Montpelier, VT – Vermont House budget writers are preparing for difficult spending decisions as potential federal funding cuts loom, according to a recent analysis. Economists warn that projected revenue increases will likely be insufficient to cover rising state employee costs and other fixed expenses,potentially leading to adjustments in state programs and services.
The analysis, conducted by state economists Scheu and Harrison, highlights uncertainty surrounding the impacts of a recently passed federal spending package and former President Trump’s tariffs. While the full Legislature is unlikely to reconvene this year due to the delayed implementation of many federal changes – some not taking effect until 2026 - lawmakers have built-in triggers for a special session should federal cuts exceed predetermined thresholds. Those thresholds currently appear unlikely to be met.
“Don’t get cozy,” cautioned economist Tom Kavet in July, underscoring the evolving financial landscape. The economists noted that even without drastic cuts, the state faces a budgetary squeeze due to increasing costs. they wrote that projected revenue growth “won’t be enough to cover projected increases in salaries and benefits for state employees and a myriad of other fixed costs,” signaling “we can probably expect some adjustments to programs and services.”
The Scott governance is currently developing its proposed budget plan for the next fiscal year, with a balanced budget expected to be delivered to the Legislature in January. Press Secretary Amanda Wheeler stated the administration is still assessing potential impacts to existing programs.Lawmakers proactively included measures in the current fiscal year’s budget, approved in May, that would automatically convene a special legislative session if federal funding reductions reach specific levels. though,Scheu and Harrison believe those levels won’t be triggered in the immediate future.