Updated at 5:50 p.m.
Republican Gov. Phil Scott presented lawmakers Tuesday with a $9.4 billion state budget that weans 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 new state spending.
"Today, even the traditional funding we’ve come to expect from Washington is uncertain. And from what I’ve seen, no amount of political posturing or strongly worded statements will change that,” Scott said. “So, it’s more important than ever to focus on the issues we can control, stay disciplined, and set clear priorities so we make sure Vermonters get the most out of the resources we do have.”
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 a result of last year’s buy-down.
This general fund transfer would also raid much — 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 helps pay 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 in September, to make up for the rest of the shortfall. Administration officials declined to provide additional details on Tuesday, but said Transportation Secretary Joe Flynn would brief lawmakers soon.
Democrats met the governor’s speech with mixed reactions. The House’s Appropriations chair, Rep. Robin Scheu, called his plan to redirect education fund revenues to the transportation fund little more than a “shell game.” Rep. Emilie Kornheiser, who chairs the House Ways and Means Committee, said Scott’s budget plan offered “band-aids, duct tape,” and “Yankee ingenuity” in place of durable solutions.
“What it looks like when the rubber hits the road is patching potholes instead of taking the time to look at the structural problems,” she said.
But even as Democrats expressed discomfort with Scott’s ideas, they also appeared unwilling to call all of them non-starters — especially when it came to the property tax buy-down.
Senate Appropriations Committee Chair Andrew Perchlik bemoaned Vermont’s continued reliance on one-time money to take the edge off of property taxes. The practice, he said, was digging the state “into a hole.”
“We don't know how we're ever going to get out of it,” he said.
Still, he hastened to add that he wasn’t opposed to the buy-down, so long as Scott presented a credible case for what came after. With Act 73, lawmakers last year embarked on a multi-year overhaul of the state’s education system, and Scott has argued that the one-time cash is a financial bridge as Vermont works toward this historic transformation. The governor has also endorsed Senate leader Phil Baruth’s proposal to cap education spending for two years.
But lawmakers are increasingly skeptical that Act 73 — and its widescale, mandatory consolidation — is politically feasible or worth the payoff.
“I don't know if that's actually going to save that much money,” Perchlik said. “Where's the details?”
Other notable line items in the governor’s budget include:
- $4 million to make permanent a program that subsidizes the rehabilitation of vacant rental units.
- $800,000 in one-time money for mobile home repairs.
- $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.
- $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.
- $875,000 in new base funding for career counseling for people recovering from opioid addiction.
