Vermont Legislature SmartTranscripts:

[Matt Walker (Chair)]: We're live. Thank you all for coming back after the floor. It's Thursday, January 22 here in House Transportation Committee. The purpose of this mix, however long it may take and whatnot, we go from there. We have Logan Mary from our JFO Fiscal Office. What I was hoping you could walk the committee through is reviewing what we have heard on the agency was facing a $33,000,000 hole to build the FY 'twenty seven budget. What made up that hole? And then what did they do to fill that hole and present the 'twenty seven budget that we started to see yesterday? Got the budget address on Tuesday. Wednesday, we got the 30,000 foot. Now we're digging into the department details. What I'm hoping you can do is explain the $33,000,000 hole and then what did they do to fill it. So thank you very much.

[Logan Meyer (Joint Fiscal Office)]: Sure. So for the record, I'll be moving over to joint fiscal office. Well, the simplest way just to go sort of through that presentation that Candice presented and sort of talk about it, answer questions, sort of highlight some things. Would that work best for you all? Sure. We'll go in a few different directions. Right? Well, then I will just pull up for a presentation and prepare to follow on. You got this yesterday. It should be on your committee page if you don't have a copy of it. All right, 33000000. So this was from Candice yesterday, CFO, AOT. This was sort of the slide that she showed when she sort of explained where this 33,000,000 gap was coming from. And she has these numbers here that were one time sources in the FY twenty six budget that they don't have for this year. And so if you add all these up, you get to that $33,200,000 That was sort of the gap that they had found, and we're needing to sort of close going into this year. Do you have questions on sort of how we got to the gap, the 33,000,000?

[Matt Walker (Chair)]: So the first one, 12,500,000.0.

[Logan Meyer (Joint Fiscal Office)]: So that was money that was set aside by the general assembly to be used as IIJ match. Last year, they used that as IIJ match. It was one time funding.

[Matt Walker (Chair)]: So when you start building the next budget, you're already down 12 and a half. Unless you find a different one time source. Correct. Because it's not perpetual, your data is now down 12,500,000.0.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: Yep.

[Patricia McCoy (Member)]: Okay.

[Matt Walker (Chair)]: From the twenty sixth level.

[Logan Meyer (Joint Fiscal Office)]: From the Yes. Yep. From twenty sixth.

[Matt Walker (Chair)]: Would that also, though, the twenty seventh be that's maybe where it hits later then. That's when it started out in the '26 level, but then the fall came and dropped us down by 7.8. So now you gotta build a budget 7.8 lower. And you'll you'll see that up

[Logan Meyer (Joint Fiscal Office)]: there too, that downgrade, the 7.8 downgrade. That's the third one on the list.

[Matt Walker (Chair)]: They knew they had one time money, so you already knew you were 12.55. Then you go to the next one.

[Logan Meyer (Joint Fiscal Office)]: Yeah. So the next one is three versions that they found at FY twenty five that closed the FY twenty six budget. They had to take money from the budget that was closed to sort of make up and balance the budget that we're currently in the FY '26. That's also a one time you can think of it, unless they do reversions again this year, but for now, that was a one time event for money. You get to the revenue downgrade to 7.8.

[Matt Walker (Chair)]: Are versions used all the time?

[Logan Meyer (Joint Fiscal Office)]: They're used frequently. Frequently, annually, every year? Since I've been here and for the past few years I have, I don't know if there's been a year where they haven't used reversions, but pretty common mechanism just because they don't need a balanced budget. Sometimes projects come in under or the timeline gets shifted out and money needs to be moved around a bit. So yeah, they're frequently used.

[Matt Walker (Chair)]: Okay. Everybody else said, well, the next question, but they don't have to.

[Patricia McCoy (Member)]: I'm still confused. So can you start with the 33,000,000 that we took of IIJA money? Is that what you said? No. Is that what I heard? No. What did I hear?

[Logan Meyer (Joint Fiscal Office)]: So right now we're going through sort of the calculation to come up with this $33,000,000 gap that you've So probably been hearing

[Patricia McCoy (Member)]: when did the cap the gap appear? Did we know about it when

[Logan Meyer (Joint Fiscal Office)]: we passed

[Patricia McCoy (Member)]: the budget last year? We knew we were gonna be $33,000,000 in the hole when we came back in January to do the January '27 budget?

[Logan Meyer (Joint Fiscal Office)]: So the agency for the past few years has done what they call a funds outlook, where they sort of project out what they think the next year funding gap might be. Last year in maybe February, it was again updated in September at the J Talk Meet, Candice presented this federal funds outlook where she projected a $33,200,000 gap between the T Fund money we have to draw down federal funds and what we wanna draw down.

