The Appropriations Committee, section C, heard a detailed overview of Montana Department of Transportation (MDT) funding pressures on March 1, where legislative fiscal staff and MDT leaders said a large federal funding increase is raising state matching obligations at a time construction costs are sharply higher. The committee voted to adopt the motor‑pool rates in Section R of House Bill 2 and to accept a 60‑day working capital reserve for MDT’s equipment program.

The Legislative Fiscal Division’s Alice Act said the department “does not have any general fund in its budget” and that most MDT activity runs on federal and state special revenues, with a rough 60/40 split across programs but a roughly 87% federal/13% state match on typical federally aided highway projects. “When the federal bump from IIJA arrived in 2022, it increased the need for state match,” Act told the committee, adding later that construction inflation has reduced purchasing power even as federal dollars rose.

Why it matters: Montana’s principal state match account (the highway state special revenue account, often called HESRA) is funded largely by a cents‑per‑gallon fuel tax that is not indexed to inflation. Fiscal staff showed that a historic federal funding increase under the Infrastructure Investment and Jobs Act (IIJA) and subsequent discretionary awards require more state matching dollars and have coincided with a construction‑cost surge, increasing pressure on available state match.

MDT officials described program‑level requests to reflect those pressures. Deputy Director Larry Flynn said the department is seeking contractor‑payment authority to align the budget with its multi‑year construction plan; CFO Nicole Pallister said MDT expects to spend substantially more HESRA funds in fiscal 2024 and that the agency targets a working capital balance to float reimbursements. “We operate on a reimbursement basis,” Pallister said, noting HESRA must front expenditures and be reimbursed by federal partners.

Agency requests highlighted in the presentation included:
- A DP‑4 (equipment rental) present‑law increase of $26.5 million (biennium) mostly from state special revenue for maintenance equipment rental and operations.
- A contractor‑payments increase of about $127 million (biennium) to match the department’s multi‑year construction plan and federal allocations.
- New proposals to add technical and delivery staff including bridge response and alternative‑contracting positions; Flynn told the committee the department requested 16 positions focused on bridge repair and response to scale rapid repairs and maintenance.
- A proposed ongoing $10 million per year state special appropriation to support off‑system (local) bridge projects through a formula or grant process.

Federal and prior state actions discussed: Pallister and fiscal staff reviewed how the SAFER/House Bill 267 general‑fund transfer ($100 million) and Senate Bill 536 ($100 million for local road and bridge needs) have been used as match sources. Pallister said SAFER/HB 267 includes a $15 million annual cap for that match source and that most SAFER funds have already been committed to discretionary grants, while SB 536 funds were split for several off‑system bridge set‑asides and local distributions.

Votes and formal actions: The committee took two recorded voice actions on items from Section R of House Bill 2:
- A motion to adopt the motor‑pool rates as provided in Section R of House Bill 2 (moved by Senator Cuff). The committee approved the motion by voice vote; the chair announced “motion carries.”
- A motion to adopt a 60‑day working capital reserve for the MDT equipment program as given in Section R of House Bill 2 (mover not specified in the record). The committee approved the motion by voice vote; the chair announced “motion carries.”

Discussion vs. decision: Much of the meeting was informational—Alice Act and MDT staff walked the committee through HESRA balances, the working capital methodology, and the interaction between increased federal authority and state matching needs. Formal decisions were limited to the two voice votes above; no roll‑call tallies were recorded in the transcript.

Background and outlook: Fiscal materials shown to the committee illustrated that Montana’s fuel tax (33¢/gallon on gasoline, 29.75¢ on diesel per the presentation) remains a flat cents‑per‑gallon charge that is not indexed to inflation. Because construction costs (as measured in presentation slides) have risen faster than general inflation and because federal formula and discretionary funding has grown, MDT and fiscal staff told the committee HESRA’s working capital balance is projected to decline unless additional match options or structural revenue changes occur.

MDT officials emphasized operational constraints that slow spending—projects must be shovel‑ready for federal redistribution and procurement timelines and right‑of‑way, permitting, and construction season length affect how quickly funds are obligated and spent. Flynn said the department is pursuing a mix of staffing increases, alternative contracting, and targeted funding to respond to an expected “wave” of aging interstate‑era bridges that will need repair or replacement.

Ending: Committee members asked about the timing and durability of federal highway authorizations and the viability of continuing grants; MDT said those are federal negotiation risks but that Montana benefits from a historically favorable match rate and strong federal relationships. The committee will continue the MDT budget review in subsequent hearings and follow up with department staff on specific programs and project lists.

Quotes used in this article are taken verbatim from the committee transcript and are attributed to speakers who appear in the record.