oversight

Transportation Infrastructure: States Benefit From Block Grant Flexibility

Published by the Government Accountability Office on 1990-06-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   Report to Congressional Requesters
GAO

June 1990
                   TRANSPORTATION
                   INFRASTRUCTURE
                   States Benefit From
                   Block Grant Flexibility




GAO,‘RCED-90-126
          United States

GAO       General Accounting  Office
          Washington, D.C. 20548

          Resources, Community,         and
          Economic Development          Division

          B-237967

          June 8,199O

          The Honorable Quentin N. Burdick, Chairman
          The Honorable John H. Chafee, Ranking Minority Member
          Committee on Environment and Public Works
          United States Senate

          The Honorable Daniel P. Moynihan, Chairman
          The Honorable Steve Symms, Ranking Minority Member
          Subcommittee on Water Resources, Transportation, and
            Infrastructure
          Committee on Environment and Public Works
          United States Senate

          In response to your February 27,1989, request and subsequent agree-
          ments with your offices, we reviewed the experiences of the five states
          participating in the Federal Highway Administration’s Combined Road
          Plan demonstration program (hereafter referred to as the “demonstra-
          tion”). The demonstration is similar to a block grant in that it gives state
          officials greater latitude (than would be allowed under a traditional cat-
          egorical program) in determining how certain federal-aid highway funds
          will be spent. Specifically, we agreed to

      l review how states have benefitted from the funding flexibility provided
        by the demonstration,
      9 identify the administrative advantages states have derived from stream-
        lined operating procedures provided by the demonstration, and
      l review how states’ administration of the federal-aid highway program
        compares with federal administration of the program.

          In authorizing the demonstration, the Congress intended to test the fea-
          sibility of transferring greater responsibility to state officials for
          administering portions of the federal-aid highway program. It permits
          the five participating states-California,     Minnesota, New York, Rhode
          Island, and Texas-to pool funds from several programs’ into a single
          fund and to assume certain program functions previously performed by
          the Federal Highway Administration (FHWA). The demonstration’s
          results should be particularly useful during the upcoming reauthoriza-
          tion process as the Congress considers options for structuring a highway
          program beyond 1991.

          ‘The eligible program areas Include funds from the secondary and urban highway systems, as well as
          bridge funds for these systems and for a certain percent of bridges off the federal-aid highway
          system.



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                   B-237967




                   All five participating states have benefitted to a varying extent from the
Results in Brief   flexibility afforded them through the demonstration. The ability to pool
                   funds has provided states with more flexibility to address state highway
                   construction and system preservation needs. To date, three states have
                   taken advantage of this flexibility and have targeted a substantial por-
                   tion of their pooled funds towards needs within a single system. The
                   remaining two states, who began participating in the demonstration
                   later than the others, expect to realize these benefits during the remain-
                   der of the demonstration. However, states have identified a number of
                   areas in which the demonstration could be expanded to provide even
                   more flexibility. For example, states would like additional categories of
                    federal-aid funds to be eligible for the program, and they would like
                    FHWA to waive some of the restrictions attendant to funds already
                    included in the program.

                   Regarding administrative advantages, states perceive that elimination of
                   FHWA'S approval for design exceptions and final inspections has resulted
                   in time and paperwork savings. They report that the project approval
                   process has been streamlined by having FHWA approve a group of
                   projects annually instead of each project individually. Additionally,
                   states report that the processing time for design exceptions and final
                   inspections has decreased under state administration of these functions.

                    FHWA  headquarters officials believe that there is little risk to safety in
                    having the states perform final inspections. They said that of the
                    approximately 14,000 final inspections conducted by FHWA in a previous
                    year, only a few problems had been found. They indicated that any
                    major flaws are usually discovered during ongoing construction reviews,
                    not when the project is complete. However, a FHWA field office review of
                    one state’s final inspection activities identified several areas where the
                    state’s final inspection process could be strengthened to prevent nega-
                    tive safety impacts.

                    States’ actions in approving design exceptions indicate a concern for
                    maintaining safety standards. States have established formal review
                    processes for exception requests, and FHWA has approved these
                    processes. However, because design exception approvals rely heavily on
                    judgment, a complete assessment of the impact of states’ activities on
                     safety depends upon a qualitative assessment of actual state decisions.
                     Although most FHWA reviews to date have not tried to evaluate these
                     decisions, states report that they are no more lenient than FHMLA in
                     approving exceptions. States indicated that they perceive an increased
                     sense of responsibility for these decisions.


                    Page 2                    GAO/RCEMJO-126   Transportation   Block Grant Demonstration
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                                        5237967




                                        The federal-aid highway program is a federally assisted, state-adminis-
Background                              tered program that distributes federal funds to the states to construct
                                        and improve urban and rural highway systems. Federal assistance is
                                        provided through several separately funded programs, including the
                                        Interstate, Interstate 4R2, Primary, Secondary, and Urban funding pro-
                                        grams. The states are responsible for selecting, planning, designing, and
                                        constructing highway improvements; the federal government reviews
                                        and approves work done with federal assistance. For fiscal year 1989,
                                        the Federal-aid Highway Act of 1987 authorized $13.7 billion for these
                                        programs. Figure 1 illustrates the individual components of the act.