[Patricia McCoy (Member)]: What For FY '27. '7, correct. Okay.

[Logan Meyer (Joint Fiscal Office)]: Yep. And so these numbers here is how they came to that $33,000,000 gap.

[Patricia McCoy (Member)]: Okay, so what are we in the hole for, because we're still in FY '26. Yep. Are we in the hole in FY '26? And is that this 12,000,000 that we did that we're doing something funky with? Or are we in the hole for FY '26? Or are

[Matt Walker (Chair)]: we

[Logan Meyer (Joint Fiscal Office)]: whole? So because of the downgrade in the FY twenty six budget, there was the rescission plan, which sort of balanced it. We then had a small downgrade again in January, which put us down, I believe it was $1,500,000 The agency is using the stabilization reserve to sort of make up that balance in the FY twenty six budget. The 1 and

[Patricia McCoy (Member)]: a half million.

[Logan Meyer (Joint Fiscal Office)]: The 1 and a half million that we are just downgraded. And then in this budget, the FY twenty seven budget, they're bringing that stabilization reserve back up to their 5%. So they're essentially using the reserve how it's kind of meant So to be When FY '26 closes, it will be balanced one way or another. As of right now, they have a plan to balance it, things change, and we don't know what revenues are gonna be, so how it will actually be balanced out is yet to be seen. We're good for FY '26.

[Patricia McCoy (Member)]: Okay. So then fast forward now, we're doing FY '20 So we already know we have to add $1,500,000 into the reserve fund. And the revenue forecast that we think AOT did is $33,000,000 in the whole.

[Logan Meyer (Joint Fiscal Office)]: So, yes, the forecast that AOT presented recognized that there was this funding gap between the FY '26 budget and the '27 budget that they need to fill to get us back to that

[Patricia McCoy (Member)]: point.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: So you say it was $34,000,000 at '33, that is the stabilization? So we have to come up with that one and a half thing,

[Logan Meyer (Joint Fiscal Office)]: because that's on top

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: of that, I mean there's no line

[Logan Meyer (Joint Fiscal Office)]: there pointing that we got.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: So it's a little bit higher

[Matt Walker (Chair)]: than 33. I guess it was.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: 34 and a half.

[Logan Meyer (Joint Fiscal Office)]: I think these are two separate things that maybe we're discussing. It all goes into the creation of the budget, but the 33.2 is sort of a discrete number that was calculated by the agency at a point I wouldn't wanna just go adding things to their calculation.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: But from our standpoint, we had to come up 33,000,000 to fund the budget, but seeing how the January forecast went down, we had most of an additional one and a half to backfill stabilization cut done in this year's budget adjustment. It's like 34 and a half now, my way

[Matt Walker (Chair)]: would have gone in that same direction. I'm where you were at. With what you just discussed, meant that it turned out we were a little further behind than we thought because we had to make an additional adjustment to '26.

[Logan Meyer (Joint Fiscal Office)]: I don't think I can answer that question. I think that'd be a question maybe for Candice, because I think we're we're adding in multiple things into a calculation that was done at a set time back in September, I believe. Things have changed since then. I wouldn't wanna say that on the record because I just don't know. I think I would have to look into it and speak with Candice and look at how she calculated the numbers. And then potentially you could add it on, but I guess I just don't know at this time.

[Patricia McCoy (Member)]: Okay. So I'm gonna just Okay, so that was in September that he's figured the 33.4, whatever it Okay. Is came to

[Matt Walker (Chair)]: then since then,

[Patricia McCoy (Member)]: we had a downgrade, so they used $1,500,000 of the stabilization reserves that we have to cover that.

[Logan Meyer (Joint Fiscal Office)]: That's what they're proposing Oh, to do,

[Patricia McCoy (Member)]: is that in the BAA?

[Logan Meyer (Joint Fiscal Office)]: In this year's Oh, so it's in

[Patricia McCoy (Member)]: this current year budget already. They've calculated that. So then, I guess it is, we're looking at the 33,000,000 that they've thought of in September, and then this 1 and a half million that they've already kind of taken care of, This one, you're saying it's already removed, but we haven't backfilled it. Have we backfilled that in this FY '27 proposed budget? That's the question, I guess.

[Logan Meyer (Joint Fiscal Office)]: In their proposed budget, they are making that stabilization reserve full to that 5% statutory maximum as currently proposed. But

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: the current budget adjustment that we're on, it has to have our authorization to do the one patch, so it's got to be the budget adjustment.

