved allocations, all states  receive half of the funds they requested. According to FHWA officials,  once program funds are exhausted, states with eligible projects are placed  on a reimbursement backlog list, which may build up over several years.  As program funds become available with each new annual authorization,  FHWA allocates the funds based on the reimbursement backlog list. States  may provisionally utilize other federal-aid program funds to pay for  projects while awaiting reimbursement from the Emergency Relief  program. When Congress has provided the program with supplemental  appropriations for extraordinary events, it has often included  supplemental funds intended to clear the program’s accumulated backlog.  However, according to FHWA officials, in the interim, when Congress does  not provide supplemental appropriations to clear accumulated backlogs,  states go without full reimbursement. While, according to FHWA officials,  FHWA financial management systems do not track reimbursement  backlogs, congressional conference reports reference reimbursement  backlogs dating back as far as fiscal year 1997, with balances ranging from  $259 million to $741 million.
Reimbursement backlogs may tie up available state highway dollars and  affect the timely construction and repair of road facilities. In order to  prevent delays some state and local governments may borrow money to  pay Emergency Relief program project costs, while other states may delay  other planned nonemergency-related highway projects or delay permanent  Emergency Relief program projects. During our site visits, we heard  examples of the effects of reimbursement backlogs on the states we  visited. For example, in North Dakota, state officials told us that one local  government had delayed permanent Emergency Relief program road  repairs until reimbursement funding became available. State officials in  Mississippi delayed some regular federal-aid highway projects in order to  fund Hurricane Katrina-related Emergency Relief projects while waiting  for supplemental appropriations to provide reimbursement funding.  Mississippi officials also stated that these regular state and federal-aid  highway projects were delayed until Emergency Relief reimbursements  were received. In addition, Mississippi officials told us that they also  utilized an established line of credit to fund some Emergency Relief  projects and maintain some of their other planned projects while awaiting  Emergency Relief reimbursement. Similar to the states we visited, federal  land management agencies may also be affected by reimbursement  backlogs. FHWA officials told us that on several occasions, federal land  management agencies delayed initiating a needed repair because of lack of  reimbursement funding. FHWA officials also told us that federal land  management agencies are particularly burdened because they do not have  highway infrastructure funding streams comparable to those of states. In  almost all of our site visits, program officials stated that the Emergency  Relief program’s reimbursement backlogs (i.e., delayed reimbursements)  are a fiscal burden on state and local governments. This can be  particularly true for states with smaller highway budgets, such as  Mississippi and North Dakota, which may have less available highway  funds to utilize while experiencing reimbursement delays than other  states.
section_title: The Use of the Highway Trust Fund for Extraordinary Disasters May Not Be Sustainable Given Current Projections, and the General Fund Faces a Fiscal Crisis
paragraphs: Estimates from both the Congressional Budget Office (CBO) and the  President’s budget project the steady decline of the Highway Trust Fund  balance, as estimated outlays exceed estimated revenues each year for  2006 through 2011. According to CBO, the uncertainty associated with  Highway Trust Fund estimates implies that the Highway Trust Fund could  exhaust its resources before the anticipated 2009 date. Because it is not  possible to anticipate supplemental appropriations, depending on how  future emergencies are funded, the Highway Trust Fund’s future demand  projections may not fully reflect the Emergency Relief program’s future  effect on the fund. Furthermore, future demand for a program driven by  unpredictable events is necessarily uncertain.
The results of the Highway Trust Fund’s declining balance can be seen in  the two most recent supplemental appropriations to the Emergency Relief  program. In the past, because the Highway Trust Fund maintained  significant unexpended balances, the Emergency Relief program’s  supplemental appropriations have been funded through the Highway Trust  Fund. SAFETEA-LU designated the General Fund as the source for  additional Emergency Relief funds, and the most recent two supplemental  appropriations, passed in December 2005 and June 2006 to cover  Hurricane Katrina costs and backlogged projects, have come from the  General Fund. The change is at least in part due to the financial  uncertainty of the Highway Trust Fund. According to the Congressional  Research Service (CRS), because of the declining Highway Trust Fund  balance, using the Highway Trust Fund for the Hurricane Katrina  Emergency Relief supplemental appropriations would have constrained  the ability of the Highway Trust Fund to fully fund the SAFETEA-LU- authorized highway programs over the life of the authorization. For these  reasons, it was doubtful that the Highway Trust Fund could fund other  large future Emergency Relief program supplemental appropriation needs.  Under the Highway Trust Fund’s current structure, the historic pattern of  funding major Emergency Relief projects from the trust fund is no longer  sustainable.
