Vermont Highway Funding Cut 7.3% While Roads Crumble

The short version

Vermont towns maintain their own roads. The state helps pay for this through highway aid programs. Next year, that aid is being cut by $7 million — from $96.7 million down to $89.6 million.

At the same time, there's a growing pot of money called the PILOT Special Fund that could help. It currently has a surplus of over $15 million, funded partly by Local Option Tax revenues that towns voted to collect. A plan to send 50% of that surplus back to towns for highway aid was approved by the House Transportation Committee — then killed by the Ways & Means and Appropriations committees less than 24 hours later.

Instead, the legislature wants to use that surplus to pay for state grand list expenses — the cost of property assessment and reappraisal. These are costs the state has historically paid from its own general fund.

What's PILOT?

PILOT stands for Payment in Lieu of Taxes. When the state or federal government owns property in a town (like a state forest or federal building), that property doesn't generate property tax revenue for the town. PILOT payments are supposed to compensate towns for this lost revenue.

The PILOT Special Fund collects money to make these payments. One source of revenue: 25% of every town's Local Option Tax collections get withheld by the state and deposited into this fund.

The math problem

The fund already collects roughly twice what's needed for actual PILOT payments. Revenue grows about 10% per year as more towns adopt local option taxes (13 new towns voted to adopt LOT this year alone, bringing the total to 50). The end-of-year surplus was over $15 million.

Everyone agrees the surplus needs to be invested. The question is: invested in what?

VLCT's position: Return the surplus to the municipalities that raised it — through highway aid, or by changing the withholding formula.

The legislature's plan: Use the surplus to pay for state grand list expenses — lister training, property valuation defense, reappraisal costs ($66 per parcel under the new regionalization plan), and equalization studies.

Why this matters for your roads

The current FY27 transportation budget has a $33 million shortfall across all programs. This puts $163 million in anticipated federal funding at risk.

Real examples from Vermont towns:

• •Brattleboro needs $18.83 million for 60 miles of paved roads. Over 20 miles need major repair ($14M+ alone).
• •Morristown found more than half its roads in poor or very poor shape and is considering discontinuing up to 19 roads.
• •Monkton is considering closing a popular town road after successive flooding events.
• •Morristown voters approved tax increases for infrastructure reserves plus three new 1% local option taxes — just to keep up.

Transportation Secretary Joe Flynn testified that by 2030, more than half of all Vermont road surfaces will be in poor or very poor condition.

What can still change

Neither the appropriations bill nor the miscellaneous tax bill have gone to the floor for a vote yet. The committees could:

1. 1.Remove the PILOT fund appropriation for grand list expenses
2. 2.Restore the waterfall provision dedicating 50% of surplus to town highways
3. 3.Make a larger one-time appropriation to town highway aid (currently proposed: $1.7M from Transportation Infrastructure Bond Fund)

This is happening now. Your representatives are voting on this in the coming weeks.