Adam Norton, VSEA Strategic Analyst
January 27, 2023
Governor Scott has introduced his FY24 budget, which will cover July 2023 through June 2024. This budget is $8.4 billion budget is the largest in the history of Vermont; fueled by a highly stimulated economy and unprecedented federal funds. State revenues alone have rebounded well beyond the slowdown at the beginning of the recession, with the general fund revenues projected to reach $2.3 billion in FY24, nearly $400 million above the FY23 revenue projections from January of 2022. The Governor’s FY24 budget includes significant one-time investments in various infrastructure, tax cuts and expansions of various social programs to address areas of need across Vermont. Below we will discuss what we know about the budget thus far, prior to any agencies and departments outlining the specific details within their jurisdiction.
First, let’s address issues directly impacting VSEA members this fiscal year. The Governor’s FY23 budget fully funds the 2nd year of the 2022-2024 VSEA executive branch contracts, securing the 2.00% COLA scheduled for July 2021, as well as funding step increases for the fiscal year and the $1,000 lump sum in January 2024. The state executive branch will pay an additional $7.1 million to cover the employers 80% share of employee health insurance, which increased 11% in January 2023. The Governor’s budget proposal fully funds the actuarially defined employer contribution to the state employees and teachers pension fund to the tune of $444 million in total. The state’s contribution to employees’ pension plans will be roughly 25.0% of employee total wages in FY24.
The Governor’s budget does not include language amending title 3, which would allow the state to enroll state retirees into a separate health plan from the actives. Nor does the budget “book” (account for) any projected savings from the enrollment of state retirees into a Medicare Advantage plan. Unfortunately, the administration has maintained their position that they plan to impose a Medicare Advantage plan on Medicare-eligible state retirees sometime in the future, so VSEA will be working to further clarify title 3 so such a change is even more obviously illegal (Legislative Counsel has testified that they also believe imposing Medicare Advantage on state retirees would be illegal under the current statute).
The Governor’s budget includes an array of tax cuts for retirees and working families. Firstly, the governor proposes increasing Vermont’s earned income tax credit for low-income, working families from 38% of the federal credit to 45%. The Governor is again proposing making all military pensions exempt from state income taxes, while expanding the state’s exemption to social security taxes from $45,000 for an individual to $75,000. Additionally, the Scott administration proposed ending the provider tax on home health agencies, which is used to draw down federal Medicaid matching funds. Finally, the Scott administration has again proposed legalizing sports gambling in Vermont, which is projected to raised $2.6 million in tax revenue. These tax proposals are not new, save for sunsetting the home health provider tax, and legislators will have to weigh issues of tax capacity necessary to sustain state services and equity among recipients of tax expenditures.
The Governor’s FY24 budget proposal features some ongoing expansions of state appropriations, although most of the investments are one-time. Ongoing investments, totaling $77 million include:
- $2.5 million increase to the base appropriation for the Vermont State Colleges (meeting their ongoing funding request for FY27 three years early);
- $59.7 million increase in childcare subsidies (nearly doubling state investments on childcare subsidies), increasing subsidy eligibility to 400% of the Federal Poverty Line and increasing rates reimbursements to providers;
- $5.7 million to increase Medicaid dental reimbursements to 75% of the Medicare reimbursement rate, hopefully increasing dental access for individuals enrolled on Medicaid;
- $1 million to increase VSAC scholarships for trade schools.
The Governor took advantage of the windfall in state surplus revenues propose substantial one-time investments, totaling $237 million, including the following areas:
- $9 million in one-time bridge funding for the Vermont State Colleges;
- $10 million to halve tuition at CCV for students in enrolled in specific high-demand programs;
- $10 million in violence prevention grants for municipalities;
- $10 million to clean up brownfields and disused manufacturing plants to encourage new investments;
- $10 million in one-time funding for the Vermont Housing and Conservation Board which will bring their funding levels to the statutory rate for FY24;
- $26.3 million to fund general assistance and emergency housing;
- $3.4 million to continue funding the 802 Opportunities grant program which provides free CCV tuition to students without a college degree from households earning less than $75,000;
- $3 million in Working Lands grants to subsidize the growth of value-added agricultural businesses in Vermont;
- $10 million to expand cell phone coverage in areas of Vermont with poor cell phone service;
- $5 million to weatherize homes of low-income Vermonters;
- $20 million to subsidize the development of affordable, multi-family households;
- $5 million to subsidize Vermont employers for training employees for new or higher-level jobs;
- $4 million to subsidize people moving to Vermont through relocation grants;
- $3 million to complete the Lamoille Valley Rail Trail.
This has been a preliminary review of the Governor’s FY24 budget proposal. VSEA will be following the budget process throughout the 2023 legislative session. We will continue to learn more as individual agency/departmental budgets come under the scrutiny of the relevant committees of jurisdiction. Please continue to look for legislative updates and read Week in Action to stay up to date on budgetary and legislative issues affecting VSEA members.
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