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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Federal land management agencies (2004 hurricanes) 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.

Summary: Since 1972, Congress has authorized $100 million a year for highway disaster recovery needs through the Federal Highway Administration's (FHWA) Emergency Relief (ER) program. Increasingly, the program's actual costs have exceeded this amount, and Congress has provided additional funding. Because of this fiscal imbalance between program funding and program needs, we reviewed ER under the Comptroller General's authority to determine the (1) total funding, distribution of funds among the states, and disaster events funded; (2) sources of funding provided and financial challenges facing the program; and (3) scope of activities eligible for funding and how the scope of eligible activities has changed in recent years. GAO's study is based on financial data, document analysis, stakeholder interviews, and site visits, among other methods. During the 10-year period of 1997 to 2006, ER provided about $8 billion to states, the District of Columbia, Puerto Rico, American territories, and federal agencies, a total of 56 states and other jurisdictions. About 70 percent of these funds has gone to 5 states--California, Florida, Louisiana, Mississippi, and New York--that have been especially affected by major disaster events, such as Hurricane Katrina. Since 1990, 86 percent of the ER program has been funded through supplemental appropriations as the program's annual demands have exceeded the $100 million annual authorization. Even excluding extraordinary disasters, those exceeding $100 million in eligible damage per event, the program still needed $271 million per year for smaller eligible events. Meanwhile, the program has been authorized at a constant $100 million level since 1972, resulting in the current authorization being worth about one-fourth the authorization level of 1972. Until Hurricane Katrina, Congress funded extraordinary disasters through the Highway Trust Fund, but with Trust Fund balances dwindling, in 2005, Congress designated the General Fund as the source of future ER supplemental funding. But the nation faces a pending fiscal crisis, raising concerns about future use of the General Fund and financial sustainability of the ER program. Despite funding concerns, FHWA does not routinely recapture unused program funds by reviewing the program's state balances to identify potentially unneeded funds. GAO also identified $62 million in potentially unneeded statutory allocations from past disasters that could be recaptured. Activities eligible for ER funding include the repair or reconstruction of highways and roads that are supported by the Federal-aid Highway program, and of roads on federal lands that have suffered serious damage from natural disasters or catastrophic failures due to external causes. ER funds are not intended to replace other federal-aid, state, or local funds to increase capacity, correct nondisaster-related deficiencies, or make other improvements. However, contributing to future financial sustainability concerns is the fact that the scope of eligible activities funded by the ER program has expanded in recent years with congressional or FHWA waivers of eligibility criteria or changes in definitions. As a result, some projects have been funded that go beyond repairing or restoring highways to predisaster conditions--such as the $441 million Devil's Slide project and $811 million I-880 project in California--projects that grew in scope and cost to address environmental and community concerns. Also, Congress and FHWA have expanded eligibility to allow additional types of work, such as a gradual flooding of a lake basin, to be funded. Congress has also directed that in some cases the program fully fund projects rather than requiring a state match. Finally, varying interpretations of what constitutes a damage site have led to inconsistencies across states in FHWA's application of ER eligibility standards.