While our state legislature is out-of-session, the House and Senate Joint Fiscal Committee meets regularly to review the budget status. The Vermont legislature meets from Jan-May and therefore will not be in session again until next January.
There is particular concern this year
because of the pending impacts of federal policy and budget changes, given that
Vermont relies on federal funds for more than a third of its total annual state
budget. Because of the uncertainties, legislators are receiving more detailed
updates from our colleagues about the state’s financial status, and I am
sharing, here, the summary we received this week. Note that there are many
documents referenced, and they are available on the Joint Fiscal Office website
if you are interested in a greater level of detail.
Update from Emergency Board and Joint
Fiscal Committee Meetings from Reps. Robin Scheu (D-House Appropriations Chair)
and Jim Harrison (R-House Appropriations Vice-Chair):
E-BOARD
On July 31, the Emergency Board held its
semi-annual meeting to hear and accept the Consensus Revenue Forecast. As a
reminder, by statute, the Emergency Board (four money chairs and the Governor)
meets twice a year, once in July and again in January, to establish the
official consensus revenue forecast that the budget is based upon. The forecast
is developed by the General Assembly’s Economist in collaboration with the
Governor’s Economist.
You can find a copy of our economist’s,
Tom Kavet’s, July 2025 Economic Review and Revenue Forecast Update report on
the featured publication links at ljfo.vermont.gov/
General Fund (GF) revenues for FY27 (the
budget we will be working on next session) are projected to increase by 2.5% or
$61.2 million. The good news is that there wasn’t a downgrade in GF, but the
bad news is that $61.2 million is not sufficient to cover state employee salary
and benefits increases, pension payments, and a myriad of other fixed costs. As
a result, we can probably expect some adjustments to programs and services.
Further, policy changes, some of which are
contradictory to one another, tariff uncertainly, and significant budget
reductions coming out of Washington mean that projections may need to be
revisited, possibly before January.
However, it is unlikely that the General
Assembly will need to be called back into session before January. Many, but not
all, of the programs that are being pared back through the Federal
Reconciliation Bill will not take effect prior to January 2026 so the triggers
we built into the budget for a special session are unlikely to be hit.
Finally, our economists reminded us that
personal income tax is the key driver of our GF revenue. It will be important
to pay attention to job growth, the labor market, and inflation as they are
indicators of which direction future GF revenue may be headed.
JOINT FISCAL COMMITTEE
You can find the July 31 JFC Agenda and
all supporting documents at ljfo.vermont.gov/committees-and-studies/joint-fiscal-committee/meetings/2025-07-31
We heard the usual year-end closeout
updates, the Medicaid Year-end Report, and a review of the consensus revenue
forecast. Some key points:
· We ended FY25 in
solid condition and were able to fully fund all our contingencies in the budget.
· Our reserves are
in very good shape, totaling about $300 million, so we are in a strong
position. We continue to have a high credit rating as well.
· Regardless of the
above, Vermont received over $3.1 billion in federal funds so we will not be
able to backfill all potential losses of federal funds.
We also spent time hearing about several
items related to federal funds changes.
JFO presented an overview of the 2025
Federal Reconciliation Act and how programs such as Medicaid, other health care
programs, and SNAP are affected, as well as revenue and tax changes,
recissions, and other changes. [This is included in the list of supporting
documents on the JFC meeting link, above.]
In addition to some Agency reports, we
heard from three senior staff members from our congressional delegation. It
will be important to keep in close contact with the delegation so we all
understand what is happening both in Vermont and in Washington, DC. Expect more
communication with our delegation in our committees next session.
At the end of this nearly 5-hour meeting,
we made time for public comment so we could hear from community partners
affected by the loss of federal funding. The JFC will be doing something
similar at each of our future meetings this year. The impact on many of our
constituencies may be significant.
In closing, we offer the following points:
· We expect the
upcoming state budget cycle to present a number of challenges that most of us
have not experienced as legislators before, due to uncertainty in the economic
forecast and changes in the federal budget.
· Our goal is to
meet necessary changes to our budget in a bipartisan manner.
· We may need to ask
policy committees to review existing programs to see if there are any that can
be scaled back or may no longer be the priority they once were.
We are all in this together and are
confident we can find a path forward that will minimize harm to Vermonters yet
continue investments in our collective priorities.
Thank you for the honor of representing
you. You can reach me at adonahue@leg.state.vt.gov
or Rep. Ken Goslant at kgoslant@leg.state.vt.gov
For input or questions; we welcome your contacts.