Figure 1: Federal-Aid Highway Act of
1987, Fiscal Year 1989 Authorizations              interstate      4R       A
(Dollars in millions)                                    $2,875        /’
                                                                   /



                                                           .



                                               Other
                                              $2,467



                                                                                               .................,..
                                                                                              ..*                     ..........
                                                                                                  .. ...........
                                                                                                .*..
                                                                                                  ............,...........................................
                                                                                                        ...............,...
                                                                                                    ..,..,.............
                                                                                                    ,*




                                         ‘Cut slice denotes eligibility for CRP

                                         Source: FHWA Highway Statistics


                                         The Congress authorized the Combined Road Plan demonstration pro-
                                         gram on April 2, 1987, through the Surface Transportation and Uniform
                                         Relocation Assistance Act of 1987 (Public Law 100-17); the program has
                                         been authorized through fiscal year 1991. The program permitted the
                                         five participating states to pool funds from the urban, secondary, and




                                         ‘Interstate Resurfacing, Restmatio?, Rehabilitation, and Reconstruction.



                                         Page 3                                   GAO/RCED-90-126                        ‘lb nnnort                          tion Blork Gr-   t lbr   - tr tic?
B-237967




certain bridge programs (see fig. 1)” In fiscal year 1989, these three pro-
grams were authorized a total of about $3 billion, or 22 percent of the
entire federal-aid program. The percentage of the states’ federal-aid
apportionments potentially eligible for pooling under the demonstration
in fiscal year 1989 ranged from about 9 percent to about 33 percent of
the apportionments in each state.

States also assumed responsibility from FHWA for approving exceptions
to highway and bridge construction design standards. Design standards
are the federally approved controls for the design of highway projects,
Any proposed project design that deviates from the standards is han-
dled as a design exception, which must be justified and approved before
it can be incorporated into the final design for a project.

Additionally, the demonstration transfers responsibility for conducting
final inspections from FHWA to the five participating states. Final inspec-
tions, which are conducted after construction work on a project is com-
plete, function to ensure that construction is adequate and that the
project is ready for public use.

States vary in the amount of operating experience they have had under
the Combined Road Plan. Although the demonstration was authorized in
1987, all five states did not implement the program concurrently. Minne-
sota began operating under the program in October 1987, Texas in Janu-
ary 1988, Rhode Island in November 1988, New York in December 1988,
and California in May 1989. FHWA requires each state to provide a report
evaluating the program after 1 year of participation, with a final report
to be submitted to FHWA at the end of the demonstration program. Initial
evaluation reports have been prepared by each of the states except Cali-
fornia. FHWA has been required by the Congress to provide an interim
report assessing the states’ experiences with the demonstration in the
spring of 1990, and a final report at the end of the demonstration.




“Only the nonprimary portion of the Bridge Replacement and Rehabilitation program, which funds
bridges on the federal-aid urban and secondary systems and bridges off the federal-aid system, is
eligible for pooling.



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                                      B237967




                                      Three of the five states have benefitted to a differing extent from the
States Realize                        ability to use pooled funds for projects on a variety of systems. This
Significant                           flexibility has enabled the states to target funds towards higher priority
Advantages From                       state highway and bridge needs. However, states would like to see the
                                      program expanded to include funds from other highway programs.
Pooling Funds                         Additionally, states would like the Congress to waive some of the legis-
                                      lative restrictions still tied to the pooled funds which states believe limit
                                      the flexibility of the demonstration.


Pooling of Funds Allows               The demonstration gives the states discretion to choose what percentage
                                      of eligible funds they wish to pool annually. When states began operat-
States to Better Meet                 ing under the demonstration, the percentage of eligible funds they chose
Highway and Bridge Needs              to pool varied markedly. New York, for instance pooled $59 million,
                                      which represented approximately one quarter of the funds eligible to be
                                      pooled. California, in contrast, pooled $165 million, over 90 percent of
                                      its eligible funds. Table 1 illustrates the size of the state Combined Road
                                      Plan pools in proportion to the total available funds from which these
                                      dollars could be pooled.

Table 1: Percent of Available Funds
Pooled by States                      Dollars      tn millions
                                                                                                    Funds             Funds
                                                                                              available to          actually          Percent
                                      State                                                           Pool           pooled            Dooled
                                      Minnesotaa                                                       $169               $50                   30
                                      Texasa                                                            472               300                   64
                                                                                                                                            -
                                      New York                                                          227                59                   26
                                      Rhode     Island                                                    23               19                   83
                                      California                                                        180               165                   92

                                      aFlgures represent totals for fwal year 1988 and fiscal year 1989 as these two states began partlclpat-
                                      lng tn the Combmed Road Plan In fiscal year 1988


                                       Once pooled, funds can be used interchangeably for urban and secon-
                                       dary roads and bridges and for bridges not on the federal-aid system.
                                       Because of this added flexibility, states can decide when and how much
                                       funding to target towards specific system needs.

