Republican Gov. Phil Scott has taken the state budget hostage in what has suddenly become an even higher stakes showdown in Montpelier over the future of education in Vermont.
In his State of the State address Wednesday afternoon, Scott issued an ultimatum to the Democratically-controlled Legislature: force Vermont’s 119 school districts to consolidate into much larger entities, or he’ll block the more than $9 billion in funding needed to keep government running the next fiscal year, which begins July 1.
“I want to be clear,” Scott told the Vermont lawmakers who gathered in the House chamber to hear his speech. “I will not sign a budget or an education bill or a tax bill that deviates from Act 73 or fails to fix what’s broken.”
FULL TEXT & VIDEO: Gov. Phil Scott's 2026 State of the State address
Act 73 represents a tenuous bargain between Scott and Democratic leaders in the House and Senate over the future of Vermont’s education system. The law, passed last year, seeks to curb spending, and mitigate geographic inequities, by making generational changes to the ways Vermont funds and governs public schools.
“I will not sign a budget or an education bill or a tax bill that deviates from Act 73 or fails to fix what’s broken.”Gov. Phil Scott
The multi-year overhaul theoretically culminates in 2028, when Montpelier would begin wresting control over education spending from local school boards. The realization of that bipartisan vision, however, hinges on the Legislature drawing new district maps. And while the governor continues to insist on redistricting as a prerequisite for funding reform, Democrats and some Republicans have suggested mandatory consolidation may not have the votes to pass.
"Maps was always a really heavy lift for the Legislature to do,” Senate Minority Leader Scott Beck told Vermont Edition this week.
Not since former Gov. Peter Shumlin used his 2014 speech to address opioid addiction has a governor devoted the entirety of their state of the state address to a single issue. Scott’s speech was a 35-minute treatise on the fiscal downfall of Vermont’s current education system, and the ways in which it is failing students.
“The way our system was built, our approach to funding, and how we run it has led to deep inequity,” Scott said.
According to the Department of Taxes, per-pupil spending is expected to range across districts next year from a low of $10,846 to a high of $19,089. And while student enrollment numbers have fallen from 107,000 in the late 1990s to about 80,000 today, Scott said education spending has risen $900 million — about 56% — during the nine years he’s been in office.
Scott is keenly aware of the political pressure on many lawmakers to oppose mandatory mergers. His threat to veto the state budget if they don’t capitulate could complicate matters for Democrats, who maintain control of the Legislature but no longer enjoy the supermajority required to override a veto.
“I know the pressure you’re under, with calls to delay, to water things down, or stop this transition all together,” Scott said. “But we’ve been down that road before, and every time we bend to the vocal minority, these problems get worse.”
Much of the state’s public school establishment, including its teachers union, has come out against the education reform law. And Scott attempted Wednesday to extend an olive branch to the state’s teachers.
“I know you often feel like we’re blaming you when we talk about the need to make changes,” he said. “So let’s clear the air.” The current system, he argued, was tantamount to asking “teachers to go it alone.”
He noted there’s a $22,000 gap between the average salary in the highest- and lowest-paying districts. With Act 73, he said, the state could ensure that teachers who teach the most vulnerable students don’t do it for less money than educators in more affluent districts.
"Every time we bend to the vocal minority, these problems get worse."Gov. Phil Scott
Left unsaid: the raises needed to equalize salaries will almost certainly be made possible under Act 73 by having far fewer educators working in Vermont overall.
Still, Scott did not shy away from some of what the most controversial outcomes of Act 73 would be — namely, shuttered schools.
“Here’s the thing, the status quo is already closing our schools,” he said.
But the schools that are closing under the current system are only doing so after it was far too late, and “years of declining opportunities for students.” Windham Elementary closed when it had only 15 students left, he said. Rochester High closed with just two.
“Instead of this slow, torturous, and unmanaged process, let’s move forward with Act 73, so we can manage change thoughtfully, strategically, and with students’ best interests at the forefront,” he said.
With midterm elections on the horizon, politics will infuse policy this session as Democrats cling to a two-seat majority in the Vermont Senate. And Scott has again positioned himself as a champion of affordability battling against a recalcitrant Legislature.
Nowhere has Scott drawn this contrast more clearly than on education. And the governor’s campaign manager during the last election cycle has already made it clear that Democrats’ failure to deliver on school district consolidation will be weaponized against them this November.
“At that point they would embrace and own the status quo, which I don’t think anyone would agree is working well for students or taxpayers,” said Jason Maulucci, who now serves as the administration’s director of policy development.
Democrats’ political vulnerability on education stems in part from their inability to clearly articulate a vision of their own. After passing legislation in 2024 that resulted in a 14% average property tax hike, House and Senate leaders created a blue-ribbon commission to deliver recommendations for reform.
They effectively sidelined that panel less than a year later, after those same property tax hikes cost Democrats a historic number of seats in the 2024 election. Shortly after the electoral pummeling, Senate President Pro Tem Phil Baruth announced that he wanted to hand the reins to Scott.
“If there is a message in this election, I believe it was that the voters wanted the governor’s ideas moved to the top of the agenda,” Baruth said less than two weeks after the 2024 elections. “That is literally what I’m suggesting.”
Democratic leaders were muted in their responses to the governor’s speech. Baruth joked afterwards that while he never agrees with a veto threat — “because I’m the one being threatened” — at least this time it advanced a policy he favored.
And both he and House Speaker Jill Krowinski suggested that the people who really need convincing are everyday Vermonters. Scott, who frequently polls as America’s most popular governor, needed to take his message of reform on the road, they said.
“I really need the governor out there going to communities across the state, because I think there's a lot of concern, and we need his voice out there to make the case,” Krowinski said after Scott’s speech.
Under no governor in recent memory have the costs of property taxes, housing and health care risen so dramatically. But so far, voters have punished legislative Democrats, not Scott, for their affordability concerns.
Health care costs, which significantly contribute to rising education budgets, received essentially no attention in Scott’s address. Health insurance premiums in Vermont, meanwhile, are among the highest in the nation, and thousands of Vermonters will pay even more this year after Congress failed to renew enhanced Obamacare subsidies. Both the state’s rural hospitals and its largest private insurer are facing solvency concerns.
"I really need the governor out there going to communities across the state, because I think there's a lot of concern, and we need his voice out there to make the case."House Speaker Jill Krowinski
President Trump’s sweeping tax bill is expected to compound the state’s health care woes over the next several years. KFF, a nonpartisan health care researcher, has estimated that changes to Medicaid alone could cost Vermont between $1 billion and $2 billion over 10 years.
Scott has promised to talk more about the rest of his priorities during his budget address in two weeks. Baruth said he was eager to hear what he had to say.
“If he doesn’t talk about health care in the budget speech, I would be very surprised and very critical,” he said.
