Republican Gov. Phil Scott presented lawmakers Tuesday with a $9.4 billion state budget that would wean the state off pandemic-era spending by tamping down on new government expenditures.
The proposed budget represents an approximately 3% increase in total spending over the current fiscal year. While it lacks the laundry list of federally funded one-time initiatives that characterized the last five budget cycles, Finance Commissioner Adam Greshin said it maintains support for core state services.
“This is not an austerity budget by any means, but it will feel tighter than past years,” Greshin told reporters during a briefing Tuesday morning. “No one’s going to leave hungry, but it’s just going to feel tighter than last year.”
Federal stimulus measures such as the American Rescue Plan Act of 2021 and the Inflation Reduction Act of 2022 sustained billions of dollars in new state spending. Administration Secretary Sarah Clark said fiscal year 2027, which begins on July 1, marks the first budget cycle in which none of those dollars are available to support state spending.
This year’s major budget debates will likely concern Vermont’s ailing education and transportation funds, where the cost of delivering services is rising much faster than dedicated revenues.
The Scott administration is proposing a one-time transfer of nearly $115 million from the state’s general fund to the education fund, which would cut a forecasted 12% property tax increase in half. Doing so is risky: Absent more surplus funds with which to buy down property taxes the year after, the move will set Vermont up for another steep hike in property taxes.
Already, about half of this year’s projected property tax increase is not due to higher spending, but instead last year’s buy-down.
This general fund transfer would also raid most — but not all — of the money Vermont has set aside in part to deal with financial shocks out of Washington, D.C. Administration officials said the state will still have about $70 million available to deal with whatever funding cuts come from the federal government.
At the same time as the governor is offering another cash infusion to the education fund to provide temporary property tax relief, he is also proposing to take away ongoing revenues from that same fund. That’s because Scott wants to redirect revenue from the purchase and use tax, which functions like a sales taxes on vehicles, back to the transportation fund, which is short about $33 million this year. About $50 million of that revenue stream currently pays for schools.
Scott eventually wants all of the money from the purchase and use tax to go back to paying for roads and bridges. But he is proposing a gradual transition, with $10 million redirected next year.
More belt tightening is expected at the Agency of Transportation, which already conducted one round of layoffs, to make up for the shortfall. Administration officials declined to provide additional details on Tuesday, but said Transportation Secretary Joe Flynn would brief lawmakers soon.
Scott said housing and public safety are two other top priorities this year. His budget includes an additional $10.2 million for the construction of shelter housing tailored to meet the needs of vulnerable populations, such as families and people with substance use disorder.
Clark said the funding will help the state transition away entirely, by July of 2027, from an emergency motel housing program that cost the state about $35 million this fiscal year.
To advance public safety, Scott wants to spend $500,000 to expand on a “community accountability court” pilot program launched in Chittenden County last year. The initiative seeks to resolve longstanding court backlogs by increasing funding needed to move repeat offenders through the criminal justice process.
Scott is also proposing $875,000 in new base funding for career counseling for people recovering from opioid addiction.