However, the alternative used in the most recent appropriations, the  General Fund, also faces future demands that will place severe pressures  on all discretionary programs, including those that fund transportation.  Our simulations show that by 2040, revenues to the federal government  might barely cover interest on the debt—leaving no money for either  mandatory or discretionary programs—and that balancing the budget  could require cutting federal spending by as much as 60 percent, raising  taxes by up to 2½ times their current level, or some combination of the  two. This impending fiscal crisis means that it will be difficult to fund  extraordinary highway disaster needs for highway repairs and for other  programs from this source.
section_title: Despite a Long-term Fiscal Imbalance and a Depleting Highway Trust Fund, FHWA Has Not Been Recapturing Unused Program Funds
paragraphs: While the Emergency Relief program has experienced a fiscal imbalance,  FHWA officials do not routinely recapture unused funds. These unused  funds may come from (1) unobligated balances available to the states, (2)  obligated balances where the funds are no longer needed to complete  projects, or (3) funds Congress has directed to specific disasters that  remain available after the projects are completed. FHWA officials  explained that states may retain these unused Emergency Relief  obligations after projects are completed, and those funds can be used for  future disasters in the state. However, while states with completed  projects retain these unused obligations for future disasters, other states  with immediate Emergency Relief needs may experience a reimbursement  backlog.
While FHWA officials said they are currently beginning to identify state- obligated funds that show no activity for a given time period, the agency  has not moved to recoup unneeded funds. FHWA’s Office of Financial  Management can query program data to identify federal-aid contracts with  obligated funds where there has been no expenditure or payment activity  for 1 year, or 2, or more. Our analysis of FHWA financial data found there  to be over $158 million in inactive unexpended balances from Emergency  Relief program allocations between fiscal years 1985 and 2006. Program  officials acknowledge that allowing states to hold on to inactive  unexpended balances to pay for future events enables states to bypass any  backlog queue and fund their projects before older projects in other states  are addressed. However, the amounts that could be recaptured from these  sources are too small to put the program on a solid financial footing.
In addition, 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. Unobligated funds may occur  when a state’s estimated need for a disaster exceed actual project costs.  The practice of identifying and reallocating unobligated funds is intended  to avoid accumulating a large balance of allocated but unobligated  Emergency Relief funds and to help manage available funds nationwide as  effectively as possible. Emergency Relief program officials told us that  identifying unneeded unobligated balances is difficult and there has not  been a specific effort to identify these funds in recent years. According to  FHWA officials, these funds may remain because projects have not been  completed or have not fully utilized available program funds at the close of  the fiscal year. The unobligated balance at the end of fiscal year 2006,  which includes funding for the 2005 Gulf hurricanes and other funds yet to  be obligated for ongoing projects, was over $1.8 billion.
Finally, events with designated supplemental appropriations may have  remaining funds that cannot be used for any other disaster. Congress has  on occasion provided a supplemental appropriation to the Emergency  Relief program with designated funds to be used for specific disasters. It  has done so for disasters such as the Loma Prieta earthquake, Hurricane  Andrew, the attacks on the World Trade Center, and Hurricane Katrina.  Unless specifically worded otherwise, these funds cannot be recaptured  by FHWA and used for other Emergency Relief disasters. Congress has  more recently used language that allows for unused designated funds to be  used for other approved Emergency Relief projects. However, this  language was not always used in the past and has resulted in unneeded  balances that cannot be recaptured by FHWA. As a result, these balances  remain unexpended unless the state uses the funds for additional work  related to damage from the disaster.
During our site visit to California, we found the state still has $62 million in  obligated but unexpended Emergency Relief funds designated for the 1989  Loma Prieta and 1994 Northridge earthquakes. It is unlikely that most of  these funds, particularly those for the Northridge earthquake, will be  needed for additional work, according to California Department of  Transportation (Caltrans) officials. However, these funds remain at the  state level, and barring a rescission by Congress, remain available until  expended. Given that these events took place 17 and 12 years ago  respectively, the emergencies have long since passed, and it is reasonable  to expect related emergency projects to be complete. Moreover, because  the damage occurred on the federal-aid system, the state could still use its  normal federal-aid highway funding to pay for any small residual cost, if  the need arose. For these reasons, these funds are potentially available for  rescission.
section_title: Changing Interpretations of Program Criteria and Congressional Involvement Have Resulted in Expanded Emergency Relief Eligibility
paragraphs: The expansion of program eligibility criteria to fund larger and more costly  projects and congressional action to increase funding for certain projects  or disasters above what the program would ordinarily provide have both  contributed to the fiscal imbalance and concerns about long-term  sustainability of the program. Law and regulations define qualifying  criteria for disaster events, and link the federal share of funding under the  Emergency Relief program to the share of funding provided under other  federal-aid highway programs. However, environmental requirements,  community concerns, congressional direction, and unique localized  circumstances have increased the scope and costs of projects, increased  the portion of project costs funded by the program, expanded the  definition of program-eligible events, and resulted in projects that go  beyond the original intent of the program. These include instances that go  beyond restoration, involve replacement rather than repairs, entail  expansion of the type of work that the program may fund, or involve  waivers of the federal match.
subsections: section_title: Program Criteria Designed to Limit Eligibility and Funding
paragraphs: Emergency Relief program regulations define disaster events that qualify  for program funding—and set criteria for projects that can be funded— which help contain program expenditures. For instance, regulations define  eligible events as natural disasters—sudden and unusual natural  occurrences, such as floods, hurricanes, landslides, and earthquakes—and  catastrophic failures—the failure of a major segment of a highway due to  an external cause. Additionally, the program is not intended to supplant  other federal or state funds for correction of preexisting nondisaster- related deficiencies. It is expected that restoration to predisaster  conditions will be the typical type of repair accomplished through the  Emergency Relief program.
