Gov. Phil Scott delivers budget address
January 28, 2025 | By Waterbury RoundaboutGov. Phil Scott on Tuesday delivered his ninth budget address to the General Assembly, presenting his proposed budget for fiscal year 2026 which begins on July 1.
Gov. Phil Scott delivers his budget address to the General Assembly, Jan. 28, 2025. Screenshot ORCA Media
The governor’s plan does not call for tax increases while outlining investments Scott says should make Vermont more affordable, improve the state’s demographics, and grow its workforce. The speech included ideas on increasing housing stock, transforming the state’s public education system and addressing ongoing public safety concerns.
“With this budget and common-sense reforms, we can help more folks from all income levels put and keep a permanent roof over their head,” the governor said. “We can address climate change without punishing people. We can help families feel safe in their neighborhoods once again. We can let them keep more of what they earn. We can restore left-behind communities, giving them back the pride and opportunity they once felt. And we can keep and attract the workforce and families we desperately need.”
A full transcript of Gov. Scott’s address is below. See a video recording of the governor delivering the speech on ORCA Media here.
Mr. President, Madam Speaker, Members of the General Assembly, Honored Guests and fellow Vermonters:
In my inaugural address, I spoke about colleagues and neighbors whose accomplishments and service are there for us to learn from.
On Sunday, I had the honor of joining UVM President Prelock, the Mayor of Burlington, many faculty members past and present, and thousands – and I mean thousands – of Vermonters, young and old, to celebrate the UVM men’s soccer team and their National Championship.
I have to say, I was blown away by the turnout and enthusiasm. Jeff Schulman and Krista Balogh from the athletic department deserve all the credit. It was very well done. It was truly a wonderful moment of pride for UVM and our state, but most importantly for an exceptional group of players and their coaches.
You see, I’ve learned throughout my life – whether in work, politics or racing – that the team is always more important than the individual. There’s something special that comes from true team chemistry, which allows us to accomplish so much more than we could ever achieve alone.
Their coach, Rob Dow, spoke passionately about the team’s Three Pillars: Hard work, discipline, and dedication to one another – principles that brought them success.
I have spoken a lot about our desperate need for good role models and Rob has proven he’s one of them. At a time when many seem to have forgotten how to treat one another, we must strive to do better and remember our kids are watching and want to be just like us.
The way the team carried and conducted themselves has been inspiring. They’ve represented Vermont with class. In fact, in one week’s time, they made such an impression on James, their bus driver from North Carolina who carted them around for the tournament, that he took it upon himself to make the 17-hour drive up with his family to celebrate this weekend. That says a lot about the team – and James.
Hard work, discipline and dedication – another example for us to follow as we take on big challenges this session.
Patty, Rob, Jeff and Krista are here today. Please join this very proud alum in welcoming them.
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The budget I present today follows through on my commitment to Vermonters to prioritize affordability and solutions to address demographics like a 21st-century education system and housing people can afford while revitalizing cities, towns and villages in all parts of the state.
Taxpayers also made it clear they want us to fix broken systems not just fund them. So, I will forward four bills that address housing, public safety, education and affordability to improve in each of these areas. Focusing on these issues is critical to improving our demographics, which – alongside making Vermont more affordable – has to be at the center of everything we do.
This session won’t be easy because we’re expected to solve big problems. But if we stay focused and you put your community and the well-being of the entire state first, we will deliver the brighter future Vermonters asked for and deserve.
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In total, across all funds, I’m proposing a $9 billion budget.
It doesn’t raise taxes or fees, and invests to grow our economy, make Vermont more affordable and protect the most vulnerable.
For those of you in your first term, I remember when I was in your seat listening to my first budget address given by Gov. Howard Dean. There was so much government jargon, I said to myself, what’s he talking about? Base, one-time, carry forwards, reversions, limited service, match, stabilization reserve, unfunded liabilities? I thought I understood a little bit about finances, but this was all new to me.
So let’s break it down a bit:
First, there’s one-time vs. base. One-time is exactly what it sounds like – money we only expect this year, so we can’t count on it in the future. We need base funds for that, which is ongoing revenue to pay for core operations.
