Board hears first pass of FY26 budget and strong FY25 Q2 performance; composite financial index shows improvement

The finance and facilities committee reviewed the Vermont State Colleges' first pass of the fiscal year 2026 operating budget and received a second‑quarter FY25 financial update on Feb. 10.

Chief Financial Officer Sharon Scott said the FY26 budget target set for the system is a $5.0 million deficit. Under the first pass, the system is projecting a $6.4 million deficit and staff and institutions are continuing work to close the gap. Scott noted the FY25 target had been a $10.0 million deficit and that the first‑pass result represents progress toward structural balance. The proposed FY26 revenue assumptions include reductions tied to scheduled step‑downs of bridge funding and transformation funding; the institutions are planning modest tuition increases and VTSU is budgeting a 9% increase in new student enrollment for fall 2025 as a revenue assumption. Room and board assumptions were held roughly level with FY25.

Scott said expense pressures for FY26 center on salaries and benefits (a projected ~9.3% increase in benefits and a 4% wage increase applied across a fully staffed organization would add roughly $3.5 million to the expense base). Offsetting items include a permanent debt‑service reduction of about $670,000 annually and other planned payoffs. The first‑pass budget is advisory; second and final passes will be brought to trustees in April and May respectively before full board action.

Trustees also received FY25 second‑quarter results showing a favorable variance to budget of about $15.5 million, driven largely by $10.0 million of unbudgeted bridge funding and stronger‑than‑budgeted investment income; operating expenses were roughly $3.0 million better than budget, largely because of vacancies. Scott and trustees discussed the limits of relying on vacancy savings and the need to fill critical positions.

Scott and others noted a multi‑year improvement in the system's Composite Financial Index (CFI), a commonly used higher‑education financial health measure. CFI for FY24 was reported at 4.58, above the commonly cited threshold of 3.0 and described by staff as enabling transformation and planning. Trustees and staff said the improvement reflects combined legislative, administrative and internal management actions over recent years.

Committee members asked about risks, including enrollment uncertainty and the governor's proposed budget; staff said the FY26 request differs from the governor's recommendation by $1.5 million tied to earlier bridge‑funding commitments and that enrollment remains the primary revenue risk.

No final budget votes were taken at the meeting; trustees were reminded the FY26 budget will return for additional review and approval in the spring.