FHWA’s Emergency Relief program regulations limit the types of work  that are eligible for program funding. The regulations state that  betterments—additional features or improvements that change the  function or character of the highway facility—are eligible for funding only  if they are economically justified. That is, when the cost of the betterment  is weighed against the risk of recurring damage that would be eligible for  Emergency Relief funding and the cost of future repairs. The regulations  also state that except for those cases where betterments are justified, the  total cost of a project eligible for Emergency Relief funding may not  exceed the cost to repair or reconstruct a comparable facility. However,  where it is not feasible to repair or replace an existing highway facility at  its existing location, an alternative selected through the NEPA process, if  comparable to the destroyed facility, is eligible for Emergency Relief  funding.
Emergency Relief program regulations also establish various dollar-limit  criteria that define program eligibility and funding for an affected state. By  law, FHWA can provide a state with up to $100 million in Emergency  Relief funding for each natural disaster found eligible for funding. Also,  each prospective damage site must have at least $5,000 of repair costs to  qualify for funding—-a threshold intended to distinguish emergency relief  work from maintenance.
section_title: Responding to the Environmental Process Has Contributed to Larger Projects
paragraphs: Some emergency relief projects require a comprehensive environmental  review, and when such reviews take place, the project may expand  significantly in scope and cost. Repair projects funded under the  Emergency Relief program, like other federal-aid highway projects, must  comply with the requirements of NEPA. NEPA, which applies to all federal  agencies, and to states receiving federal funding, requires an assessment of  the environmental impact of federal programs and actions. Emergency  repair projects to restore existing facilities qualify as “categorical  exclusions” under NEPA, and normally do not require any further  environmental study or mitigation. However, large projects such as  replacing a bridge or relocating a length of roadway that has been  destroyed can trigger a need for more extensive review—-an  environmental impact statement (EIS) or an environmental assessment  (EA). An environmental impact statement presents a range of proposed  alternatives for a project and analyzes the cumulative effects of each. The  EIS process also requires public notice of relevant hearings and meetings,  and the draft and final EIS are made available for public comment. An  environmental assessment may be required for a project that does not  clearly qualify as a categorical exclusion or clearly require an EIS. The  environmental assessment process concludes with either a finding of no  significant impact or a decision that an EIS is required. The process of  completing an EIS can result in a finding that replacing the destroyed  facility at the same site is not possible, and that a more costly relocation  that addresses environmental or community concerns is needed. The  NEPA process addresses environmental issues, but the hearings that are  part of the process allow the public and other interested parties to raise  other concerns.
The need to address both public concerns and the NEPA process has  resulted in the Emergency Relief program funding larger and more costly  projects than it might have otherwise approved under the Emergency  Relief program. One such project followed the Loma Prieta earthquake. In  October 1989, the Loma Prieta earthquake struck northern California,  collapsing a two-tiered portion of Interstate 880 through Oakland known  as the Cypress Viaduct. Immediately after the earthquake, FHWA and  Caltrans planned to replace the Cypress Viaduct as it existed prior to the  earthquake, and FHWA prepared a cost estimate of $306 million. However,  this route had divided an Oakland neighborhood, and opposition from  residents and the city government led Caltrans to consider several  alternative alignments. Because of the size and complexity of these  alternatives, an environmental impact statement was required. After  completion of the EIS in 1992, Caltrans selected an alignment that  replaced the original 1.5-mile structure with a 5-mile structure that  circumvented the neighborhood.
GAO reported on the status of this project in May 1996. As we noted then,  the Emergency Relief program regulations allow for funding  betterments—such as relocation, replacement, upgrades, or added  features—only when they are economically justified to prevent recurring  damage. Although the Cypress Viaduct relocation involved a significantly  different design with more extensive construction and higher costs, FHWA  officials approved the relocation based on the results of an EIS, and did  not consider the project a betterment. Therefore, Emergency Relief  program regulations, which place limits on funding improvements or  changes in the character of a destroyed facility, were not applicable.  Emergency Relief funding for the relocated Cypress Viaduct was approved  without (1) making a finding that relocation was economically justified to  prevent recurring damage, or (2) placing limits on the use of Emergency  Relief funds. The project was carried out as a permanent restoration  project and completed in 1998 with the Emergency Relief program funding  approximately $811 million of the more than $1.0 billion project cost.
