Vermont Legislature SmartTranscripts:

[Matt Walker (Chair)]: We're live here in the House Transportation Committee on Wednesday, 02/04/2026. And we have distinguished guests today, starting with our CFO of the Agency of Transportation. Candice, welcome back. I'm looking at your presentation from back on January 21 and still trying to make sure I really understand how you built where you started from with the budget and how you got there and making sure that I understand all those pieces. And I know you have some additional I think you had some additional stuff for us. So welcome. And we'll have quite a bit of back and forth, I think, over the next hour. Great.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Thank you very much. For the record, Candice Elquist, Chief Financial Officer, Agency of Transportation. So we have this slide deck from a week and a half ago now. I also have prepared a memo on the indirect cost rate. And I'm happy to either dive into the memo, because that was where most of the questions were last time, or I could open it up for questions on the slide deck.

[Matt Walker (Chair)]: Well, let's start with what you brought,

[Timothy R. Corcoran II (Vice Chair)]: and we'll go back to

[Patricia McCoy (Member)]: Okay.

[Timothy R. Corcoran II (Vice Chair)]: The memo. I can Great. Go grab my notes.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yeah. Memo should be

[Matt Walker (Chair)]: point anybody's got any questions. Once we get started, I'm sure

[Timothy R. Corcoran II (Vice Chair)]: it'll Right.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: So the memo was part of the supporting materials, so I wasn't planning on bringing it up

[Timothy R. Corcoran II (Vice Chair)]: Oh, I'm sorry.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Unless you need me to. Sure.

[Patricia McCoy (Member)]: There we go. That's what I looked for. Looks like just a one pager.

[Timothy R. Corcoran II (Vice Chair)]: Yeah, it's online. Yeah, it's online. Okay.

[Matt Walker (Chair)]: I guess I better bring it

[Logan (Director of Administration, Vermont Agency of Transportation)]: up. Good day.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I will just hit the key points of each paragraph of this memo. I was able to investigate with my staff that the last time we utilized the indirect cost rate for the agency of transportation was recently, actually, 2022. The time before fiscal twenty twenty two was fiscal twenty twenty 2004. And it's likely that we had it on continuously between the mid 1990s and 2004. The use of an indirect cost rate is made possible by having an approved indirect cost plan on file with FHWA. We have a plan on file with FHWA right now. We had a plan on file with FHWA last year. This is a normal business process. Choosing to use the plan is is, what we're considering for fiscal twenty seven. When an indirect cost rate is in use, FHWA is essentially resupplying the cash outlays that AOT advances on behalf of FHWA's share of AOT's indirect costs. So these are eligible expenses that FHWA could pay, and AOT is paying first. And we're receiving reimbursement. So how this happens operationally, costs are billed to the federal FHWA fund code via the regular federal billing process. Once we receive funds, the Department of Finance and Management financial operations moves the revenue from the federal FHWA fund code to the Transportation Fund fund code. I know that's a little in the weeds, but I thought that was interesting. As we talked about a week and a half ago, it should be noted that the receipt of indirect receipts from FHWA do not increase the total dollar amount from FHWA. That federal apportionment stays the same.

[Patricia McCoy (Member)]: I have And you said that again.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes. Yes. So we are receiving, in the '27 budget, $12,250,000 worth of indirect costs from FHWA, but that doesn't increase the total federal dollars that we are going to receive from FHWA. So those those dollars could have essentially gone towards project costs, which is what we talked about last time.

[Timothy R. Corcoran II (Vice Chair)]: We have a May I?

[Matt Walker (Chair)]: Yes, please.

[Patricia McCoy (Member)]: We have a FHWA gives us? An apportionment, a set dollar value. Which is in the millions. This is a separate amount on top of the millions that we have. It's a part of it, actually. Oh, so it's incorporated in So I'm just gonna I don't know. We get $100,000,000 from FHWA. We're not gonna get $112,000,000 from FHWA. Exactly. A part of this $100,000,000 is indirect costs. Right. Okay. Absolutely.

[Phil Pouech (Ranking Member)]: Yeah, thanks for helping some skilled people sort of absorb power, all that sick and drinking diesel. So if we were to take this and not use it for indirect costs, go to SelectRenture project, we would have to come up with whatever the match is.

[Timothy R. Corcoran II (Vice Chair)]: But

[Phil Pouech (Ranking Member)]: because we're using it with indirect, do we also need to show some kind of match?

[Patricia McCoy (Member)]: No.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: It is a one for one swap with transportation fund dollars, so there's no matching for indirect costs received from FHWS.

[Timothy R. Corcoran II (Vice Chair)]: Okay, thanks. Candice, how

[Matt Walker (Chair)]: does it come to 12.25 and not 14 or not eight? So how did you I guess maybe I want to back up before that. That's a question that I want to understand. But before that, how did a decision get made or what would drive the decision to go ahead and implement this this year as opposed to other previous years or all the way back in the nineties to 2004? But why why decide to do this? What was that decision? How did that come about? Or when did you get brought into that? And why do this as opposed to some other pieces?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes. The $33,000,000 hole in the transportation funds for fiscal 'twenty seven was quite substantial. The executive committee came together in August to start our budget build for the 'twenty seven budget. And we tried to identify avenues to fill that gap. The 12,200,000.0 and change figure is very exact. That started off as a little bit higher, dollars 13,000,000. That was what we thought could be attributed to the indirect cost rate without affecting the rest of the schedule of the white book projects. That's part of the Highways division.