                                       Minnesota, Texas, and Rhode Island have all capitalized on the flexibil-
                                       ity afforded through the demonstration program. For example, although
                                       only 20 percent of the Minnesota pool was composed of bridge funds,
                                       nearly 40 percent of its spending commitments from the pool was for




                                       Page 6                             GAO/RCEIMO-126       Transportation    Block Grant Demonstration
                        B23m37




                        bridge projects. Likewise, only $30 million of the $300 million-10 per-
                        cent-pooled by Texas in fiscal years 1988 and 1989 was from secon-
                        dary road funds. Over this same period, Texas obligated nearly $125
                        million for secondary roads-or 42 percent of the amount pooled. Rhode
                        Island chose to address urban needs by targeting 70 percent of the
                        pooled funds to projects on their urban road system. Urban funds repre-
                        sented about 21 percent of the original amount pooled in Rhode Island.
                        New York officials, while acknowledging the potential flexibility of the
                        program, reported that since fiscal year 1989 funding was adequate in
                        each category they would not take advantage of this flexibility. How-
                        ever, the officials told us they expect to use the funding flexibility in the
                        future. California officials cited their relatively short period of opera-
                        tions under the demonstration as reason for not yet realizing the advan-
                        tages offered by the funding flexibility. They also, however, expect to
                        take advantage of this flexibility in the future. Appendix II illustrates
                        how states have used funds under the demonstration.


States Would Like the   States suggest that the demonstration’s flexibility could be enhanced if
Program Expanded to     certain legislative restrictions were waived for funds administered
                        through this program. Although the demonstration has given states sig-
Provide
-- ._.-.Even More       nificant latitude to determine where and how selected federal-aid funds
Flexibility             will be spent, certain legislative restrictions still remain tied to the
                        pooled funds. Under the categorical programs, the Congress enacted a
                        number of spending requirements to assure a minimum amount of fund-
                        ing to certain systems or areas. For instance, one requirement mandates
                        that states must spend at least 15 percent but not more than 35 percent
                        of their federal-aid bridge funds for bridges not on the federal-aid sys-
                        tem. Because the authorizing legislation for the demonstration did not
                        waive these requirements (as outlined in app. III), FHWA determined that
                        the requirements would still be applicable. According to FHWA, unless the
                        Congress waives the restrictions, the states will be required to demon-
                        strate that they have complied with these requirements by the end of
                         the demonstration period. State officials told us that having to comply
                         with these limitations inhibits their ability to target pooled funds to
                         their priority needs.

                         State officials believe that the demonstration’s objective of providing
                         increased flexibility would be enhanced by making funds from addi-
                         tional programs eligible for the demonstration. The specific funds that




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                                      B-237967




                                      states have identified-Hazard     Elimination and Rail-Highway Cross-
                                      ings”-are often used on urban and secondary highway system projects.
                                      In their interim report, Minnesota officials explained that having some
                                      funds eligible for the demonstration while other funds used on the same
                                      systems must be administered through alternative procedures-those
                                      traditionally used for categorical programs-can be confusing for peo-
                                      ple responsible for administering the programs. Additionally, using
                                      these other categorical funds along with demonstration funds results in
                                      the state forfeiting the administrative benefits inherent to the Combined
                                      Road Plan-state approval of design exceptions and final project
                                      inspections, Consequently, some states exclude projects involving these
                                      program funds from the demonstration.

                                      The inclusion of Hazard Elimination and Rail-Highway Crossings funds
                                      would increase the size of the states’ pools by as much as 18 percent.
                                      Table 2 illustrates the difference in funding available to states for pool-
                                      ing if fiscal year 1989 apportionments for these funds had been eligible
                                      for the demonstration.

Table 2: Potential Size of Expanded
Combined Road Plan Program            Dollars      in mlllions
                                                                                                  Potential programs
                                                                                  Current                              Rail-
                                                                                maximum             Hazard         highway             Total
                                      State                                      eligible8      elimination      crossings        expanded
                                      California                                     $154.9           $14.2            $10.2           $179.3
                                      Minnesota                                        42.8               3.5            4.2             50.5
                                       New York                                       218.2             10.4             6.0            234.6
                                       Rhode       Island                               10.0              0.8            0.4                 11.2
                                      Texas                                           139.0             10.6            10.8            160.4

                                       aDoes not include unobligated   funds from prior years




                                       “Hazard Elimination funds are designated for highway safety improvement projects on all federal-aid
                                       systems except the Interstate.

                                       ‘Rail-Highway Crossings was established by Section 203 of the Highway Safety Act of 1973 and
                                       authorized funds for the installation of protective devices at rail-highway grade crossings and for
                                       elimination of hazards at rail-highway grade crossings.