In another case, the environmental review process led to the Emergency  Relief program funding a very large project to relocate a section of a cliff- side highway that has been frequently closed by slides. The cost of this  project will also exceed the recent costs to the Emergency Relief program  of keeping the current highway open. The Devil’s Slide area in California is  a formation of steep, geologically unstable cliffs on the Pacific coast, south  of San Francisco. State Route 1 (S.R.1), originally constructed in 1937,  runs along the coast at the base of Devil’s Slide, and has long been subject  to recurring rock slides. From 1982 to the present there have been three  significant Devil’s Slide events that have cost the Emergency Relief  program $17 million to reopen S.R. 1. Following a major landslide over the  winter of 1982-1983 that closed S.R. 1 for nearly 3 months, Caltrans began  to pursue relocating S.R.1 away from the slide area.
The Devil’s Slide project required a full environmental impact statement,  which was begun in 1983 and completed in 1986. The EIS set out three  options, one of which involved relocating S.R.1 inland, away from the slide  area, and FHWA selected this as the preferred alternative. The  environmental document was challenged in U.S. District Court, and the  project was enjoined in September 1986, prior to the start of any  construction. In orders issued in 1989 and 1990, the court ultimately  determined that the EIS was deficient only in regard to noise impacts.  Thereafter, FHWA and Caltrans began work on a supplemental EIS to  address noise impacts. In the years that had passed since the original EIS,  community attitudes had begun to shift in favor of relocating S.R.1 by way  of a tunnel through San Pedro Mountain behind Devil’s Slide. Public  comments in the 1995 hearings for the supplemental EIS, and a local  referendum in 1996, called for consideration of a tunnel alternative. A  second supplemental EIS, completed in 2002, resulted in selection of a  tunnel route. FHWA had previously determined that the federal share for  an emergency relief project is guided by the rules and regulations in effect  at the time of the disaster. In the case of Devil’s Slide, that is the Surface  Transportation Assistance Act (STAA) of 1982, which established the  federal share as 100 percent. Also, the Transportation Equity Act for the  21st Century (TEA-21), enacted in 1998, had directed that the Devil’s Slide  project was Emergency Relief program eligible.
The current Devil’s Slide project is a pair of 4,200-foot-long, 30-foot-wide  tunnels through the San Pedro Mountain, connected at the north end to a  1,000-foot bridge spanning a valley, and connected at the south end to a  realignment of S.R.1. Construction began in early 2006, more than 20 years  after the 1982-1983 event. The bridge portion is currently under  construction, and a contract was awarded for the tunnel portion in  December 2006. The total project will cost an estimated $441 million, and  is scheduled to be completed in 2011. FHWA has allocated $241 million for  the project, and an additional $200 million in future Emergency Relief  funds will be needed to complete the project. Following the completion of  the Devil’s Slide project, Caltrans will relinquish the bypassed section of  S.R.1 to the county, which will maintain it for bicycle and pedestrian use.
During the two decades that the Devil’s Slide project has been delayed,  S.R.1 has remained open, and subject to periodic slides that resulted in  road closures, including a 5-month closure in 1995 that cost about $3  million to clean up, and a closure from April to early August in 2006 that  cost $12 million in Emergency Relief funding. S.R.1 carries significant  commuter and business traffic through the Devil’s Slide area, and road  closures due to slides have been a significant hardship for commuters and  the local communities. However, the goal of the Emergency Relief  program is to restore damaged or destroyed roadways to essential traffic,  which in the case of Devil’s Slide had been accomplished through cleanup  and restoration. As a long-standing problem, replacing S.R. 1 with a tunnel  could have been addressed through the state’s regular federal-aid highway  program.
section_title: Congress Increased Project Funding beyond What the Program Would Otherwise Have Funded
paragraphs: Congressional action has increased the amount of Emergency Relief  program funding provided to certain disasters and projects. The  devastation caused by Hurricane Katrina at the end of August 2005  included the destruction of the 1.6-mile U.S. Highway 90 Biloxi Bay Bridge  in Mississippi (see fig. 8). The bridge provided essential emergency,  commercial, and residential traffic between the city of Biloxi, Mississippi,  and the city of Ocean Springs across Biloxi Bay. The original bridge was a  four-lane bascule bridge. Mississippi Department of Transportation  (DOT) proposed to replace it with a six-lane high-rise fixed structure  bridge. Mississippi DOT justified the increased capacity, from four lanes to  six lanes, based on a prehurricane traffic model that was not updated to  consider posthurricane projections. An environmental assessment for the  replacement bridge project was completed in November 2005 with a  finding of no significant impact, but other issues were raised in the course  of Mississippi DOT working with the communities through the NEPA  process. These included accommodations for pedestrian and bicycle  traffic and protection of existing trees, but a more significant concern was  raised by a local shipbuilder about the proposed height of the new bridge.
According to Mississippi DOT officials, DOT initially proposed a bridge  that would provide an 85-foot clearance above Biloxi Bay. During a public  comment period on the proposed bridge design, a local shipbuilder  expressed concern that the height was not sufficient to allow for future  ships to pass under the bridge. Mississippi DOT revised its proposed  bridge design to provide a 95-foot clearance, which increased the cost of  the bridge from an estimated $275 million to the current cost of $339  million. As noted in the November 2005 final environmental assessment  document, the plan was to limit Emergency Relief program funding to the  portion of the project required to reestablish the function of the original  bridge, widen the structure to six lanes, and construct it to current  standards—other work would be eligible for funding with normal federal- aid program funds. However, in December 2005, Congress passed an  emergency supplemental appropriation that addressed the Gulf Coast  hurricanes of 2005, and authorized 100 percent federal funding for the  repair or reconstruction of hurricane-damaged highways, roads, and  bridges. This effectively included the Biloxi Bay Bridge. As of December  2006, construction of the new bridge has begun, with completion expected  in May 2008.