[Matt Walker (Chair)]: Are you saying you started talking about or investigating this indirect conflict issue back in August? Yes. Absolutely. So it's been on the table through the whole budget process.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes, it has.

[Matt Walker (Chair)]: And so the specific number that becomes very specific, how does that narrow down from all of the costs that are associated, that are administrative or potentially indirect? How do you get narrowed down to such a specific amount? How do you process work?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: The last time we turned on the indirect cost rate in 2022, we garnered $20,000,000 worth of costs from FHWA. I felt like $20,000,000 was too great a risk to put in this budget cycle. So in conversations with chief engineer Jeremy Reed, he and I came to a number of $13,000,000 that was more reasonable for the projects in the white book. And then it went from $13,000,000 to 12,200,000.0 as we narrowed in on exactly what the salary benefits and internal service figures from the management were.

[Matt Walker (Chair)]: Thank you. What does it mean that $20,000,000

[Timothy R. Corcoran II (Vice Chair)]: is too much of a risk? What's the risk? I wasn't quite sure what you meant by that.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: We never know exactly what is going to be determined as an eligible cost from FHWA. Right? So if I'm saying we're building the 27 budget thinking that we're going to get $12,200,000 worth of costs, I, as a CFO, am basically saying, I'm I'm gonna find $12,200,000 available costs one way or another. So in my mind, as as a, risk averse individual, I'm thinking, wow. I I have to find $12,200,000 next year. And 20,000,000 in 2022, I think, was garnered because of the state of emergencies we were under. There was COVID. We were just coming up on on the flood.

[Patricia McCoy (Member)]: I think the eligible projects now would be different than it was back in 2022. So I tried to There's plenty of expenses to pick from the university projects that you could work off of doing this, might not have been able to come

[Timothy R. Corcoran II (Vice Chair)]: up with $20,000,000 yes.

[Matt Walker (Chair)]: Is what you're saying the risk could have been. Yes. And then, I don't know where that would leave us, but you're confident you'd come up with 12.2 out of what's available in the White Book projects. Right. Okay. Representative Boiref? So

[Patricia McCoy (Member)]: if the 12 I'm going to just say 12. So would have gotten $100,000,000 from FHWA. Correct? I mean, that's

[Timothy R. Corcoran II (Vice Chair)]: Yes.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Let's go with 300

[Patricia McCoy (Member)]: We're million

[Logan (Director of Administration, Vermont Agency of Transportation)]: going to get $300,000,000

[Patricia McCoy (Member)]: regardless of whether we use indirect costs or not. By using the 12,000,000, which is incorporated in our 300,000,000, this 12,000,000 is charged to projects in our white book. Is that right? Or is that $12,000,000 used for other things in transportation? So the $12,000,000

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: is going to be put towards indirect costs, towards eligible Right. So you could say that of the pot of 300,000,000 that we might get from that we will get from FHWA, because that's what we're saying the apportionment is Yep. 288 is direct to projects, and 12 is gonna be indirect, whereas without indirect, 300

[Patricia McCoy (Member)]: Which is could be all of these that you're listing here, central service charge, utilities. Exactly. Okay. Okay. But they're all projects within the white book. Yes, all. And you're attributing $12,000,000 of this to indirect costs, and the federal government is allowing us to do that, which pretty much offsets maybe people's salary or anything in regards to facility charges? Yep, I have

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: a list here of eligible indirect Utilities, facilities, property management, general office, central service charges.

[Patricia McCoy (Member)]: So instead of using state monies for these things that you have that are eligible, we are using $12,000,000 of the 300 that we normally wouldn't charge to a federal dollar amount to the feds, and they're allowing us to do this because we have this FHWA plan on file, and we need to do it this year. Thank you. Representative White's comment.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Okay, so can you remind me, were you here in 2022 the last time this was utilized? I was not. Okay. And you've spoken about you're risk averse, you're

[Unidentified Committee Member (possible Candice White or Kate Lalley)]: a CFO, you're kind of supposed to be risk averse.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: So

[Unidentified Committee Member (possible Candice White or Kate Lalley)]: I understand your being a little conservative in terms of feeling like you can commit to 12,000,000, you're not sure you can find any more. What are the other downsides that come into your mind when using a process like this? Because obviously we haven't used it very often. So what are we missing out on when we're going down this road?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: There's less federal dollars available for projects in the highways division.

[Unidentified Committee Member (possible Candice White or Kate Lalley)]: And just looking at the different items that can come out of that 12,000,000, and looking at soap, cleaners, brooms, that you're gonna need a lot of soap to get to On 12,000,000 the other hand, rent. I think AOT has a lot of property, and you're probably charging rent from different divisions. So is that where you're thinking that you might find the majority of that?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes. Property management, rent, utilities. Again, I feel confident in what's been proposed, the 12.2. I wouldn't have put a number forward that I wasn't confident in getting. I just also am aware that now this is something my staff has to work on for the next year.

