Alaska Department of Transportation & Public Facilities Administrative Services Division Director Dom Pannone delivers information about funding at the 2024 Associated General Contractors, or AGC, of Alaska Annual Conference in November.

Changing Lanes

Transportation funding frustrations lead to a new approach

By Rachael Kvapil

n 2024 the Alaska Statewide Transportation Improvement Program, or STIP, was initially rejected by the federal government, a rare and unanticipated roadblock as the state and contractors were prepping for upcoming public projects. While the STIP was later approved, this early difficulty led to a lower-than-anticipated August Redistribution, funding that the Federal Highway Administration, or FHWA, distributes each August.

To respond to construction industry concerns, the Alaska Department of Transportation and Public Facilities, or DOT&PF, updated Associated General Contractors, or AGC, of Alaska members at the 2024 AGC of Alaska Annual Conference about the STIP process in the future, construction projects in the coming year, and other project opportunities on the horizon.

Alaska’s STIP is a four-year transportation systems preservation and development program that includes interstate, state, some local highways, bridges, ferries, and public transportation.

It covers all system improvements for which partial or full FHWA funding is approved and expected to be received within the duration of the four-year plan. The STIP doesn’t fund airports or non-ferry-related ports and harbors that receive dollars from other sources.

In most years, the STIP is submitted and approved with findings or corrections. This year, the process didn’t go as smoothly. Though DOT&PF presented the STIP in the same format as previous years, the plan was initially rejected in February. After DOT&PF made corrections to its initial submission, the plan received partial approval in March, but DOT&PF says FHWA did not process the amendment fully until September, after funding decisions for the annual August Redistribution were already made. That delayed decision left Alaska with only $19 million in the August Redistribution, much lower than the $71.4 million the state would have been eligible to receive had the amendment been approved prior to the August Redistribution.

Alaska Department of Transportation & Public Facilities Deputy Commissioner Katherine Keith presents information at the 2024 Associated General Contractors, or AGC, of Alaska Annual Conference in November. Keith discussed several issues, from thanking contractors for their timely response to emergencies to funding for workforce development, and work zone safety measures the department plans to put in place.

August Redistribution is unused spending authority provided back to the states. It comes from unspent program funds—under-used grant programs, loans, and new Infrastructure Investment and Jobs Act programs for which allocated money has not been spent. The redistributed spending authority allows states to put that money into projects that meet eligibility requirements for funds they have remaining. If a state is unable to spend those funds through August Redistribution, those funds typically carry over to the next year.

The catch is that the funds have to be obligated by the end of September, and the funding is only approved if the request fits into one of about sixty-five “pots” of money, each pot representing different spending eligibility criteria.

The process gives states a chance to fund additional projects, and generally Alaska does well, DOT&PF leaders say, typically even outperforming many other states. But this year, DOT&PF Administrative Services Division Director Dom Pannone told AGC members, eleven of the projects submitted to use the August Redistribution funds were rejected: seven of those because the project budgets had increased enough that moving forward on the project now required a STIP amendment.

The percentage increase at which a STIP amendment is required varies by the total project cost. Projects estimated to cost more than $100 million must have a formal STIP amendment if the project cost estimate increases by 10 percent; a 20 percent increase triggers a STIP amendment for projects in the $10 million to $50 million range.

Alaska had submitted the amendment requests, Pannone said, but they had not yet been approved in August.

Ryan Anderson, DOT&PF commissioner, attributes the difficulties with STIP funding and the August Redistribution to federal staff changes, additional scrutiny of Alaska’s transportation spending, and lack of clarity on federal requirements.

“You can read all the correspondence online and the progress we made,” says Anderson. “But some projects like the Chena Flood Plain Bridges were cut because we don’t interpret boundary regulations the same way as our federal partners. We’re struggling to get the details and descriptions we need to resolve things.”

It’s a balance, Anderson told the audience of contractors.

“We definitely don’t want to delay projects over fights with the federal government, but there are certain things that, we believe, if we don’t stand up for ourselves and say, hey, we have to have a certain amount of flexibility in the state of Alaska… it’s going to affect us in the future,” he said.

FHWA funding fluctuates from year to year but has remained relatively steady. In 2019, for example, the state received a little more than $500 million in formula funding connected with the STIP. That amount was closer to $600 million in 2020, followed by a dip to less than $500 million in 2021, and a jump to nearly $600 million in 2022. It has remained at the approximately $600 million mark for the past two years. But the lower August Redistribution this year put the total FHWA funding amount at about $663 million, significantly less than the roughly $800 million total funding the state saw in 2022 and 2023. The decrease sparked concern.

Anderson says many contractors feel like they aren’t seeing the backlog of work for next year, or they worry about further delays to existing projects due to funding. However, funding for DOT&PF projects includes other programs and grants outside the STIP. Though the August Redistribution was only $19 million, this is just a piece of the overall $650 million in federally funded highway projects Alaska acquired in fiscal year 2024. And $300 million more from the Federal Aviation Administration, or FAA, was awarded for aviation projects, with other projects receiving funds from the State of Alaska capital budget.