And we have to be strategic when deciding between the two. For instance, we’ve got a lot of cash right now – about $1.6 billion, mostly due to the federal money that came our way after the pandemic. Now, don’t get too excited because all that money is dedicated to infrastructure. But in the meantime, it generates a lot of interest – about $60 million this year alone. That money, however, continues to go out the door. So, the revenue from interest will subside, meaning we can’t count on it forever. The same goes for our pension funds, which are also doing pretty well these days due to a healthy market.
But we can’t believe our own magic because, as I recently heard from someone in the finance world, “Don’t confuse a bull market with brilliance.”
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Gov. Phil Scott during his budget address. Screenshot, Vermont Public
Next, for emerging needs, we can make changes to last year’s budget in what’s called the BAA – the Budget Adjustment Act.
On our side, we’ve kept this proposal pretty lean and clean this year. The only item you might consider new is $10 million to give the Agency of Human Services flexibility for urgent needs in the healthcare system.
We decided to transfer the remaining surplus revenue to make investments in the Fiscal Year 2026 budget, which I’ll talk about shortly.
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Then there’s the capital bill, overseen by the Institutions committees. They consider investments we want to make for capital projects, like courthouses, state police barracks, state parks, water, sewer and stormwater utilities, as well as priorities like housing.
Think about this as an investment in tangible things that last a while because this is borrowed money that’s paid back over a long period of time.
This year, the debt affordability committee suggested we reduce borrowing. So, my bill proposes $100 million over two years.
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Then we get to the big three.
There’s the Education Fund, which this year totals $2.4 billion. And we’ll talk more about that in a bit.
Next is the Transportation Fund, which between state and federal money totals $858 million for things like roads, bridges, winter maintenance, public transit, rail, airports and much more.
Decades ago, the T-Fund was flush with cash, so lawmakers diverted revenue to prop up other parts of the budget, including what’s called the JTOC transfer. At one time, it moved over $45 million to the General Fund. But we’ve steadily worked that down to around $20 million.
The problem is, due to the sheer number of projects and escalating costs, the T-Fund now needs that money. So, let’s take a step toward making this fund whole by eliminating the JTOC transfer once and for all.
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If you are keeping track, we started with about $9 billion.
$3.1 billion is federal money, which – other than the half-a-billion dollars for transportation – primarily supports Medicaid and other human service programs. So, we don’t have much control over that spending.
Of the $5.9 billion that comes from state funds, almost half goes to pre-K-12 education. Because on top of the Ed Fund, the General Fund pays $225 million for teachers’ pensions and other benefits. And $340 million goes to Transportation.
So, what’s left is about $2.9 billion… which has to cover everything else.
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That brings me to the General Fund, where most of the action takes place.
Now, I know many of you saw the big revenue upgrade last week and think we’re in pretty good shape. But even with a strong economy, balancing this budget wasn’t easy.
Here’s why: Just to provide the exact same programs and services as last year, it costs us $133 million more this year. That’s due to increases in pensions, health benefits, human services and other pressures.
What this means is that 90% of the General Fund is used to just keep the lights on.
With all these obligations, the two-and-a-half billion we started with is now down to just $250 million. And while that’s a lot of money, it goes quickly because there were nearly half a billion dollars in new funding requests.
So, even with a surplus we can’t do everything we want. That’s why budgeting is typically about choosing between many good things. And we have to. Because at the end of the day, Vermonters were very clear: They expect us to separate our wants from our needs and live within their means.
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That starts with housing, where it’s too hard and too expensive to buy, own or rent.
The data tells us we need over 7,000 units just to keep our heads above water. With the lack of supply, it’s no surprise that a quarter of renters spend half their income on housing. Or that the median home price increased by 43% in just four years.
Now, for those who might not see the need or are not sure about having more neighbors, think about it this way: More housing can help pay for schools without adding to your property tax. More housing for workers keeps employers in business and brings in more revenue. It gives families financial security that can improve health and public safety. And it can brighten neighborhoods and revitalize downtowns.
