Declining Gas Tax Revenue

For decades, Vermont has relied heavily on taxes on gasoline and diesel fuel to fund transportation infrastructure. As vehicles become more fuel-efficient and more Vermonters adopt electric vehicles, fuel tax revenues are declining. While this transition is essential to reducing greenhouse gas emissions, it also erodes one of the state’s primary transportation funding sources.

Rising Costs

At the same time that revenues are decreasing, the costs of maintaining Vermont’s transportation system continue to climb. Inflation, rising labor costs, increased construction material prices, and higher insurance expenses have significantly increased the cost of transportation projects across the state.

Climate and Flood Resilience

The growing cost of flood recovery has intensified Vermont’s transportation funding challenges. Recent flooding events have demonstrated the growing vulnerability of Vermont’s transportation infrastructure, and require significant investments for repairs and upgrades – the amount of these projects continue to consume staff capacity and funding otherwise set aside for basic system maintenance and local improvements. Transportation funding must account not only for maintaining existing infrastructure, but also for rebuilding it to withstand future climate impacts.

The Hidden Costs of Sprawl

Dispersed development patterns require more miles of roads, bridges, culverts, and other infrastructure to serve fewer people, increasing long-term maintenance costs for taxpayers while making Vermonters more dependent on driving. By contrast, compact development in downtowns, village centers, and existing settlement areas makes more efficient use of public infrastructure, supports walking, biking, and transit, lowers household transportation costs, and helps protect Vermont’s farms, forests, and natural resources. A sustainable transportation funding strategy must recognize that land use decisions directly influence both the cost of maintaining our transportation system and the transportation choices available to Vermonters.

A Disconnect with Vermont’s Climate Targets

Vermont’s Climate Action Plan recognizes that reducing vehicle miles traveled (VMT) and expanding transportation choices – including, critically, a transition to electric vehicles – are essential strategies for meeting the state’s climate commitments. However, transportation funding decisions have not always aligned with these goals. The state cannot meet its climate obligations while continuing to rely exclusively on funding mechanisms and investment priorities that reinforce dependence on driving alone, or that single-out or discourage EV adoption.

VNRC supports exploring a range of transportation funding solutions that provide stable, sustainable revenue while advancing broader public policy goals. These are complex ideas that require thoughtful consideration to ensure equitable and effective outcomes. 

Climate-Aligned Transportation Funding

Transportation funding should reinforce – not undermine – Vermont’s climate commitments. Investments should support access to clean vehicles, walkable community centers, public transit, and housing development in places where residents have more transportation options and lower household transportation costs.

Pollution Pricing and Cap-and-Invest Approaches

Market-based strategies that place a price on transportation-related carbon emissions can both reduce pollution and generate revenue for transportation investments. Revenue generated through cap-and-invest or similar mechanisms could help fund cleaner transportation options, improve mobility, and support climate resilience projects.

Align Transportation and Land Use Policy

Vermont can reduce long-term transportation costs by encouraging growth in places where infrastructure already exists. Investing in downtowns, village centers, and neighborhood-scale development helps make more efficient use of roads, bridges, water systems, and public services while reducing the need for costly infrastructure expansion. 

Diversified Revenue Sources

No single solution will fully address Vermont’s transportation funding challenge. The state should evaluate a mix of revenue options that are equitable, durable, and capable of supporting both infrastructure maintenance and investments in a more efficient, affordable transportation system.

Mileage-Based User Fees

Mileage-based user fees (MBUFs) offer one potential long-term replacement for declining gas tax revenues. Under this approach, drivers contribute based on the number of miles they travel rather than the amount of fuel they purchase. Properly designed, an MBUF system could provide a more sustainable funding source as vehicle technology evolves.

Read more: VNRC comments to the Senate Transportation Committee, April 2026

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