[Phil Pouech (Ranking Member)]: Yes. President Trump? Just to reiterate, so the $12,000,000, if we weren't doing this, we could potentially have two more projects in the white book at $6,000,000 a piece. But of course, we would need the match to go with it.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes, that's an accurate statement.

[Matt Walker (Chair)]: How did adding or the projects that got added into the budget out of the leveraging of the $10,000,000 that added a whole bunch of new projects, did that increase the opportunity to do indirect conservation?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I wouldn't say that the administration's $10,000,000 proposal had any relation to the indirect cost rate.

[Matt Walker (Chair)]: So when we put those projects into the white book or accelerated them in some way, I guess, because they're identified to be done, You'd already done the work on what was already in the book. Those were added. But you didn't go in and say, Okay, I could do more indirect cost ratio with those? No. You could have or not. I don't know. But we didn't.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yeah. I I'm not sure.

[Matt Walker (Chair)]: That part had already been in effect. You had already worked on what was in the white book before that piece was decided or added.

[Patricia McCoy (Member)]: Yes.

[Matt Walker (Chair)]: Okay. So they were accelerated into the white book after the budget had already been built? Yes. Okay. But they could potentially be an opportunity for more indirect savings since there's more in the book than there was when you first went through it?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Perhaps.

[Joe Flynn, Secretary, Vermont Agency of Transportation]: Perhaps.

[Patricia McCoy (Member)]: So I guess we're $30,000,000 in the whole, this FY 'twenty seven budget.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: We started '33. '33. Okay, so

[Timothy R. Corcoran II (Vice Chair)]: $12,000,000 of it is indirect costs that we're recouping.

[Patricia McCoy (Member)]: Remind me again where the other $18,000,000 is at RIFs?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: So from my slide deck, we took $21,000,000 worth of reductions. And the September reduction in force. The current reduction in force is $7,500,000 of the $21,000,000

[Patricia McCoy (Member)]: So with the $10,000,000 the governor has stated he wants to take from the purchase and use tax, we had that slide up that has funded $10,000,000 worth of projects, 19 projects, throughout the state. That's in addition to all of what we've done. This is just as an aside, if we get the 10,000,000, we can do this with these projects. So we didn't use that 10,000,000 when we added new projects into the white book. We didn't use ongoing projects to fund those. We were in the whole $30,000,000 which meant we have projects in the white book that may have had to be suspended for a year or something. Was that ever in the mind of maybe we need to pause a project for a year or two because we don't have the money? Instead of that, we went through all of these machinations to get to, we can fund these. But if we get $10,000,000 we can do these $19,000,000

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: part of the $21,000,000 worth of reductions was a $5,300,000 reduction to highways projects. That's transportation fund dollars only. And then when we were made aware of the $10,000,000 from the administration's proposal, $9,300,000 of that went back to highways projects. Okay. Secretary, did you have something?

[Matt Walker (Chair)]: Oh, I'm sorry. I'm sorry. Happy to have you here.

[Joe Flynn, Secretary, Vermont Agency of Transportation]: I'll be here. Joe Flynn, Secretary for the Record. Apologize for backpunching, but I just think it's important to make the point that $10,000,000 in the government's proposal gets us $63,000,000

[Patricia McCoy (Member)]: of the Fully aware of that.

[Joe Flynn, Secretary, Vermont Agency of Transportation]: Spread across the whole state. Correct?

[Timothy R. Corcoran II (Vice Chair)]: Yes. I think ten minutes. Yeah, I'm just trying to formulate it. I guess story with Cherry Walker is the 5,300,000.0. And it's, I guess, again, how did you come to that? The way I look at it is every budget that we pass is so big, you're bound to add things that slip or aren't done, and your comfort level is 5.3. It's not necessarily projects are going to get cut, but just the naturality of the history of things in here, you're going to have carryovers. If you look in our footprint, those carryovers are potential revisions. So you felt like 5.3 was something that we could do without really affecting projects was going to happen on this thing, natural fourth. Is that accurate?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I'd say that it was that figure as a reduction to highways projects before the administration's proposal was a result of the executive team coming together and figuring out what reductions we were going to take as an agency for the 'twenty seven proposal. So that 5.3 is only highways projects. There are other reductions to other divisions. All of those reductions were a result of the executive committee coming together and saying, this is what we're putting forward for 'twenty seven.

[Timothy R. Corcoran II (Vice Chair)]: Well, you would be as clear, it's not really affecting projects. That's sort of like the natural ebb and flows of the project, which they are now urban ones.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I mean, I don't know the specifics of Jeremy's highways division. So I would defer to him.

[Timothy R. Corcoran II (Vice Chair)]: Well, that's my understanding. And I guess my other question I'm still wrestling with is just the federal money. Like you said, we get $300,000,000 it's a five year appropriation, you have eight years to obligate it. You constructed a budget based on a 33,000,000 shortfall that was constructed, the government said, hey, we're gonna get another 10,000,000. Save money. Well, you're gonna need federal money, as Secretary Clinton just stated. So you just grab down another 63,000,000. I'm just struggling at how does that math work? Because we're in the fifth year of a budget and all this money is just sitting there and we're always told every year that we could maximize in the federal dollars. So how do magically do the $63,000,000 still be on the table? What is our balance? What is our federal balance? If our committee said, all right, we're gonna find another 20,000,000?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: So the apportionment remains the same, but we were able to match up to $63,000,000 for projects through advanced construction. Advanced construction is a concept of basically borrowing future apportionments.

