AOT outlines $61.5 million FY26 funding gap; proposes highway cuts, use of cash‑fund match

Candace Elmquist, chief financial officer for the Vermont Agency of Transportation, told the House Transportation Committee on Feb. 26 that the agency began the FY26 budget process facing a $46,000,000 one‑time revenue hole and other known pressures totaling about $61,500,000.

The shortfall, Elmquist said, has been addressed through a mix of revenue and reductions: $10.3 million from the revenue forecast, $20.25 million from the JTAC/JTOC appropriation historically allocated to public safety, a $12,500,000 reserve from a state cash fund earmarked as state match for projects funded via the Infrastructure Investment and Jobs Act (IIJA), $14,000,000 in proposed budget reductions (largely highway projects) and an additional $4,500,000 the agency said it is committed to finding by July.

"On this slide, I was talking about a $46,000,000 1 time revenue hole that we had when we started the FY 26 budget process," Elmquist said during the presentation.

Agency staff and lawmakers discussed how much of the $14,000,000 reduction proposal is realistically deliverable. Jeremy Reed, chief engineer, cautioned that the agency’s ability to realize savings shrinks as it proceeds through the construction season because executed contracts reduce the scope for deferral. "We're executing these projects now, and the available savings finishes as we sign contracts because we will need to pay the contract for something. We either get out of the contract entirely or to delay it a year," Reed said, describing which projects still carried full potential savings and which had diminished savings because contracts were awarded or advertised.

Elmquist said the $12.5 million in the cash fund was set aside as state match for IIJA discretionary grants and would require statutory language in the budget bill to be used. Committee members pressed for clarity about how much of the cash‑fund match the agency could reasonably rely on in subsequent years; Elmquist warned that relying on one‑time revenue increases future budget risk.

To reach the remaining $8,000,000 the agency said it had identified this week, Elmquist summarized proposed reductions and operational changes: $4,000,000 from delaying some aviation and rail projects, $2,000,000 from district maintenance and fleet through a targeted 15% reduction in salt usage and winter overtime, $1,000,000 from finance and administration via position management strategies, and $1,000,000 from the Department of Motor Vehicles by reviewing customer service hours.

Committee members asked about federal discretionary programs that underpin parts of AOT’s capital plan. Members were told that the National Electric Vehicle Infrastructure (NEVI) funds had been rescinded by the federal administration; committee discussion named a $15,000,000 rescission from NEVI. Elmquist said the presentation’s numbers were a "snapshot in time" and would change as rescissions and federal actions are finalized.

Lawmakers and staff repeatedly returned to two central constraints: (1) many rail and aviation projects depend on competitive federal grants rather than formula funds, and (2) delaying projects to meet a fiscal target becomes harder as the agency enters construction season and awards contracts.

The committee did not take a formal vote. AOT staff said they will return with more detailed updates as the budget process continues.

Ending: Committee members said they will continue scrutiny of the proposals as the House moves further into the budget process; staff indicated revisions will follow as federal rescissions or additional revenue decisions become final.