This week Governor Scott gave his budget address for FY2026 and we learned more details about his plan to overall Vermont's education system.
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This week Governor Scott proposed a $9 billion state budget that (per usual) did not raise any taxes or fees. He emphasized housing, education, public safety, and affordability in his 49-minute speech. The housing investments, both one-time and ongoing, were the most pronounced with expansions to the Vermont Housing Improvement Program the Manufactured Home Improvement and Repair program. He also proposed one-time investments in health care reform, emergency housing, infrastructure, and the Vermont Housing and Finance Agency.
The proposed budget would also provide tax savings to young families, seniors, and veterans by expanding the child tax credit, and exempting both social security benefits and military pensions from income taxes. For low-income families without children, an expansion of the Earned Income Tax Credit would also provide some relief. All these tax breaks add up to $13.5M in savings for Vermont's most financially-strapped families.
The Secretary of Education also rolled out more details on the funding formula for the Administration's education reform plan. The foundation formula proposal would bring Vermont more in-line with how other states fund education. A base of $13,200 per student would be provided by the state Education Fund, which would then be adjusted upward for local factors like economic disadvantage, non-native speakers, CTE, etc. Categorical aid would still apply on top of this, like it does today, for special education and transportation. Overall, the proposal would reduce Education Fund spending by $184M according to Secretary Saunders. However, individual school districts could choose to spend back up to current spending levels if they so choose, however it would (presumably) be on the local tax base. Saunders argues that the proposed base funding amount would be one of the most generous in the country.
It is also worth calling out that the Governor's budget is proposing to use $77M in one-time funding to buy down statewide property tax rates for FY2026. The Legislature used $69M in one-time funds last year to do the same thing for FY2025; we were critical of that idea then, and still are. One-time funds create a hole that you have to dig out of the following year. We are seeing that play out this year, where property taxes are picking up $115M in new spending plus the one-time funds from last year. I wrote a commentary about this last month.
There is also an accountability problem with these property tax buy-downs. When school budgets go up rapidly and the Legislature bails them out with new or one-time revenues, it allows school boards to bypass tough decision-making and being accountable to taxpayers for their decisions. Put differently, it further insulates local school boards and voters from their spending decisions.
Other notable events this week include the rollout of the Governor's housing proposal; a plan to ban cell phones in schools; a bill to control AI content in elections; a plan to move the electronic voting for the Vermont House; and an introduction from the Tax Department on their new proposed property tax credit system to replace the current income-sensitivity system. We will work on bringing details of these to you in the coming weeks.
On behalf of Vermonters,
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