Major flooding in the state's central west and elsewhere has severely damaged regional road networks, at times disrupting harvest, freight and other major industries.
NSW Premier Dominic Perrottet announced the funding for 128 councils at a roundtable with local mayors in Molong on Tuesday, with $280 million for the regions and $220 million for metropolitan areas.
"We want our families, farmers, truckies and tradies to be able to get around our state safely, and that's what this investment will do," Mr Perrottet said.
"I don't want any person in our state dying on our roads and that means this half a billion dollars needs to get out the door as fast as possible."
Mr Perrottet said Transport NSW employees would be deployed to address local labour shortages, while the government was pushing its federal counterparts to clear a backlog of overseas workers.
Forbes mayor Phyllis Miller will use the money to repair the shire's 2000 kilometre local road network, some of which has been underwater for six months.
Ms Miller urged Prime Minister Anthony Albanese to match the funding.
"Unless we can get this matched by the feds, we're only going to get half the job done," she said.
Bathurst mayor Robert Taylor said councils would take what they could get.
"I've driven out here to Molong and I thought our roads around Bathurst are bad - the ones around here are like dodge 'em cars," Mr Taylor said.
"Everyone desperately needs our roads fixed."
He said filling potholes was a band-aid solution with some sections of road needing to be ripped up and re-done.
Narrabri Mayor Ron Campbell said the funding was a major step up from what his council received from the state government in late 2022 as part of a $50 million pothole fund.
NSW opposition roads spokesman John Graham accused the government of breaking election promises by failing to transfer 15,000 kilometres of council roads to state responsibility.
But Deputy Premier Paul Toole said the move was on hold while the government rebuilt after flood damage.
"We've had land slips on several of our roads right across the state, we need to make sure those roads have been opened up," Mr Toole said.
"That has been our focus and that has been our primary activity."
The NRMA's Fix Our Broken Roads report released in December revealed NSW councils already faced a $1.9 billion backlog in 2020/21 to maintain roads to a safe standard.
Before Christmas, the NSW government said 190,000 potholes had been repaired since February.
NRMA spokesperson Peter Khoury said ongoing support from state and federal governments was critical
"There's going to be a lot of work to do, and while this will not address the issue right across the state in its entirety, it's a very good start."
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