House committee considers formula to tie town-highway grants to transportation fund or CPI

Legislative Council staff presented draft language Wednesday to change the way Vermont funds state aid for town highway structures and Class 2 town highways, replacing fixed base amounts with a formula that ties annual grants to either growth in Transportation Fund appropriations or to inflation as measured by the Bureau of Labor Statistics consumer price index (CPI).

Damian Leonard of the Office of Legislative Council said the draft removes the existing fixed “base” appropriation and instead directs that the appropriation for these grants “shall increase over the previous fiscal year's appropriation by the same percentage change as the following, whichever is less,” using a comparison of (1) the agency’s total appropriations funded by Transportation Fund revenues (excluding these grants) and (2) the CPI percentage change based on the two prior fiscal years. Leonard also told the committee the formula is written so the appropriation cannot decline below the prior year — "It may be level funded, but it can't go backwards," he said.

Why it matters: Committee members and agency staff said the move would make town-highway grant amounts track broad Transportation Fund trends and inflation, rather than rely on a fixed dollar minimum. Proponents said that could protect program stability when the fund grows, and limit statutory nominal increases when the fund weakens. Opponents and several committee members raised operational and fiscal questions about the formula’s base and the mechanism used to measure the agency’s year‑to‑year change.

Key details from the draft and committee discussion - The draft eliminates fixed bases that previously appeared in the statute (the bill text removed references to a $7,200,000 and an $8,600,000 minimum that had functioned as baseline awards in earlier drafts). Leonard said those fixed bases were removed because the formula now builds off the previous fiscal year's appropriation. - The calculation uses the lesser of (a) percentage change in the agency’s total appropriations funded by Transportation Fund revenues (excluding the grants covered by the subsection) and (b) percentage change in the BLS CPI for all urban consumers, measured over the two prior fiscal years. Leonard said the CPI is used because those data are delayed and the two-year comparison aligns with budget timing. - Current-year figures cited in committee: Leonard said the current appropriation for town-highway structures in the present fiscal year is about $8,016,000; the draft would use the enacted prior-year appropriation as the base for the next fiscal year and take effect July 1 of the following fiscal year. - Fiscal and process questions: Representatives and staff discussed whether the draft should reference “appropriations as approved in the annual transportation program” rather than year-end expenditures, because budget adjustments or midyear reversions could make a prior-year end balance look lower than the appropriated base. Committee members asked staff with fiscal expertise (identified in the meeting as Candace and Logan) to advise on whether prior practice or the budget-adjustment process could produce unwanted volatility in the formula.

What committee members asked or directed - Several members asked the legislative drafter to confirm whether the measure should use “agency appropriations as approved in the annual transportation program” (the enacted appropriation) rather than the final outturn after reversions, so the formula reflects the legislature’s appropriation decision rather than year-end adjustments. - Members noted the committee can always supplement statutory formula funding in the annual budget and that a future legislature is not bound by the statutory default. Leonard reiterated that the statute sets a default but the Appropriations Committee can override or adjust those amounts in subsequent budgets.

Context and background - The change mirrors a similar inflation-tracking approach the committee adopted for the town-aid program in an earlier year, Leonard said; this draft applies it to the two additional grant categories: town-highway structures (bridges/culverts/other structures) and Class 2 town highways. The measure is intended to provide a predictable baseline that grows with either Transportation Fund capacity or inflation, whichever is less.

Next steps - Leonard said he will refine the draft after collecting committee feedback and requested committee members flag any missing items. Committee staff agreed to follow up with fiscal staff to clarify whether the formula should use enacted appropriations or year-end account balances for the percentage comparison.

Ending - The committee did not take a formal vote during the session. Members signaled they would return to the sections once Legislative Council and agency fiscal staff supply the requested clarifications and any additional technical edits.