[Matt Walker (Chair)]: Think they need

[Chris Rupe (Joint Fiscal Office)]: authorization in

[Matt Walker (Chair)]: in the right example. The same as the insurance or I think finance and matching can do.

[Patricia McCoy (Member)]: While we're at it, can I have one more question, please? Do we have anything in the BAA? Transportation? Nothing. We haven't That's gotten

[Matt Walker (Chair)]: not entirely true. There was quite a small it was not deemed worthy enough to set up the accounting committee. So I don't want say no, but in effect no.

[Patricia McCoy (Member)]: You're telling us that CFR can make this whatever financial management can do the what are we calling this now?

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: Stabilization.

[Matt Walker (Chair)]: No. The internal what is it? Oh, we haven't gotten to that yet. We haven't gotten there yet.

[Patricia McCoy (Member)]: Okay. Alright.

[Matt Walker (Chair)]: Representative Keyser?

[Chris Keyser (Member)]: So I just want to, like everybody else, trying to be clear. But the narrative on the right side is a description, as I see it, of what made up that $34,000,000 deficit. So that basically sets up all the different for the four events that happened that created that gap. And then on the left hand side, we have a spreadsheet that shows how we're going to make our budget.

[Logan Meyer (Joint Fiscal Office)]: So that's for the FY '20 No, that's how we're

[Chris Keyser (Member)]: going to make our budget.

[Logan Meyer (Joint Fiscal Office)]: That's the twenty sixth budget. So if you look over the top so that was last year's budget. That's sort of how that budget is brought into balance. As representative

[Matt Walker (Chair)]: Burke pointed out this, there's

[Logan Meyer (Joint Fiscal Office)]: a it should say There's a typo. Yes. There a typo. There is a typo.

[Matt Walker (Chair)]: Where it says one time revenue sources in the f y twenty seven budget. That should say '26. Should say 05/06.

[Chris Keyser (Member)]: That's right, she said that. In other words, this '27 is not

[Logan Meyer (Joint Fiscal Office)]: It's not '27 there, should be '26. Was the typo.

[Matt Walker (Chair)]: It's still about how we got into the hole. Just We're have to start building the budget from.

[Chris Keyser (Member)]: So these are the holes in '26 budget, and then the representation is over here in numbers. Okay, thank you.

[Matt Walker (Chair)]: Representative White?

[Patricia McCoy (Member)]: I just have two questions about

[Kate Lalley (Member)]: the first two numbers, Logan. So the 12,500,000.0 transfer from the cash fund for capital and the central investments fund to the transportation fund.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: I

[Kate Lalley (Member)]: missed a little bit of Candice's testimony yesterday, so I'm not sure. Can you just tell me, like, explain that one in the 5.4 reversions? Like, it's a 5.4 reversion. Was that savings they didn't use last year that they're carrying forward, but they're still gonna need it this year because it was just, like, money that wasn't And course. That was saved.

[Logan Meyer (Joint Fiscal Office)]: So we gotta be careful because we're talking about three budgets essentially. We're talking about the current proposed budget, FY27, which you all are working on now. Then there's the '26 budget, and then there's the '25 budget.

[Matt Walker (Chair)]: The longer budget gets closed out. Right, that one's done.

[Logan Meyer (Joint Fiscal Office)]: So in the '25 budget, which is already done, they found the $5,400,000 which they used in '26, or I guess they're currently using in the budget that is going right now to close, if it comes to zero.

[Kate Lalley (Member)]: That was the money that wasn't spent or they just

[Logan Meyer (Joint Fiscal Office)]: That wasn't spent in '25, and they reverted it back or carried it forward to be used in the '26 budgets.

[Kate Lalley (Member)]: And I guess my question on that money is, was it because they did a project and it came in a little bit under budget, or was it because they didn't quite finish this project in that year, so they're gonna carry it over into the next year because they didn't spend that money in the first year? They're still gonna need it?

[Logan Meyer (Joint Fiscal Office)]: I don't know specifically, but it could be either of those options. There are a number of reasons why they might do that. That'd be a good question that Candice could probably speak to.