                                       Page 7                               GAO/RCEDW-126       Transportation   Block Grant Demonstration
                           B-237967




                           Although the most significant benefit of the demonstration for states
States Cite Additional     has been the flexibility provided through pooling funds, most states cite
Administrative             the additional benefits of time and paperwork savings associated with
Benefits Realized          streamlined processes for approving, implementing, and completing fed-
                           eral-aid projects. New York officials, however, believe that in their first
Under the Combined          10 months of operations they did not realize the substantial time savings
Road Plan                  and flexibility benefits that they had anticipated. They added, though,
                           that they anticipate making better use of the program as their experi-
                           ence grows. FHWA officials report as well, that state performance of Com-
                           bined Road Plan responsibilities has enabled FXWA to make better use of
                           its own resources. Officials in the FHWA division office in Minnesota, for
                           instance, report that FHWA engineers can focus their attention on higher
                           priority projects such as the Interstate.


Streamlined Project        States report that the project approval process under the demonstration
                           enables them to initiate projects more quickly. Prior to the demonstra-
Approval ProcessEnables    tion, states submitted a program of projects to FHWA. However, the states
States to Undertake        could not award contracts for individual projects without FHWA concur-
Projects More Quickly      rence. Under the demonstration, states annually submit a program of
                           projects, which FHWA reviews as a whole. Once FHWA approves the pro-
                           gram of projects, the states may undertake projects from the list with-
                           out further FHWA approval. New York officials noted that, prior to the
                           demonstration, FHWA approved funding commitments on a project-by-
                           project basis. With an average of 2 weeks needed for FHWA to turn
                           around these approvals, New York officials estimate that theoretically
                           they were able to save over 600 days in the processing of 47 projects.


Requests for Design         Officials from all five states believe that assuming responsibility for
Exceptions Are Processed    approving design exceptions has proven administratively beneficial.
                            State officials estimate that processing time for exceptions has
More Quickly Under the      decreased between 2 weeks and 2 months as a result of not having to
Combined Road Plan          forward the requests to FHWA for approval. Some state officials report
                            that prior to the demonstration, states conducted preliminary reviews of
                            exception requests before forwarding them to FHWA. Under the demon-
                            stration, this review is final instead of preliminary.


State Final Inspections     States believe that assuming responsibility for conducting final con-
Viewed as More Timely       struction inspections has resulted in a significant savings in the time
                            needed to close a project. After construction on a project is complete, the
                            paperwork to close the project cannot be processed until the final


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                                  5237967




                                  inspection has been conducted. Prior to the demonstration, state and
                                  FHWA officials coordinated to perform these inspections. Under the dem-
                                  onstration, state officials estimated that they have saved up to 3 months
                                  by not having to coordinate with FHWA for final inspections. In their first
                                  evaluation of the demonstration, New York officials estimated that a
                                  total of over 200 days processing time have been saved by not having to
                                  process 6 final inspection reports through J?HWA. They added, however,
                                  that since other factors may affect the actual project closeout date, this
                                  savings may not translate to an identical savings in project closeout
                                  time.


States Have Developed             To evaluate the success of the demonstration, it is necessary to look not
                                  only at how states have benefitted from the additional flexibility pro-
Procedures to Meet Safety         vided by the program, but also at how states’ actions under the program
Standards                         have impacted the federal-aid system-particularly      in the area of
                                  safety. To ensure that appropriate attention is given to these issues,
                                  FHWA requires that the states develop procedures for reviewing requests
                                  for exceptions to design standards and for conducting final inspections.
                                  FHWA conducts periodic process reviews of specific demonstration activi-
                                  ties. According to FHWA officials, these reviews focus on the procedures
                                  used to make decisions, not the decisions themselves.

State Design Exception Approval   To ensure safety and uniformity in the design of federal roads and
ProcessesMeet With FHWA           bridges, design standards define such criteria as acceptable widths for
Approval                          travel lanes and shoulders, characteristics of road curvatures and sight-
                                  lines, and guardrail placement. When highway designers request an
                                  exception to these standards, the states need to decide what potential
                                  effect on safety may result.

                                  The five states involved in the demonstration have developed formal
                                  review procedures for making decisions on design exception requests;
                                  these procedures have been approved by FHWA. One example of such a
                                  process is Minnesota’s procedures which require that requests be sent to
                                  the Office of Technical Support or the State-Aid Engineer and that they
                                  consider the effect of the exception on the safety and operation of the
                                  facility and its compatibility with adjacent sections of roadway. The
                                  request should consider, for example, such factors as the amount and
                                  type of traffic, the type of project, the accident history of the roadway,
                                  and the cost of attaining full standards. Another example is Texas,
                                  which has established special committees for the specific purpose of
                                  reviewing requests for exceptions received from their various highway
                                  districts. Requests submitted to the committees must explain why the


                                   Page 9                   GAO/RCED-99-126   Transportation   Block Grant Demonstration
                                 B-237967




                                 design standard cannot be attained and note its conformity with the
                                 adjacent roadway, provide information on the accident history of the
                                 road section, discuss the alternatives considered and cost differences
                                 involved, and describe the consequences if a request is not approved.

                                 The FHWA division office in Minnesota has collected data on the number
                                 and types of exceptions granted prior to the demonstration which indi-
                                 cates that the types of exceptions granted by the state have not changed
                                 significantly from the types that were formerly approved by FHWA.
                                 About two-thirds of the design exceptions that FHWA approved in calen-
                                 dar year 1987 were for deviations from standards for horizontal or ver-
                                 tical curves on roadways. About 87 percent of the exceptions approved
                                 by Minnesota state officials under the demonstration have also been for
                                 deviations from standards for horizontal or vertical curves.

