Legislative Finance Committee staff and the Department of Finance and Administration’s infrastructure division told the committee they can use the Capital Development Program Fund to pilot new approaches for prioritizing and funding local capital projects and to improve project vetting and completion.

The committee discussed multiple options for the fund, which was created by the 2024 capital legislation. "That distribution this next session is anticipated to be about $26,000,000 and then that will grow to $50,000,000 by 2029," Kelly Carswell, principal analyst for capital outlay at LFC, told members. "Over the last five years we've put roughly $2.4 billion into local projects through legislative capital outlay; we can be doing bigger things if we change how the system works."

Why it matters: local capital outlay currently divides discretionary dollars among many members, often producing small appropriations that leave larger projects unfinished and generate a growing backlog of outstanding balances. Carswell presented data showing that in the latest session the legislature received nearly $4 billion in local requests but had roughly $600 million available to appropriate — about 15 percent of requests. Sixty percent of local appropriations in 2025 were $250,000 or less; fewer than 10 percent exceeded $1 million.

Options presented: staff outlined several ways to use the Capital Development Program Fund (CDPF): direct DFA and LFC staff to develop eligibility and prioritization criteria and run an application process for local governments; appropriate the fund to DFA to operate a grant program for planning, design and smaller construction projects outside the legislative session; or develop a legislature‑run application and vetting process. DFA’s Wesley Billingsley urged quick action if the committee wants LFC/DFA collaboration: "If you are interested in going with option 1 for the funds for next year, I think we would need that direction soon so that DFA could stand up an application process very quickly ... with the goal of having a kind of scored list of projects to recommend by September."

Possible criteria and guardrails: staff suggested vetting criteria that would prioritize project readiness (design and cost estimates), ICIP ranking, compliance with public finance rules and evidence of other funding sources. Billingsley also proposed ensuring a share of funds for frontier/rural communities (he suggested a 40 percent set‑aside as a policy option) and delivering a scored list of applications for legislative review in time for the statewide request process.

Reauthorizations and special grants: staff recommended limiting routine reauthorizations — one option is allowing a single one‑year extension per appropriation — to reduce incentives for piecemeal funding. Members and staff also discussed steering water, wastewater and local roads projects to existing grant programs (for example the Water Trust Board and federal programs) that can issue larger awards and often achieve higher completion rates than member share appropriations.

Members’ reactions: several lawmakers supported piloting the fund for local projects but stressed protections for member share and legislative involvement in any vetting committee. Senator Munoz urged codifying guardrails into statute rather than leaving them as administrative policy: "If we don't have a policy in statute ... the legislature and the exec will override policy like a suggestion," he said. Representative Luhan and others asked for mechanisms to ensure local legislators can view and comment on applications from their districts.

What’s next: staff said they would narrow options based on the committee’s feedback and return with proposals and possible draft statutory language. Billingsley and Carswell asked the committee to decide soon if they want an LFC/DFA application process in time to produce a scored project list by September for the October statewide request cycle.