[Kate Lalley (Member)]: And then that 12.5

[Logan Meyer (Joint Fiscal Office)]: Yeah, so that 12.5 was set aside, I believe in '25 for use by the transportation as match for the IIJA, the Infrastructure Investment Jobs Act, to be used as essentially federal match. We put that into projects. That was one time funding that we set aside. They used it in FY '26, but it's gone. It's just for the one time. So in '27, it represents sort of a hole that we won't be able to use 12,500,000.0

[Matt Walker (Chair)]: as we did last year. We passed the bill that showed the 12,500,000.0 and the 5,000,000. We passed that bill and said, it's okay to go grab these one time muddies and use the reversions to true up that budget. We passed that. We agreed to that. I think the corporations did too. Yeah, but we and I, everybody did. And then we eventually passed it on the floor. So I guess we knew that. That was how we filled the hole that was declared last year. So if you had said we knew we were gonna be 17,000,000 behind just the way we passed last year's budget when they started to draft this

[Patricia McCoy (Member)]: year's. This year's

[Logan Meyer (Joint Fiscal Office)]: budget. Yep. Okay.

[Matt Walker (Chair)]: And then July hit, 'seventeen went up to '24, almost '25, because the 7,800,000.0 said, guess what? Which I want be clear, when you build the budget in, when we always build the budgets based on revenue projections, it's not based on a guessing or it's well, it's an estimated number, but it could go up or down and it came down. So now we're down another, so now we're at 17 and almost 80, so we're at 25, right? And then Candice, the CFO said, well, I'm also going to need to pay all the new increases and all the new raises and all the expenses in healthcare, everything that's going to come automatically is another 7,500,000.0, right? Yep. And so that gets me to 33,000,000. So when I start out the budget, we already are gonna need to go find $33,000,000 just to get us up to the expected revenue number. We've to build the budget based on whatever that number is, and we know that we don't have $33,000,000 We've to go find 33,000,000 to get there. Plus 1 and a half. Plus 1

[Logan Meyer (Joint Fiscal Office)]: and a half, I would agree.

[Matt Walker (Chair)]: I would agree because in January, or just now, they did another revenue downgrade which you have to then cover because you aren't gonna have that money. If you're gonna have the match money, you're gonna have the budget, you gotta come up with another 1.5. I agree with you, would think that way. At least to keep my mind straight on what we're doing. That's why we're So when they started out, they knew they didn't have enough money and that's where we get into the governor's plan.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: I

[Matt Walker (Chair)]: don't know that everybody understands that or not, but at least I feel better that I do.

[Patricia McCoy (Member)]: All right.

[Logan Meyer (Joint Fiscal Office)]: So now to this sheet where Candice laid out how they made up for that gap. And to make this easier, let's forget about the top section, the stuff in yellow, pretend this doesn't exist for a second, because I think that'll maybe hopefully make things a little simpler. So there's the $33,000,000 gap. To address that gap, the agency in this year's proposed budget took a reduction, which you see here from what was in the twenty sixth budget. So everything in green here were under reductions from the '26 budget, our expenses or things that they reduced in this proposed budget. If you can see the list there, this totals, we'll call it '21 for the sake of easy math. Then

[Patricia McCoy (Member)]: Yes? So we're still in FY 'twenty six, though.

[Logan Meyer (Joint Fiscal Office)]: No, so now we're moving into the FY 'twenty seven budget. This is a reduction. Is compared to

[Patricia McCoy (Member)]: So in the 'twenty six budget, we had all these figures in, but it's currently ongoing.

[Logan Meyer (Joint Fiscal Office)]: So

[Patricia McCoy (Member)]: we're going to keep these in the FY '26 budget, but we're going to remove them in the FY '20 Or yes, we're

[Logan Meyer (Joint Fiscal Office)]: going to reduce certain things by the amounts here on the right, as compared to the '26 budget. So that's where you get '21 of the '33.

[Patricia McCoy (Member)]: You mean 20.9, is that what you're talking about?

[Logan Meyer (Joint Fiscal Office)]: Yeah, that 20.9 in the green there. So if you add up all those on the side, you should get, I'm assuming her math is correct, but you should get 20.9, or we'll call it 21 for the sake of easy math.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: So where did they get? I was sort of sidetracked. They got 21 from where?

[Patricia McCoy (Member)]: So I think all those numbers from the yellow down to number five, those are

[Matt Walker (Chair)]: the green

[Logan Meyer (Joint Fiscal Office)]: Green deck. One through 10 under the green.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: Yeah, that adds up to 20 something.

[Logan Meyer (Joint Fiscal Office)]: So then if we go

[Patricia McCoy (Member)]: Well, now I'm confused. So the reductions from the '26 budget are actually all the numbers that are Correct. Below the

[Chris Keyser (Member)]: Switching that up to 29.

[Patricia McCoy (Member)]: So what is this? May add up to 20. Okay, I get it.