                                 Most of the FHWA division offices plan to review the process followed by
                                 the states in approving design exceptions. In this type of review, FHWA
                                 reviews the procedures to determine if they have been documented, if
                                 they comply with demonstration guidelines, and if the state has fol-
                                 lowed the procedures. FHWA does not evaluate the appropriateness of the
                                 state’s decision. In April 1989 the F’HWA Texas division issued a report on
                                 a process review of design exceptions. The report stated that the proce-
                                 dures being followed by Texas, while not fully documented, were in
                                 compliance with the guidelines. According to the FHWA report, the state
                                 appeared to be making a conscientious effort to arrive at proper deci-
                                 sions on design exception requests.

                                 According to FHWA officials, it is difficult to establish absolute criteria
                                  for determining whether a design exception is warranted. Consequently,
                                 judgment plays a large role in the decision. While process reviews can
                                  provide valuable insights on how well the program is being adminis-
                                  tered, we believe that a complete assessment of whether a design excep-
                                  tion impacts on safety can be best achieved by reviewing the propriety
                                  of the actual state decisions. Although FHWA has not reviewed state deci-
                                  sions, the states contend that the increased sense of responsibility for
                                  evaluating requests for design exceptions has caused them to be no more
                                  lenient than FHWA in approving design exceptions.

F’HWA Believes States’ Final      When construction on a project is complete, a final inspection is con-
Inspection Activities Maintain    ducted to ensure that construction is adequate and that the road is
Integrity of Nation’s Roads       ready for public use. Before the demonstration took effect, most states


                                                       .


                                  Page 10                  GAO/RCED-W126   Transportation   Block Grant Demonstration
5237967




were already conducting their own final inspections to ensure construc-
tion adequacy, according to state officials; the demonstration only elimi-
nated the requirement to coordinate these inspections with FHWA.

According to FHWA officials, final inspections usually do not uncover
major construction problems; if such problems exist, they would be iden-
tified during inspections performed earlier in the construction process.
According to FHWA officials, only a few problems were recently found
during approximately 14,000 final inspections.

FHWA   officials told us that there are no standards for what constitutes a
final inspection. Inspecting officials may perform a number of different
activities, such as inspecting the physical construction, reviewing mater-
ials delivery reports, and comparing design plans to actual construction.
FHWA officials told us that, as a result, it is difficult to assess how or if
state inspections differ from FHWA inspections; however, both state and
FHWA officials told us they believe that state inspections are essentially
the same as those previously conducted by FHWA.

To monitor state final inspection activities, FHWA division offices have
conducted or are planning to conduct process reviews similar to those
planned for design exception activities. These reviews focus primarily
on the procedures states follow to assess the final acceptability of a con-
struction project. However, in an FHWA process review of final inspection
activities in Rhode Island, the division office took the additional step of
performing its own final inspection of a sample of projects that had been
inspected by the state. In doing so, FHWA identified several items that it
believed the state inspection team should have noted in its report. FHWA
suggested that one of these items presented a potential safety impact.
The division office recommended that Rhode Island enact a number of
changes to improve its process. These recommendations included pro-
viding better training to those conducting final inspections and that
more experienced personnel be placed on the final inspection teams.

 The standard process reviews being conducted in the states focus prima-
 rily on the procedures used to reach decisions. Generally, these reviews
 do not attempt to validate the adequacy of the procedures by testing the
 results of the process, for example, by reviewing a sample of the deci-
 sions. We believe that such a test is necessary to validate the adequacy
 of state procedures in ensuring that safety objectives are being main-
 tained through state actions.




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                B-237967




                All five states participating in the demonstration are either taking or
Conclusions     planning to take advantage of the additional funding flexibility afforded
                to them through pooling. However, this flexibility could be enhanced in
                two ways. First, greater program flexibility could be achieved by
                allowing states to administer demonstration funds absent some of the
                title 23 legislative requirements-such   as the 15-percent minimum/35-
                percent maximum off-system bridge requirement. Unless the legislative
                mandates are lifted and states are allowed to make their own decisions
                on how to allocate highway program funds, the Congress will be unable
                to determine how states would administer these federal-aid programs if
                given such flexibility permanently.

                Second, some state officials believe that the Combined Road Plan dem-
                onstration could be improved by expanding the number of categories eli-
                gible for pooling. We believe that including Hazard Elimination and Rail-
                Highway Crossings funds could benefit the demonstration program. This
                inclusion would alleviate some of the confusion associated with adminis-
                tering these funds in conjunction with demonstration funds on a single
                project. Additionally, states would not forfeit the administrative bene-
                fits inherent to the demonstration-state-approved     design exceptions
                and final inspections- on projects where Hazard Elimination and Rail-
                Highway Crossings funds are used in conjunction with demonstration
                funds.

