Fine with me. States can prioritize what is more important to them, and if they want extra, can pay for it themselves. While it might sound bad to lose the money, the federal government has used the highway funds to force the states into supporting things they probably wouldn’t otherwise (55 speed limit). When the funding drops, so does the ability to use it as a weapon.
You are correct, no more threats from the feds to withhold the funds... if the funds aren’t there to begin with.