Another instance of Congress increasing the Emergency Relief program’s  funding to a project followed Hurricane Ivan striking the Florida  panhandle near Pensacola in September 2004, causing severe structural  damage to both spans of the I-10 Bridge over Escambia Bay. In the  aftermath of the hurricane, the Florida DOT decided it would replace  rather than repair the bridge, because of the age and the extent of damage  to the old bridge. Like the old bridge, the new bridge would also have two  spans, but built to a higher elevation to better protect against storm surge  damage, with three lanes on each span—increasing the capacity of the old  bridge.
Under FHWA’s Emergency Relief Manual, program participation in project  funding can be limited depending on the circumstances involved.  Specifically, when repair and restoration of a damaged facility are  possible, but the state prefers to build a replacement facility, Emergency  Relief funding can be limited to what the program would have contributed  to the cost of repairing the damaged facility. FHWA estimated the cost to  repair the original bridge to be $179 million. FHWA division officials were  in discussions with the Florida DOT about the level of Emergency Relief  program funding for the project when, in December 2004, passage of the  Consolidated Appropriations Act of 2005 directed that replacement of the  Escambia Bay Bridge be federally funded. The program would fund 90  percent of the project cost, the federal share for work on interstate  highways. As of December 2006, the bridge is under construction, with one  of the spans nearing completion, and FHWA officials informed us the  entire bridge project is expected to be finished ahead of the scheduled  December 2007 completion date at an estimated cost of $245 million.  Although FHWA could have limited the Emergency Relief program’s  participation to 90 percent of the prospective repair cost of the Escambia  Bay Bridge, congressional action ensured that the Emergency Relief  program would have a larger financial commitment in the project.
section_title: Definition of a Disaster Has Been Expanded, and New Types of Work Have Been Authorized
paragraphs: In the Emergency Relief program regulations, a natural disaster is  described as a sudden and unusual natural occurrence, and a catastrophic  failure is described as the sudden failure of a segment of the highway  system due to an external cause. In one circumstance, Congress and  FHWA have decided that a gradual and predictable basin flooding event,  which was not a sudden occurrence, warranted treatment as a disaster for  Emergency Relief program eligibility, and have defined its eligibility in  legislation, regulation, and revisions to the Emergency Relief Manual.
Devils Lake in North Dakota lies in a large natural basin and lacks a  natural outlet for rising water to flow out of the lake. Starting in the early  1990s, the lake level has risen dramatically—over 25 feet from 1993 to the  present. The volume of water in the lake has quadrupled in that time,  flooding or threatening nearby communities, farms, reservation lands, and  roads (see fig. 9). According to North Dakota DOT officials, many roads in  the Devils Lake area were built in the 1930s and 1940s, when the lake’s  water levels were near their historic low point. Initially, the approach to  preserve roads from being inundated was to buildup the grade of roads  that were threatened by the rising waters of Devils Lake. FHWA amended  its Emergency Relief program regulation in December 1996 to explicitly  provide that raising road grades in response to an unprecedented rise in  basin water levels was an Emergency Relief-eligible activity. FHWA’s next  Emergency Relief Manual revision in 1998 identified basin flooding as an  Emergency Relief-eligible disaster. In April 2000, FHWA also issued a  memorandum that provided authorization for grade raises in basin  flooding situations based on forecasted rising water levels—a unique  provision for the Emergency Relief program, which otherwise funds only  postdisaster repair or restoration. Some roads have already had their  grades raised more than once, and according to North Dakota DOT  officials, one bridge had been built up three times in 4 years. As of  September 2006, North Dakota DOT officials informed us that they had  essentially completed raising the road grades to the levels currently  allowed, based on existing forecasts for lake levels, but further grade  raises might be necessary in the future if lake levels continue to rise. As of  September 2006, the Emergency Relief program has funded over $145  million for projects related to Devils Lake flooding.
Additional problems at Devils Lake led to Congress authorizing FHWA to  fund an additional type of project through the Emergency Relief program.  According to North Dakota DOT officials, grade raises to roads in the  Devils Lake area begun in the mid-1990s were constructed with culverts  embedded in the roadway embankments to allow water to flow through  the embankment, in order to equalize water pressure on each side of the  raised roadway. According to North Dakota DOT and FHWA division  office officials, in 1997 some communities and the local Indian reservation  plugged some of these culverts, without FHWA’s or the state DOT’s  knowledge, to prevent water from flowing through and onto their land. As  a result, in these areas, the raised roadways were now acting as dams,  which increased their risk of failure. As additional grade raises to these  roads became necessary, FHWA was prohibited by regulation from  authorizing additional work on such roads unless their safety could be  certified by the agency responsible for the safety of dams—in this case the  Army Corps of Engineers. However, the Corps of Engineers determined  that it could not certify the safety of the existing roads acting as dams  without major modifications, such as the construction of additional  embankments.
