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Gov. Phil Scott unveils budget proposal with funding for child care & housing, tax cuts

A photo of the governor in a suit and tie waving while walking through the House chamber, with lawmakers standing and applauding. The view is from above, and visible are wooden desks and a yellow and red patterned carpet.
Elodie Reed
/
Vermont Public
Lawmakers and state officials applaud Gov. Phil Scott as he departs the Vermont House chamber following his budget address on Friday, Jan. 20.

Updated 6:13 p.m.

In what he called “undoubtedly the most significant budget” he’s ever delivered, Gov. Phil Scott on Friday outlined an $8.37 billion spending plan that includes new investments in housing, child care and rural economic development, but also squirrels away hundreds of millions of dollars for choppier economic times ahead.

Watch, hear or read the full speech here.

The “incredible” state revenue growth Vermont has enjoyed over the past two years, coupled with massive funding infusions from the federal government, has put Vermont on a strong financial footing, Scott told House and Senate lawmakers Friday.

But as state economists warn policymakers of an inevitable economic slowdown in the near future, Scott said lawmakers must spend the windfall in ways that don’t commit the state to long-term financial obligations.

To that end, Scott said, his budget includes many “one-time” appropriations — for housing, infrastructure projects, and brownfield remediation, for instance — that he said will spur the economy without spiking the trajectory of state spending in the future.

“If we allow the base budget to grow with temporary and unsustainable revenue, we will create a cliff when these stimulus dollars go away, putting us on a path that eventually leads to deep and painful cuts,” Scott said. “We’ve taken a lot of time to make sure this budget is investing, rather than just spending, in areas that will put us in a much stronger economic and fiscal position to generate more dollars in the future.”

“We’ve taken a lot of time to make sure this budget is investing, rather than just spending, in areas that will put us in a much stronger economic and fiscal position to generate more dollars in the future.”
Gov. Phil Scott

Those one-time investments include about $80 million for housing, including $26 million toward emergency housing for people at risk of homelessness, and $20 million to construct homes for middle-income Vermonters.

Scott also wants to allocate $150 million now for money that Vermont will have to pony up in future years in order to draw down grants from the federal Infrastructure Investment and Jobs Act.

“If we can’t fund [those state matches] in the future, we will lose out on critical infrastructure funds, or have to cut state programs to find the match,” Scott said. “This is an investment that will inject money and jobs into the economy for the next several years, which we’ll need to sustain state revenue and continue to invest in our priorities.”

Other proposals for one-time allocations include:

  • $50 million in clean water initiatives, including $10 million to improve drinking water and waste water systems, mostly in mobile home parks
  • $15 million in climate, including a new program to weatherize homes, install cleaner heat systems and make electrical upgrades
  • $12.5 million to clean up old contaminated industrial sites
  • $13 million to spur agricultural economic development by increasing the state's processing capacity
  • $10 million for a new regional investment growth fund that would pay for facilities construction or improvements for new or existing businesses, especially in rural areas
  • $3 million for “final touches” on the Lamoille County Rail Trail
  • $10 million for “stabilization” funding for hospitals
  • $19 million to state colleges, both for building improvements and tuition assistance for students pursuing degrees in “high demand” fields such as child care and education

Scott’s budget plan does include some proposals for increases in base funding for existing government programs, notably the Child Care Financial Assistance Program.
The governor wants to increase child care funding by $56 million annually, which he said would allow the state to increase child care subsidies that already receive them, and expand eligibility to an additional 4,700 families.

Scott said he looks forward to collaborating with lawmakers on a consensus budget plan. He said, however, that he remains unambiguously opposed to any proposals that rely on tax hikes to support new spending.

“Now I know this … will get resistance from some, because they want a new tax to pay for it,” Scott said.

Washington County Sen. Ann Cummings, chair of the Senate Committee on Finance, said there isn’t a lawmaker in the Statehouse that “wants” new taxes.

“We all pay taxes,” Cumming said. “I’m a senior citizen — I don’t want to pay them anymore than anyone else does.”

But Cummings said taxes are the means by which Vermont funds the public programs and services its residents need to thrive. And she said her committee is prepared to come up with proposals for revenue increases if a majority of lawmakers feel they’re necessary to fund things like child care or a universal paid family and medical leave program.