[Logan Meyer (Joint Fiscal Office)]: Don't worry about the ones above for Okay,

[Patricia McCoy (Member)]: okay. So

[Logan Meyer (Joint Fiscal Office)]: that's '21. And then if we jump down to the pink bar down there, whatever color you wanna call that, the reductions from FY '26, and then this is where we get into those, the FHWA approved indirect cost rate or the federal indirect costs that Candice was mentioning is a very confusing thing. But then that they're planning to do in the FY '27 budget, dollars 12,200,000.0 of indirect costs. So if you take the '21 and you add the 12.2, add a little math, you get the 33,200,000 gap that we had just sort of calculated out. That is how they're sort of meeting that projected gap that they've now.

[Patricia McCoy (Member)]: '27.

[Logan Meyer (Joint Fiscal Office)]: For '27, yep.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: So the sales position management savings is 7,500,000.0.

[Logan Meyer (Joint Fiscal Office)]: Yeah, and this is what Candice mentioned. So the $33,000,000 gap was calculated prior to the reduction of force that happened over the off session. Yeah. This number is is both of those. So the one that happened in September whenever the the J talk meeting was, and then the ones that they are planning for this year. So it's a combination one of both.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: And then the balance was back. The top.

[Logan Meyer (Joint Fiscal Office)]: Correct, it's a combination of both.

[Matt Walker (Chair)]: You have a note of 4.1 plus 3.3 to get your 7.31. Right. Two reductions in force. I see the $1,900,000 in credit card fees that we saw on the budget. We took testimony on the rail division, but this confused me that he's getting back a million dollar in a TIF fund of 24. This is just TIF said 1,600,000 and he said that it basically does not impact his business at all.

[Logan Meyer (Joint Fiscal Office)]: I can't speak to that. I'll just say that this chart here is just related to the T fund dollars.

[Matt Walker (Chair)]: Separate and they put it on the rail, so they could keep the project going. That's what the presentation said. Okay. We didn't get very far on that one then. Yeah, and a

[Logan Meyer (Joint Fiscal Office)]: lot of these How are

[Matt Walker (Chair)]: do continue with the reduction?

[Logan Meyer (Joint Fiscal Office)]: The specifics of the numbers on the right there will be questions that you'll have to ask to whoever comes in to present on these different divisions. Essentially, lot of these are a reduction in the state match that we were using for certain projects, and it's like the program development division reduced the amount of state match going to projects, so the projects that we're doing by $5,300,000 I'm sure Jeremy or whoever comes in to talk about that can explain what those projects are, why they chose them, what the impact of that is. Sounds like you heard from Dan at Rail and then the other ones, I think you just heard from maintenance earlier. So

[Matt Walker (Chair)]: We didn't get into this portion.

[Logan Meyer (Joint Fiscal Office)]: You've heard about the position management savings and then the miscellaneous reductions. Candice could probably mention those if you have questions on those.

[Matt Walker (Chair)]: Represent Lalley?

[Kate Lalley (Member)]: Yeah, so to get to the '21, basically, we did a lot of little here and there reductions in state match, but all of those dollars were dollars that could have been

[Patricia McCoy (Member)]: amplified. It could have

[Logan Meyer (Joint Fiscal Office)]: went to draw down federal funds.

[Kate Lalley (Member)]: Yeah, so the true opportunity cost is significant. Potentially.

[Matt Walker (Chair)]: Which is where we get into this conversation about indirect cost rate

[Logan Meyer (Joint Fiscal Office)]: or not? Guess it's, yes, I can talk about that briefly. I am far from an expert on this. So my understanding of this and from Candice's presentation, what I understood this to be is that, So when we use state dollars to match federal dollars for say a bridge or a road project, we usually get like a four to one match. We put in a dollar that's We'll sort of match that $80.20, right? Federal indirects are taking federal dollars and turning them into T fund dollars at a one to one rate. So for every one federal dollar we use, it turns into one T fund dollar, and we can use those for essentially costs that are not directly related to a project, and therefore not able to get that higher match rates, but we can use these to pay for some administrative costs and some other things. I think that the one Candice mentioned is if she helped an engineer on a project do some financial administration stuff using the indirect costs, they could bill per time to the feds at a sort of one to one dollar rate, one federal dollar to one T fund dollar rate. This is done fairly rarely. After talking with Chris, we think 2022 was the last time we did that. Don't Chris can maybe get into the specifics of the details of why we did that, but prior to then, it hasn't shown up on the TFUND operating statement for many years going back into the preteens.