                 We recognize states’ interest in maintaining safety through their final
                 inspection and design exception activities. States and FHWA believe that
                 the design exception and final inspection processes performed by the
                 states are generally equivalent. In the one case where FHWA actually
                 evaluated state final inspection decisions, FHWA found substantive
                 problems with a potential impact on safety. The fact that these issues
                 might not have surfaced through the more prevalent FHWA process
                 reviews underscores the need for such qualitative evaluations to be
                 performed.


                 To maximize the funding and administrative flexibility provided by the
Matters for      Combined Road Plan demonstration program and to more closely
Congressional    approximate the block grant concept, the Congress may wish to consider
Consideration    (1) removing some or all of the title 23 legislative restrictions attendant
                 to the use of funds eligible for the demonstration and (2) expanding the
                 list of eligible programs for the demonstration.




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                 We recommend that the Secretary of Transportation direct the Adminis-
Recommendation   trator of the Federal Highway Administration to evaluate, on a test
                 basis, the impact of states’ actions on safety by evaluating the appropri-
                 ateness of states’ final inspection and design exception decisions.


                 We performed our work at the five participating states and appropriate
                 FHWA offices between March 1989 and March 1990. Our work was done
                 in accordance with generally accepted government auditing standards.
                 (Further details on our objectives, scope, and methodology are provided
                 in app. IV.) We discussed the information in this report with state and
                 federal officials. They agreed with the facts as presented in this report,
                 We are sending copies to the Secretary of Transportation; the Adminis-
                 trator, FHWA; interested congressional committees; participating states;
                 and other interested parties upon request. Our work was performed
                 under the direction of Kenneth M. Mead, Director, Transportation
                 Issues, who may be reached at (202) 275-1000 if you or your staff have
                 any questions. Other major contributors to the report are listed in
                 appendix V.




                 J. Dexter Peach
                 Assistant Comptroller       General




                                         .

                  Page 13                     GAO/RCJZD-9@126   Transportation   Block Grant Demonstration
Contents


Letter                                                                                           1

Appendix I                                                                                   16
Federal-Aid Highway
Program Fiscal Year
1989
Authorizations-
Surface
Transportation and
Uniform Relocation
Assistance Act of 1987
(Title 1)
Appendix II                                                                                      17
States Use of Funds to
Meet Priority Needs
Appendix III                                                                                 20
Title 23 Requirements
Still Applicable to
Federal-Aid Funds
Administered Under
the Combined Road
Plan
Appendix IV                                                                                      23
Objectives, Scope, and
Methodology
Appendix V                                                                                       24
Major Contributors to
This Report

                         Page 14   GAO/RCElMO-126   Transportation   Block Grant Demonstration
          Contents




Tables    Table 1: Percent of Available Funds Pooled by States                                 5
          Table 2: Potential Size of Expanded Combined Road Plan                               7
              Program

Figures   Figure 1: Federal-Aid Highway Act of 1987, Fiscal Year                               3
               1989 Authorizations
          Figure II. 1: Minnesota: CRP Pool and Obligations, Fiscal                            18
               Years 1988-89
          Figure 11.2:Texas: CRP Pool and Obligations, Fiscal Years                            18
               1988-89
          Figure 11.3:Rhode Island: CRP Pool and Obligations,                                  19
               Fiscal Year 1989
          Figure 11.4:New York: CRP Pool and Obligations, Fiscal                               19
               Year 1989




           Abbreviations

           FHKA      Federal Highway Administration
           GAO       General Accounting Office


           Page 16                 GAO/RCEDW126   Transportation   Block Grant Demonstration
Appendix I

Federal-Aid Highway Program Fiscal Year 1989
Authorizations-Surface Transportation and
Uniform Relocation Assistance Act of 1987
(Title 1)
               Dollars in mullions
               Program                                                                         Authorization
               Interstate Construction                                                                 $3,150
               Interstate 4R                                                                            2,815
               interstate Substrtution-Highways                                                           740
               Pnmarv                                                                                   2.325
               Pnmary Minimum (estimate)                                                                    48
               Secondary                                                                                   600
               Urban                                                                                       750
               Bridge                                                                                    1,630
               Hazard Elimination                                                                          170
               Rail-Hrqhwav Crossinos                                                                      160
               Indian Reservation Roads                                                                     80
               Forest Hrghways                                                                              55
               Public Lands Highways                                                                        40
               Parkwavs and Park Hrahwavs                                                                   60
               FHWA 402                                                                                     10
               FHWA 403                                                                                     10
               Rarlroad Relocation Demo                                                                     15
               New Demo Projects                                                                           178
               Minimum Allocation (estimate)                                                               800
               Emergency Relief                                                                            100
               Feasibility Study-Highway   Electriftcation                                                    1
                                                                                                      $13,737




               Page 16                            GAO/RCED9@126   Transportation   Block Grant Demonstration
Appendix II

