Updated at 6:38 p.m.
MONTPELIER — Vermont Gov. Phil Scott proposed a $9.4 billion budget to state lawmakers on Tuesday that he called a “disciplined” spending plan in the face of waning support — and more cuts likely to come — from the federal government.
Scott’s proposal, which lays out spending for a one-year period starting in July, is about 3% larger than the state budget he and the Legislature enacted last year. But he said his latest plan calls for fewer new initiatives, largely because the state no longer has Covid-19 pandemic-era federal relief funding available for new uses.
He also pointed to how the state’s top economists lowered previous estimates, in a report last week, for the amount of revenue the state will bring in through June. That decrease, which is only about $8 million, nevertheless indicates that legislators need to be frugal, Scott told a joint session of the House and Senate Tuesday afternoon.
Last year’s budget was about 5% larger than the budget before that. Scott framed his latest proposal as a return to state spending levels that predate the pandemic.
Still, “even the traditional funding we’ve come to expect from Washington is uncertain,” the Republican governor 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.”
Tuesday’s spending plan covers the 2027 fiscal year, which will start in July 2026 and end in June 2027. The governor’s address was legislators’ first look at his spending priorities for the upcoming year. Now that they have his proposal in hand, they’ll start developing their own version of a budget that will ultimately need Scott’s signoff.
At a press briefing earlier in the day, officials from Scott’s administration pointed to how Vermont is poised to lose hundreds of millions of dollars from cuts to Medicaid and other human services programs over the next several years under President Donald Trump’s sweeping tax and spending law, in addition to other proposals Trump has backed.
Scott’s proposal would leave available $70 million lawmakers set aside last year to respond to future federal cuts, the officials said. But they acknowledged that amount would likely be far from enough to fully plug the gaps in numerous key programs.
“That’s just the harsh reality,” said Sarah Clark, Scott’s secretary of administration.
The governor’s budget would take $30 million legislators previously set aside — and which could, also, be used to respond to federal cuts — for property tax relief. It would add that sum to $75 million in surplus state revenue that Scott has already indicated he wants to use to help out taxpayers, for a total of $105 million for that purpose.
In all, Scott officials said that money would “buy down” the average property tax increase projected across the state in the upcoming school budget cycle from about 12% to about 5.5%.
About half of the projected 12% tax hike would come from an expected jump in school spending, though districts are still in the process of formulating their budgets for the 2026-27 school year. The other half of the spike is the result of a fiscal hole left by Scott and legislators’ decision to use about $100 million to blunt property taxes in 2025.
Scott said the property tax buydown was a stopgap measure to provide relief while lawmakers attempt to advance the key provisions of last year’s sweeping education reform law, Act 73. His administration has been adamant the plan will lower the costs of education, though critics have questioned whether the path will result in savings.
The governor voiced support, specifically, for a plan by Senate President Pro Tempore Phil Baruth, D/P-Chittenden Central, to put a cap on school district spending in the 2028 and 2029 fiscal years, based on districts’ spending in the prior year. He said his support demonstrated “to the naysayers that we can work together to solve this problem.”
At the same time, Scott’s speech Tuesday comes just weeks after he threatened in his State of the State address to veto a final state budget later this year unless he sees the education funding changes he wants to see under Act 73. Baruth and other legislative leaders expressed frustration with that ultimatum.
Transportation funding, ‘accountability court’
Scott’s budget proposal also calls for cutting the amount of state revenue from the tax on new vehicle purchases that is used to pay for schools. Compared to the current year’s budget, Scott wants to reduce the amount of the purchase and use tax directed to Vermont’s Education Fund by $10 million this year, he told legislators.
Instead, that money should be directed to the state’s Transportation Fund, he said. The state is facing major challenges funding its transportation system as revenue from taxes on gasoline, which support road paving and other key projects, has long been falling.
State transportation revenues are expected to be about $33 million short of what is needed to access as much matching federal grant funding as possible for transportation projects. In the upcoming fiscal year, that shortage could leave about $165 million in federal dollars on the table, according to legislative analysts.
Administration officials indicated Tuesday that the Vermont Agency of Transportation could need to lay off additional employees — beyond reductions it made last fall — as a result of funding challenges, though they did not provide specifics.
Scott said his goal is to eliminate the use of vehicle purchase tax revenue for education costs completely in the future. In responses to reporters after the speech, Democratic leaders in the Legislature expressed tepid support for that idea, saying they needed to see more details about how the governor would make up the resulting hole in the Education Fund.
“It is a problematic solution, in that it puts new pressure on the Ed Fund over the next five years,” Baruth said. “There’s a long-term, structural plan that’s needed.”
“We’re looking for long-term solutions here — not Band-Aids,” said House Speaker Jill Krowinski, D-Burlington, speaking about the governor’s address as a whole.
Scott also said his administration would, again, present a package of changes to Act 250, the state’s signature land use law, that would make it easier for new housing to be built in certain parts of the state. He is also asking legislators to approve a $4 million annual appropriation for a program that funds repairs to vacant rental housing.
The governor proposed spending about $21 million in the upcoming year on the state’s emergency shelter program that allows people to stay in motels, though reiterated he wants to see the program ended as soon as possible. He also panned what he called energy policies the Legislature has passed that make life in Vermont less affordable.
To address “escalating public safety concerns,” Scott proposed $500,000 for at least one new location of a specialized “accountability court” that hears cases from repeat offenders. A pilot of the initiative has been operating in Burlington since last fall. Clark, Scott’s administration secretary, said Rutland was a likely next location.
