Gov. Phil Scott plans to propose a state budget with little new spending if he gets reelected in November, one of his top deputies told a panel of Vermont House and Senate leaders Wednesday.
That’s partly because the governor also plans to propose new — but as yet unspecified — measures to lower taxes, which would reduce the revenue the state brings in to pay for programs and services, said Adam Greshin, Scott’s commissioner of finance and management.
Greshin described the governor’s intent in a memo last month to Vermont’s state agency and department heads. Administration leaders issue the directive around this time every year to begin developing a new year’s budget proposal.
“The Governor has directed us to lower our tax burden,” he wrote. “To succeed, we must be willing to prioritize affordability for Vermonters and the initiatives that truly have a positive impact on our state.”
The memo’s directive underscores a key difference between Scott and Amanda Janoo, his Democratic challenger in this fall’s governor’s race. Janoo has called for boosting public services with new revenue streams, including taxes on the state’s wealthiest residents, which the Republican governor firmly opposes.
State officials are working up a budget proposal for the 2028 fiscal year, which starts in July 2027 and runs through June 2028. The governor’s administration will pitch the plan to state lawmakers when they convene for a new legislative session in January, should Scott get re-elected.
The upcoming budget-building process will be “challenging,” Greshin told members of the Legislature’s Joint Fiscal Committee. That’s because, in addition to making room for tax reductions — something legislative leaders may or may not support, depending on the details — the cost of running state government is growing more quickly than the state’s revenue sources, he said.
Greshin cited a midsummer report from the state’s economists showing state coffers brought in slightly more revenue than past projections expected, but that growth, in the big picture, was effectively flat. He noted that growth has also been “meaningfully below” the pace of inflation.
State agencies “will spend an awful lot of time figuring out how to allocate scarce dollars,” he told lawmakers. “In a nutshell, we’re not expecting this to be an easy budget. But it reflects the realities that we face.”
Specifically, the governor has ordered state agencies to increase their budgets only to accommodate salary and benefit increases the state has already negotiated with the state employees’ union — and not much more, Greshin said.
That works out to about a 1% increase in spending compared to agencies’ budgets for the current fiscal year, which started in July and ends next June. Notably, it’s also lower than the 3% increase the governor has pushed for in recent years.
Rep. Robin Scheu, D-Middlebury, sits on the joint fiscal panel and chairs the budget-writing House Appropriations Committee. She agreed with Greshin’s assessment that the budget will be challenging with little growth in state revenue to draw from. To her, though, the commissioner’s remarks suggested the governor could propose cutting state government jobs to achieve his goals.
“Revenues are not keeping pace with expenses. And when that happens, you have to make cuts — and they danced around saying, ‘You have to make cuts,’” Scheu said.
She said one reason the state has less revenue to count on is that the Scott administration has, broadly, opposed raising taxes and fees for state services during the decade the governor has been in office.
Sen. Andrew Perchlik, D/P-Washington, also serves on the Joint Fiscal Committee and chairs the Senate appropriations panel. He’s also vying to be the chamber’s next president pro tempore, should he get reelected. Perchlik said another reason the state has limited revenue to work with is that it’s used surpluses over the past two years to reduce projected increases in property tax rates to pay for education.
Scott proposed, and lawmakers later agreed, to use about $100 million in excess state revenue to lower property taxes for the current fiscal year. Perchlik and Scheu said that, at least for now, they couldn’t imagine where the money to do the same process again next year would come from — so if that’s what the governor wants to do, they said, he’ll have to look to other sources.
“We’ve been taking money out of one hole and filling another hole and saying, ‘look, the hole’s filled,’” Perchlik said of the tax buydowns.
Scott alluded to a slate of new tax cuts he’d propose to the Legislature in January at a press conference last month. He said they’ll build on a package his administration advocated for, and lawmakers approved, during the 2025 legislative session that created new tax breaks for low-income workers and military retirees, among others.
Greshin said the tax initiatives in the upcoming budget would “ease the cost of living for many of our residents and, hopefully, lower barriers to entry for people who are interested in moving” to the state.
Proposing new tax cuts puts the governor at odds with Janoo, his Democratic challenger this fall. Janoo is campaigning on raising taxes on high earners, second homes and large technology companies to fund a universal primary care system and other services.
Janoo said in an interview Thursday she thinks the state government should not rule out increasing taxes on “extractive activities of our wealth,” so that the money can be reinvested by the government back into local economies.
She said the governor is right to prioritize funding services with the most successful outcomes. But she thinks a blanket request across government agencies to limit, if not cut, funding could potentially have the opposite effect down the road.
“I think for too long, particularly under this administration, fiscal responsibility has just been asking, ‘What we can cut?’” Janoo said. “Fiscal responsibility is not just about balancing budgets, but ensuring that you’re really not stealing from Peter to pay Paul, so you’re not passing today’s bill to tomorrow.”
This story was first published by VTDigger and is republished with permission as part of the Vermont Journalism Trust’s Community News Sharing Project.