[Patricia McCoy (Member)]: So I Yes, please. So the reductions in the FY '26 budget are from the green band down, which totals the $20,000,009.45

[Logan Meyer (Joint Fiscal Office)]: $0.04

[Patricia McCoy (Member)]: 6. Correct? Yes. And Then we're going to implement this FHWA approved indirect cost rate of 12,243,565, so we get to the 33.2 that we need to shore up the FY '27 budget. Why do we have this column one through five

[Matt Walker (Chair)]: in the yellow? So these are

[Logan Meyer (Joint Fiscal Office)]: essentially increases from the FY '26 budget. I guess I can't speak to why they're specifically on this page, but these are areas that Candice flagged as having increased from where they were

[Patricia McCoy (Member)]: In FY '26.

[Logan Meyer (Joint Fiscal Office)]: In FY '26, yep.

[Patricia McCoy (Member)]: In FY '25.

[Logan Meyer (Joint Fiscal Office)]: Nope, in '20 the six budget. So in the FY '20

[Patricia McCoy (Member)]: this current FY '27 proposed budget, these top five things have increased by Oh, twenty twenty one thousand nine hundred thirty two.

[Chris Rupe (Joint Fiscal Office)]: Correct,

[Logan Meyer (Joint Fiscal Office)]: from the FY26 budget. Okay.

[Patricia McCoy (Member)]: So that's just like a, here's 21,000,000 in increases that weren't there last And

[Logan Meyer (Joint Fiscal Office)]: number five is one that we can get into a little bit more. This is the governor initiative, highway and maintenance projects that are being funded with the purchase and use. So these are occurring, but what is also occurring is the decreases happening below. So the proposed budget is increasing planned highway and maintenance with that $10,000,000 They're also decreasing some state match for rail projects and state match for aviation. Both of these are occurring in the FY '27

[Patricia McCoy (Member)]: budget. Second budget, okay. And then this governor's number five is the 10,000,000 that we're clawing back from the purchase and use tax.

[Logan Meyer (Joint Fiscal Office)]: So that represents an additional 10,000,000 in transportation fund in the FY '27 budget that wasn't there in '26. Right.

[Patricia McCoy (Member)]: And then this 10,000,000 will leverage about how much

[Matt Walker (Chair)]: in federal? 40 something dollars. 40,000,000. 50,000,000.

[Logan Meyer (Joint Fiscal Office)]: It's not in this presentation. So they didn't mention these are the projects.

[Matt Walker (Chair)]: This an

[Kate Lalley (Member)]: average 53,000,000

[Patricia McCoy (Member)]: or it's 53,000,000

[Kate Lalley (Member)]: total?

[Chris Keyser (Member)]: Well, they're gonna be $63,000,000 partly.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: I know. Sorry. I get it.

[Matt Walker (Chair)]: I appreciate that because can't do that. Why don't you phrase your question, too? Lalley.

[Patricia McCoy (Member)]: So I just want to know, that's the $10,000,000 that we're drawing back from the purchase and use tax beginning hopefully this FY twenty seventh. Yes. Okay. All right. So that was just kind of like, all right, now I get it. So, Keyser,

[Chris Keyser (Member)]: what was testified is that that $10,000,000 equated to a $63,000,000 spend on new projects.

[Matt Walker (Chair)]: So the 10,000,000 leveraged to 53, the total 63. So in effect though, adjustments of the 33,000,000 were covered, and then we're doing 10,000,000 more on top of that. Right. So you came out with a budget that we knew we had to fill the 33, And we did that through these mechanisms, these cuts and these adjustments, all of which included some highway project cuts. And then we have the 10,000,000 coming in, which we are in effect going to leverage and spend $63,000,000 Those

[Logan Meyer (Joint Fiscal Office)]: are above, and they have different projects than the ones that were necessarily cut. So I can't speak to the specific timeline of how this budget was created, but my understanding is that the budget was created without the understanding that there was gonna be the additional 10,000,000. They came up with the cuts they needed to do, the federal indirects to sort of make it work. Then they got the 10,000,000 and came up with these projects, which I believe Candice testified, and Jeremy can confirm these, were scheduled to be in out years, so '28 or '29, that are brought forward into this year using the $10,000,000 from the purchase and use reallocation to fund and draw down the federal match needed to do these this year. So they're doing that, and to your point, they are doing the other reductions, the projects, the rail, to the things listed here. Both of those are occurring.

[Patricia McCoy (Member)]: So can you just explain what the FHWA approved indirect cost rate is? Where is that money? What is it?

[Logan Meyer (Joint Fiscal Office)]: It's federal money. Right now, I'm sure this is oversimplified, Candice

[Patricia McCoy (Member)]: That's what we need.

