A funding shortfall that jeopardizes more than $150 million in road and bridge projects has catapulted transportation to the top of the agenda for Vermont lawmakers.
More than half the state’s annual transportation budget comes from the federal government. But Vermont must contribute a state “match” to draw down that money.
Analysts for the Legislature say state transportation revenues are about $33 million short of what Vermont would need to maximize its federal drawdown in the next fiscal year. That deficit would cost the state an estimated $163 million in lost federal revenue, unless lawmakers and Republican Gov. Phil Scott decide to plug the gap.
"I would keep everything on the table to make sure that we solve this core function of government for Vermonters.”Swanton Rep. Matt Walker
“The state has always had a policy, Republican or Democrat administration, to maximize all federal dollars,” said Swanton Rep. Matt Walker, the Republican chair of the House Committee on Transportation. But, he continued, “coming up with that match money is a bigger and bigger struggle.”
That struggle isn’t unique to Vermont. Most state transportation funds rely most heavily on a revenue source — the gas and diesel tax — that hasn’t come close to keeping pace with the rising cost of construction. The cost of road and bridge repairs has tripled since the turn of the century, according to the National Highway Construction Cost Index. Vermont’s gas and diesel tax revenues have risen by about 30% over the same time period.
Lamoille County Sen. Richard Westman, the Republican chair of the Senate Committee on Transportation, has been sounding the alarm for years about revenue shortfalls in Vermont’s transportation fund. The advent of more fuel-efficient vehicles means Vermonters are using less gasoline and diesel to travel more vehicle miles, which causes more wear and tear on highway infrastructure, Westman said.
“We have not fully thought through the policy behind this,” he said. “We’re the victims of dramatic increases in costs and everything’s more efficient than it was.”
Lawmakers and the governor faced a similar dilemma last year. They solved the problem by ending the decades-long practice of using $20 million in transportation revenues annually to support Vermont State Police, and also by using $12 million in one-time money to fill the hole.
Westman said Vermont could balance this year’s transportation budget by reclaiming the approximately $50 million in purchase and use tax revenue that currently goes to the education fund. Doing so, he acknowledged, would add to the 12% property tax hike that Vermonters are forecast to see this year.
“I think in the long term, we’re going to have to look at that and say, ‘How could we bring at least a portion of that (purchase and use revenue) back to transportation?’” Westman said. “I still have a short-term problem.”
A short-term problem that needs to be fixed, according to local officials. Municipal leaders say funding constraints at the Vermont Agency of Transportation are resulting in yearslong delays on state highway projects that affect town and city infrastructure.
Nicolas Storellicastro said that when he came on as Barre City’s manager in 2022, state officials were scheduled to repave Main Street — a state highway AOT is responsible for maintaining — in 2027. When city officials discovered that the project had been postponed until 2030, Storellicastro said, they decided to dip into municipal coffers to do it themselves.
“Our poor Main Street, where we have our shops, our restaurants, was a danger to people crossing it,” he said, noting the city spent $187,000 to complete the project. “That was a huge hit for us.”
Josh Hanford, with the Vermont League of Cities and Towns, said Barre City’s experience is symptomatic of a statewide problem that’s seen the delay of road and bridge projects critical to municipal economies.
If Vermont maintains current funding levels for paving projects over the next 10 years, according to a recent analysis by the Agency of Transportation, the percentage of state highway miles in very poor condition will rise from 6% today to 48% by 2035.
Transportation, Hanford said, is an issue now on par with education, health care and housing.
“It’s really gotten to a breaking point,” he said.
Even Republican lawmakers acknowledge that increasing state revenues — by raising the gas tax or some other means — may be the only way to ensure the long-term health of the transportation fund. Scott made clear in his State of the State address last week, however, that that option won’t be on the table in 2026.
Lawmakers say they’re in a holding pattern until next week, when the governor delivers an annual budget address. Scott has indicated he’ll include a plan to address the transportation shortfall.
“We’re all anxiously waiting to see what that is,” Walker said. “And I would keep everything on the table to make sure that we solve this core function of government for Vermonters.”
