The clock is running out on the federal transportation program - which provided $16.8 billion in formula funds to help New York repair roads and bridges, maintain and modernize transit, and move major projects from the planning board to construction.
On September 30, 2026, the landmark Infrastructure Investment and Jobs Act (IIJA) expires. The federal fiscal year (FY) 2027 budget request for the U.S. Department of Transportation (USDOT), and the inability of Congress to progress a reauthorization bill, makes clear that Washington has not yet answered the central question facing states: what comes next?
The Administration’s request appears stable at first glance. USDOT seeks $114.1 billion in new budgetary resources, including $26.8 billion in discretionary budget authority and $87.3 billion in mandatory budget authority spending. But the topline masks a major reset. The IIJA’s guaranteed advance appropriations - which represent nearly one-third of total IIJA’s transportation funding - end with the current authorization, and the FY 2027 request includes no replacement. As a result, total USDOT resources would fall from roughly $146.1 billion in FY 2026 to $112.3 billion in FY 2027 — a decrease of about $33.8 billion, or 23 percent.
The federal surface transportation program now faces two pressures at once: the end of the IIJA investment surge and the long-running instability of the Highway Trust Fund (HTF).
The IIJA temporarily expanded federal infrastructure investment by pairing traditional HTF-backed formula programs with guaranteed general fund advance appropriations. Those dollars helped states plan with greater certainty, compete for major discretionary grants, and keep large capital programs moving despite inflation and supply chain challenges. When that funding expires on September 30th, Congress must enact a new multi-year surface transportation law with new and/or redirected resources, or the federal program will revert to a smaller funding base.
At the same time, the HTF can no longer support current transportation spending on its own. Federal motor fuel taxes remain the fund’s main revenue source, but Congress has not raised the federal gas tax since 1993. As vehicles use less fuel and as more drivers shift to electric or alternative-fuel vehicles, revenues have failed to keep pace with system needs. Since 2008, Congress has transferred approximately $275 billion from the General Fund to keep the HTF solvent. The Congressional Budget Office projects that both the highway and mass transit accounts will face exhaustion in 2028 without additional action.
September 30, 2026, is not a routine budget marker. It is the deadline for Congress to enact the next surface transportation reauthorization or pass a short-term extension.
Extensions can keep money flowing, but they rarely give states the confidence they need to launch major procurements, lock in local matches, or commit to multi-year construction schedules. Without a new federal framework, New York and other states will have to plan in smaller windows, carry more risk, and make harder decisions about which projects can move forward.
The FY 2027 budget request points toward a more formula-centered but fiscally constrained federal program. Core highway and transit formula programs may continue through annual appropriations, but the request does not continue the IIJA’s supplemental advance appropriations and proposes no funding for several major flexible discretionary accounts that states and localities have used to fill complex project gaps.
For New York, that shift matters. Formula dollars provide the backbone of transportation funding, but competitive grants often help advance large, regionally significant projects that need resources beyond baseline allocations. A smaller discretionary footprint would mean fewer opportunities to layer federal funds, close financing gaps, and move major projects from concept to construction.
New York depends on a strong federal partnership to maintain one of the nation’s largest and most complex transportation networks. The IIJA gave the State greater certainty for highways, bridges, transit, rail, aviation, safety, and resilience investments. It also supported New York’s ability to move forward with historic capital programs at NYSDOT, the MTA, and local governments across the State.
As the IIJA expires, New York faces a new environment. The State must balance existing commitments, rising construction costs, aging infrastructure, and demand for transit and mobility improvements while federal rules and funding levels remain unsettled. That uncertainty will shape the next NYSDOT Five-Year Transportation Plan, which enters its final year in state fiscal year (SFY) 2026-27, and influence how the State prioritizes projects across regions.
The absence of federal clarity is a direct threat to New York’s ability to plan, finance, and deliver a long-term transportation program. In the near term, the State has taken steps to shield projects already in the pipeline, such as actively defending approved federal funding in court when federal agencies attempt to withhold or redirect dollars already committed to New York projects.
These temporary measures are not substitutes for a stable federal partnership. Federal transportation funding underpins a significant share of both the MTA’s capital plan (21 percent) and NYSDOT’s capital program (40 percent). Prolonged uncertainty - or worse, a reduction in federal support - will have immediate and cascading consequences: projects will stall, contracts will be delayed or canceled, and long-planned investments will be deferred indefinitely.
If federal inaction persists, New York will be forced into a constrained and reactive posture, including:
Congress must now decide how to rebuild the federal surface transportation program for the post-IIJA period. The debate will likely focus on several difficult options: to
Each option creates tradeoffs across revenue stability, equity, political feasibility, and long-term project delivery.
The FY 2027 USDOT budget request does not settle the future of federal transportation policy. It shows the scale of the challenge.
September 30, 2026, is the deadline that will determine whether Congress gives states a stable next chapter or leaves them operating on temporary extensions and shrinking certainty. For New York, the stakes are clear: a smaller federal footprint and delayed reauthorization would slow project delivery, strain capital planning, and force tougher choices across highways, bridges, transit, rail, and local infrastructure. A durable reauthorization would give the State the predictability it needs to plan, procure, and build the transportation system New Yorkers rely on every day.
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