Senate committee shifts mileage-based user fee start to July 1, 2026, pending funding and federal grant decision

The Senate Transportation Committee on Tuesday reviewed updates to the T bill that push the earliest start of a mileage-based user fee — often called a mileage-based user fee (MBUF) — to July 1, 2026, and make that date explicitly contingent on “sufficient funding” and successful federal grant awards.

David Leonard, legislative council, told the committee the bill text reflects a schedule change: “clearly, we are not starting a mileage based user fee this coming July 1,” and the language was updated to set the target to 07/01/2026, “subject to sufficient funding being available for implementation.”

The change matters because federal funding tied to the program is in a 90‑day administrative hold. Committee members repeatedly asked the Agency of Transportation (AOT) to report back to joint legislative fiscal committees with updates so the Legislature can decide whether to proceed if grant money does not arrive.

Legislative and AOT witnesses described the existing funding picture as incomplete. Committee discussion identified three separate strands of funding mentioned in the draft bill and related budget work: state T‑fund money, an appropriation in the T bill for non‑federal match, and a $1,000,000 general‑fund allocation in the House’s version of the larger budget bill (described in committee testimony as contingent). Committee members and staff repeatedly cautioned that those amounts, as discussed in the hearing, do not yet equal the program cost estimates described by AOT staff.

Committee members pressed the agency on implementation details that must be resolved before any launch. Changes in the bill clarify how mileage reporting would work: annual odometer checks at vehicle inspections, with an alternate reconciliation method where, in the absence of an odometer reading, “you would get a 98 percentile mileage based user fee for that year if you didn't have an odometer reading to report,” language the committee recorded as a penalty for non‑reporting. The draft also allows vehicle owners to choose whether to pay on an annual, quarterly or monthly basis, with reconciliation at registration renewal or within 60 days after a terminating event (for example, a sale or out‑of‑state move).

AOT staff said IT and administrative work remains. The agency expects to build on existing DMV inspection contractors and the agency’s IT modernization work (including prior contracts with Parsons and DMV vendors), but any IT module or billing system would need review under the state’s Agency of Digital Services process before contracts start. AOT staff told the committee that the federal grant office had indicated the award looked “promising,” but no timeline had been set for a grant agreement and the 90‑day hold remained a live uncertainty.

Committee members raised equity and affordability concerns and asked for a stronger check‑back process. One senator asked for a schedule from AOT showing the sequence of technical, procurement and outreach milestones the agency would need to hit to meet a mid‑2026 launch; another said that if the committee learns in the coming months the federal money will not arrive, the Legislature should have direct input on whether to spend limited state dollars on an unfinished, multi‑year effort.

The committee’s discussion also touched on intent language in the bill that directs the General Assembly’s expectations for initial rates: the draft instructs designers to propose a MBUF rate “approximately equivalent” to the amount collected in combined state and federal gas tax per mile for a comparable internal combustion pleasure car (with separate guidance for plug‑in hybrids that also pay an EV infrastructure fee). Several members asked for clarification because that guidance could limit future choices such as inflation‑adjusted rate increases; agency staff said proposed rates would come back to the Legislature for approval and that the current bill only directs the design, not the implementation.

Committee members asked AOT to provide: (1) a clear, dated timeline for federal grant steps and internal IT procurement milestones; (2) regular updates to Joint Fiscal/JTOC on the grant status and projected budget gap if federal funds are not awarded; and (3) an explanation of how the proposed intent language would affect the agency’s ability to adjust rates over time.

What happens next: Committee staff and AOT agreed to continue section‑by‑section review of the bill; AOT will return with more detailed schedules and with explanations of the funding sources referenced in the draft. No final vote or enacted change was recorded at this hearing; the committee was reviewing draft session law language and directed follow‑up.

Ending: Committee members emphasized they want more information on the grant decision and a no‑surprises timeline before the Legislature commits further financing or implementation steps.