Federal-Aid Highways: States and Local Governments Reported Benefits to Federal Highway Fund Swapping, but Impacts Cannot Be Definitively Determined, Report to the Committee on Transportation and Infrastructure, House of Representatives [open pdf - 455KB]
From the Highlights: "The Federal Highway Administration (FHWA) provides funding to states to build and maintain the nation's roadways and bridges. States must follow applicable federal standards such as laws that require contractors to pay locally prevailing wages. States can make federal funding available to local agencies for projects, but the ability of local agencies to comply with federal requirements is a well-documented risk area. Some states have established 'fund swapping' programs where local agencies swap proposed federal funding with the state in return for state dollars. FHWA does not directly oversee these programs, and no federal statutes or regulations authorize or prohibit fund swapping. GAO [Government Accountability Office] was asked to review swapping of federal-aid highway funds and its impact. In this report, GAO describes: (1) the extent to which states and local agencies engage in fund swapping; (2) factors affecting whether state and local agencies engage in federal fund swapping; and (3) what is known about the impact fund swapping has on prevailing wages paid to workers and other federal requirements."
Government Accountability Office: http://www.gao.gov/