December 4, 2025 Legislative Preview

 Legislative Update

Rep. Anne Donahue

December 4, 2025

It’s just about a month away from the start of the 2026 legislative session, and this week we held the “preview meeting” to hear from our consultants about the state’s financial picture. In terms of predictions on the overall economic picture, our state economist said, “We’re tearing our hair out. We’re having to guess at it.” While they’ve always placed caveats on their reports, this is the first time they’ve said anything like that.

In terms of the two specific areas of staggering costs that are looming for Vermonters: it’s the parallel crises in health care and in education costs.

We pay the highest premiums in the country, driven by the highest priced hospital in the country. On average, Vermonters pay 19.6% of their income for health care. The national average is 7.9%. That is staggering. At the same time, quality and access have dropped. There were theories shared by different speakers about why the costs of care are so high, but there is no clear picture of why this is other than that prices at the University of Vermont Medical Center are the biggest factor, and it has a 47% market share.

Slides we were shown included this example: an MRI at UVMMC costs $6,520. At Dartmouth, it costs $4,884. At a sample regional hospital, Northwestern Medical Center in St. Albans, it’s $2,785. Independent facilities charge $1,799. (A standard birth at UVMMC is $17,373, while at Northwestern it’s $5,150.) On the flip side, some of the small hospitals in the state are in financial distress and on the brink of closing.

I know one piece of institutional knowledge, and I shared that. It hasn’t always been this way. Only 25 years ago, Vermont had average costs below the national average. The warning signs were there, because our cost increase trend was above the national average. We were catching up, and soon to exceed, the rest of the country. The entire time I’ve served in the legislature, we’ve been scrambling to try to address this, without success.

The push now is to regionalize high cost, high intensity services and to move more lower-intensity services out of hospitals and into less expensive community settings. Regionalization would help protect access to essential services over the long term, rather than risk losing them altogether. It may mean longer travel in some cases and less local hospital control over types of services, but the current trajectory is unsustainable.

On top of the cost increases that impact everyone, there has been a lot of worry about the pending loss of federal subsidies for those on the insurance exchange, Vermont Health Connect. It’s been on the news a lot, and it is a dramatic loss. But we were urged to make it clear for constituents that subsidies have not been completely lost. People should be applying to find out eligibility. What has been lost is the enhanced COVID subsidies, not the base ones.

***

“Current trajectory unsustainable”

Does that phrase sound familiar? And does the push to create more regional planning and service delivery also sound familiar? With further travel and less local control? It is the identical scenario we have in our education system. The projection of a 12% property tax increase next year just hit the news. That estimate is based upon “if everything stays the same,” meaning, projected school budgets and votes on them, and legislative action.

This came as no surprise. We built it into last year’s budget with a temporary shift of $118 million in one-time (non-recurring) revenue so that last year’s tax increase was minimized. We knew the difference would have to be made up for this year.

Homestead property taxes are only 28% of the overall education fund; non-homestead are another 40%; the rest (32%) are other taxes. Those non-property tax sources will increase by about 2.6% this year, and when school budgets increase higher than that, it further increases the rate of the increase on the property tax portion. We could repeat a shift to add in other general funds like last year, but that assumes those “one-time” revenues are available and it would take back-up money away from urgent needs in the general fund.

It was done last year on the premise that we were planning some major restructuring of the education system and how we pay for it that would impact future growth. That bipartisan bill setting up a plan of action is now facing fierce pushback, and the reforms are in jeopardy.

The assertion is that there is a lack of evidence that it will save money. I said that last year. That’s a given. The major change is to have statewide funding controlled by the state legislature (that’s the reason there’s no certainty of less spending) instead of by each town. The problem with each town voting on a local budget is that it is paid for by a statewide pool of money.

When Northfield tightens its belt, it doesn’t get all of the tax benefit because the rest of the state saves; when Burlington votes for increases it doesn’t fully pay for it, the rest of the state pays. So, for those who worry about loss of local budget control: under the current system, there is only a make-believe type of local control.

The impact is inequitable, and what kids receive from their local schools is inequitable. It also makes the financing unpredictable and much more difficult to control. We’re the only state to do it this way. I very much hope we do not change course away from true reform this year.

***

The Unknown Overall Budget Picture

Will federal policies send us over an economic cliff? Will they cause damage, but survivable damage? Could they help the economy? That was the “we have to guess at it” that our fiscal experts were referencing. The loss or delay of key national financial statistics due to the shutdown means, “we’re flying blind right now.” We may know more by January.

The two cross-currents that were detailed were the existence of “staggering” new investments and equity gains in the build-out of Artificial Intelligence, and the impact of “deglobalization” by the U.S., which, our consultants said, “is unwinding the postwar economic order through punitive U.S. tariffs assessed against friends and foes, and a reversal of immigration flows that have defined and shaped the U.S. for most of its history.”

The full power point of the presentation, with a lot of detailed explanation and graphs, is well worth reading and can be seen at: https://ljfo.vermont.gov/assets/Publications/All-Legislative-Briefing-December-3-2025/December-2025-Legislative-Economic-Review-REV.pdf

Vermont revenues are seeing direct losses from reduced Canadian tourism. Uncertainties for our state budget also include the fact that federal funding directives are arriving without explanations or specific directions, data is missing, and the discretion given to the executive branch has resulted in pauses, cancellations, and reissuance of funds. There are still unknowns about what, if anything, might change based on pending court decisions.

The coming year will remain an unknown until Congress addresses the 2026 budget in January, and the perils to Vermont are significant. In the current year, of our $9.1 billion budget, $3.1 is paid by federal dollars. What happens on the federal level is a very big deal in terms of what we can provide. While the future details are still not well known, the general goals (and impacts we can assume for Vermont) are clear: cut taxes, cut mandatory spending, cut discretionary grants, shrink the federal footprint and expand executive power.

One direct, known change is that Vermont will need to budget a new $8.4 million annually for the administration of the food stamp program. That used to be paid fully by the federal budget; now 50% is being charged to the states. All of our ordinary pressure will also be there: the fact that our increases in revenues are outpaced by inflation and fixed costs. The Transportation Fund already required rescissions this year due to lost revenue (drop in gas usage) and increased road construction costs.

All of the briefings can be seen at: https://ljfo.vermont.gov/publications/legislative-briefing/all-legislative-briefing-december-3-2025

***

 Once we are underway in January, lots of issues beyond the financial ones will be on the table. Please contact me (adonahue@leg.state.vt.us) or Rep. Ken Goslant (kgoslant@leg.state.vt.us) with questions or input. We look forward to serving you in the new year.