Appropriations panel agrees to end $20.25 million T‑Fund transfer to state police, flags transportation shortfall

Members of the Vermont House Appropriations Committee agreed on March 12 to remove a long‑standing annual transfer of $20,250,000 from the state’s transportation cash fund (the “T Fund”) to the state police from the House draft FY2026 budget.

The committee discussion centered on whether the T Fund could spare the transfer without jeopardizing the state’s ability to match federal transportation grants. Chris (Joint Fiscal Office) told the committee, “JTOC transfer is really not a transfer, and it really has nothing to do with JTOC anymore,” and explained the governor’s proposal would keep the $20,250,000 in the T Fund rather than moving it to state police funding. Joint Fiscal staff and transportation witnesses warned that removing state match dollars would force cuts or delays in federally‑funded capital projects because the state would be unable to draw matching federal dollars at the same scale.

Why it matters: the T Fund’s revenue base has declined as fuel consumption and taxable gallons have flattened, Joint Fiscal said. That decline has coincided with a surge of federal capital money from the IIJA (the Infrastructure Investment and Jobs Act) and related federal programs; without state match, those federal awards cannot be fully leveraged. Committee members noted the state has partly filled gaps in prior years by using other cash‑fund transfers, increased DMV fees, or one‑time general fund commitments.

Committee members also discussed a recurring statutory earmark that directed $2.1 million toward state police vehicle replacement. Staff reminded the panel that the $2.1 million figure was placed in statute to prevent vehicle‑replacement schedules from slipping and that the language had historically been in Title 19. The committee questioned whether $2.1 million remained the appropriate fixed amount and asked staff to check carry‑forward and expenditure records to confirm how much has actually been spent on vehicle replacement in recent years.

After extended questioning and briefings from Joint Fiscal and transportation staff, committee members agreed to accept the governor’s recommendation to end the $20,250,000 transfer for FY2026 and add language directing staff to provide follow‑up information on (1) the effect on project matches at AOT, (2) the historical use of the $2.1 million statutory earmark for vehicles, and (3) any carry‑forward balances that would mitigate near‑term cuts. The committee recorded no formal roll‑call vote in the transcript; members indicated consensus to adopt the change in the House draft.

Committee members emphasized that ending the transfer does not eliminate the underlying structural mismatch between stagnant T Fund revenues (driven by reduced taxable gallons) and growing capital needs. Several members urged broader consideration of long‑term revenue options— including mileage‑based fees for EVs and other fee adjustments—while others noted political resistance to raising the gasoline tax.

What’s next: staff will provide the committee with detailed figures on T Fund capacity, the historical vehicle replacement expenditures tied to the Title 19 earmark, and an inventory of projects that would be affected by removing the transfer. Those follow‑ups will inform final House language before the bill goes to the Senate.