[Logan Meyer (Joint Fiscal Office)]: It's federal money that we're turning into T fund dollars to use for administrative costs of projects.

[Patricia McCoy (Member)]: So instead of It's transportation. What kind

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: of money? It's I just like, where I found out last night just yet. Just Yeah. Like, where

[Patricia McCoy (Member)]: to know where this $12,000,000 came from?

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: Well, it's just credit money. You're washing the money, sort of cleaning it. So you're taking this federal money, and then you're trying to find things that qualify that you could offset that you can swap out for state dollars. So they're going to go through their processes and come up Logan, not get yelled at here, with $12,000,000 So they have like a chart going through, it's gonna probably be time consuming for them to start documenting all these indirect to come up with $12,000,000 But once they come to that number and the

[Matt Walker (Chair)]: things that qualify for it, they're going

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: to go to the Fed and say, hey, clean it, and then we can get a 12,000,000 in state match. It's state match, it's state dollar. It gets funneled back in.

[Patricia McCoy (Member)]: Okay.

[Matt Walker (Chair)]: It's the way I look at it.

[Patricia McCoy (Member)]: So they can use things like, I don't know, some engineered study person that is paid for, or paying currently state monies for, but it may qualify federally. So we're going to pull that money out of our state match money and swing it over into the federal match money. And that's part of this 12,000,000. We're building 12,000,002 and $43 of federal money that's probably stuck in a state bucket right now, but it qualifies for federal money. Is that what we're doing? Well,

[Matt Walker (Chair)]: I just want to make sure we're pointing our questions out. Whether they're at if you're going to ask Danielle to answer that one.

[Logan Meyer (Joint Fiscal Office)]: I'm to defer to Chris and see if he has a way of explaining this complicated concept.

[Patricia McCoy (Member)]: We have state grants that are in 20 matches, and then we have federal grants that are ninetyten matches. And there might be money that we're using for a state freeze right now that actually would qualify some of the project managers' time or something in state money that we're swiping out of the state money to put into federal money so that we can get the reimbursement federally. I

[Chris Rupe (Joint Fiscal Office)]: think you're really, really close, Representative McCoy. So I am not an expert on indirect rates because the agency does not list lever very often because it is administratively burdensome to do, and you're basically taking federal money that could be used on a project and using it to cover administrative overhead that's related to the project. The state is know, agency uses state money to pay for centralized administrative costs that are hard to attribute to, that bridge or that, you know, stretch of pavement, but they support all these other activities. So like the financial shop, the contract shop, I'm sure their legal costs have some support. What the indirect allows you to do is say, all right, we can quantify this amount of state funded time was spent in furtherance of these eligible activities instead of continuing to use our state money to pay that, can we get reimbursed with our federal apportionment and pay us back for what we put in? And the money comes out of every year in August, in October, October 1, FHWA sends out a letter to all the states that says, hey, here's your apportionment amount that you can is now available to obligate in our computer system. So you get a known amount of money and that is what this would be coming out of. It's a little different. I think Candice mentioned the other day, I caught up afterwards, it's a little different than in like the human services world where they do this regularly because we have like a finite known amount of money. So the real trade off is are you using that known finite amount of federal money to pave a road or build a bridge or are you using it to reimburse yourself for your

[Matt Walker (Chair)]: overhead costs?

[Chris Rupe (Joint Fiscal Office)]: I hope that didn't overly complicate that.

[Patricia McCoy (Member)]: No, so I guess I'm assuming that we're using it this one time to cover overhead costs.

[Chris Rupe (Joint Fiscal Office)]: My understanding of the agency, think, planning to do it for two years, and there's a limit to it. You can't just say 500,000,000 or $300,000,000 where it's going to charge the dinner. There's a ceiling price.

[Patricia McCoy (Member)]: I think she said two years. Yeah. Did I say that? Said it.

[Logan Meyer (Joint Fiscal Office)]: It's been

[Matt Walker (Chair)]: a long week. You have to prove that it's I

[Patricia McCoy (Member)]: think I've got it.

