With the annual state budget expected to hit the House floor later this week, tensions are running high in the Statehouse as the philosophical differences between Vermont’s legislative and executive branches appear increasingly prominent.
A key legislative panel, the House Appropriations Committee, on Monday evening voted 8-4 to advance its version of the state’s Fiscal Year 2025 budget, H.883. On Tuesday afternoon, the House Ways and Means Committee greenlit the bill by a 9-2 vote, sending the $8.58 billion budget to the House floor.
The grand total differs from Republican Gov. Phil Scott’s $8.56 billion budget by two-tenths of a percent, House Appropriations committee members noted.
“So it’s really, very tiny,” the committee’s chair, Diane Lanpher, D-Vergennes, told VTDigger Tuesday afternoon. “Very tiny as to what we actually have a difference with the governor on in the total amount.”
But in state budgeting, less than 1% can translate to millions of dollars — roughly $19.4 million in the case of this year’s budget, according to a summary provided by Vermont’s Joint Fiscal Office.
Gov. Phil Scott sees the changes as substantial, particularly as they include cuts to some of the administration’s favored programs.
However, that debate over the upcoming year’s budget’s priorities has been largely overshadowed by several new taxes advanced last week by the House Ways and Means Committee, which would pay for increased state investments in housing, an expansion of Medicaid eligibility and increased staffing in the state judicial system starting next fiscal year.
One of those bills, H.829, would create a new marginal personal income tax bracket with a tax rate of 11.75% on income earned above $500,000, plus increase property transfer taxes for property purchases exceeding $600,000, well above Vermont’s median home price. Two other bills, H.721 and H.880, would increase taxes on corporations. Together, the proposals would increase yearly revenues by more than $100 million.
The House on Tuesday preliminarily approved H.880 and was expected to vote on H.721 later Tuesday evening. The House is scheduled to vote on H.829 on Wednesday.
Most of these proposed tax increases, if approved, would not take effect until next fiscal year. But the bills, in conjunction with this year’s budget proposal, have ignited fierce debate between legislators and the Governor’s Office over responsible budgeting, and what it means for corporations and Vermont’s wealthiest to pay their “fair share.”
“In January, the Governor proposed a balanced budget that didn’t raise taxes and lived within its means, while making strategic investments in housing, public safety and flood recovery,” Scott’s spokesperson, Jason Maulucci, wrote on Tuesday. “It can be done. The answer to every problem is not a new tax or adding more costs for Vermonters.”
‘What we had to work with’
Since before the start of the legislative session, state budget writers have cautioned that this year marks Vermont’s return to pre-pandemic budgeting — the state’s coffers no longer comfortably lined with pandemic-era aid from Washington.
“We did the best we could, I think, with what we had to work with,” Lanpher said ahead of her committee’s vote Monday evening.
Scott has been among the loudest voices calling for fiscal restraint as the state’s federal funds run dry. Before begrudgingly signing this year’s mid-year budget adjustment into law earlier this month, he told reporters that “there just isn’t any money” to spend.
The loss of federal funds doesn’t mean the state’s fiscal reality is dire. Revenues remain healthy and there is no predicted recession on the horizon, state economists told key lawmakers in January. Neither the Governor’s Office nor legislative budget writers have floated major cuts to state government.
But it did mean that budget writers — first in the Governor’s Office, then in the House — no longer had the wiggle room they once enjoyed when deciding where state dollars should be spent.
While Scott’s budget proposal reined in spending by generally capping state government increases at 3.6%, House Appropriations took a different approach, rummaging through the governor’s budget proposal to find a few million dollars here and there to trim.
The committee didn’t cut programs or funds wholesale, Lanpher told VTDigger earlier this month, but instead pulled back on some of its annual allocations, or “top-offs” — particularly if any given state program hadn’t exhausted its funds from years prior.
For example, Lanpher’s committee halved the governor’s recommended $4 million appropriation for the Vermont Department of Environmental Conservation’s Healthy Homes Program, which utilizes federal dollars from the American Rescue Plan Act to help predominantly low-income Vermonters upgrade their drinking water and wastewater disposal systems.
Committee members also moved $5 million in unspent federal pandemic dollars from the Department for Children and Families’ weatherization program — which helps low- and moderate-income Vermonters pay for home weatherization upgrades to reduce their heating bills — to the general fund. Lanpher told her committee colleagues on Monday that the program was previously “saturated” with $45 million from the American Rescue Plan Act, and currently has $13 million unspent as of this year.
Then there’s the Vermont Housing Improvement Program, which incentivizes owners of uninhabitable housing units to rehabilitate them, returning them to the rental market. With $18 million in unspent dollars still in the bank, the House opted to zero out VHIP’s general fund money for the year — $6 million, as proposed by the governor — and instead fund the program through grant dollars in a separate housing bill, H.829.
VHIP is one of the Scott administration’s crown jewels. In his statement on Tuesday, Maulucci touted the program for its ability to bring “housing units online quickly and for a fraction of the cost of other programs,” and chastised legislators for what he described as their cut to the program on Tuesday. He also equated their change to the Healthy Homes clean water initiative to “slashing” the program.
Reductions like these — particularly to some of the administration’s proudest state program achievements — have drawn vehement criticism from the Governor’s Office in recent weeks. More broadly, the governor has wagged his finger at state budget writers for, by his account, failing to live within the small state’s financial means, forcing themselves to either reduce funding for individual programs like Healthy Homes and VHIP, or ultimately raise taxes.
Most of the $15 million difference between the House and governor’s general fund spending, Lanpher told VTDigger Tuesday afternoon, is due to a $12 million state pension fund obligation that was not accounted for in the governor’s 2025 general fund. His proposed budget paid for the obligation with a previous year’s surplus, which the legislative committee chose to transfer to the general fund.
“That $12 million is the vast majority of that increase, only because we’re being transparent about the action,” Lanpher said.
‘Fair share’
Behind these smaller disputes, the issue of potential new taxes looms large. And for Scott, raising taxes is a nonstarter.
Even special interest groups have chimed in on the debate. On Tuesday, Americans For Prosperity, the libertarian national advocacy group founded by the Koch brothers, blasted Vermont legislators in a written statement “for being completely out of touch with what Vermonters need.”
“While hardworking folks are barely scraping by, lawmakers are squeezing them for more, all while ignoring the real struggles facing Vermonters,” the group’s Northeast Region Director Ross Connolly said in a written statement. “Between some of the nation’s highest property taxes, the ever-present statewide housing crisis, and more preposterous tax increases introduced this week, our state is heading for disaster and our legislature’s in the drivers seat. Vermonters have had enough.”
But missing from such criticisms, Kornheiser told VTDigger last Friday, is who would be paying the price of these proposed tax hikes: corporations and the wealthy.
The bills advanced by House Ways and Means with associated tax hikes would each address great needs in Vermont state government right now, Kornheiser said last week. And if there’s “no money” to make those investments, she said, lawmakers need to raise it.
“It’s clear … that we need new revenue to do that,” Kornheiser said. “So the Ways and Means Committee has spent the first half of the session looking across our tax structure, seeing who pays and who doesn’t, and making sure we could develop tax proposals that were really focused on folks — whether that’s corporations or individuals — paying their fair share.”
Asked how she defines “fair,” Kornheiser responded: “It’s those who are most able to pay the most.”
