By Guy Page
Gov. Phil Scott on Tuesday unveiled his proposed FY2027 budget, saying the $9.4 billion plan reins in costs, provides targeted property tax relief, and begins addressing long-term structural challenges in education, transportation, housing, and human services—without raising broad-based taxes.
The governor’s annual proposed budget reveals how the governor would spend the money raised for Vermonters’ taxes and fees, and other sources, for the benefit of all Vermonters. The Legislature will develop and pass its own budget this session. The governor will either approve or veto it.
Republican legislative leaders praised the budget. “House Republicans appreciate the serious proactive approach that Governor Scott laid out in his budget address. Many difficult decisions need to be made for Vermont to become affordable,” House Minority leader Pattie McCoy (R-Poultney) said. Senate Minority Leader Scott Beck (R-Caledonia) agreed: “Governor Scott is asking the legislature to reform inefficient systems that are not cost-effective and making Vermont unaffordable. Senate Republicans take this message seriously.”
For their part, House Democrats will discuss their take on the budget at a press conference at noon today. Democrat leaders, including Ways & Means Chair Emily Kornheiser (D-Brattleboro), were seen clapping lightly at several points during Scott’s budget address in the House Chambers.
The governor’s proposal includes total FY2027 uses of $2.53 billion from the General Fund, $2.56 billion from the Education Fund, and $341.66 million from the Transportation Fund. Scott emphasized fiscal restraint as federal stimulus dollars fade and state revenue growth slows, while maintaining full funding for pension obligations, debt service, and statutory reserves.
Transportation Fund and taxes
A central theme of the governor’s address was the Transportation Fund, which Scott said is facing a projected $33 million deficit next year. He drew a firm line against increasing the gas tax to close the gap.
Instead, Scott proposed reducing by $10 million the annual diversion of Motor Vehicle Purchase and Use tax revenue from the Transportation Fund to the Education Fund. The diversion, established decades ago, has increasingly strained transportation finances as fuel tax revenues flatten and infrastructure needs grow. Last year’s budget eliminated $20 million in transportation revenue being redirected for non-transportation purposes; Scott said this year’s proposal begins unwinding a total $50 million transfer.
“With fuel taxes flat or declining and our transportation infrastructure needs growing, we must end the drain on this fund and use the revenue as it was originally intended,” Scott said.
Education and property tax relief
Education spending remains the largest cost driver in the state budget. Scott noted that total state and federal education spending now approaches $3 billion annually, or more than $36,000 per student for roughly 80,000 students statewide.
“For that amount of money, we should be providing far better outcomes for our children and equitable salaries and support for our teachers,” he said.
To ease pressure on property taxpayers while longer-term reforms move forward, the budget includes a $105 million General Fund transfer to the Education Fund. The proposal also allocates $716,000 in base funding to the Agency of Education to make permanent five positions dedicated to education system transformation.
In addition, the administration is proposing $700,000 in one-time General Fund money through the FY2026 Budget Adjustment Act for “Read Vermont,” a statewide literacy initiative aimed at strengthening early reading instruction.
Housing and community revitalization
The governor’s budget continues investments in housing, citing regulatory barriers and high construction costs as major contributors to Vermont’s housing shortage.
The plan includes $4 million in base General Fund funding for the Vermont Housing Improvement Program, making the previously one-time program permanent. VHIP is designed to bring affordable rental units online more quickly and at lower cost than traditional programs.
The proposal also includes $800,000 in one-time General Fund funding for additional housing and community revitalization initiatives.
Homelessness, public safety, and recovery
Addressing homelessness and public safety, Scott criticized the state’s continued reliance on temporary motel placements, calling the approach isolating, unstable, and ineffective.
The budget includes $21.2 million in one-time General Fund funding for the hotel and motel program in FY2027, along with funds to develop new shelters as the state transitions toward a permanent sheltering model.
An additional $10.2 million in base funding is proposed for medically vulnerable shelters, substance use recovery shelters, enhanced case management, rapid rehousing, family reunification, and related support services.
Other public safety and recovery-related investments include:
$875,000 in base funding for Hireability Vermont to support employment programs for people in opioid recovery.
$200,000 to expand pretrial supervision services statewide, building on a pilot program in Newport.
$500,000 in one-time funding to expand the Community Accountability Court model, first piloted in Burlington, to additional willing counties.
“Good government” and economic stability
Framing the budget as a response to tightening fiscal conditions, Scott said the state must focus on core responsibilities and long-term stability.
The proposal includes $231,500 in base funding to the Agency of Agriculture, Food and Markets to eliminate water quality fees currently paid by farms, which the administration says have placed a hardship on agricultural operations.
It also includes $500,000 in one-time funding for the Vermont Outdoor Recreation Economic Collaborative to support grants aimed at strengthening local economies and promoting stewardship of natural resources, and $110,000 in one-time funding to continue IDEAL Vermont, a municipal coalition focused on advancing racial and social equity initiatives.
Scott said the budget reflects difficult choices but argued it balances near-term relief with longer-term reform.
“If we don’t follow through on transforming how we deliver and pay for education, and if we don’t fix the structural issues in our transportation funding, we’ll keep seeing rising costs and worse outcomes,” the governor said.