[Timothy R. Corcoran II (Vice Chair)]: Yeah, and so we are borrowing. So if I look in this book and notice the paving is at $140,000,000 and the next year is cut in half, is that an indication of the decisions that we're making today of what's going to be happening

[Phil Pouech (Ranking Member)]: in

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: 2028, potentially? If we get our advanced construction number up to a level that FHWA deems inappropriate, that we have to start cutting back and not borrowing so much. But in terms of exactly what the paving figure is in the future, again, I

[Matt Walker (Chair)]: definitely Well,

[Timothy R. Corcoran II (Vice Chair)]: not the exact amount, but obviously this was presented to us, our comfort level is that we're gonna feel the pinch follow-up here because of the decisions that have been made. Not saying a right or wrong, but at the end of the day, the decision has been made not to generate new revenue. I've been in that argument, but based on that, we're going to feel that pinch as of today.

[Matt Walker (Chair)]: Mr. Sanger, if you'd like to

[Phil Pouech (Ranking Member)]: take the If I may.

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

[Joe Flynn, Secretary, Vermont Agency of Transportation]: would state the fact respectfully that this committee and this legislature has approved budgets every year that involve advanced construction. This is not new. This is a fiscal tool available by Federal Highway Administration, and it's printed in the federal regulation as such. We're borrowing it in as much as we're using available dollars from the future. And I know this does sound like semantics, I don't mean it to be. This isn't like going to a bank and borrowing money you don't have, and then having to figure out how you're going to pay it back. This is going to someone who has money set aside for you, and you're saying, based on your rules, we'd like to take 12,500,000.0 of that down. And their rules say, sure, you can do that. So it does reduce future, you're correct. One of the wild cards here as well in this current year is the reauthorization that we've talked about, which is coming in October 2026. So we don't know what reauthorization will mean. Every indication at this point is telling us it will be the same or larger, but we can't take that to the bank either. But the point I simply wanted to make was advanced construction is not a new concept. It has been part of every budget the Agency of Transportation has presented, perhaps for decades, if not forever. The conversation really would be the amount of advanced construction to the concerns you're raising, viable dialogue. But this is not new. So any concern, whether in the committee or in the building, about the methodology the agency is using, the building through the T Bill has adopted budgets for years that have been built on advanced construction. But as you understand from the time in this committee, the complexities of how much, how did we get there, In some respects, my simplified mind says, we looked at all the other things we knew we could do without really flipping programs upside down. And then the gap told us 12,500,000 was the sweet spot, or 12,250,000. But it is a somewhat arbitrary process that got us to that level.

[Matt Walker (Chair)]: Yeah, no, I understood.

[Timothy R. Corcoran II (Vice Chair)]: Like I said, that's well appreciated. I just, like I said, I just want make clear to this committee that these decisions have consequences in my mind. And obviously, instruction has been around. But it's a culmination of the other things that you're doing, it makes me give pause of the effect that Lieutenant AB had in the out years. I mean, that's just the reality. I think this committee has to be going into this with eyes wide open of what we're doing, with the $12,500,000 the $5,300,000 that they're gonna be basically going out of this year's budget, you know, the Maryville round is gonna probably stop there eventually, we're gonna have to adjust accordingly. You know, I'm not saying there are any easy decisions, but just wanted to point that out. I don't know you answered the last question about the fund balance. What is our federal fund balance? We did come up with another ex fund.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: You mean what is the block?

[Timothy R. Corcoran II (Vice Chair)]: Well, you said federal dollars. Now, like I said, we're allotted $300,000,000 and we're doing advanced starts based on anticipated. What's your comfort level? If this committee said, we just found another 20,000,000 would you give us $100,000,000 of federal dollars?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I'd say there was a time in recent history, maybe a year and a half ago, when we were up to 400,000,000 construction, and we've now gotten that down to, like, $270,000,000 and that's a much more reasonable number.

[Matt Walker (Chair)]: That is a running balance that you have that you're keeping. You know how much we moved into the future funds and Yes. So if it's not new, which we have lots of new members and those of us that are slower learners than others, as the Secretary is saying, it's not new, but is it really the scarcity or the financial struggle that we're facing that really highlights it more than perhaps it has in the past? Maybe the BVU is not new, but it certainly comes to light far more because we're probably taking each other at a different level. There's our unfamiliarity of it.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: My first year testifying with transportation was last year, and we didn't about advanced construction that much last year, but it was definitely in the budget.

[Matt Walker (Chair)]: Well, I wanted to touch on another thing that our representative Corcoran had said. When I was first asked about the thought on the transportation budget with the leadership of the House, I said, I think you should double down on the governor's effort to bring money to construction. It's been a $20,000,000 shortfall for gas tax for $20,000,000 the year before, and it was $20,000,000 the year before. This isn't a, it's stacked up, and now it's years of being stacked up behind and not having money to do much beyond maintenance and a few additional projects. I'm not saying that's what they're going to do, or the answer is, could it be? But that was my first response is, let's double down on the 10,000,000 and go to 20. And if we did, and if there would be other pieces that would build to that, you're confident that you could find the work to get done, and you're confident it's available to us?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes. The contractors and the workers are out there. So yes, we could find the work to get done.

