Senate Appropriations hears FY2026 general fund overview: health care, housing, education and one-time spending highlighted

At the Feb. 5 meeting of the Senate Appropriations Committee, Adam, commissioner of finance, walked committee members through the FY2026 general fund sources, base adjustments, current-service pressures and a menu of base and one-time initiatives totaling hundreds of millions of dollars.

"We begin with last year's base appropriations ... and then we add pay act," Adam said, summarizing the structure he presented in the committee budget book. He told members the administration's proposed FY2026 package includes about $34 million in new base initiatives and roughly $236 million in one-time appropriations and transfers; when combined with tax initiatives the administration described, he said the total initiatives approach $250 million.

Nut graf: The presentation covered expected revenue changes (including a lower property transfer tax figure tied to statutory distributions), base adjustments for items such as pensions and previously one-time programs, and a range of current-service pressures that together produced a roughly 6.1% rise from the base appropriation. The package attempts to address health-care costs, housing and infrastructure needs, and specific program funding such as PCBs testing and ADS billing stabilization.

Key revenue and base items

Adam said total base sources from the Emergency Board forecast, property transfer tax adjustments and direct applications amount to about $2.509 billion. He pointed to several revenue notes: a lower-than-previous property transfer tax figure resulting from restoring statutory amounts for the Vermont Housing and Conservation Board (VHCB) and regional planning grants, declining net income from the liquor enterprise compared with prior years, and the first-year reduction of a Secretary of State direct application related to IT licensing costs.

Base adjustments include a permanent shift of the Office of Health Equity into the Department of Health ($250,000) and a $5,000,000 restoration to the Department of Corrections after temporary ARPA replacement. The budget moves a pension payment line into base, resulting in a $15,000,000 ongoing pension-plus payment until the systems achieve a 90% funding level.

Current-service pressures and pay act

Adam said current-service pressures amount to roughly a $133,000,000 (about 6.1%) increase over the adjusted base. Major components are pay act and salary increases, a $19,800,000 increase in employer health-benefit contributions tied to the medical insurance premium increases and projections discussed earlier, and higher retirement contributions for the Vermont State Employees' Retirement System (VSERS) and teacher unfunded liabilities.

Major initiatives and one-time items

Notable base and one-time items discussed include:

- A $20,250,000 proposal to end the long-standing JCOP (Joint Committee/Joint Transportation Oversight Committee) transfer from the Transportation Fund to the general fund; Adam described this as effectively a funding-source swap and said the change is net neutral statewide but raises general fund resources.

- Baking successful one-time housing programs into base: the manufactured home improvement and repair program and the VHIP program, plus continued funding for a Quebec representative office.

- A proposed recovery campus pilot (likely in the Northeast Kingdom) and an expansion of urgent-care-style mental health sites.

- A $15,000,000 appropriation to smooth an Agency of Digital Services (ADS) billing transition from arrears-based to prospective internal service billing; Adam described the amount as "money that would be built anyway" but advanced a year to avoid double-billing during the transition.

- $9,520,000 for PCBs testing and mitigation, plus a $480,000 BDH operational position tied to PCB work; Adam said the administration expects the $10 million total will cover likely remediation costs for the coming year.

- $77,200,000 estimated to stabilize average statewide property taxes through education fund support.

- A series of health-care investments including funding for the Green Mountain Care Board (three positions funded through the position pool) and base funding in BDH for substance-use continuum-of-care needs.

Questions from committee members

Senator Bruce expressed concern about a DCF projection to move $19,000,000 from general fund to special fund within CCFAP and described the shift as troubling in light of the program's recent rollout and the legislature's role in its enactment. "This honestly, this is the place where I'm most disturbed by the budget," he said, asking whether the administration would discuss the projection further with the committee. Adam responded that the numbers came from DCF and characterized them as "real numbers" the agency projects.

Other points and technical adjustments

Adam explained a $131,000,000 carryforward from the BAA and a set of tax initiatives the administration treats as base items (including an earned income tax credit expansion and a child tax credit). He described a capital cash-fund construct that directs roughly 4% of prior-year appropriations, minus debt service, into a cash fund to reduce borrowing over time; for FY2026 that amounted to about $14,880,000.

On debt, Adam said total debt service is expected to increase to roughly $81,000,000, driven by more debt outstanding and higher interest rates since prior years.

Process and next steps

Adam said he would bring agencies into committee for follow-up discussions on specific items such as VLFA projects, CAFO permitting transitions, and the PCBs program. Several members encouraged further conversation about health-care reform and Green Mountain Care Board capacity.

Ending

The committee did not take final action on the FY2026 proposals at the Feb. 5 meeting. Members asked for agency follow-up on a number of items; Adam said the administration will continue to engage with the committee as the budget moves through the legislative process.