States Use of F’undsto Meet Priority Needs


               The Combined Road Plan demonstration permits the five participating
               states to pool funds from several program areas. The eligible program
               areas include funds from the secondary and urban highway systems, as
               well as bridge funds for these systems and for a certain percent of
               bridges off the federal-aid highway system. Once funds are placed in the
               pool, the funds can be used for projects on any of these systems. Over a
               Z-year period, Minnesota used demonstration funds to address bridge
               needs, pooling $10 million in bridge funds, then committing over $17
               million for bridge projects. Texas used most of the demonstration funds
               to address secondary system needs, pooling only $30 million in secon-
               dary funds over 2 years but committing almost $1‘25 million for secon-
               dary projects during this period. Rhode Island committed $13 million of
               its original $19 million pool for urban projects after pooling only $4 mil-
               lion in urban funds. Kew York chose not to change the distribution of
               pooled/committed funds; the state did not commit more funds to any
               category than the amount pooled. Figures 11.1,11.2,11.3,and II.4 provide
               additional information on the source and use of the pooled funds for
               Minnesota, Texas, Rhode Island, and New York. California is not
               presented as it had less than 1 year of operating experience. The figures
               show the total amounts pooled and obligated by each state.

                Federal-aid highway funds generally remain available for a 4-year
                period. State officials expect to obligate all their pooled funds within the
                demonstration period.




                Page 17                   GAO/RCEJMO-126   Transportation   Block Grant Demonstration
                                              Appendix II
                                              States Use of Punds to Meet Priority   Needs




Fiaure 11.1:Minnesota: CRP Pool and Obligations, Fiscal Years 1988-89

                                    Dollar6     in Million6
                            $25
                            $20
                            $15

                            $10
                             $5

                             $0-        Secondary                         Urban                      Bridge
                                               $20                         $20                         $10
                                              $12.8                       $14.8                       $17.3



                                                         1m      Pooled        m      Obligated


                                               Source Minnesota Department of Transportatjon


Figure 11.2:Texas: CRP Pool and Obligations, Fiscal Years 1988-89

                                    Dollars     in Millions




                                        Secondary                         Urban                      Bridge
                      Pooled                   $30                        $135                        $135
                      Obligated               $124.4                      $94.7                       $50.8


                                                          m      Pooled        m      Obligated


                                               Source: Texas State Department of Highways and Public Transportation




                                               Page 18                             GAO/RCED8@120      Transportation   Block Grant Demonstration
                                              Appendix II
                                              States Use of Funds to Meet Priority    Needa




Figure 11.3:Rhode Island: CRP Pool and Obligations, Fiscal Year 1989

                                   Dollars     in Million8




                                         Secondary                        Urban                      Bridge
                      Pooled                   $5                          $4                         $10
                      Obligated                $0                         $13.3                       $1.4



                                                       1  m      Pooled        k%% Obligated



                                               Source. Rhode Island Department of Transportation


Figure 11.4:New York: CRP Pool and Obligations, Fiscal Year 1989

                                    Dollar8     in Million8
                           $40




                             $0
                                         Secondary                        Urban                      Bridge
                      Pooled                  $7.4                        $18.4                      $35.8
                      Obligated               $1.9                        $7.8                       $29.7



                                                        1 _      Pooled        m      Obligated



                                               Source: New York State Department of Transportatlan




                                               Page 19                             GAO/RCEIMO-126     Tramportatlon   Block Grant Demonstration
Title 23 Requirements Still Applicable to
Federal-Aid Funds Administered Under the
Combined Road Plan
               Several states participating in the Combined Road Plan demonstration
               program have indicated that the legislative restrictions imposed by title
               23 restrict the flexibility of pooled funds. These requirements set
               restrictions such as what percent of a state’s bridge funds must be used
               on off-system bridges, or how much of a state’s total appropriation may
               go for employee training. Although the demonstration’s authorizing leg-
               islation did not specify whether these restrictions would still apply to
               the funds included in the state’s pool, FHWA made an initial determina-
               tion that absent the specific legislative waiving of such requirements,
               the restrictions would still be applicable. Title 23 contains numerous
               requirements and limitations, and although only a small number are spe-
               cifically noted in the FHWA Combined Road Plan model agreement and
               subsequent state proposals, FHWA determined that the states should com-
               ply with those limitations. Following is a list of those requirements spe-
               cifically noted by FHWA in the model agreement:

               1. Bridges not on the federal-aid system (section 144) Not less than 15
               percent nor more than 35 percent of the amount apportioned to a state
               for its bridge program can be spent for projects to replace or rehabilitate
               highway bridges located on public roads, other than those on a federal-
               aid system.

               2. Allocation of urban systems funds (section 150)

               A percentage of apportioned highway funds must be available for
               expenditure in urban areas with populations exceeding 200,000. This
               percentage is to be based on a fair and equitable formula devised by the
               state and approved by FHWA.

               3. Ten-percent limitation requirement for projects funded under section
               120(d)

               Not more than 10 percent of a state’s total federal-aid apportionment
               may be spent on projects including hazard elimination of railway-high-
               way crossings, traffic control signalization, pavement marking, or for
               commuter car-pooling and vanpooling. The federal share for construction
               may amount to 100 percent of the total project cost, as long as no more
               than 75 percent of the right-of-way cost or property damage costs are
               paid for with federal highway funds.



                                     .