[Matt Walker (Chair)]: We could find the federal match.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Buy yes. Find the federal match, borrow more on advanced construction. The exact number of advanced construction is a continuous dialogue between our AOT exec leadership and FHWA. When it reaches a level that FHWA is not comfortable with, that's when we'd have to start building it back down.

[Matt Walker (Chair)]: She could still take those T funds and put them into town highway projects if we didn't have money to match. Representative Pouech? Yeah, just

[Phil Pouech (Ranking Member)]: to sort of simplify things. So an argument, I've taken the 10,000,000 from the purchase and use, it leverages x amount 80,000,000. But that 80 millimeter is actually sitting in the FHW bank. If you don't take it this year, it's still there next year.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Is that true? For advanced construction, yes.

[Patricia McCoy (Member)]: Okay.

[Phil Pouech (Ranking Member)]: So it's really not an argument that if we don't take the 10,000,000, we're gonna lose that match. That match is there for, I mean, obviously we're gonna have to come up with the match either this year or next year.

[Matt Walker (Chair)]: Cost of goods.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Right. I mean, I'd say every budget cycle is different. But no, wouldn't say we're losing the match if we don't take it this year. It's just that we've built a budget assuming that those projects would happen in '27. So that's a more real construct than any future budget that we haven't built yet.

[Phil Pouech (Ranking Member)]: Right. Right. You've built a budget that allows that to happen. Every year, I think for now three years or four years, the question always comes up, are we leaving any money on the tape? And we've been told, nope, we're capturing everything we can in formula funds and then grants too, we go after as many as we feel we can get or use. But now we're getting a little more understanding that's, hey, sometimes our budget pulls a little from the future to mix, and I get that, hey, you can't get it to the dollar, right? You got projects and you start lining them up, they're ready to go, and we have a match, let's go ahead and pull a little from the future. But, again, it's fair to say if the 10,000,000 doesn't happen for whatever reason, that's not money we're gonna lose. That's still out there to capture for the next year or the following year.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Depending on on the budgets that we propose

[Phil Pouech (Ranking Member)]: for 20 budget to do that next year. Okay. Thank you. Yeah. That's helpful.

[Timothy R. Corcoran II (Vice Chair)]: Representative McCoy? If we don't have

[Patricia McCoy (Member)]: the 10,000,000 this year, if we don't get the 10,000,000 this year, those projects that are earmarked for that 10,000,000 do not have it. Correct. Okay. So, I

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: guess

[Patricia McCoy (Member)]: I have a couple of questions. Number one, paving seems to be the big issue, that we're going to go from 148 miles down to whatever, 70 or something next year. Yeah, miles, million,

[Timothy R. Corcoran II (Vice Chair)]: to 148.

[Patricia McCoy (Member)]: Yeah, 108, okay. Is So, any of that money match money, or is it just state money that paves our state highways, not federal highways? I don't know if we get any matches for federal. I don't know if you're the person that we pass this or not. If we decide to pave Route 30, which is a state highway, know, 30 miles of Route 30, is any of that money matched by any federal dollars? I've seen Logan shaking his Yes.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: The paving program that's in section 5A, the white book, is matched by FHFA.

[Patricia McCoy (Member)]: So if we don't realize this 10,000,000 a year for 5,000,000, that's $50,000,000 that we do not have to put towards not only anything, but paid, which seems to be, first and foremost, I know on my constituents' lines, that's all I ever hear about. What's wrong with the roads? I mean, you can't pave the roads, I mean, you can't fix the roads. What's wrong with the bridges? Can you fix the bridges? First and foremost, that's what's on their mind. So, when we put in those projects with the $10,000,000 that are earmarked, like, we might get it if we get it, this is what we'd like to do with the money, which realizes 63,000,000 from the Feds. If we put the 10,000,000 towards paving projects, what do we realize from the Fed? The same $63,000,000 or is it a different amount? I'm going

[Logan (Director of Administration, Vermont Agency of Transportation)]: to defer to Director of administration for A and T. Essentially, realized the same state and federal match put forward as a package of bridge and paving projects. So if we were to replace the bridge projects with all paving projects, if they were available to draw from, which without having the chief engineer here, I can't say we wouldn't have paving projects to draw from, but the prioritization of the projects was developed with what's available and what's prioritized for work that needs to be done already. So they're able to be drawn forward. They don't know if there is an equivalent amount dollar not behaving, but it might also require federal and state dollars. Okay.

[Patricia McCoy (Member)]: And these, the 'nineteen projects were, I don't know, shovel ready, but

[Timothy R. Corcoran II (Vice Chair)]: they were ready to go, these projects. Okay, thank you. And if the decisions were made not to

[Matt Walker (Chair)]: make that move to purchase new stacks, and that amount of projects that leveraged $63,000,000 and they didn't happen this year. With the inflation rate on construction projects and the costs and the situations we have with what that does or doesn't do to our contractors, know that becomes a bigger question than what I was really asking about workforce, and they don't have that work to do this year and where they look for it. But just on what you know about the construction costs, how much more are they going to cost the next year for the exact same work if we don't do them this year?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Chief engineer Jeremy Reed has said inflation for construction projects is 23%. So add 23% onto the nine

[Matt Walker (Chair)]: point Or by three the other way, saying my twenty three's hour or $10,000,000 is now $77,000,000 or 23% less. Is that what you're already selling? $7,700,000 Is that a real simple answer? Not necessarily the right way to

[Timothy R. Corcoran II (Vice Chair)]: look for

[Matt Walker (Chair)]: It could be, in effect, that much less buying power. Our $10,000,000 is really only going result in substantially less, 23% less activity.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: That's good, quick math.

