Federal Highway Funds Face August Redistribution as States Near FY 2026 Deadline
The Federal Highway Administration has established a process to redistribute unused fiscal year 2026 federal-aid highway obligation authority, creating a late-summer deadline for states that cannot commit their available authority before the federal fiscal year ends.
FHWA Notice N4520.295, issued June 29, governs the redistribution process after Aug. 1, 2026. The notice directs states to identify balances they do not need and coordinate with FHWA on moving that authority to states that can use it.
The process concerns existing federal-aid highway obligation authority. It is not a new infrastructure spending program or a completed round of project awards. Instead, it is a mechanism for reallocating authority that otherwise may go unused as the fiscal year closes.
The deadlines states face
FHWA identifies Sept. 25, 2026, as the effective final day to obligate federal-aid highway program funding through FMIS. The underlying authority is subject to lapse on Sept. 30 if it has not been obligated.
That timing gives state transportation departments a narrow final window to determine whether they can use their allocations, identify unneeded balances and work with FHWA on possible redistribution. States able to move projects forward may receive additional obligation authority if other states cannot use what was assigned to them.
The distinction between the two dates matters. Sept. 25 is the effective final date identified for obligations through FMIS, while Sept. 30 is the date on which unobligated authority is subject to lapse. The notice therefore places practical pressure on states to resolve unused balances before the end of September rather than waiting until the final days of the fiscal year.
What the notice does and does not decide
The notice does not identify the final dollar amount that will be redistributed. It also does not name the states that may receive additional authority. Those outcomes will depend on the balances states identify as unneeded and on their coordination with FHWA during the redistribution process.
No specific state is identified as having lost funding. The notice sets procedures for handling obligation authority that could lapse; it does not announce completed project cancellations or final awards to recipient states.
The authority is governed by Section 120(c) of the Department of Transportation Appropriations Act, 2026, Public Law 119-75. FHWA’s notice applies nationwide to the Federal-Aid Highway Program and directs FHWA division administrators and state transportation departments across the United States.
Certain transportation funds are excluded from the redistribution process, including specified research funds and no-year and multiyear funds. The notice therefore applies to the covered FY 2026 obligation limitation rather than every federal transportation account.
Why the process matters
For states, the immediate issue is access to federal highway authority during the final months of FY 2026. A state that cannot obligate available authority before the deadline could lose access to that authority for the fiscal year, while a state with projects ready to advance could benefit from authority redistributed from elsewhere.
The broader federal transportation pipeline includes roadway, transit, rail, maritime and aviation projects supported through programs such as the U.S. Department of Transportation’s BUILD program. The FHWA notice, however, addresses federal-aid highway obligation authority and does not itself award BUILD grants or announce new construction funding.
The next known step is for states to review their FY 2026 balances and coordinate with FHWA after the Aug. 1 redistribution period begins. The amount ultimately moved between states, and the recipients of any additional authority, remain to be determined.
Sources
- FHWA Notice N4520.295: Federal-Aid Highway Program Obligation Limitation—FY 2026 Redistribution, Federal Highway Administration
- BUILD Grant Program, U.S. Department of Transportation
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