In 2005, the passage of SAFETEA-LU reauthorized the FHWA highway  program, and authorized up to $10 million of Emergency Relief program  funds to be expended annually, up to a total of $70 million, for work in the  Devils Lake region of North Dakota to address roads acting as dams,  which were not previously eligible for Emergency Relief funds. This $10  million comes out of the $100 million annual authorization of contract  authority that funds the Emergency Relief program, effectively reducing  Emergency Relief funding available to other states to $90 million.  SAFETEA-LU also included language authorizing FHWA to carry out  necessary work in connection with Devils Lake roads acting as dams, and  it exempts the work in the Devils Lake area from the need for further  emergency declarations to qualify for Emergency Relief funding. As of  September 2006, FHWA has been working with the Bureau of Indian  Affairs to address high-priority sites on the Indian reservation adjacent to  the lake where roads were acting as dams, and it has been meeting with  North Dakota DOT and the Corps of Engineers to develop solutions for  other sites. These solutions may include building dams or dikes to control  lake flooding or protect the raised roadways. While the damage and  financial loss caused by this flooding are very real, defining a gradual and  predictable event—which is not a sudden occurrence—as an eligible  disaster represents a broadening of the definition of what is a disaster for  purposes of the Emergency Relief program, and places an additional claim  on limited program funding. The North Dakota DOT estimates the cost of  all of the additional work at Devils Lake may well exceed $200 million.
section_title: Congressional Action Has Increased Program Funding Commitments for Some Disasters and Projects
paragraphs: In its first fiscal year 2006 supplemental appropriation for the Emergency  Relief program, Congress directed that the Emergency Relief program  shall fund 100 percent of all repair and reconstruction of highways, roads,  and bridges necessitated by Hurricanes Katrina, Rita, and Wilma, because  the states’ resources were inadequate to deal with the string of disasters.  For example, Mississippi’s allotment for Hurricane Katrina damage was  about $1 billion, and a 20 percent local share would have cost the state  about $200 million. To put the level of damage in perspective, total prior  2005 Federal-aid Highway Program funding for Mississippi was about $402  million.
This can especially affect large replacement projects. For example, the  original Biloxi Bay Bridge was on a noninterstate federal-aid highway and  the Emergency Relief program would ordinarily fund 80 percent of the  project cost. However, as a result of the supplemental appropriation, the  Emergency Relief program will fund the full cost of the Biloxi Bay Bridge  project rather than the 80 percent that would normally be funded under  the program criteria. Also, as noted earlier, Congress authorized program  funding for the replacement of the I-10 Escambia Bay Bridge. In the  absence of congressional direction, the Emergency Relief program may  have funded only 90 percent of the prospective repair cost of $179 million.
There have also been other instances where Congress has waived the  requirement for state matching funds or waived the limit on funding  provided to any one state, to support states that have been overwhelmed  by the costs of terrorist attacks or natural disasters. However, this has  added to the costs borne by the Emergency Relief program. Congress  authorized 100 percent federal funding for Emergency Relief program  highway projects in its 2002 supplemental appropriation to fund recovery  from the September 11, 2001, terrorist attacks. Congress has also acted to  waive the $100 million maximum limit on the Emergency Relief program  funding that could be provided to a single state for a disaster eight times  since 1989—in the two supplemental appropriations cited above, and in  six other supplemental appropriation acts.
section_title: Defining the Damage Threshold for a Site Can Affect Program Outlays
paragraphs: FHWA’s division offices have been inconsistent in how they identify  eligible damage sites, which has a potential impact on program funding.  The Emergency Relief Manual states that, generally, a site is an individual  location where damage has occurred. However, a site could also  incorporate several adjoining locations within a reasonable distance  where similar damage has occurred, such as damage to traffic signs over  an area. The manual cautions, however, that aggregating damage locations  to form a site should be done with care, as it is not the intent of the  Emergency Relief program to pay for damage that a transportation agency  would normally perform as maintenance. We found that different FHWA  division offices accepted differing definitions of what constituted a site.  For example, in Florida, where hurricanes and storms have leveled signs  and signals over a wide area, whole counties have been designated as  sites. In California, where wildfires have destroyed signs and guardrails  over a wide area, state DOT officials told us that 20- to 30-mile stretches of  highway have been treated as single sites. On the other hand, an official in  the Ohio division office said that he generally limits the scope of a site to  the distance a person could see in both directions, although that is not an  absolute rule.