[Matt Walker (Chair)]: Are we going start today on that? It's going to cost us $2,000,000 minimum, at least, or more. Because if you look at it, the $66,000,000 I guess, or 63 plus 10, now you're gonna get out and I'd have to start writing it down. But it's gonna cost substantially more, 23 percent more one year later, without any other factors, just as what we know right now.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: That would be an argument for maintaining the governor's recommend 27?

[Phil Pouech (Ranking Member)]: Yeah, I don't want to speak for Jeremy or anybody else, but we did hear some testimony about how inflation after COVID just went skyrocketed. But I'm not sure I heard the number 23% expected from this year to next year. Is that the administration's viewpoint that we expect inflation on construction and paving to go up 23% next year?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I wouldn't say it's the administration's viewpoint. Chief engineer Jeremy Reed has said that's an average inflation for construction projects across the Northeast.

[Timothy R. Corcoran II (Vice Chair)]: For how many years? Based on the bid you

[Matt Walker (Chair)]: can see that? I'm sorry.

[Phil Pouech (Ranking Member)]: Yeah, yeah. I'm just curious if that I didn't see that was a number that we can start penciling in.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I will talk with him more about the number of years that he used to get the average. But I also saw Secretary Flynn stand up.

[Joe Flynn, Secretary, Vermont Agency of Transportation]: Just to offer that in testimony in the Senate, the American Association of State Highway and Transportation Officials, AASHTO, which is the national organization, testified given timing as the executive director, Across The U. S, we're seeing 40 to 60% higher costs for construction projects. And I'm going to I correctly remember, I think it's the American Society of Civil Engineering that can be checked in testimony. They testified as well. Completely independent of the administration, and of us, they also testified to the 40 to 60%. That's how much hotter construction is brought. What we've seen in Vermont is on average 23%. That's a factual number and it's not something given to us to work with by the administration. It's what we're seeing for a reality. Even though, to your point, the inflation is down dramatically from three or four years ago, there's more to the cost of a project than just the rate of inflation.

[Phil Pouech (Ranking Member)]: Yeah, okay. Thank you.

[Matt Walker (Chair)]: So another question, sorry. Just had a revenue forecast for the state came out and there was no change. Our base was flat and there was situation where the transportation revenues didn't warrant any additional or trigger activity. So does that mean three months from now there'll be another forecast? I assume, right? It's every three months or so?

[Logan (Director of Administration, Vermont Agency of Transportation)]: It's every six months. Six months.

[Matt Walker (Chair)]: Okay, have to deal with it in the fall, I'm not sure how the six months

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: There's a consensus revenue forecast in July and January. We responded to the July forecast in September. Okay.

[Matt Walker (Chair)]: At what point do you start, if you haven't already? Would be the next set of contingencies, adjustments, or activity that accounting would work like this would be on the table for the next piece? Or is that something you're already looking at? And what domino goes down next if we don't have the level of revenue?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Are you saying if there's a downgrade in July 2026, how would we respond to it?

[Matt Walker (Chair)]: I would say, yeah. I guess that's really what I'm

[Joe Flynn, Secretary, Vermont Agency of Transportation]: asking, because

[Matt Walker (Chair)]: the budget has a reduction in force. It has a change in projects. It has some overtime, maintenance, highway, rail. It's got a little bit of everything for the big $33,000,000 But we went to them in the fall into reduction in force and some other project roles. So I guess I'm not an economist, but it doesn't look like this is going be very it certainly won't be a surprise if that's where we're at in July. What is in here that helps buffer anything that we might hit again in July? I can't rephrase it that way. If that's two different questions or if that's one, a couple of different ways of looking at it.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I thought of another thing you might be talking about, Cherry. You might be asking, what if actual revenues come in under forecast at the end of this fiscal year? So it could either be under forecast for this fiscal year or a downgrade for July 26, correct?

[Matt Walker (Chair)]: And they both if they're over a certain amount, they trigger a fortunate activity within the budget that you just had to deal with, which wasn't pleasant either. And then you have to build this budget. Is there anything in here that's going to help us buffer that situation?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: So I'd say for revenues coming in under consensus for this fiscal year, I'm already compiling a list in my head. If we needed to find money at the end of the fiscal year because revenue underperformed consensus, what would we do? And we do that every year. Although we have heard from the Department of Finance and Management that their preference this year, if that were to occur, would be to have us go into the transportation fund stabilization reserve and then propose reversions in the BAA process, rather than proposing reversions administratively year end, as we have typically done.

