After a key vote Thursday, Vermont’s state budget is on its way to the final stages of negotiation.
The Senate voted 26-2 for an $8.6 billion budget, which would take effect at the start of the fiscal year beginning in July. Having passed its own version of the budget last month, the House can now sign off on the Senate’s rewrite or — far more likely — call for a conference committee to hash out the differences.
For the most part, there is little daylight between the Senate and House versions of the budget. Their topline numbers differ by a mere $2.2 million. The Senate allocates $17.6 million less to the state’s education fund largely due to recently rejected school budgets and updated cost estimates of universal school meals. For the state’s other two major funds — the transportation fund and the general fund — the Senate’s allocations differ from the House’s by less than a $1 million each. (There are more than a dozen other, smaller funds that also impact the topline.)
Legislators went into this session knowing that pandemic-era federal aid was drying up and cash wouldn’t be easy to spend. So, as House Appropriations Committee Chair Diane Lanpher, D-Vergennes, told VTDigger last month, budget writers knew they’d have to work within “a pretty tight box.” The confines of that box were largely built by Gov. Phil Scott in the initial budget proposal he outlined in January.
The Senate Appropriations Committee did find some wiggle room in its rewrite. It zeroed out the House’s $3.7 million Fiscal Year 2025 proposed expansion to Medicaid and Dr. Dynasaur, which provides free or low-cost health insurance to young people and those who are pregnant. To the House’s proposal to add 62 new positions to the state’s judicial system in order to address Vermont’s stubborn court backlog, the Senate responded with 26 positions — less than half of the House proposal. Both chambers agree to add three new Superior Court judges.
A slew of housing investments, laid out in several House bills, are still being considered by the Senate Finance Committee. And on the state’s emergency motel housing program for Vermonters experiencing homelessness, the Senate opted to institute new restrictions to the program to trim spending. Namely, the Senate implemented a room cap, putting a lid on how much the state can spend sheltering program participants at any given time.
The result from the Senate was a budget that rang in just $2.2 million cheaper than the House version — but $61.4 million greater than the budget proposed by the Scott administration in January.
The Senate’s proposed spending triggered another round of finger-wagging from Scott, a Republican, at a press conference Wednesday, when he was asked about the latest iteration of the bill.
“My concern is that it spends much more than we had introduced,” he told reporters.
“I’m still concerned about the tax increases that are going to have to be put into place to prop this up,” Scott continued. “It’s something that, again, I don’t think Vermonters should expect to be burdened.”
Philosophical differences between the House, Senate and Governor’s Office on whether and how to raise taxes have been a flashpoint of this legislative session. And while tax policy itself is not written into the state budget — that’s where the Legislature’s yield bill and miscellaneous tax bill come into play — the House and Senate versions of the budget integrate entirely different tax proposals into their revenue numbers.
Through three separate bills, the House last month approved plans to raise corporate taxes, institute a higher marginal personal income tax bracket for Vermonters earning more than $500,000 annually, and increase property transfer taxes in real estate deals exceeding $750,000. In total, the three bills would raise a projected $100 million annually in future years.
The tax proposals drew the ire of Scott and interest groups such as Americans for Prosperity. But House Ways and Means Committee Chair Emilie Kornheiser, D-Brattleboro, told VTDigger at the time that the bulk of detractors were ignoring who would bear the brunt of the hikes: corporations and the wealthy.
In mulling over the House tax proposals, Senate Appropriations Committee Chair Jane Kitchel, D-Caledonia, told her Senate colleagues on the floor Wednesday that her committee took into consideration how much “taxing capacity” legislators wanted to “use up in one year.”
“There are times, in fact, out in the future where that capacity is going to be needed,” Kitchel said.
The House proposals have thus far withered in the Senate, though the finance committee is still mulling over changes to property transfer tax. Any such changes, should they pass, have not yet been factored into the budget.
The Senate does, however, have the appetite for a new tax on online streaming services such as Netflix and Hulu, which would be levied on streaming services’ operating revenues from Vermont customers. That new tax would bring an estimated $6 million into the state this fiscal year, according to the Legislative Joint Fiscal Office.
Also baked into the Senate budget’s revenue projections are proposed increases to insurance, registration and securities fees levied by the state Department of Financial Regulation. Those fee hikes would bring in another $19.4 million in Fiscal Year 2025, according to JFO.
According to that office, the Senate’s budget zeroed out projected revenues from the House’s tax proposals, but did include its own. Once in conference committee, the two chambers can work out their differences, then send the bill to Scott for his signature or veto.