MONTPELIER — The Vermont Agency of Transportation expects that it will pave about 220 miles of state-owned roads over a yearlong period that ends in June. In the year after that, though, it’s set to pave only about 125 miles, according to the agency’s latest spending plans — a nearly 45% reduction.
That drop has raised concerns among the leaders of the Legislature’s committees on transportation in recent weeks, who said that while the amount the state paves varies each year, the projected change from the 2025 to 2026 fiscal years stands out.
Miles paved over the 2026 fiscal year, which starts this July, would be the lowest since 2020, agency data shows, when the state paved 157 miles of roads it owns and operates.
Lawmakers said the drop is a symptom of a broader issue that, to be sure, is not unique to Vermont. Key sources of state transportation revenue are faltering, they said, while the cost of paving and other road construction work has been on a sharp rise in recent years.
The state has a goal of repaving its major roads every 10 years if possible, but some projections show the state moving toward as many as 25 years between repaving, according to Sen. Richard Westman, R-Lamoille, who chairs the Senate Transportation Committee.
“We’re in a bad place,” he said, speaking about transportation funding.
The transportation agency’s proposed paving budget for 2026 totals about $103 million, which is less than roughly $130 million lawmakers approved for paving in the state’s 2025 budget. A year before that, lawmakers approved about $141 million worth of state paving projects.
Joe Flynn, the transportation secretary, told House lawmakers in January that the paving decrease proposed for 2026 reflects cuts his agency had to make to balance its books. He said the structure of certain federal funds means the agency is more likely to cut paving before other types of projects, such as bridge reconstruction.
“We’ve built a responsible budget, without raising any taxes or fees, that is using the available federal funds to us,” Flynn said, presenting the agency’s proposed budget to the House Transportation Committee. The agency’s construction costs have gone up in recent years by 40% in some cases, he said, adding, “you know, bids are running pretty hot right now.”
The transportation agency’s work is largely funded, at the state level, with a pot of money that includes receipts from taxes on gas and diesel, fees charged for vehicle registrations and drivers’ licenses, and the sales tax that is levied when people purchase new vehicles.
Vehicle sales tax receipts have increased in recent years, state data shows. However, a third of that revenue doesn’t go to the state transportation fund, but instead is directed to the education fund, a statewide pot of money used to fund the operations of public schools.
At the same time, fuel tax revenue has declined as vehicles get more efficient — drivers use less gas, and so pay less in gas taxes. More and more people are buying electric cars, too, which means the state can expect even less revenue from its gas tax in the coming years.
Overall, Vermont’s transportation fund revenues have grown by an average of about 2% a year for the past decade, according to a January report from the transportation agency. That’s not enough to keep pace with the costs of maintaining key infrastructure, lawmakers have said.
“Because of this, the number of miles that the Agency of Transportation is able to pave each year is dropping, funding for much-needed municipal infrastructure improvements is relatively flat, and the State is less able to build a resilient transportation network to support Vermonters and Vermont’s economy,” Rep. Matt Walker, a Swanton Republican who chairs the House transportation panel, wrote in a memo to his colleagues on the House Appropriations Committee in late February.
Walker and Westman said that, without substantial new state revenue, Vermont could lose out on even more transportation funding because it would not be able to draw down as many dollars from the feds. Many transportation projects require the state to put up between 10% and 20% of the total cost, Westman explained, with the federal government covering the rest.
The state is projecting a roughly $30 million hole in the amount it can use to “match” federal transportation funds in the 2027 fiscal year, agency data shows, and a $45 million hole the year after that. According to Westman, that could mean the state leaving some $180 million in federal funds on the table in 2027, alone.
He said he’s worried, too, about the long-term outlook for state paving.
Vermont sorts its roads into four categories based on their condition: fair, good, poor or very poor. About a quarter of state-owned roads fall into the “poor” or “very poor” category today, but over the next five years, according to agency data, some 60% of state-owned roads could fall into the two lowest categories.
To provide more money for paving and other projects, the committee chairs suggested they could support keeping the entirety of the state’s vehicle sales tax receipts in the transportation fund. But they agreed that could be a difficult proposition this year, when the state is facing major challenges — and contentious debates — related to education spending.
“Let transportation money stay in transportation — and fix transportation,” Walker said in an interview.
Downward pressures on state transportation revenue, combined with rising costs of construction materials and labor, have made for “a perfect storm” threatening the sustainability of the state’s transportation funding, according to Sarah Mearhoff, a lobbyist for the state’s construction industry, who’s been involved in negotiations over transportation funding in recent months.
“While I know that there are other policy discussions that are, understandably, taking up a lot more oxygen in the Statehouse this year, this is truly something that affects everyone,” Mearhoff said. “If we’re talking education, kids ride to school on the bus on our roads. If we’re talking jobs, people commute to their jobs on the roads.”
Transportation agency leaders have also said they could need to slash more paving projects this year, among other reductions, if lawmakers don’t eliminate a standing transfer of cash from the transportation fund to the state’s general fund. The change, which would keep about $20 million in the transportation bucket, was included in the 2026 budget proposal that cleared the House earlier this month. The budget proposal is now being considered in the Senate.
Lawmakers have taken some other steps in recent years to address the gas tax decline, which is a problem impacting state transportation budgets across the country. They’re also weighing some new changes this year, though it’s not clear yet which, if any, would become law.
In the most recent Legislative biennium, they created annual flat fees on electric vehicle owners and owners of plug-in hybrid cars. They also approved an increase to Department of Motor Vehicle fees, though that proposal has since drawn opposition from Scott’s administration.
The state is also in the process of developing a different fee, which would replace the levy enacted last year, that would charge electric vehicle owners based on how many miles they drive. The “mileage-based user fee” is slated to take effect when at least 15% of new cars sold in the state are fully electric. That percentage is currently around 12%, lawmakers said.
As it’s planned, the state would charge the mileage-based fee to fully electric vehicle drivers. The fee would be calculated using odometer readings at annual inspections. Those who drive plug-in hybrids would pay a higher vehicle registration fee, but not the mileage-based fee.
Some legislators are also backing a proposal to charge a new fee on delivery vehicles, such as from Amazon, and put the fee revenue into the state’s transportation coffers. Some of that funding could go toward local transportation projects, Walker noted, which are facing substantial cost pressures of their own.
“Perhaps that’s a way that we can find revenue to help small towns,” the House chair said. In the coming weeks, he said, his committee will be “looking at teeing up potential items for next year — and that’s one of them.”
Disclosure: Sarah Mearhoff reported for VTDigger from October 2021 until December 2024.
Correction: An earlier version of this story misstated the types of vehicles that would be subject to the planned mileage-based user fee.