[Matt Walker (Chair)]: So by putting this 5.4, which

[Timothy R. Corcoran II (Vice Chair)]: represent Corcoran sort

[Matt Walker (Chair)]: of line to 5.3 on the highway, sort of like the idea that we took sort of the money knowing that it's not going to go through all the projects, you've already taken it to build this budget. It won't be there the way it has been the last couple of years in terms of carryovers, I guess, is more of the number. You're in effect taking the carryover early, it won't be there. It'll have to be something else. We took highway money and carryover before to balance the budget last year, and now we're taking it in effect early. You could somewhat argue it that way. I don't know if that's entirely true. But I feel like this limits the options if something goes bad if it continues to go in the wrong direction. That's one of the worst of the worst. You're taking one more out of the belt. It's already being used up. I guess it maybe it heightens the financial

[Timothy R. Corcoran II (Vice Chair)]: pressures even more.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: The reductions in the '27 budget give us less options for responding to a revenue downgrade in '27, but I wouldn't say that the 5.3 is is carryforward.

[Matt Walker (Chair)]: Okay. So it does give you less we have less options come July because of this construct is what I think you just said. I just want to be very clear about that. You will have less. Doesn't mean you have no options, but you will have less options to deal with a revenue downgrade than you otherwise would have based on what you put together here. Based on previous budget years, had more options to deal with a downgrade than you do now, or you will in July.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yes. But I would also say that as CFO, it is my job to respond to revenue downgrades.

[Phil Pouech (Ranking Member)]: I am here again.

[Matt Walker (Chair)]: And those are certainly difficult decisions, and your options will be less available than they are previous year and the previous year to that. And I think the community needs to understand what we've already done in the fall in combining what this budget is saying. And that brings us back to the politics of the discussion on where we're at. I'm sorry. So I have one more in that area that is personally.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Yeah. Candice, could you just help clarify for me where the $5,300,000 is that Absolutely. Is in It is line four on the reductions section of the slide deck.

[Unidentified Committee Member (possible Candice White or Kate Lalley)]: And that slide deck is from today or from It's here.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I did resubmit it for today, but I presented this a week and a

[Patricia McCoy (Member)]: half ago. Okay. Gotcha.

[Unidentified Committee Member (possible Candice White or Kate Lalley)]: Thank you. I've got

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: that up. I just couldn't find that chart. Thank you. Page three.

[Matt Walker (Chair)]: Got any? I'm sorry, I got

[Timothy R. Corcoran II (Vice Chair)]: Okay, thanks. Representative Ford? Peter, good.

[Patricia McCoy (Member)]: We had all these discussions, and I think this brings the point clearly home to me that we need to claw back, the 50,000,000 that we give every year in purchase and use monies. I don't think we can continue doing this for transportation. I'm not directing this at the chain.

[Timothy R. Corcoran II (Vice Chair)]: Think that I we

[Patricia McCoy (Member)]: can't do this every year. We've been doing this for the last couple of years, and we just cannot continue to do this. It's money that when this started years and years ago, that transportation was flushed with cash and could give it to education who was hurting. Well, education continues to hurt, but we're hurting Matt, and we have been for the last couple of years. So I think we need to just, if it were me, if I had a magic wand, I'd bite the bullet this year. Education is in flux, and they're trying to figure out how to fund it again. Take it now, and then let them figure out what they need to do with 50,000,000 less. That's just my soapbox. We're too dead.

[Matt Walker (Chair)]: You very You're putting me in a really bad storm.

[Chris Keyser (Member)]: Represent Teaser and then the representative. Sure. So thanks for this. Two unrelated well, two first question. Stabilization fund, how much money do we have in that?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Stabilization reserve, oh my gosh.

[Chris Keyser (Member)]: In round figures.

[Logan (Director of Administration, Vermont Agency of Transportation)]: Yes. Don't know. Think

[Chris Keyser (Member)]: you can call a friend.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Give me one second. That is +1 6627.

[Timothy R. Corcoran II (Vice Chair)]: Yes.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: You need to call a friend, okay? Okay,

[Chris Keyser (Member)]: and then my another question. So understanding the imaginations that a budget like this would develop. And so you put everything together and you say, well, we've got a $33,000,000 hole, but we're to solve that. And so there's a lot of different levers you can pull back and forth. But the question is, the $33,000,000 pull, do you do any zero based budgeting?

[Logan (Director of Administration, Vermont Agency of Transportation)]: Yes.

[Chris Keyser (Member)]: Okay, So if you do zero based budgeting, you really can't do it out of the whiteboard, can you? Because they're ongoing projects, or you're just going to pull those. Is that what you're saying to me?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I would actually say that the highways division does zero based budgeting every year. Yeah.

[Timothy R. Corcoran II (Vice Chair)]: Thank you. You're welcome. Just had a on the stabilization there. January had a downgrade of 1.5 and we made it up through the stabilization that was going to get backfilled in this year's budget. Correct. How did we make it up this year's budget?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: In 'twenty seven?

[Timothy R. Corcoran II (Vice Chair)]: Yeah, where we're just going to backfill it, but I don't think it was ever explained to us how we came up with that one. Because basically, if it was 33, is it like 34 and a half million? Do you want to look at it that way?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I'd say that that was a part of the reductions that we took. When Oh, and the lines of memo that you gave us? Like this?

