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Agency of Transportation seeks JTOC transfer, warns of FY26 funding gap and future shortfalls
Summary
AOT officials told the House Appropriations Committee they plan to use a $20.25 million JTOC transfer in the governor’s FY26 recommendation to close near‑term Transportation Fund shortfalls and identified $61.5 million in known FY26 pressures and an exploratory $30 million 2027 gap if current assumptions hold.
Candace Sompquist, chief financial officer for the Agency of Transportation, told the House Appropriations Committee on Feb. 25 the agency faces a multi‑part funding gap for FY2026 and has proposed using the JTOC transfer (approximately $20.25 million in the governor’s recommendation), reserved cash‑fund state match and additional reductions to balance the budget.
Sompquist said FY2025 closed relying on several one‑time items that created a roughly $46 million hole heading into FY2026: an expected Federal Highway Administration (FHWA) reimbursement for July 2023 flood administrative costs (initially shown as $8.5 million but negotiated down to about $6.3 million), $12.5 million in reversions used at FY24 closeout and a $25 million one‑time cash‑fund appropriation used last year.
For FY2026 the agency listed roughly $61.5 million in known pressures: the $46 million carryforward hole plus $15.5 million of routine increases — including a 6.4% salary step per collective bargaining, a 17% rise in health benefits, a roughly 7% retirement increase and roughly 4% increases in internal service and service‑level charges. Sompquist said the agency has identified $6.5 million in reductions and additional revenues (including a $1.5 million net increase from the July 2024 revenue forecast and electric‑vehicle registration fees) and proposes to use the $20.25 million JTOC transfer and $12.5 million in reserved cash funds for state match (subject to budget language).
Agency chief engineer Jeremy Reed explained how AOT would achieve the remaining $12.5 million in transportation‑fund savings if the JTOC transfer were unavailable: by deferring paving projects, delaying district‑level “band‑aid” repairs, and pausing smaller aviation and rail projects. Reed said the list used to estimate $12.5 million in highway savings largely comprises paving contracts that the agency expects to have advertised or under contract by March; delaying those contracts could reduce expected near‑term savings because contracts often carry cancellation or delay costs.
Reed said the agency’s highway project list yields an estimated $44 million reduction in total project cost once federal participation is included, meaning deferrals could leave federal funds unused. He also said a district‑level maintenance program increase in billed square footage drove some cost changes; an internal review found an increase of about 10,000 square feet in billed space tied to West Cottage and other changes.
Sompquist and Reed described additional proposed savings including $4.4 million from aviation and rail division changes, $2 million from maintenance and fleet by reducing salt and overtime (15% reduction estimate cited as an option), $1 million from DMV adjustments to customer service hours and $1 million from position management in financial and administrative lines. The agency also said it expects to rely on an annual reversion target of about $4.5 million, plus smaller carryforwards, to balance recurring needs.
Looking ahead, agency slides presented to the committee show a potential roughly $30 million budget hole by FY2027 even with the JTOC transfer available, driven largely by continuing state match needs for discretionary federal grants, the agency said. Sompquist and Reed said many items on the multi‑year projection depend on competitive federal grants (for example, “Protect” resilience grants and aviation/rail competitive awards) and on how much state match the agency and Legislature fund.
Committee members questioned the assumptions for EV and plug‑in hybrid fees; Sompquist said FY revenue includes about $600,000 in BEV/PHEV fee receipts that were folded into the consensus forecast (netting $1.5 million improvement in FY25 forecasts when combined with other updates). Committee members also asked for documentation on the FHWA reimbursement estimates and details on which paving contracts would be affected.
The agency did not propose formal committee action in the hearing; it presented the governor’s recommended approach and identified programmatic tradeoffs should JTOC or other one‑time sources be unavailable.
