State officials present $50M-plus public transit budget, warn of service cuts and higher operating costs

The Vermont House Transportation Committee on Feb. 4 heard a presentation on the state’s public-transit budget for fiscal 2026, during which agency staff said the roughly $50 million program will rely on a mix of federal funds flexed from highway programs, $10 million in additional state match and one-time carbon-reduction and innovation grants while the system grapples with rising operating costs and falling volunteer capacity.

Agency representative Ross McDonald told the committee, “we have the most well funded rural public transit program in the country, but it's still not enough,” and detailed how the state braids programs — including Medicaid non-emergency medical-transportation funding — to sustain demand-response and fixed-route service.

McDonald said Vermont’s annual public-transit budget is “approximately $50,000,000” and noted the state adds about $10,000,000 from state funds to support the non-federal match. He said providers are also using roughly $16,000,000–$18,000,000 per year in Medicaid non-emergency medical transportation funds administered by the Department of Vermont Health Access to amortize overhead and deliver trips.

Why it matters: transit supports access to jobs, health care and education in communities without frequent service. Committee members and the presenter repeatedly flagged demand-response trips as the costliest category — a modest share of trips that consume a disproportionate share of operating dollars — and said changes will be needed to avoid an abrupt budget ‘cliff’ that would force larger, sudden cuts.

Key funding and one-time dollars McDonald told members the agency has moved its Mobility & Transportation Innovation (MTI) grant program from $500,000 to $3,000,000, and that roughly $1,000,000 of that has been or is expected to be obligated in the current federal fiscal year, leaving roughly $2,000,000 available for FY2026 and beyond if plans proceed. He also said the agency has obligated a bit more than $1,000,000 of about $2.9 million in FTA funds for e-sprinters and charging equipment.

The agency will flex federal highway (FHWA) and Surface Transportation Block Grant (STBG) funds into the FTA program where possible. McDonald described using Carbon Reduction Program dollars for operations for the first time to sustain routes; those dollars are being treated similarly to CMAQ funds (80/20 federal/nonfederal) to help cover operating shortfalls.

Fleet electrification and capital needs McDonald said Vermont has about 65 electric buses in the procurement pipeline or already on the road — “between 17 and 20 on the road” now — representing roughly 50% of the transit fleet by his accounting. He warned of limitations in the smaller EV cutaway and e-sprinter models, noting a roughly 100-mile range for many smaller EVs and charging and redundancy issues in cold weather. “Not every vehicle needs to go over a hundred miles a day,” he said, but added, “when it's cold weather… we cannot rely on a fleet of electric buses at this time.”

To address grid and charging needs, the state received a competitive FTA award of about $2,900,000 for switchgear, transformers and other charging infrastructure work. McDonald said utilities such as Green Mountain Power have been cooperative and that procurements include negotiations with local utilities, including use of timers to take advantage of off-peak rates.

Ridership patterns and cost pressures The agency reported ridership has largely recovered to pre-COVID levels across the system except commuter routes, which remain below pre-pandemic ridership. McDonald said the system logged about 5,000,000 trips pre-COVID and has rebuilt most categories except commuter trips, which he attributed in part to remote work.

He highlighted that urban routes make up roughly 47% of ridership but account for about 20% of the budget, while demand-response trips represent roughly 11% of trips but about 40% of operating costs — a core tension for sustainability. McDonald noted that providers reported cost increases driven by paid drivers, maintenance, and overhead and that the volunteer driver pool, once about 300 people, has fallen to roughly 160, contributing to higher per-trip costs.

Microtransit pilots, fare policy and volunteer/community drivers The agency is testing microtransit in six regions, operating app- or phone-based, on-demand services; early results indicate microtransit can be expensive per trip and may not be cost-effective where fixed-route service already performs well. McDonald said Middlebury and Montpelier are among communities testing overlays of microtransit and fixed routes.

On fares, many rural services remain fare-free; some providers such as Advanced Transit and RCT were already fare-free or low-fare before COVID, and McDonald noted that fare collection infrastructure can be expensive relative to modest fare revenue in low-density areas. The agency estimated statewide fare revenue before COVID would have been about $570,000; McDonald said returning to pre-COVID fare structures would not come close to closing the operating gap and that farebox recovery statewide ranged from roughly 3–7% on rural services pre-COVID versus higher recovery in some small urban systems.

Service performance and potential reductions McDonald provided a route performance report to the committee and said the agency is working with providers to address underperforming services. He listed routes or services already changed or proposed for adjustment or elimination, including the Jackson commuter (already canceled), route consolidations (a named brown route combined with another), Jeffersonville commuter removed, the Crown Connection and several other underperforming circulators and evening services. He said some adjustments are already being implemented by providers while others will be considered over months in discussion with local boards.

McDonald said the agency’s preference is to “right-size” services using metrics and planning rather than make cuts solely for budget reasons. To that end, the agency has issued scopes to retainer contractors to produce coordinated implementation plans and MOUs across providers, and it said legislative language would be required to allow provider-area adjustments in statute for Green Mountain Transit (GMT), which currently has communities defined in statute.

Committee reactions Several committee members pressed on fares, the return on investment of subsidized service and whether certain tourism- or event-focused trips could be restructured to bring revenue. Representative Keith questioned whether providers should charge more broadly, saying, “I don't understand how you guys operate along. I have a business. Right? And I can't operate my business that way.” McDonald and others responded with detail on low farebox recovery in rural areas and the equity tradeoffs of charging modest fares in communities where card and fare infrastructure impose cost and administrative burdens.

Next steps McDonald said the agency will proceed with applications and awards in March–April, continue to use one-time MTI and Carbon Reduction dollars to stabilize FY2026 and work with providers to implement route adjustments, volunteer and community-driver pilots, and capital requests for replacement vehicles and charging infrastructure. He warned the committee the agency wants to avoid a sudden funding cliff in future years and prefers staged adjustments guided by data and local planning.

Ending The agency presentation closed with a commitment to return with additional analysis and with staff-led implementation planning; the committee indicated interest in future briefings on school transportation coordination and the results of microtransit and electrification pilots.