[Timothy R. Corcoran II (Vice Chair)]: This part or down in here?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: In the slide deck. So the the 33 number that we've been talking about from September 2025 was a point in time estimate. Yeah. It just so happens that we took $21,000,000 of reductions and $12,000,000 worth of the indirect cost rate, and that equals 33. The fact that we're backfilling the stabilization reserve by 1.5 probably means that our pull was 1.5 larger back in September, but I was doing the best I could in September to predict what the whole would actually be.

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

[Matt Walker (Chair)]: So it

[Timothy R. Corcoran II (Vice Chair)]: was already covered. Alright. I just put the flare up.

[Phil Pouech (Ranking Member)]: Thank

[Timothy R. Corcoran II (Vice Chair)]: you. Yeah, no problem. So

[Matt Walker (Chair)]: the budget address was pretty clear in terms of taxes. But this budget does include a tax or fee increase of $1,900,000 Are you looking at any other fees or pieces for that potential downgrade or any other parts of the budget as we go through it? Why that one and not any others?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I'm sorry, Chair. Can you tell me more about the 1.9? Sure.

[Matt Walker (Chair)]: Pass credit card processing fees for DMV, V trips transactions onto the customers. And I assume the customers mean Vermonters. Yes.

[Timothy R. Corcoran II (Vice Chair)]: And that

[Matt Walker (Chair)]: would be a $1,900,000 tax increase to Vermonters. We're willing to do it here. What other ones are we willing to look at?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I wouldn't propose to speak for the administration. My understanding on the 1.9% is that it's standardization across the state of Vermont.

[Matt Walker (Chair)]: The 1,900,000.0?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: Or sorry, the 1,900,000.0 standardization across the state of Vermont on how we treat these types of charges.

[Joe Flynn, Secretary, Vermont Agency of Transportation]: Secretary Oh, I'm sorry. In reestablishing what we took away from DMV. We removed those fees probably three fiscal years ago. But in part of the view of all the thresholds, we've added those back, but not every Vermonter would have to pay the fee, only a Vermonter who uses a credit card. We accept ACH direct payments, we accept cash, we accept checkbooks. So it's an option for every payer to not have to face those fees if they want to have another form of payment. But for the credit cards that are used, we are passing the cost of the banking fees. These are the banking fees, these are not DMV deriving new revenue. That is a parson terminology, but it's a fact. We're passing the banking fees for the use of a credit.

[Phil Pouech (Ranking Member)]: Just to understand what we said there, and maybe you didn't imply it, but are we saying that now across the board for all Vermont folks who take credit cards, I guess I could get a camping reservation on a credit card. Is there a fee applied for that? Is this across the board now? Change, do you know?

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: No, I do not know. I'm sorry, representative. I would defer to other agencies' departments. But that would be

[Phil Pouech (Ranking Member)]: an example, which I've done, get a reservation, use a credit card. I'm not sure, yeah, I'd have to look to see if they applied fee or not. So this wasn't across the board by the state, it was DMV saying, hey, it's time to add

[Patricia McCoy (Member)]: the fee, the banking fee to the bus. Yes, think that's more accurate.

[Timothy R. Corcoran II (Vice Chair)]: Representative McCoy and then representative Lalley and then representative White.

[Matt Walker (Chair)]: And then representative Keyser, think, was up there after that.

[Patricia McCoy (Member)]: I just wanna make a comment

[Timothy R. Corcoran II (Vice Chair)]: that

[Patricia McCoy (Member)]: towns, municipalities who accept credit cards for their property tax payments have like a three the credit cards usually are 3%. The taxpayer pays that, not the town. So the town remains whole in their property tax. So it's pretty much the norm for any municipality that is gonna accept credit cards. They're not gonna pay your 3%. They have 3%. It's an automatic thing. Yeah. So the credit card company will charge the additional 3%, but the town only realizes the property tax amount, and the credit card company retains the 3% as a cost of doing business. So,

[Matt Walker (Chair)]: may I ask you? Yes, I understand the kind of work well. I let it go a couple times.

[Patricia McCoy (Member)]: So if I pay

[Phil Pouech (Ranking Member)]: with my credit card, I'll be charged 3% more. Okay. It's 6%.

[Patricia McCoy (Member)]: So I'm not paying your 3%. It's the other property tax. The room's paying for the check.

[Matt Walker (Chair)]: Representative, I think it was Representative White, Matt.

[Candice Elquist, Chief Financial Officer, Vermont Agency of Transportation]: I am answered by the question.

[Chris Keyser (Member)]: Excellent. Representative, do Just a personal experience. I deal with ANR this weekend, dollars 1,000, and to avoid the You just put the check numbers in and the routing and all that type of thing. I think it's statewide that they're not collecting the fee, you know what I'm saying.

[Matt Walker (Chair)]: Does anybody else have any other questions or any? I certainly appreciate the complexity of 900 plus million and the amount of unbelievable different things that the Agency of Transportation is involved in, the incredible amount of programs and the amount of activity that it does for Vermonters. I certainly you have my appreciation for all that you had to put together and to make it happen and to your entire executive team and to all the people out there with all the winter weather that is out there. Trying to understand the real financial struggles that you're in and highlighting that some of the things that you've done do have some consequences, as has been pointed out in terms of future years. Revenue is a big issue and dealing with it. And I appreciate all that you've done. I appreciate you coming back in and going over it again. And I appreciate the secretary being here and his team. And if there's not any other questions, I think we're at a good spot to take a break for