Congress must decide whether IIJA’s record funding for roads, bridges, and transit becomes the new normal or a short-lived peak.
The Infrastructure Investment and Jobs Act (IIJA) provides funding for roads, bridges and transit through Sept. 30, 2026. The IIJA provides the Highway Trust Fund (HTF) with expenditure authority, or the ability for state and local governments to get reimbursed for obligations for projects. This expenditure authority ends unless Congress passes an extension or a new reauthorization bill. Payments on projects that were already obligated continue, but lettings, new grant agreements and many discretionary awards pause until Congress restores authority. DOT’s own lapse plans underscore this: during an authorization lapse, Federal-aid Highway programs stop obligating new funds.
To understand what changes could happen on Oct. 1, 2026, it helps to separate IIJA’s two main money streams. The first is the HTF, the traditional backbone that finances state formula programs like National Highway Performance Program (NHPP), Surface Transportation Block Grant (STBG), Highway Safety Improvement Program (HSIP), Congestion Mitigation and Air Quality Improvement (CMAQ) and others. IIJA set five years of highway contract authority and propped up the HTF with a one-time $118 billion transfer from the General Fund designed to carry the trust fund through the life of the reauthorization as user fee revenues meant to fund the HTF were not sufficient enough.
The second stream is Division J “advance appropriations.” Congress wrote five years of guaranteed general fund dollars directly into the statute, outside the annual congressional budget cycle. Across DOT these advances total $184 billion over fiscal years 2022-26. For highways specifically, the package delivers $9.5 billion per year to FHWA while for the FTA this amounts to $4.25 billion per year. This is money that sits on top of the trust fund formulas and then stops after FY26 unless Congress chooses to continue them. That supplemental funding includes the Bridge Formula Program at $5.5 billion per year, funded entirely from the general fund. You can find a full list of programs affected by Division J funding at www.transportation.gov/sites/dot.gov/files/2022-01/DOT_Infrastructure_Investment_and_Jobs_Act_Authorization_Table_%28IIJA%29.pdf.
Those two streams produce very different FY27 outlooks. On the HTF side, a short extension or a full reauthorization can keep formula programs flowing with an annual obligation limitation. The final-year marker in IIJA is useful here: FHWA’s FY26 obligation limitation sits at $62.65 billion, which is generally a useful indicator for how much Congress carries forward in extensions in previous years while it negotiates a new bill. On the Division J side, there is no built-in carryover. Those advances were time-limited by design, so the DOT supplemental, at a total $36.81 billion per year, disappears on Day 1 unless lawmakers affirmatively recreate it. That is the single biggest change most contractors could feel in their FY27 pipelines depending on what Congress decides.
The discretionary landscape changes accordingly. Programs that were fed from both the HTF and Division J will likely shrink if only the HTF taps remain open. INFRA is an example of this. By statute it draws from multiple sources; trust-fund contract authority, Division J advances and authorizations subject to annual appropriation. If the general fund advances sunset and appropriators are less generous, INFRA rounds will tighten. The same logic applies to other competitive programs that had a Division J boost. By contrast, the Bridge Formula Program has no HTF footing at all, so without a new law it simply ends after FY26.
What will Congress do? History suggests we should be ready for a period of extensions before a deal lands. That pattern spanned the gaps from TEA-21 to SAFETEA-LU and from SAFETEA-LU to MAP-21, and it’s a familiar way for Congress to buy time while committees negotiate a long bill. Extensions keep formulas moving but inject planning uncertainty and can push lettings to the right if obligation limitation arrives late. Governors have already warned that any lapses could threaten states’ abilities to maintain roads and bridges.
Discussions around the next full five-year reauthorization will focus on how to fund our nation’s transportation infrastructure. Fuel taxes, the HTF’s main revenue source, haven’t been increased since 1993, and the Congressional Budget Office projects that under current policy, the highway account will run short of cash by FY28, with annual gaps approaching $40 billion. Independent analyses drawing on CBO’s baseline suggest that simply holding spending near IIJA levels through FY27-31 would require on the order of $150 billion in added resources through either more general fund transfers, new user revenues, or some mix. That reality makes a “same as IIJA plus all the advances” outcome less likely.
In other words, the HTF formulas are the part Congress can most easily keep steady for FY27 under an extension or a modest “skinny” reauthorization, because the structure already exists and states rely on it. Recreating the Division J surge, particularly the extra billions for bridges and megaprojects, is the expensive choice because it requires fresh general fund commitments beyond the trust fund baseline. If lawmakers are searching for ways to pare back totals without cutting core formulas, dialing down or dropping the advances is the low friction lever.
So, what does all this mean for what contractors can expect starting in 2027? The safest assumption is to expect formula-heavy letting calendars and a leaner discretionary grant environment. In addition, expect some possible timing friction. Even if Congress avoids a lapse, multiple short extensions are common and can shift bid dates and cash flows. DOT’s lapse guidance also serves as a reminder that while reimbursements continue for previously obligated projects, new obligations can’t proceed without authority in place.
Two numbers are worth keeping in mind while you watch Congress move: the FY26 obligation limitation, a workable proxy for a “flat” extension, and the Division J annual amount that falls off without a new vote. Together they explain why the pipeline in the years following IIJA’s expiration are likely to feel thinner even if headline formula numbers look flat in nominal terms. When you layer on the increased construction costs, flat nominal dollars will buy less work than they did when IIJA launched.
Congress could still manage to avoid such situations. If a five-year bill emerges with new HTF revenue – whether from indexing or increasing fuel taxes, adding a user-fee like an EV fee, or another large general-fund transfer – lawmakers could hold formulas steady in real terms and even revive a version of Division J for targeted priorities like bridges, freight, or safety. But that takes money, and the CBO baselines point to a sizable hole that must be filled before those ambitions can be realized.
As always, AGC will keep you updated on the latest. Please be sure to check out AGC’s Recommendations for Surface Transportation Reauthorization to learn more about what AGC is advocating on behalf of the construction industry.
For more information, contact Jonathon Porter, at jonathonporter@agc.org, or Deniz Mustafa, at denizmustafa@agc.org.