The physical size of a site that an FHWA division office will accept has  implications for the Emergency Relief program, because a site must have  at least $5,000 worth of damage to qualify for Emergency Relief funds.  When a major disaster covers a large area, and there is clearly sufficient  damage to qualify for Emergency Relief funding, treating widespread  damage at a limited number of damage sites can simplify program  administration. In addition, in the case of a more limited disaster—with  damage around the $700,000 level needed to qualify for Emergency Relief  funding—allowing sites to incorporate large areas, with a higher dollar  amount of damage, might allow a state to qualify for Emergency Relief  program funds, while a state held to a narrower site definition might not.
section_title: Conclusions
paragraphs: There is a continuing need for a federal role to assist states in responding  to and recovering from natural disasters. The long history of federal  support to states to repair highway infrastructure in the wake of disasters,  and the potential for states to be financially overwhelmed by the burden of  the resulting costs, especially after extraordinary events, argues strongly  for a continued Emergency Relief program. However, where a continued  federal role is seen in the future, the nation’s pending fiscal crisis requires  reexamining whether the current mission is fully consistent with the initial  or updated statutory mission, whether significant expansion of scope has  occurred, and whether a program is affordable and financially sustainable  over the long term, given known cost trends, risks, and future fiscal  imbalances. From this perspective, the Emergency Relief program faces  sustainability concerns in the future, exacerbated by the gradual  expansion of eligibility criteria that should be addressed.
While predicting the future financial requirements of disasters is not  possible in any precise way, on the basis of past demands on the program,  it is reasonable to expect a continuing fiscal imbalance if the program  remains at the current funding level. Thus Congress has the opportunity to  establish a more sustainable funding level and to identify a stable long- term source of funding consistent with future demands. Given current  projections on the status of the Highway Trust Fund and the recent history  of large costs incurred by the states responding to disasters, the program  does not appear to be sustainable in the long term if funding is derived  from the Highway Trust Fund, as currently structured. In fact, the current  authorization from the Highway Trust Fund does not cover the ordinary  events states experience, and the supplemental appropriations from the  General Fund are funding both extraordinary and ordinary events. The  National Surface Transportation Policy and Revenue Commission can  help—it will be examining alternatives to replace or supplement the fuel  tax as the principal revenue source to support the Highway Trust Fund,  and putting the Highway Trust Fund on a sustainable basis. In theory,  sufficient revenues could allow all Emergency Relief funding, including  funding for extraordinary events, to be financed by the Highway Trust  Fund, the approach taken when the Highway Trust Fund held large  balances. This would have the advantage of relying on a predictable  source of revenue intended for highway projects as the source of the  program.
Alternatively, Congress could, as it also has done in the past, provide some  or all emergency funding from the General Fund. This might be  particularly appropriate for extraordinary events because such events are  comparatively rare, can occur on a large multistate level, can overwhelm  all levels of government, and cannot be reasonably planned and budgeted  for. This would also place the Emergency Relief program on the same  footing as FEMA’s disaster relief programs, which are financed through  the General Fund. While this approach would help the short-term  sustainability of the Highway Trust Fund, because the nation faces a long- term fiscal crisis, relying solely or heavily on the General Fund is a limited  option.
In order to put the program on a sound financial footing, additional  alternatives to address the fiscal imbalance need to be considered.  Revising the program’s criteria to place 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 is one  possibility. Looking for alternative funding for projects designed to solve  chronic problems, as opposed to immediate road opening needs, is  another. These changes would place greater burden on the states, which  would have to pay for project expansion driven by nonemergency factors  and projects to address chronic, predictable conditions, while saving  federal funds for larger disasters.
The funding imbalance makes FHWA’s fiscal stewardship of the  Emergency Relief program especially important. While the fiscal  imbalance in the program is too great to be solved by improved  stewardship by FHWA alone, FHWA is not routinely recapturing all unused  program funds once a project is complete. In fact, states with immediate  disaster needs experience reimbursement backlogs, while unused program  funds are maintained by states with no current disaster needs.  Furthermore, the lack of a standard definition of what constitutes a  damage site opens the door for many smaller costs to be charged against  the program, and may result in higher federal reimbursements.
section_title: Matters for Congressional Consideration
paragraphs: In order to put the Emergency Relief program on a sound financial footing,  Congress should 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. Congress should also 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.
section_title: Recommendations for Executive Action
paragraphs: In order to help put the Emergency Relief program on a more sound  financial footing, we recommend that the Secretary of Transportation  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. 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. Finally, in order  to ensure that similar types of events result in consistent determinations 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.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided copies of a draft of this report to DOT for its review and  comment. DOT provided its comments in an e-mail message on February  5, 2007. DOT generally agreed with the facts presented but took no  position on our recommendations. DOT also provided technical  comments, which we incorporated into this report as appropriate.
We are sending copies of this report to congressional committees and  subcommittees with responsibilities for DOT. We will also make copies  available to others upon request. This report will be available at no charge  on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at (202) 512- 2834 or siggerudk@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Staff who made key contributions to this report are listed in  appendix VI.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to review (1) the total amount of  Emergency Relief program funding allocated to the states in recent years,  how this funding was distributed among the states, and the events for  which it was allocated; (2) the sources of funding used to finance these  emergency relief allocations and the financial challenges facing the  program; and (3) the scope of activities eligible for funding and the extent  to which the scope of eligible activities has changed in recent years.