This is what we can achieve. Because it’s not just about units, it’s about community and opportunity.
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We have learned a lot over the last several years, after investing hundreds of millions of dollars in this area. And my team has a plan to build on what’s worked and fix what hasn’t.
First, we’ll continue to be creative, finding ways to invest in more and better housing.
With hundreds of millions of dollars to the Vermont Housing and Conservation Board in recent years, traditional affordable units are still coming online. And my budget fully funds VHCB with almost $37 million.
But these partners can’t solve this crisis on their own. So, let’s help more “mom and pop” investors build and restore homes with Infill Technical Assistance and our Homes for All toolkit. And let’s make our very successful Vermont Housing Improvement Program permanent with $4 million in base funding.
These VHIP units come online faster and at a fraction of the cost of other programs. They also lift people out of homelessness. Take the couple my team recently met in St. Johnsbury, who transitioned from the Shelter at Moose River to a VHIP unit downtown, where they’re back on their feet and within walking distance to their jobs.
That shelter, by the way, was stood up by VHCB and our Housing Opportunity Program, so we are giving that program another $3.3 million, and $2 million more to AHS for emergency shelters.
But if we want to get ahead of this, we also need to keep people housed. And our Mobile Home Improvement and Repair program is making a big difference. So, let’s make it permanent with $2 million in base funding.
These initiatives, and many other ongoing programs in the budget, give families opportunities they may not otherwise have.
Take Renn and Cory Boudreau. They worked for years to afford a place to raise their 4-year-old daughter in the community where Renn grew up. With help from our Downpayment Assistance Program and a MHIR grant that covered the foundation and site work, their mortgage payment was reduced by half – making their dream of owning their own home a reality.
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Next, we can do more to help restore homes and businesses in the heart of our communities.
Our Downtown and Village Center Tax Credits are extremely successful, and we consistently have more applicants than we can fund. So, let’s dedicate another $2 million, for a total of $5 million a year, to help turn around more of these town centers.
We’ve proven cleaning up brownfields helps achieve our housing, economic, and environmental goals.
It’s a win for everyone, so let’s invest another $2 million.
And incentives matter. So, let’s make sure Bennington, Essex and Grand Isle counties get the same property tax incentive we gave every other county in last year’s land use bill.
Now, my budget also dedicates over $30 million – which is among the largest one-time allocations we’ll make – for what’s known as our Hotel/Motel program. But I want to be clear: This is funding, not fixing the problem. It’s permanent solutions that will – and are – helping families across the state.
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An important area to fix is infrastructure.
There are many projects, right now, with the financing and permits for hundreds of units but the cost of water, sewer and stormwater is holding them back.
To help, I propose a significant and strategic state investment.
My capital bill dedicates about $1 million each to close this gap for three projects: Barre’s Prospect Heights, the Bennington High School conversion, and Brattleboro’s Winston Prouty renovation.
In total, this will support over 300 new homes and childcare for 100 kids. And with another $40 million in one-time funds, we can help more municipalities and create more workforce housing with this critical infrastructure.
This historic investment will make a huge difference, speeding up projects and lowering building costs all around the state.
Expanding the Tax Increment Financing program will add to this effort.
TIF is a valuable tool that bigger towns have used to take on major projects that jumpstart economic development. It allows municipalities to use a portion of the increase in tax revenue to pay for projects that ultimately add to the grand list and grow the local economy.
Some criticize the program because they claim the money collected from the property tax diverts money from education. But that math is short-sighted. Because the reality is TIFs will add nearly $60 million to the Ed Fund.
See, I don’t believe the critics are taking into account the long-term benefits of this creative economic development tool. Without TIFs, downtown St. Albans, Winooski’s city center, Burlington’s waterfront, and Milton’s economic hub, would not be what they are today.
But you will notice these projects are in bigger towns and cities in Northwest Vermont. So, let’s extend this option to smaller towns and on a smaller scale. Because they too deserve a chance for better infrastructure, better housing and more climate resilience.
