Joint Fiscal Office, administration brief Appropriations Committee on federal funds exposure; SEFA shows Medicaid and transportation as largest federal shares

Emily Byrne, senior analyst at the Joint Fiscal Office, told the House Appropriations Committee on April 8, 2025, that federal funds represent roughly $3 billion of state appropriations and urged lawmakers to build a baseline understanding of where those funds flow and how departments use them.

"There's a lot going on at the federal level... they represent about $3,000,000,000 of the appropriations that the state makes," Byrne said, noting federal funding is concentrated in programs such as Medicaid and transportation and that the rules and timing of federal action vary by grant. Byrne recommended the legislature and executive branch review departmental uses, subrecipients and match obligations so Vermont can respond to federal changes.

Adam Gresham, commissioner of finance and management, described the Schedule of Expenditures of Federal Awards (SEFA) the committee had received. "What you have in front of you is affectionately called the SEFA," Gresham said, explaining the SEFA reports FY24 expenditures by agency, federal award listing number (ALN), federal agency, and amounts passed through to subrecipients. He said the SEFA shows Medicaid as the largest federal program (roughly $1.5 billion by Byrne's figures) and federal highway aid and transportation among the largest dollar items (about $500 million). Education federal funds were described in discussion as approximately $354 million in FY24; removal of certain state payments changes the education tabulation to show about $400 million in that area with a high federal share for specific lines.

Sarah Clark, secretary of administration, described an internal monitoring process the administration has instituted. "Agencies and departments, as they learn of more of a real impact, they are communicating them up to my office for aggregation," Clark said. She told members the administration is collecting reports from agencies manually for now, with the goal of providing the legislature timely, consolidated information as federal developments solidify.

Officials explained distinctions that affect exposure and response: some grants are categorical or formula grants (Medicaid is a major example and typically reimburses costs incurred), some are block grants with more flexibility, and some are competitive, one-off awards. Byrne and Gresham highlighted key technical points officials said the committee should track: federal match requirements and maintenance-of-effort conditions, the federal Medicaid assistance percentage (FMAP), the Single Audit process and federal uniform guidance (2 CFR 200), and whether funding is paid directly to beneficiaries (which will not appear as subrecipient payments) or flows through subrecipient grant agreements.

Gresham said the SEFA reports expenditures (what was spent in FY24), not necessarily original award amounts, and that the spreadsheet can be sorted in multiple ways to identify largest exposures by agency, ALN or federal source. He noted the SEFA includes columns for expenditures and amounts passed to subrecipients; the document alone does not identify individual subrecipients but can be cross-referenced with the administration’s public transparency tool, "Spotlight for Financial Transparency," which shows grants and subrecipients by fiscal year.

Committee members raised scenario-planning questions. Representative Harrison urged deeper scenario work: if Medicaid funding were reduced by a given percentage, what cascading impacts would follow on hospitals, providers and related programs? Officials said detailed scenario planning is challenging without specific federal actions to model, but agreed that preparing baseline data and prioritization will be part of the committees' and administration’s work.

Officials cited some grant actions being tracked: the administration said it had received termination notices related to a USDA local foods program totaling about $1.7 million and noted directives affecting federal staff at the Institute of Museum and Library Services; in both cases the administration said it was still confirming obligation status and the real programmatic impact and would follow up.

Next steps listed in the meeting: a deeper briefing on Medicaid from the Medicaid director and policy director scheduled for the next morning at 9 a.m.; a treasurer briefing on cash flow at 10:30 a.m.; and further agency briefings in the coming days. Officials said they will provide the SEFA spreadsheet and related materials to the committee and can supply additional breakout data on subrecipients and obligations on request.

Why it matters: Vermont’s budget relies on a large share of federal funding in health care, transportation, education and other services. Agencies must track match requirements, maintenance-of-effort rules and audit obligations; the committee and administration plan to aggregate agency information and prioritize functions they consider core if federal funding is reduced.

The committee closed the session by scheduling follow-up briefings; officials and staff will provide the SEFA and related data for members to review before those meetings.