To examine the total amount of Emergency Relief funding allocated to  states in recent years, we interviewed and obtained documentation from  the Federal Highway Administration’s (FHWA) Office of Financial  Management and analyzed Fiscal Management Information System (FMIS)  data on program trends, including allocations by state, total program  allocations, unexpended balances of “inactive” projects, and unobligated  balances. We assessed the reliability of the information system extracts  and queries by reviewing relevant system documentation, interviewing  agency officials who worked with the information system, and conducted  manual data testing. We found that state allocations data were available  only for two specific time periods—cumulatively beginning at program  inception or the last 10 fiscal years—rather than from fiscal year 1985 to  present as requested. We determined the data to be sufficiently reliable for  analysis of state allocation data from 1997 through fiscal year 2006—the  last 10 years. We also found that Emergency Relief projects may be  initially funded through other federal-aid programs and converted to  Emergency Relief funding in FMIS once funds are available. Consequently,  the Emergency Relief program obligations in FMIS may not be exhaustive,  as they may not include funds that will be converted to Emergency Relief.  We determined that FMIS Emergency Relief program obligations data  were not sufficiently complete for analysis of project obligations by state.  These data were not used in any of our analyses and therefore had no  impact on our findings.
To examine the value of the annual $100 million authorization over time in  constant dollars, we adjusted the $100 million authorization using the  annual values of gross domestic product (GDP) price index for fiscal years  1972 through 2005. Fiscal year 2005 is the most recent year for which there  were accurate GDP index annual values available.
To examine the purposes for which Emergency Relief funds were  allocated, we interviewed the Emergency Relief program manager and  obtained data on program allocations by event from him, rather than using  FMIS data. While FMIS contains fields that document disaster sequence  number and fiscal year, there is not a simple way to calculate the total  obligations by event. Event cost data have been maintained by the  Emergency Relief program manager from fiscal years 1998 through 2006.  We accessed the reliability of program data on allocations by event by  interviewing the program manager and manually testing program data  against congressional appropriations legislation and found the data to be  sufficiently reliable for analysis of event cost from fiscal years 1998  through 2006.
To examine the sources of funding used to finance the Emergency Relief  allocations, we analyzed supplemental and annual authorizations using the  legislative history of the Emergency Relief program from fiscal years 1990  through 2006. We also used the legislative history of the program from  fiscal years 1985 through 2006 to obtain information on program  reimbursement backlogs. Because FHWA officials do not maintain  historical reimbursement backlog data, we relied on periodic references to  reimbursement backlogs in the legislative history.
To examine the scope of activities eligible for Emergency Relief program  funding and the extent to which the scope of eligible activities has  changed in recent years, we obtained and reviewed program manuals,  guidance, and documentation for program eligibility criteria and policies  and requirements. We also interviewed FHWA officials at U. S. Department  of Transportation headquarters who are responsible for providing  guidance and policies for the Emergency Relief program and the  Emergency Relief program for federally owned roads. In addition, we  conducted site visits to five states (California, Florida, Mississippi, North  Dakota, and Ohio) and conducted interviews with state department of  transportation and FHWA officials, including managers, team leaders, and  engineers, that are responsible for the administration of Emergency Relief  program, as well as other FHWA highway programs. We also interviewed  officials from the FHWA’s Eastern Federal Land Highway Division Office  in Virginia. We gathered relevant program documentation from each site  visit, including project Detailed Damage Inspection Reports,  environmental assessments, and cost analyses. To capture a variety of  disaster events and projects, we selected five states considering (1) the  dollar amount of program allocations from fiscal program inception  through 2005, (2) the dollar amount of program allocations from fiscal  years 2001 through 2005, (3) geographical dispersion, (4) whether the state  sustained damage from the 2005 Gulf hurricanes, and (5) whether the  states had Emergency Relief projects costing more than $1 million within  the last 10 years.
To examine the extent to which the scope of eligible activities has  changed in recent years, we reviewed the legislative history of the program  from fiscal years 1985 through 2006. We identified congressional waivers  of program requirements such as the requirement for state matching funds  and the $100 million maximum limit on program funding that could be  provided to a single state per fiscal year.
We conducted our work in California, Florida, Mississippi, North Dakota,  Ohio, Virginia, and Washington, D.C., between April 2006 and December  2006 in accordance with generally accepted government auditing  standards.
section_title: Appendix II: Emergency Relief Allocations, by State, Fiscal Years 1997 through 2006
section_title: Appendix III: Tables of Allocations by Event from Fiscal Years 1998 through 2006
paragraphs: Federal land management agencies (2004 hurricanes)
section_title: Appendix IV: Summary of Emergency Relief Program Supplemental Appropriations
subsections: section_title: Fiscal year Title or description
section_title: Appendix V: Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, other key contributors to this  report were Steve Cohen, Assistant Director, and Ashley Alley, Robert  Ciszewski, Colin Fallon, Don Kittler, and Amber Yancey-Carroll.