Grants to the States are the predominant type of Federal highway funding. These funds are largely apportioned to the States by statutory formulas. The majority of these grants fall into one of five general categories: Interstate Maintenance, National Highway System, Surface Transportation Program, Bridge Replacement and Rehabilitation Program, and Congestion Mitigation and Air Quality Improvement Program. Other categories have smaller levels of funding. Each of these programs has its own eligibility rules, and funds may be switched between categories.
Under the Federal-aid program, Federal requirements apply when Federal funds assist a project, but are generally not triggered on an entire project corridor, merely because there are Federal funds being used in other portions of the project corridor. The term project is defined in statute as "an undertaking to construct a particular portion of a highway, or if the undertaking so implies, the particular portion of a highway so constructed, or any other undertaking eligible for assistance under this title."[417] In other words, only that portion of a highway corridor project that uses Federal-aid funding becomes a Federal project. Only these Federal projects must comply with Federal requirements. The scope of the project agreement entered into under 23 U.S.C. 106 constitutes the project under which the Federal Government is contractually obligated for the payment of the federal share.
The concept of a State-run federally-assisted highway program is underscored by 23 U.S.C. 145, which provides that States have the right to determine which projects shall be federally financed. The States, not the FHWA, may decide where to use their Federal-aid highway funding. This right allows the States more flexibility in forming public-private partnerships, because the States can decide to form a public-private partnership without seeking Federal funds or by seeking Federal funds on only a portion of the particular corridor. For construction projects directly receiving Federal assistance, Title 23, United States Code, makes no distinction between grants and loans for most of these requirements.
While Federal conditions attach when a project is constructed with Federal funds, the operation of a number of Federal laws also results in these conditions applying to a much broader scope of projects. Most environmental laws, and particularly the National Environmental Policy Act, 42 U.S.C. § 4321, et seq., often apply to the entire action, even if only a small portion receives Federal funds. The reason is that actions must be analyzed between "logical termini" and cannot be segmented.[418] Moreover, environmental reviews must consider the "cumulative and secondary impacts" of actions.[419] "Connected actions" must be considered together.[420] Even when no funding is involved, these laws can come into play because they normally apply to approvals and permitting actions as well as to grant decisions. Some laws apply to recipients of Federal funds, no matter where those funds are used. The civil rights laws, and particularly title VI of the Civil Rights Act of 1964, as amended, apply in this way. Some highway safety requirements, such as the standards set forth in the Manual on Uniform Traffic Control Devices, normally must be applied on a system-wide basis.