Vermont Agency of Transportation proposes roughly $883–885 million fiscal 2026 budget; paving funding falls

Secretary Joe Flynn of the Vermont Agency of Transportation told the House Transportation Committee on Jan. 29 that the governor's recommended fiscal 2026 budget for the agency is roughly $883 million, driven by federal grants, state transportation fund receipts and targeted program lines.

The recommended budget “depicts an $883,400,000 budget for the agency of transportation,” Flynn said, noting the total includes all VTrans operations and the Department of Motor Vehicles. Flynn emphasized the agency used far less one‑time money in the FY26 proposal than in FY25: "when we built the fiscal 25 budget, we used $46,000,000 of 1 time money... when we built this fiscal 26 budget... we've used only $12,500,000 of 1 time money."

Why it matters: the presentation frames a budget that keeps major programs funded while responding to higher project prices and constrained discretionary state revenue. Committee members pressed agency leaders about where revenue increases landed and why the paving line dropped, because pavement is a visible daily concern for motorists and municipalities.

Most revenue from federal highway programs, state transportation fund

Flynn and Chief Financial Officer Candace Almquist explained the budget mix: the single largest revenue contributor is Federal Highway Administration funds, followed by the state transportation fund (mostly DMV receipts such as fuel taxes, registrations and license fees), other federal sources (Federal Transit, Aviation, Railroad and Highway Safety programs) and smaller buckets such as local matches and interdepartmental transfers. Flynn noted the FY26 consensus forecast produced a modest net increase in TIB and transportation fund revenue—about $4 million—driven largely by DMV fee collections, while fuel revenues remain “tracking slightly soft.”

Almquist said the FY25 picture was distorted by one‑time items: "that $46,000,000 was comprised of a 1 time transfer to the transportation fund... and also $12,000,000 of reversions... and also $8,500,000 of reimbursements that we expected from FHWA in admin costs from the July 23 flood." She offered to walk committee members through the transportation fund operating statement line by line to show how those items affected year‑to‑year comparisons.

Paving reduction reflects higher unit costs, project queue

A notable change in the proposed budget is a reduction in the state paving line to about $102.9 million (down from roughly $130 million the prior year and from a recent peak near $150 million). Flynn attributed the change to two forces: sharply higher construction pricing and the queue of projects that are ready for work. "Inflation may be down from its highest peak about 9%, but the prices that we see are running about 40% higher than we used to see," Flynn said, adding that higher bids mean state and federal dollars buy fewer miles of work.

Flynn also noted statutory limits on some funding categories (for example Transportation Infrastructure Bond or TIB receipts must be used for long‑life projects such as bridges), which constrains the agency's ability to shift dollars to paving. He said the agency still programmed work on dozens of paving projects—"you'll see 38 paving projects"—even though the aggregate paving appropriation declined.

Program highlights and project delivery

Flynn and division directors summarized program lines the budget supports: the state interstate bridge program (the single largest slice), district maintenance and fleet (operations funded largely with state dollars), roadway safety, park‑and‑ride projects, and multi‑modal work including public transit, rail and aviation. He pointed to two specific items boosting percent‑change figures: a Sharon Park‑and‑Ride project on I‑89 northbound and a federal bike‑and‑pedestrian grant to South Burlington for a pedestrian bridge over I‑89.

On program delivery Flynn stressed that "construction" in the budget can include scoping, preliminary engineering and right‑of‑way work as well as earthmoving and paving, and that some projects remain tied up for years by litigation or other delays.

DMV modernization and ePermitting

The budget includes roughly $40–50 million for DMV operations and a material increase tied to two major contracts: a new core system being built by FAST Incorporated and an ePermitting system for heavy‑haul and oversize permit applicants. Flynn said the core system remains "on time, on target, on budget for completion in November of 2025," and described the projects as intended to improve customer service and business processing.

Public transit and electric buses

Policy Planning and Intermodal Development Director Michelle Boomhower told the committee the transit budget supports 10 public transit providers and that ridership patterns are changing: some rural routes show declines while urban routes remain strong. On electric buses Flynn said funding is in place for a larger fleet and that "there are currently 17 electric transit buses" in service, with the remaining 48 in procurement phases.

EV incentives and omnibus bill

When asked whether electric vehicle incentives were in the FY26 recommendation, Flynn said they were not in this packet because the administration plans to include EV incentives in an upcoming omnibus administration bill: "They're not included in this budget because there will be an omnibus bill coming out in a week or 2, which is an administration bill that will include the EV incentives." Committee members and senators on the call discussed programs such as Replace My Ride and other income‑targeted incentives; Flynn and others said many incentives are focused on lower‑income Vermonters.

Questions from lawmakers

Committee members repeatedly pressed the agency on the relationship between small increases in forecasted revenue and the overall program mix. One representative asked why a roughly $3 million uptick in state transportation revenue plus a reversal of a roughly $20 million transfer did not translate into a substantially larger state fund total; Flynn and Almquist replied that higher construction costs and the one‑time FY25 items narrowed apparent year‑to‑year gains.

Senators and representatives also asked about TIB fund flexibility and longer‑term revenue reforms. Flynn said TIB is statutorily limited to long‑lived projects (typically structures) and that any broad reallocation would require statutory change. He added that the federal tax structure and shifts in fuel consumption are national issues that affect state revenues.

Municipal concerns and resilience

Several lawmakers from towns affected by storms raised resilience concerns. Flynn acknowledged the tension municipal officials face between investing for resilience and local fiscal limits: "we just at this point, we don't have the resources to meet every town's queue that is ready," he said, noting the agency operates a practical queue for town highway and municipal projects and that federal disaster assistance (FEMA) and other funds are being deployed in some cases.

What the presentation did not decide

No formal votes or committee actions were recorded in the presentation. Agency staff offered to provide more detailed line‑by‑line briefings and answered follow‑up questions; lawmakers asked for additional data on the transportation fund operating statement, the MTI awards roll‑out and the status of particular building projects.

Ending

Flynn closed by reiterating the overall tradeoffs in the FY26 proposal: continued reliance on federal grants, constrained discretionary state dollars, and rising construction prices that reduce the unit‑value of available funds. The committee scheduled follow‑up and deeper briefings on specific program lines.