[Matt Walker (Chair)]: You've to prove that it's applicable. And I guess if we're getting closer on there, I would we've only been doing this a short time. But I would also want to point out that some of these things we did choose last year to cover this one time fund from another spot. We did choose to agree with the reversions that were made. We did choose line number three to increase town highway. We put the Quimby rule on every town highway project. So that put the state T funds on $1,300,000 lower than they would have otherwise had. We, and then as you point out, up through the ways and means and appropriations and through the body and in the Senate and the we collectively did agree to a lot of these things. So it's not entirely just the agency out there making up numbers. We certainly have a big part of that, that we agree or we push them to say we want more town help, and we want it to be adjusted for inflation. And we go ahead and use the reversions, which some members do push back on very heavily because they're concerned the money won't be there to pay the towns when the time comes or that other projects could have been there. When we agree or don't agree to the adjustments on town highway bridge or aid and less money spent there, when we pass through the budget, we've agreed to all of these things or we have decided that we didn't decide to make any changes. I want to make sure that's clear. This is not just the agency pulling in things. This is what we pass for a budget and knowing that at least part of this was coming. Having $7,800,000 downgrade in revenues on top of another 1.2 or 1.5 that just came, that added significantly $10,000,000 to our problem that we didn't obviously agree to or want, but that's the way it is. So there's a lot of pieces of this narrative that you'll all have to figure out for yourselves and what parts are there. There are other the story goes on from there too in terms of the narrative of whys and what it will accomplish and what will happen. And that's something we'll have to figure out for yourselves. But at least as far as the hole that we did help agree to by passing last year's budget, the huge drop in forecast. And now that we have a governor's plan to how he thinks we should the administration feels and secretary feels that we should address it. I'm not sure that we're quite there, but it's what we're trying to be at. So I appreciate you coming in and going through it some more. Are there more questions right now?

[Patricia McCoy (Member)]: They have it ready. Check back tomorrow.

[Matt Walker (Chair)]: Yes, I got it. I got it.

[Kate Lalley (Member)]: I am

[Matt Walker (Chair)]: more than happy revisit it again because we're still going to have to we had a big mission last year, to make sure everybody knew we had this problem. And we did a very good job with lots of other people's health and lots of other people working on it and lots of that everybody knows we have a big problem. Now we have to come to some level of what's going to be the right plan and what are we going to agree to. And then also what changes are we going want to make to it. I know there's people that are working on requests that are going to want to make some changes. Trust me, that's going to be complicated. But I'm not saying that's a complete no, but you'll have to navigate through this entire piece. And everybody in the building is now looking at it, which is what we wanted in the first place. Representative Weiss?

[Patricia McCoy (Member)]: I have two questions. The

[Kate Lalley (Member)]: first is, thank you, well, again, and press for trying to explain this FHWA indirect cost rate. And I think we understand it a little bit, but it makes me think that it could be really helpful to get a little bit more testimony from someone just about federal highways, more of an overview of the matching, this, the that. Because it seems it's complicated. Not for today, but just I'm kind of making that request. And my simple question is, looking at between the yellow and the green lines, I see salaries, position movements, benefit rates increase. That's an additional $8,000,000 cost. But we've also got that $10,000,000, that's not a cost, that's revenue that's coming back. So I'm just wondering why the salary increases, which is a cost, is reflected the same way as the $10,000,000 which is additional revenue.

[Logan Meyer (Joint Fiscal Office)]: I don't know that I can speak to why Candice made the document that way. Think it's maybe just to highlight noticeable increases in this year's budget. Number five there does, will show up sort of above the line as an increase in T funds. The rest are sort of cost pressures that we'll have to absorb within this year's budget. I can't speak to it. Okay.

[Unidentified Member (possibly Vice Chair Timothy R. Corcoran II)]: I just

[Kate Lalley (Member)]: wanna make sure I wasn't completely missing something. Okay. That's great. Thank you.

[Patricia McCoy (Member)]: Think it's revenue in, but it's also a cost out because we're expending that money on those projects from that slide that Yeah. Those are the projects that are gonna make up that 10,000,000 for this year. And then going forward, we're going to have to I'm sure those projects are maybe not one year projects, they might be two year projects. So when we get $20,000,000 next year, part of that funding will expend, it'll become an expense yearly, it's a revenue in, but it's an expense. That's my sense on that. And I may or may not

[Logan Meyer (Joint Fiscal Office)]: be That's exactly correct. You're right. Yep.

[Chris Keyser (Member)]: I had some of the same reservations that was expressed by Candice. And the fact that I would really like to see, and I know it's Candice, but a format that is appropriate to me, where you have revenue and you have expenses, and you have the changes in that instead of this lineup of what I think was mixed. Anyway, I just think that presentation added to the confusion.

[Logan Meyer (Joint Fiscal Office)]: I believe you would like to see the operating statement. Thank you. I can show you what's okay.

[Chris Keyser (Member)]: I did not expect a five on a Thursday.

[Matt Walker (Chair)]: Thank you very much for