The Recovery Act provides funding to states for restoration, repair, and construction of highways and other activities allowed under the Federal- Aid Highway Surface Transportation Program and for other eligible surface transportation projects. In March 2009, $26.7 billion was apportioned to all 50 states and the District for highway infrastructure and other eligible projects. The Recovery Act requires that 30 percent of these funds be suballocated, primarily based on population, for metropolitan, regional, and local use. Highway funds are apportioned to states through federal-aid highway program mechanisms, and states must follow existing program requirements, which include ensuring the project meets all environmental requirements associated with the National Environmental Policy Act (NEPA), paying a prevailing wage consistent with federal Davis- Bacon Act requirements, complying with goals to ensure disadvantaged businesses are not discriminated against in the awarding of construction contracts, and using American-made iron and steel in accordance with Buy America program requirements. While the maximum federal fund share of highway infrastructure investment projects under the existing federal-aid highway program is generally 80 percent, under the Recovery Act, it is 100 percent. The Recovery Act appropriated $8.4 billion to fund public transit throughout the country mainly through three existing Federal Transit Administration (FTA) grant programs, including the Transit Capital Assistance Program and the Fixed Guideway Infrastructure Investment program. The majority of the public transit funds—$6.9 billion (82 percent)—was apportioned for the Transit Capital Assistance Program, with $6 billion designated for the urbanized area formula grant program and $766 million designated for the nonurbanized area formula grant program. Under the urbanized area formula grant program, Recovery Act funds were apportioned to large and medium urbanized areas—which in some cases include a metropolitan area that spans multiple states— throughout the country according to existing program formulas. Recovery Act funds were also apportioned to states for small urbanized areas and nonurbanized areas under the formula grant programs using the program’s existing formula. Transit Capital Assistance Program funds may be used for such activities as facilities renovation or construction, vehicle replacements, preventive maintenance, and paratransit services. Up to 10 percent of apportioned Recovery Act Transit Capital Assistance funds may also be used for operating expenses. The Fixed Guideway Infrastructure Investment program was appropriated $750 million, of which $742.5 million was apportioned by formula directly to qualifying urbanized areas. The funds may be used for any capital projects to maintain, modernize, or improve fixed guideway systems. The maximum federal fund share for projects under the Recovery Act’s Transit Capital Assistance Program and the Fixed Guideway Infrastructure Investment program is 100 percent; the federal share under the existing programs is generally 80 percent. As they work through the state and regional transportation planning process, designated recipients of funds apportioned for transit—typically public transit agencies and metropolitan planning organizations (MPO)— develop a list of transit projects that project sponsors (typically transit agencies) submit to FTA for Recovery Act funding. FTA reviews the project sponsors’ grant applications to ensure that projects meet eligibility requirements and then obligates Recovery Act funds by approving the grant application. Project sponsors must follow the requirements of the existing programs, which include ensuring the projects funded meet all regulations and guidance pertaining to the Americans with Disabilities Act (ADA), pay a prevailing wage consistent with federal Davis-Bacon Act requirements, and comply with goals to ensure disadvantaged businesses are not discriminated against in the awarding of contracts. Three quarters of Recovery Act funds provided for highway infrastructure investment has been obligated nationwide and in the 16 states and the District that are the focus of our review. For example, as of November 16, 2009, $20.4 billion of the funds had been obligated for just over 8,800 projects nationwide and $4.2 billion had been reimbursed. In the 16 states and the District, $11.9 billion had been obligated for nearly 4,600 projects and $1.9 billion had been reimbursed. Table 1 shows the funds apportioned and obligated nationwide and in selected states as of November 16, 2009. As of November 16, 2009, $4.2 billion had been reimbursed nationwide by the Federal Highway Administration (FHWA), including $1.9 billion reimbursed to the 16 states and the District. These amounts represent 20 percent of the Recovery Act highway funding obligated nationwide and 16 percent of the funding obligated in the 16 states and the District. As we reported in our September report, because it can take 2 or more months for a state to bid and award the work to a contractor and have work begin after funds have been obligated for specific projects, it may take months before states request reimbursement from FHWA. However reimbursements have increased considerably over time, from $10 million in April to $4.2 billion in mid-November. Reimbursements have also increased considerably since we reported in September, when $604 million had been reimbursed to the 16 states and the District and $1.4 billion had been reimbursed nationwide. See figure 1. While