A photo of a woman in a suit jacket and glasses with a Vermont state flag in the foreground
Elodie Reed
/
Vermont Public
Vermont House Speaker Jill Krowinski.

There are early indications that many influential lawmakers, such as House Speaker Jill Krowinski, don’t think Scott’s budget goes far enough, specifically on child care.

“I have some serious concerns about the lack of a long-term vision, and how we make sure that we’re not only supporting families with children, but we’re supporting the workforce, those child care providers that are working so hard and need more pay,” Krowinski said Friday.

A long-awaited report from the RAND Corporation that came out earlier in the week found that Vermont will have to spend an additional $179 million to $279 million annually in order to pay child care providers a livable wage, and ensure that Vermont families don’t spend more than 10% of their annual income on child care expenses.

More from Vermont Public: Report says lawmakers need to spend up to $279 million to make child care affordable for all

If Vermont needs to resort to tax increases to fund government programs like child care that improve the public good, then Brattleboro Rep. Emilie Kornheiser said it’s a worthwhile option to consider.

“I think we’ve learned in the last few years that when we invest really deeply in our communities, and when we spend in our communities … that immediately returns to our state revenue coffers so we can reinvest that money,” said Kornheiser, who chairs the House Committee on Ways and Means. “And what I’d like to see is that our budget is built and our tax policy is built in the next few years, really remembering that important lesson that we are all benefitting from right now.”

Though Scott and Democratic leaders in the Legislature may depart on some key issues, both sides say they also share plenty of common ground.

“I had to recognize how much [the governor’s budget proposal] aligned with really how we’ve been building budgets for the last few years,” said Caledonia County Sen. Jane Kitchel, chair of the Senate Committee on Appropriations. “The amount of federal money coming into the state has really distorted our revenue picture, so we have been very vigilant to make sure that when we’re building budgets, we’re using this one-time money for long-term investments.”

“I have some serious concerns about the lack of a long-term vision, and how we make sure that we’re not only supporting families with children, but we’re supporting the workforce, those child care providers that are working so hard and need more pay."
House Speaker Jill Krowinski

Kitchel said Scott’s general emphasis on housing, infrastructure, climate mitigation and workforce dovetails with priorities in her committee. She said it’s difficult, however, to assess the merits of the budget plan until she’s able to delve into the details to answer one key question.

“What’s not in this budget?” Kitchel said. “And that’s when we’re going to start hearing from our community organizations. We’re going to be hearing from health care providers. We’ll be hearing from all sectors, so that may influence some of the decisions too.”

Scott’s budget includes $17 million in tax cuts. He wants to increase the earned income tax credit, increase the income-tax exemption on social security benefits, and eliminate the state income tax entirely on military pensions.

Cummings said she sees merit in the upping the EITC and adding $15,000 to the social security exemption, but she said it’s unlikely her committee will support a full exemption on military pensions.

More from Vermont Public: Vermont lawmakers start new session with Affordable Heat Act, other climate concerns

The governor's budget also includes funds for administration staff to study the most cost effective way to reduce emissions from home heat — and design a policy recommendation for lawmakers based on what they find. The results of that study aren't likely to come back until late spring.

Vermont's climate action plan already recommends a solution here: the clean heat standard. Scott vetoed that policy last year, and lawmakers are already working on a follow-up bill called the Affordable Heat Act to see this through.

Addison County Sen. Chris Bray chairs the Senate committee on Natural Resources and Energy and sponsored the new bill. He says this winter is the time to advance a plan to help Vermonters move away from fossil fuel heat.

"You know, here we are in the second winter of record high fuel prices," Bray said. "I think the Legislature needs to step up now, not say, 'We're going to study this for yet another year.'"

Bray says he's confident lawmakers can design a program this session that helps lower and moderate income households benefit from the transition to cleaner energy,

Vermont Public's Abagael Giles contributed reporting to this story.

Have questions, comments or tips? Send us a message or get in touch with reporter Peter Hirschfeld:

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The Vermont Statehouse is often called the people’s house. I am your eyes and ears there. I keep a close eye on how legislation could affect your life; I also regularly speak to the people who write that legislation.
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