Anderson says $100 million in new projects is a good start. “We want to deliver more projects earlier in the year, prepare better bids, and stay focused to get project work to the street as early as possible.”

Alaska Department of Transportation & Public Facilities Commissioner Ryan Anderson addresses a full audience at the 2024 Associated General Contractors, or AGC, of Alaska Annual Conference in November.

To address some of these concerns moving forward, Anderson and other key DOT&PF staff presented plans at the recent AGC of Alaska annual conference. The presentation aimed to explain the department’s complex funding structure and address the recent challenges with the STIP and aviation improvement programs. Likewise, presenters answered questions, presented upcoming projects, and provided updates on other construction industry issues.

“We’ve asked AGC leadership to give us some targets as we look at these challenges and program by year,” said Anderson during his presentation. “We’re looking for input on what types of projects, how to manage the geographic spread, and what size is preferable. What’s the right spot for the industry?”

Though the STIP has taken the spotlight recently, FAA funding also experienced disruption as the FAA Reauthorization Act of 2018 ended in fiscal year 2023, the new Reauthorization Act was delayed and has been funded with continuing resolutions, which slows down the roll-out of the program.

Troy LaRue, DOT&PF operations manager for the Division of Statewide Aviation, told AGC members that without reauthorization funding the entire program, the FAA relied on continuing resolutions. That made it difficult to determine when money would be available for projects.

In mid-May, Congress passed the FAA Reauthorization Act of 2024, which runs through fiscal year 2028; however, this meant the bulk of the funding wasn’t available until the end of the construction season.

“If you look at the grant timeline, you can see that we were really hit hard by how the FAA soft-rolled them out,” said LaRue. “We’re talking to them at great lengths and seeing how we can change that.”

According to LaRue, another source of recent funding restriction is the Airport Improvement Program, or AIP, Handbook. The handbook provides guidance to FAA staff about administering the AIP program. He said revisions rendered several previously accepted projects ineligible and put more of the funding burden on the state programs. Since the changes were made without public process, DOT&PF is working with FAA to make corrections.

LaRue says the next two years of the Airport Capital Improvement Program, or ACIP, look solid, but the third year will depend on the bid openings from the first two seasons. DOT&PF attempts to program the Airport Capital Improvement Plan five years out. Overall, he told AGC members that he feels the department has a fairly good grasp of where it’s going with statewide aviation.

Associated General Contractors, or AGC, of Alaska members listen to a presentation about Department of Transportation & Public Facilities funding methods and 2025 projections at the 2024 AGC of Alaska Annual Conference in November.

During the AGC conference session, DOT&PF Deputy Director Katherine Keith led a discussion about the key components critical to project delivery in Alaska. Top comments included having projects on the shelf and ready to go, having resources and capacity to do the work, stakeholder buy-in from communities and other regulatory agencies, and contract administration from contractors. Keith said the department is currently working with the American Association of State Highway and Transportation Officials, or AASHTO, and other agencies on position papers on joint efforts in workforce development by encouraging transportation careers among middle- and high-school students, promoting on-the-job training, improving outreach with historically underrepresented populations, removing barriers to entry in the transportation workforce, and compiling use cases for workforce development funds. These position papers provide a unified viewpoint when speaking in Washington, D.C., or other public arenas.

“We did open up a project for over $3 million each year to put back into transportation workforce development,” reported Keith. “We will continue to have conversations with AGC, and we look forward to discussing what we can do together to increase our workforce.”

To better keep contractors informed about DOT&PF projects, the department has developed an online dashboard that displays a tentative schedule. It allows users to search projects by cost, region, and time. To view the schedule, visit dot.alaska.gov/tasdashboard/.

Regional leaders wrapped up their look forward by highlighting projects slated for 2025, an outlook that included more than 100 road, airport, facility, and Alaska Marine Highway System projects in the works or scheduled to come up for bid in the next year to year and a half. Chris Goins, Southcoast Regional Director, also thanked contractors who helped clean up the more than twelve disasters over the last year, particularly a spate of recent disasters in Southeast that included a landslide, office fire, and significant culvert collapse, all of which occurred in the span of just a few hours.

“Contractors like you showed up. Some of you, I didn’t have to call. You just showed up with equipment and said, ‘I’m ready to work, what do you need me to do?’” said Goins.

Even with a healthy offering of projects for the coming years, Anderson says DOT&PF continues to work to improve the STIP process. Earlier in the year, the department announced that it would be moving toward implementing a rolling STIP, a primary planning document that is prepared yearly instead of a four-year, comprehensive document. Rolling STIPs are common in other states, and Anderson feels it allows the department to update information more efficiently. He says all the components are in place to move into the rolling STIP process.

“We all know how important this program is for the construction industry,” says Anderson. “This is a two-way partnership with AGC. We aren’t shying away from this issue even when things are tough and complicated.”

Alicia Amberg, Executive Director for AGC of Alaska, says AGC members appreciated the entire DOT&PF leadership team taking the time to present on upcoming challenges and opportunities while answering some tough but valid questions from members on the overall program.

“We continue to engage in dialogue with the administration and DOT to understand better the construction program in the upcoming year, as well as concerns surrounding FHWA and the STIP,” she says.