                Page 20                  GAO/RCEDSO-126   Transportation   Block Grant Demonstration
Appendix IIl
Title 23 Requirements Still Applicable to
Federal-Aid Funds Administered     Under the
Combined Road Plan




4. Limitation on training funds (section 32 1)

Not more than one-quarter of 1 percent of a state’s total yearly appor-
tionment of federal-aid primary and Interstate funds may be spent in
connection with the education and training of state and local highway
department employees. The federal share shall not exceed 75 percent of
the cost of tuition and direct educational expenses, excluding travel,
subsistence, or salaries.

5. Local official role in project selection (section 105(b),(d))

Projects on the federal-aid secondary system shall be selected by state
highway department officials in cooperation or consultation with appro-
priate local officials. Federal-aid urban projects will be selected by
appropriate local officials with concurrence of the state highway
department and in accordance with the required planning process.

6. Urban planning (section 134)

State and local officials, in cooperation with the Secretary of Transpor-
tation shall develop transportation plans and programs formulated on
the basis of transportation needs giving due consideration to compre-
hensive long-range land use plans, development objectives, and overall
social, economic, environmental, system performance, and energy con-
servation goals and objectives. Due consideration will be given the prob-
able effect on the future development of urban areas with a population
exceeding fifty thousand.

7. Interstate Substitution (section 103(e)(4))

 If any route or portion thereof of the Interstate is not deemed essential
 to the completion of a unified and connected Interstate system, the
 funds earmarked for completion of that segment may be used for public
 mass transit projects or substitute highway projects. Highway projects
 must be on a public road, serve the area or areas from which the Inter-
 state route was withdrawn, and be selected by responsible local offi-
 cials. The federal share on such projects shall not exceed 85 percent.




 Page 21                          GAO/RCED-90-126   Transportation   Block Grant Demonstration
Appendix III
Title 23 Requirements  Still Applicable to
Federal-Aid  Fund13 Administered    Under the
Combined Road Plan




8. Minimum apportionment Interstate construction (section 102(c) of the
STURAA of 1987)

No state may receive less than one-half of 1 percent of the total federal
apportionment for the Interstate system. Whenever amounts made
available through this apportionment exceed the state’s estimated Inter-
state needs, the excess funds shall be eligible for expenditure on the
state’s primary, urban, and secondary systems, as well as for projects
undertaken with the goal of eliminating safety hazards.




 Page 22                           GAO/RCED-90-128   Transportation   Block Grant Demonstration
wendix   IV

Objectives, Scope,and Methodology


               Our objective was to evaluate the experiences of each of the five states
               participating in the Combined Road Plan demonstration program and
               how each state has benefitted from the additional flexibility provided
               by the program.

               We performed our work at the five states participating in the demon-
               stration. We interviewed officials at the California Department of Trans-
               portation, Sacramento, California; the Minnesota Department of
               Transportation, St. Paul, Minnesota; the New York State Department of
               Transportation, Albany, New York; the Texas State Department of High-
               ways and Public Transportation, Austin, Texas; and the Rhode Island
               Department of Transportation, Providence, Rhode Island.

               We also interviewed officials at the FHWA headquarters in Washington,
               D.C.; at regional offices located in Albany, New York; Homewood, Illi-
               nois; San Francisco, California; and Fort Worth, Texas; and at divisions
               located in Providence, Rhode Island; Albany, New York; St. Paul, Minne-
               sota; Sacramento, California; and Austin, Texas.

               We interviewed state and federal officials to obtain their views on the
               demonstration and their respective state and federal experiences,
               obtained statistical and financial data on program operations, and iden-
               tified benefits and problems encountered. In each state we interviewed
               officials responsible for managing the program and discussed why the
               state was interested in the demonstration, their experiences to date, and
               their analysis of the benefits received from the program. We discussed
               with FHWA officials how the demonstration has affected their operations,
               their analysis of benefits of the program to the states and the program’s
               effect on the federal-aid highway program, and the methodology
               employed by FHWA to monitor and evaluate state activities.

               We obtained and reviewed documentation relevant to the demonstration,
               such as pertinent laws, agreements with each state, financial and statis-
               tical operating data, the interim reports prepared by the states, and
               FHWA monitoring plans and process review reports. We did not indepen-
               dently verify information given to us by state and FHWA officials.

               Our work was conducted between March 1989 and March 1990 in accor-
               dance with generally accepted government auditing standards. We dis-
               cussed the information in this report with responsible state and FHWA
               officials, and their suggested clarifications have been incorporated
               where appropriate.

                                        .

               Page 23                      GAO/RCED9&126   Transportation   Block Grant Demonstration
                                                                              -




                         John W. Hill, Jr., Associate Director
Resources,               Jacquelyn L. Williams-Bridgers, Assistant Director
Community, and           Yvonne C. Fkfahl, Assignment Manager
                         Leila D. Kahn, Site Senior
Economic
Development Division,    Hubert M. King, Jr., Evaluator

Washington, D.C.

                         James S. Jorritsma, Evaluator-in-Charge
Boston Regional Office   Christine M. McGagh, Site Senior
                         Lena L. Huang, Evaluator
United States
General Accounting    Office
Washington,   D.C. 20548

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