State transportation officials warn purchase‑and‑use reallocation only delays funding shortfall for federal match

Jeremy Reed, chief engineer at the Agency of Transportation, and Logan Hoogre of the Joint Fiscal Office presented projections showing how changes to the purchase‑and‑use tax and differing federal/state growth rates affect the state's ability to match federal highway funds.

Reed described a conservative analysis that focuses on formula federal highway funds the agency can count on annually and excludes discretionary grants. "Federal highway money is roughly $375,000,000," he said, and after stripping out nonformula and nonproject funds the core dollars available for capital work are much smaller. Reed modeled multiple recapture scenarios tied to the proposed purchase‑and‑use reallocation and showed how assumptions about federal escalators and state growth change when the state would run short of match funds.

Logan Hoogre of the Joint Fiscal Office summarized the assumptions behind a hypothetical scenario: transportation needs growing at 3.71% annually, AOT appropriations growing at the same rate, the governor's purchase‑and‑use reallocation moving revenue to the T fund (about $10 million per year in the FY27 proposal), and the T fund growing at about 1.67% in the FY32–FY37 window. Hoogre told the committee that under those assumptions the purchase‑and‑use reallocation keeps pace with appropriations until about FY33; after the reallocation completes, appropriations (driven by needs) grow faster and the gap widens.

Committee members asked about volatility in purchase‑and‑use revenue, pointing out the tax is sensitive to vehicle purchases and recession risk. Hoogre and other staff cautioned that forecasts are uncertain and that the purchase‑and‑use forecast reflects a post‑COVID rebase that economists currently expect to persist, but that future recessions or market changes could materially alter outcomes.

Members discussed longer‑term policy choices: indexing the gas tax or construction cost indices, exploring vehicle‑miles‑traveled (VMT) fees, using TIB borrowing selectively for large projects, and local option tax pilots to direct revenue back to towns. The committee asked staff to run additional scenarios, including earlier lump‑sum reallocation timing, and scheduled further discussion over the next two days on local option taxes and town funding formulas.

No formal vote occurred. The presentations underscored that the governor's purchase‑and‑use reallocation could provide near‑term breathing room (committee members described it as a 5–7 year alleviation in some scenarios), but that longer‑term structural revenue choices will be necessary to sustain state match for federal funds.