reimbursement rates have been increasing, wide differences exist across states. Some differences we observed among the states were related to the complexity of the types of projects states were undertaking and the extent to which projects were being administered by local governments. For example, Illinois and Iowa have the highest reimbursement rates—36 percent and 53 percent of obligations, respectively—far above the national average. Illinois and Iowa also have a far larger percentage of funds devoted to resurfacing projects than other states—as discussed in the next section, resurfacing projects can be quickly obligated and bid. Florida and California have among the lowest reimbursement rates, less than 2 percent and 4 percent of obligations respectively. Florida is using Recovery Act funds for more complex projects, such as constructing new roads and bridges and adding lanes to existing highways. Florida officials also told us that the pace of award ing contracts has been generally slower in areas where large numbers of projects are being administered by local agencies. In California, state officials said that projects administered by local agencies may take longe to reach the reimbursement phase than state projects due to additional steps required to approve local highway projects. For example, highway construction contracts administrated by local agencies in California call for a local public notice and review period, which can add nearly 6 weeks to the process. In addition, California state officials stated that localit tend to seek reimbursement in one lump sum at the end of a project, reimbursement rates not matching levels of which can contribute to ongoing construction. Almost half of Recovery Act highway obligations nationally have bee pavement improvements—including resurfacing, rehabilitating, and reconstructing roadways—consistent with the use of Recovery Act fundin our previous reports. Specifically, $4.5 billion, or 22 percent, is being used for road resurfacing projects, while $5.2 billion, or 26 percent, is being used for reconstructing or rehabilitating deteriorated roads. As we have reported, many state officials told us they selected a large percentag of resurfacing and other pavement improvement projects because those projects did not require extensive environmental clearances, were quick t design, could be quickly obligated and bid, could employ people q uickly, and could be completed within 3 years. In addition to pavement improvement, other projects that have significant funds obligated include pavement widening (reconstruction that includes adding new capa city to existing roads), with $3 billion (15 percent) obligated, and bridge replacement and improvements, with $2 billion (10 percent) obligated. Construction of new roads and bridges accounted for 6 percent and 3 percent of funds obligated, respectively. Figure 2 shows obligations by the types of road and bridge improvements being made. According to California officials, under a state law enacted in March 200 62.5 percent of funds went directly to local governments for projects of their selection, while the remaining 37.5 percent is being used main state highway rehabilitation and maintenance projects that, due to significant funding limitations, would not have otherwise been funded. According to California officials, distributing a majority of funds to localities allows a number of locally important projects to be funded. Mississippi used over half its Recovery Act funds for pavement improvement projects and around 14 percent of funds for pavement widening. The Executive Director of the state transportation department told us the Recovery Act allowed Mississippi to undertake needed projects and to enhance the safety and performance of the state’s highway system. However, the Executive Director also said that the act’s requirements that priority be given to projects that could be completed in 3 years resulted in missed opportunities to address long-term needs, such as upgrading a state roadway to interstate highway standards, that would have likel a more lasting development. impact on Mississippi’s infrastructure and economic In Florida, 36 percent of funds have been obligated for pavement-w projects (compared with 15 percent nationally) and 23 percent for construction of new roads and bridges (compared with 9 percent nationally), while in Ohio, 32 p road and bridge construction. ercent of funds have been obligated for new Pennsylvania targeted Recovery Act funds to reduce the number of structurally deficient bridges in the state. As of October 2009, 31 per of funds in Pennsylvania were obligated for bridge improvement and replacement (compared with 10 percent nationally), in part because a cent significant percentage (about 26 percent, as of 2008) of the state’s bridges are structurally deficient. Massachusetts has used most of its Recovery Act funds to date for pavement improvement projects, including 30 percent of funds for resurfacing projects and 43 percent of funds for reconstructing or rehabilitating deteriorated roads. A Massachusetts official told us that the focus of its projects for reconstructing and rehabilitating roads, as well as the focus of future project selections, is to select projects that promote the state’s broader long-term economic development goals. For example, according to a Massachusetts official, the Fall River development park project supports an economic development project and includes construction of a new highway interchange and new access roadways to a proposed executive park.