Committee examines town-highway aid formula and proposals to index structures and class‑2 programs

The House Transportation Committee on Feb. 26, 2025 reviewed the statutory formula that determines annual town‑highway aid and heard options to add an automatic increase for town‑highway structures and the class‑2 roadway program.

Logan Mulberry of the Joint Fiscal Office explained that town‑highway aid is a line-item appropriation from the Transportation Fund and that the FY26 town‑highway appropriation is about $30.5 million. Under current statute the appropriation ‘‘shall increase over the previous fiscal year’s appropriation by the same percentage as’’ the lesser of (1) AOT’s year‑over‑year percent change in Transportation‑Fund appropriations (excluding reversions and the town‑highway appropriation itself) or (2) the percent change in the CPI‑U. Mulberry said the committee used that statutory calculation and that in the most recent year the CPI‑U change governed, producing a 3% increase for town‑highway aid in FY26.

The appropriation is divided among buckets by statute: 6% of the town‑highway appropriation is allocated for class‑1 mileage, 44% for class‑2, and 50% for class‑3. Mulberry said towns receive disbursements based on their miles in each class. He noted that the town‑highway aid grant is flexible for municipal road maintenance but that the statutory bucket percentages and mileage calculations can produce winners and losers among towns depending on road mix.

The committee then turned to two related programs that currently lack an automatic escalator: the town‑highway structures program (grants for bridges and culverts) and the town‑highway class‑2 roadways program. Mulberry noted statutory minimum annual appropriation language for these programs (the structures program’s statutory minimum the presentation cited as $7.2 million and the class‑2 roadway minimum as $8.6 million). JFO presented two principal options for consideration: (1) mirror the town‑highway aid statutory escalator for these two programs, so they would grow annually by the lesser of AOT appropriation growth or CPI‑U, or (2) tie them to T‑Fund revenue growth directly (which JFO said typically forecasts at roughly 1–1.5% per year).

Mulberry provided an estimate of the immediate FY26 impact of mirroring the escalator: an increase of about $216,000 for the structures program and about $258,000 for the class‑2 program — roughly a half‑million dollars combined. He warned the committee that indexing those programs would reduce the Agency of Transportation’s flexible Transportation Fund balance by the same amount, meaning the agency would have less discretionary T‑Fund money available for other uses in the governor’s recommended budget.

Janice Alcoast, chief financial officer for the Agency of Transportation, described how reversions and carryforwards affect the underlying calculation and year‑end balances. She said the agency already expects to take roughly $5.5 million in reversions this July based on FY25 performance and noted that reversions and carryforwards can alter the AOT appropriations figure used in the statutory escalator calculation.

Legislators stressed municipal impacts and equity among towns. Representative Wilde said some towns decline to take certain classifications because state funding levels do not cover the cost; Representative Kayser and others raised concerns about towns resorting to property‑tax increases to cover maintenance and resilience investments such as upsizing culverts. Multiple members expressed interest in applying the escalator to help towns keep pace with inflation over time, while recognizing the trade‑off with agency flexibility.

No formal legislative action was taken; members asked staff and agency witnesses to provide more detail on town‑level distributions, per‑mile amounts by class, and the likely multi‑year cumulative effect of indexing the structures and class‑2 appropriations so the committee can weigh whether to propose statutory changes.