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Finally, we have to break down regulatory barriers in more parts of the state.
That includes adding commonsense standards for appeals, like those used in Massachusetts and the State of Washington.
Last year, we all agreed that Act 250 exemptions are a way to jumpstart housing. But too many towns were carved out. So, my bill expands and extends them, and adjusts the Tiers to make sure our smaller, rural towns are not once again left behind.
If this is truly a goal we all share, we must take more steps to legalize housing, so communities and families can thrive in all parts of our state.
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We also need people to feel safe. Unfortunately, they don’t, and the data backs them up.
According to the Vermont Intelligence Center, 2024 was the third straight year with more than 20 homicide victims.
Between 2018 and 2023, aggravated assaults increased by 40%. Reported motor vehicles, identity and retail thefts have each more than doubled. And from 2022 to 2023 alone, reports of shoplifting increased by 40%. These crimes impact our communities. They hurt our retailers and downtowns. And customers, residents and visitors are staying away.
I believe one solution is more accountability.
Some of the laws we’ve passed, including some I signed, have removed consequences, especially for young adults.
For example, “Raise the Age.” If we do nothing, come April, those up to age 20 who break the law will be pushed into a system meant for children, which is not equipped to handle adults or hold them accountable. This law already covers those up to 19, and it is straining our social workers and our communities. So, let’s repeal it for 19-year-olds, and make changes to how we handle youthful offenders, so we don’t go any further down this precarious path.
We also need to make it easier to revoke bail, limit the ability to reduce or suspend sentences, seal criminal records instead of erasing them and provide more tools to hold repeat offenders accountable, including funding to expand last year’s pilot for pre-trial supervision.
We have all seen the headlines. There are far too many people with hundreds of law enforcement encounters, dozens of arrests and many active criminal court cases. Yet, they’re still walking free.
This wastes time and resources, adds to the court’s backlog, and erodes faith in law enforcement, the courts and us.
Enough is enough. Let’s fix it.
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Many of these crimes, and those committing them, overlap with addiction and mental health issues.
By retooling existing services and programs, we can provide them with immediate and long-term treatment. To get started, we will invest nearly $1.5 million in state funds, which gets us another $1 million from the feds.
The Agency of Human Services will repurpose existing beds to help law enforcement with people impaired by drugs or alcohol.
We’ve been a leader in providing Medication Assisted Treatment in our corrections system. Because accountability and intervention can be what people need to turn their lives around. And we can give them even more tools for long-term success by adapting the St. Johnsbury Work Camp to offer more comprehensive treatment.
We can also fill gaps in recovery by creating beds specifically for those who have relapsed and want to get back on track, as well as a new 15-bed recovery campus.
By pairing this work with other programs, like drug treatment diversion, stronger conditions of release and pre-trial supervision, we can offer a clear path to lasting recovery.
And that is exactly what we need because reducing the size of the addicted population is the only way to truly turn the corner on both public health and public safety.
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Since 2011, we’ve had 26 federal disaster declarations, which is double what we used to see. Climate resiliency is critical to adapting to this new reality. But we don’t have enough state dollars to buy our way out of it. So, we are working to get the most out of federal resources.
We’ve already gotten this going in places like Richmond, Lyndon and Hardwick using some of the $85 million in FEMA Hazard Mitigation grants plus $12.5 million from the State.
And we’ll get another $68 million in federal money to do even more, especially in Washington and Lamoille counties where most of it is required to go. After Irene, these funds helped places like Brattleboro and Waterbury replace housing, and in Wilmington and Johnson it helped repair and harden local businesses.
This combination of federal money will be used to buy out unsafe properties, shore up infrastructure, and reduce future flood risks along rivers and streams.
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As we’ve seen in recent years, towns that need the most help have the hardest time getting it, which makes the “Two Vermonts” divide even worse.
With no full-time professional staff, town clerks and selectboards – many who have other jobs – have seen their workload double and their budgets explode following back-to-back floods. They simply can’t keep up. We’ve helped bridge this gap with our Municipal Technical Assistance Program. So, we will continue this support and fund dozens of other projects in small towns and villages with $3 million this year.
