Strategies for Responding to Evolving Federal Transportation Policy and Funding Programs

How to Position Transportation Projects and Fund Capital Programs in 2025 and Beyond

The federal government allocates hundreds of billions of federal dollars for various transportation modes, including roads and highways, rail, transit, aviation and maritime. These funds are disbursed through legislation and annual appropriations for transportation infrastructure, but accessing the funding requires aligning priority infrastructure projects with administration priorities. 

Starting in early 2025, U.S. transportation policy started to shift with the change in the presidential administration and some uncertainty around levels of transportation infrastructure funding and new priorities. Some policy shifts have already resulted in changes to the grant-making process, while other shifts will have more medium and long-term effects on funding. Understanding all of the ramifications will be important for transportation agencies seeking additional funding and planning their capital programs.

Administrative Priorities and Funding Criteria

Six months into the new administration, specific policy priorities are coming into focus, including public safety, military readiness, financial responsibility, and industrial readiness. The administration has highlighted these themes across governmental departments, and promoted them through policy actions, budget proposals, and tax proposals. In transportation, these policy priorities inform the criteria used to rate and rank projects in grant program notices of funding opportunities, project selection and contracting. Those transportation priorities include: 

• Improving the safety of transportation systems, including air, rail and transit
• Improving domestic logistics and transportation routes as part of reshoring manufacturing and providing economic opportunities for workers
• Energy choice, including an all-of-the-above approach to addressing energy needs.
• Rebuilding U.S. maritime capacity
• Supporting autonomous vehicle deployment
• Reforming planning and environmental policies, including how the U.S. Department of Transportation (USDOT) implements the National Environmental Policy Act (NEPA)
• Supporting and strengthening Buy America requirements
• Family accessibility to transportation 

Discretionary Grant Program Updates 

Early in the transition, grant programs were paused and reexamined to determine adherence to the new administration’s policy priorities listed above and removed some previous provisions. Projects that were not yet under contract were reviewed for similar adherence to administrative priorities. After a transition between administrations, previously published grant program notices of funding opportunities (NOFOs) were reissued, and the administration began issuing new NOFOs for grant programs. Costs for projects under contract (obligated) prior to the new administration are being reimbursed. However, the administration is continuing to review previously awarded but unobligated grant awards. As of this summer, about a third of the awarded grant backlog has been obligated, meaning that the grantee has signed a grant agreement with the federal government and can begin project work and seek reimbursement of grant funds.

The language of new grant program NOFOs is aligned with the administration’s policy priorities.  For example, in mid-July, the USDOT announced the latest round of awards for the Better Utilizing Investments to Leverage Development (BUILD) grant program, the latest evolution of what was previously known as RAISE. The list of 30 projects, receiving nearly $500 million, included more highway projects than previous rounds. 

A few takeaways have become clear from recent NOFOs, offering strategies for those submitting grant applications: 

• Emphasize the basics
  • Recent grant notices have shown a shift back to the basic statutory requirements for awards, removing the multiple lenses previously used to evaluate projects such as equity and sustainability considerations.
• Highlight safety improvements
  • Safety continues to be a major component of project evaluation. Competitive applications will measure safety improvements.
• Focus on highways, roads and bridges
  • The current administration has made funding highway infrastructure a high priority. Projects that include multiple modes should focus on the highway component.
• Ready project information for grant application
  • To support a strong grant application, define the project, develop an accurate cost estimate, work to advance environmental clearance and permitting, and build support from local leaders before a NOFO is announced. 

Longer-Term Impacts on Transportation Funding

Looking beyond the short-term policy shifts that the administration has rolled out in executive orders and NOFOs, other changes will impact transportation infrastructure in the coming months and years. In the medium term, the administration and Congress are moving forward multiple budget bills, including the reconciliation bill enacted in early July and the Fiscal Year 26 budget proposal. Included in these are some notable changes like additional funding for roads, rail and port infrastructure. Budget line items reflect a shift to the funding of more traditional transportation infrastructure and away from support for electric vehicles and related charging equipment. 

Longer term, Congress plans to begin work on the next Surface Transportation Reauthorization bill. The Infrastructure Investment and Jobs Act (IIJA) expires September 30, 2026. Congressional committees are currently working to ready a bill to meet this deadline, although the enactment of previous authorization bills has taken an average of 18 months beyond the last bill’s expiration date. Early signals from the administration indicate the desire for significant changes to the federal-state relationship, the balance of formula to discretionary funding, the delegation of NEPA authority, and the elimination of electric vehicle and charging infrastructure support. The result will be implications to the various USDOT programs, such as the Federal Railroad Administration (FRA), Federal Transit Administration (FTA) and Federal Highway Administration (FHWA).

The administration has called for a traditional surface transportation bill that does not address funding for non-transportation infrastructure. There has also been interest in rebalancing the mix of formula and discretionary funding. Currently, approximately 87% is formula funding and 13% discretionary. Some have suggested a 90/10 or even a 95/5 mix with a simplified mix of grant programs. This could make more funding available on a formula basis, potentially via state departments of transportation (DOTs), rather than through discretionary grant programs directly administered by USDOT. The administration also seeks to give greater autonomy and flexibility to state departments of transportation to pursue their own priorities, and to devolve federal responsibility in environmental clearance, permitting, and emergency management.

Rethinking Funding Strategies and Management

What does all this mean for municipal and/or state departments of transportation, transit agencies, rail owners, municipal planning organizations and others that rely on federal funding? One major implication is the need for agencies to look beyond grants as they put together future capital plans.

It’s also important to remember that federal funding, as important as it is, does not represent all funding available. Projects that are now less likely to receive federal funding can consider alternative options, including state, local or regional funding. Multiple cities and regions have passed funding referendums in recent years that will help fund specific infrastructure initiatives or projects. Voters in Seattle, Denver, San Francisco, Nashville and elsewhere passed measures in 2024 to fund new transportation improvements and ongoing programs. According to the American Road & Transportation Builders Association, approved state and local ballot initiatives are expected to generate more than $41 billion in new and renewed funding. 

Agencies can also work to improve the management of their funds and better forecast costs in the future. For example, completing a programmatic assessment of capital needs can project upcoming costs, providing context that will inform future decisions. Or a risk analysis of capital construction, maintenance and operations costs can help decision makers understand the likelihood of future cost impacts. 

Reprioritizing projects based on available funding and criteria can help an agency strategize on how best to advance its capital plan. Knowing what is likely to be funded and the reasons why will support better decision-making about which projects to push now and which to put on hold. An exploration of alternative delivery options and options for using debt to finance projects can also provide new options for advancing needed infrastructure. 

While change brings uncertainty, it also offers opportunities for those who can navigate new requirements and needs and identify alternative funding approaches. Developing a strong financial foundation for transportation programs through an improved understanding of federal priorities and rethinking your financial strategies is an important first step in accessing those opportunities. 

For more information, contact nathan.macek [at] hdrinc.com (Nathan Macek), Infrastructure Finance Director; kathryn.roos [at] hdrinc.com (Kathryn Roos), Principal Strategic Consultant; or elena.wilken [at] hdrinc.com (Elena Wilken), Principal Financial Consultant.