How Funding Works

Turkey Hill Road, Red Hook, New York

How does transportation funding work?

We would love to say that transportation funding flows seamlessly across political boundaries, moves easily between purposes, and quickly meets our priorities – but that’s not the case, and it’s important to recognize that reality. Whether sourced from federal, state, or local government, transportation funding brings various requirements, typically intended to provide checks and balances. These requirements differ by the funding agency, source, and purpose. They can add time to projects and create unforeseen costs that frustrate project sponsors and the public alike. Yet this is the framework we operate under and one that is unlikely to change during the span of Moving Dutchess Forward.

The fundamental point is that no single source funds our transportation system, nor does a single agency manage it. Maintaining and expanding access – by fixing roads, repairing bridges, building sidewalks, purchasing buses, and operating trains – requires many partners.

The Federal, State, & Local Role in Transportation Funding

There are three basic buckets of transportation funding: federal, state, and county/local; and three primary purposes that this funding can support: roads (including bridges, sidewalks, and multi-use paths), transit (bus, rail, and ferry), and planning. For each of these buckets and purposes, funding flows to agencies and projects in different ways – and whether by design or default, this creates silos. We don’t say this in a critical way, but to recognize that these silos exist and form the context for how we talk about transportation funding.

The Federal Role

Federal funding, primarily administered through the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA), funds roads (some, but not all), transit (regardless of form), and transportation planning (what we do at the DCTC). The federal government’s role is intended to support projects and services that further national goals such as protecting public health, safety, and welfare, promoting economic competitiveness, and maintaining a strong national defense. How this happens varies by the two federal agencies and the programs they administer.


Federal funds support projects on public roads, bridges, and other infrastructure (e.g., sidewalks, shared-use paths, etc.) that are deemed federal-aid eligible, meaning they are of a high enough classification or purpose that warrants federal investment. These funds are authorized every five or more years through a federal transportation bill and appropriated annually by Congress to states, which then distribute the funds through their respective DOTs (e.g., NYSDOT) and MPOs (e.g., DCTC). The funds are tied to specific programs with specific eligibility requirements. For example, the National Highway Performance Program (NHPP), which makes up a large share of available FHWA funding, can only support projects on the National Highway System (such as I-84 and the Taconic State Parkway). Because of the federal focus on major facilities, a large share of FHWA funding supports state projects, with a smaller share available for county and local projects. Federal funding also tends to support more road and bridge projects than walking and bicycling projects.


Federal funds support capital costs (e.g., buying a bus) and operational costs (e.g., driving that bus) for public transit operators of all kinds, including bus, rail, and ferry. Federal transit funds, like highway funds, are authorized and appropriated by Congress, but the FTA uses a formula to allocate most of the funds directly to Census-defined urbanized areas, rather than to states. The MPOs within those urbanized areas must suballocate the funds to transit operators. For us, funds are first allocated to the Poughkeepsie-Newburgh Urbanized Area, which includes three counties in New York: Dutchess, Orange, and Ulster. The MPOs then suballocate the funds to local transit operators. In Dutchess, this includes County Public Transit and the Metropolitan Transportation Authority (MTA).


Federal funds also support planning work, including our three core documents (which include Moving Dutchess Forward). Planning funds stem from separate FHWA and FTA programs and are allocated by Congress to the states, who suballocate the funds to MPOs. We program the funds in our annual Planning Program, where we identify specific planning tasks that will use the funds.

The State Role

New York State provides a large amount of funding for transportation projects and services – though in a different way than the federal government, based on the state agencies involved and the forms of travel addressed. The State plays a central role in many aspects of transportation, including roads and bridges, bus and rail transit, walking and bicycling facilities, rail and maritime freight, aviation, and even licensing. Because of its reach and flexibility in how funds are used, the State can have an even greater influence on our transportation system than the federal government.


State funds for roads, bridges, and other infrastructure are generated through a mix of tax revenue, municipal bonds, and fees, and approved in the annual state budget. Much of this funding flows through NYSDOT to its regions (e.g. Region 8 in the Hudson Valley), typically in the form of State Dedicated Funds, which support many system-wide maintenance projects on state highways (repaving roads, painting bridges, replacing signs and signals, etc.). State funds also supplement federal funding for NYSDOT-sponsored federal-aid projects as well as county and local federal-aid projects. The State also allocates special funding – such as the Consolidated Local Street and Highway Improvement Program (CHIPS) and PAVE-NY – directly to counties and local municipalities for road maintenance.


State funds play an equally important role in supporting public transit operators, which in our area include the MTA/Metro-North Railroad and County Public Transit. Besides providing capital funds to transit operators, the State allocates funds through its annual Statewide Transit Operating Assistance (STOA) program, which reimburses operators for passenger trips and vehicle miles. As with FHWA-funded projects, the State supplements local match requirements for FTA-funded capital projects such as replacing buses, repairing garages, and purchasing bus shelters.


The State uses state funds, toll credits, and in-kind services to provide the required match for the federal planning funds that we use for our planning work.

The County & Local Role

Dutchess County and local cities, towns, and villages also provide funding for our transportation system, but at a smaller scale than the federal and state government. County and local funds are often used for basic maintenance work or as required matches for federal funds.


County and local funds, primarily from tax revenues and municipal bonds, support road and bridge repairs on county and local facilities. The funds are appropriated through annual budget processes or as part of multi-year capital programs (e.g. the County’s 5-year Capital Program). If the county or a local municipality is using federal funds for a project, they must also contribute a local match (typically 20 percent of the total cost). Counties and local municipalities also receive CHIPS and other special funding from the State.


County funds support capital and operational expenses for the bus services provided by County Public Transit. These funds come from tax and fare revenue, and through municipal bonds for major capital expenses (e.g. buying buses or garage repairs). Some local funds are used to support demand-response services such as Dial-A-Ride.


County funds are used to match the federal funds that support our transportation planning work.

The Takeaway

Each level of government plays a role in funding transportation projects and services that improve safety, reliability, and access to basic needs. How this happens varies by agency and funding program. Frequently, one funding source is better than others for a particular project or a specific service. But truly transformative projects often require more than one agency or funding stream.