These same municipalities are at a disadvantage when it comes to buying out properties in the floodplain because when these homes and businesses get removed, local property tax revenue is lost. So, we’ll use $1 million as a temporary bridge to replace municipal revenue lost due to buyouts.
In 2023, and again last summer, we acted quickly to create a Business Emergency Gap Assistance Program. So far, we have helped nearly 700 businesses, farms and non-profits get back on their feet. But this demand is not going away. So, let’s work with the Vermont Economic Development Authority to start a disaster recovery fund with $2 million in unspent BEGAP money.
Just like we did with pandemic recovery funds, we can once again turn major challenges into transformational change that creates more housing and strengthens disadvantaged communities – all without asking taxpayers for more.
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We should take the same approach when it comes to addressing climate change.
Reducing emissions is a goal we share. Where we’ve often differed is how to get there. Because when people can’t afford it, we can’t achieve it. So, we need changes to the Global Warming Solutions Act.
First, we should follow the U.S. Climate Alliance when tracking our goals by accounting for net emissions, not gross. This matters because it acknowledges the role of our farms and forests.
If we want to protect Vermonters, we have to remove the provision that allows special interests to sue us, which, by the way, is already happening – and it will slow down progress.
And instead of working towards arbitrary deadlines we know we can’t meet; I will direct the Agency of Natural Resources to develop a practical plan that figures out what it will actually take to reach the 2050 goals and how much it will cost. This is what we did for clean water. And just like our clean water plan, we can do it without costing Vermonters more.
As our affordability crisis is making us rethink how we do things in education, housing and healthcare, we can do the same with climate.
Efficiency Vermont has been an important partner in helping businesses and residents reduce the use and cost of energy. Let’s capitalize on what they’ve built by expanding their mission to include climate action and directing $15 million from the energy efficiency surcharge to reduce climate pollution. With this strategy, we can lower the energy burden and continue our significant climate investments.
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We will also propose changes to last year’s Renewable Energy Standard, taking a commonsense approach to reduce the cost for ratepayers.
And we should revisit the climate superfund bill because it is already costing taxpayers money as we defend the first of what could be many lawsuits.
This session, let’s focus on the fundamentals, pass climate policies with real solutions to achieve our goals, and worry less about making national headlines, and more about what Vermonters can do and afford.
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On education, I want to start by thanking the Speaker and Pro Tem for joining my team at the table, and all of you for being willing to listen and consider our proposals for stronger schools, and stronger students.
I spent a lot of time in my Inaugural talking about the challenges and shortfalls in our current system.
So, today I’ll keep it simple:
Our kids are not getting what they deserve from the $2.4 billion we spend. Neither are teachers or taxpayers.
The reason is an approach to financing that drives up costs and fuels inequity, along with a structure that’s far too big for a declining number of students.
But here’s the good news: We have the rare opportunity to increase quality and equity across all schools, pay teachers more, and rein in costs, so it is sustainable for taxpayers.
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As you know, we are proposing a new approach to education funding.
This starts with setting a base amount that will be distributed equally for all students, so that kids in Sudbury get the same quality as kids in Stowe.
Here’s how we do that:
First, with our new, higher academic standards, we will calculate the cost to educate students.
Second, we will make sure all districts can provide things like early education, afterschool and summer programs, career and college training, and special courses like art, music and foreign language.
Third, we will make sure all teachers, regardless of where they teach, can earn a competitive salary.
Fourth, we will add to the base for those students and districts that have greater needs. Because today, not all of them are getting the extra support they should.
Importantly, by reinvesting savings we can achieve this without driving up costs.
Together, we have a lot of details to work out, including how new districts could raise additional funds, and how we fold in our independent schools, which are important to us, but this is only 3,500 kids out of 83,500, so we will figure this out.
Getting this formula right will benefit taxpayers and bring a high-quality education with more opportunities for all students from cradle to career.
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Here’s the important part: For this to work we must right-size.
So, we have put forward a simpler model with only five districts and one schoolboard each. Parents and locals will continue to be involved through school advisory councils, where they can focus on the things that matter most to kids and communities instead of defending difficult budget choices year after year.
This change puts us much more in line with other states – many of which have better outcomes and most of which have lower costs.
With this larger scale, districts can be creative and flexible. In contrast, right now, when looking for savings, the only option is to cut. In some schools, cuts mean one less academic coach. In others, cuts mean an entire educational program.
This is not equal education. We can – and must – do better.
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Gov. Phil Scott speaks during his budget address as Lt. Gov. John Rodgers looks on. Screenshot Vermont Public
We know this transition won’t be easy, which is why the Agency of Education will be on the ground, helping districts along the way. And I’ve proposed $4 million to support them.
We will also take a phased-in approach, implementing this over four years. We will give administrators and school boards evidenced-based backstops for school and class size and graduation requirements. We will make changes so the impact on tax rates is easier to understand for taxpayers and for those who build these school budgets.
To ease the burden of some known expenses, I am proposing another $10 million to help those schools currently dealing with PCB contamination.
And my budget directs any additional surplus revenue that we could get in July, to a reserve fund to support this transition along the way.
The bottom line is: We are committed to seeing this through with the least amount of disruption for kids, teachers, schools and taxpayers.
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Now, we know there will be something in this bill for just about everyone to dislike – maybe even hate.
There will be campaigns and protests from special interests. The “critics say” headlines will circulate in papers and online. Many community members who begged for cost savings will petition against some of this change. We know all that and more is headed our way.
But even so, I can tell you, I am ready to take this on. Because this is our moment.
If we seize this opportunity, we can offer a world class public education for every student no matter where they live; build a system that attracts more families; prepare students for valuable careers; contribute to a stronger workforce; and support stronger communities in all corners of our state.
That is what we can achieve this session. So, let’s be brave together and get it done.
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If we fail to make meaningful changes, we will be right back where we started – with higher and higher costs every year.
We had a historic increase in education costs last year. And here we go again, because we are facing another average 6% increase in property tax bills.
That’s not going to work for anyone.
So, while we fix the education system, we can also use $77 million in General Fund to eliminate this year’s projected property tax increase.
But folks are hurting, so that’s not enough. We should provide some much-needed relief with a $13.5 million tax reduction package. Here’s what it includes:
As costs have gone up, those on a fixed income are hit the hardest, so we should increase eligibility for our Social Security income tax exemption.
To help low-income working adults keep more of their paycheck, we can expand the Earned Income Tax Credit for those without dependents.
We can cover more families with the Child Tax Credit by extending it up to age six.
And as I’ve done nearly every year, I propose eliminating the income tax on military pensions – bringing us in line with nearly every other state, attracting a valuable and important part of the workforce,
and making sure those who serve our nation can afford to thrive and retire here too.
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This session, we have an incredible opportunity – and a clear mandate – to fix the underlying structural issues that make Vermont unaffordable and make it harder to keep and attract the workers we need.
And this budget shows us what happens when we don’t.
Just think about this: About half of the $250 million we have at our discretion is being spent to fill gaps, not invested to get us ahead. $15 million – between the budget and BAA – to plug just some of the holes in healthcare. $30 million for roughly 1,100 hotel rooms (not services for people) because we don’t have enough housing. And $77 million to shield Vermonters from unsustainable growth in the cost of education.
This is what funding our challenges without fixing them looks like. But we can change that.
With this budget and commonsense reforms, we can help more folks – from all income levels – put and keep a permanent roof over their head. We can address climate change without punishing people. We can help families feel safe in their neighborhoods once again. We can let them keep more of what they earn. We can restore left-behind communities, giving them back the pride and opportunity they once felt. And we can keep and attract the workforce and families we desperately need.
As I said three weeks ago, we can be the ones who finally tackle these challenges head on.
We can leave this place better than we found it, with a legacy that gives generations of kids, workers, families and communities the more affordable, stronger, and brighter future they deserve.