Ways & Means Committee hears tax and budget proposals including $77 million property-tax stabilization and municipal buyout pilot

The Ways & Means Committee heard a detailed presentation on the tax components of the governor’s recommended budget, with Adam Gresham, commissioner of Finance and Management, and Craig Bolio, tax commissioner, joined by Abby Shepparton, executive policy adviser at the Department of Taxes. Gresham told the committee that "Revenues are healthy. I don't think there's any other way to characterize it. The revenues are healthy. I think healthier than we have anticipated." The discussion reviewed revenue assumptions, statutory allocations of the property transfer tax, and several tax-policy proposals that reduce revenue or use one-time funds.

Why it matters: committee members framed the proposals as short-term tools to stabilize local finances while larger, longer-term reforms are developed. The package includes support for municipalities facing buyouts of flood-prone properties, targeted tax relief for households, and increases to existing tax-credit caps that local economic-development officials have said are oversubscribed.

At the center of the presentation was a property-tax stabilization proposal. Abby Shepparton described the plan as follows: "the governor is proposing to set aside $77,000,000 from the general fund, to stabilize property taxes in under the budget construct," and she said that amount would eliminate the statewide projected property-tax increase if education spending remains at the levels projected in the December 1 letter. Committee members and administration staff framed the approach as one-time money intended to provide a runway for longer-term education-finance and cost-driver reforms rather than a permanent structural change.

The administration also flagged a new municipal buyout reimbursement program in the budget language (section E142.2). Gresham said the proposal would be administered from the pilot special fund and would "reimburse municipalities for lost municipal property taxes" when towns purchase flood-prone properties. He described the mechanism as a cross-agency process in which the commissioner of Public Safety would certify buyout-eligible properties, the commissioner of taxes would certify payment amounts, and the secretary of administration would release funds. The program as drafted would compensate towns for reductions to their grand lists for five years and then phase out the payments over an additional five years; the administration’s estimate for the coming fiscal year is roughly $1,000,000 from the pilot special fund.

Officials also described how statutory allocations of the property transfer tax and other statutory flows affect available revenue. Gresham reviewed the administration’s practice of budgeting agencies’ requested appropriations and sweeping remaining statutory allocations into the general fund; he said some allocations pay bond servicing for earlier housing bonds and that certain sweeps are scheduled to end when corresponding debt is paid off. He noted that the budget shows certain one-time revenues carried forward from the budget adjustment and a higher emergency-board forecast for revenues.

On individual tax relief, the administration presented a $13.5 million package of refundable and partial-exemption measures targeting low- and moderate-income households, retirees and veterans. Key elements presented by Shepparton included:

- A child tax credit expansion to raise the eligible child age to 6, which the administration estimates would affect about 3,600 filers and add roughly $450,000 to the existing child tax-credit expenditures.

- An expansion of the Vermont Earned Income Tax Credit (EITC) for filers without dependents to increase the state match to a higher percentage of the federal credit; the administration estimated this change would provide about $3,000,000 in additional relief to roughly 13,600 filers and increase the total EITC expenditure to around $27.5 million.

- An increase of the Social Security partial-exemption thresholds by $5,000, which the administration estimated would deliver about $210,000 of new relief to roughly 8,300 filers (bringing the total Social Security tax-expenditure estimate to about $10.3 million).

- A proposal to fully exempt military retirement pay and survivor benefits from Vermont personal income tax; the administration estimated this would cost about $390,000 and affect approximately 4,300 filers.

Shepparton cautioned that there will be overlap among beneficiaries of the different credits (for example, some filers could be affected by both the EITC and the child tax credit) and that the administration’s estimate of total filers affected accounts for likely duplicates.

Committee members asked for additional modeling and longer-range cost estimates, including how demographic trends and indexing could change the cost of exemptions over time, and whether one-time dollars create fiscal cliffs for municipalities or school budgets in subsequent years.

The administration also pointed committee members to several other budget items in the tax language: an appropriation to a Tax Computer System Modernization Fund (D101), statutory “waterfall” language that would direct unanticipated surplus to different priorities (pensions and education transformation), and a request to repeal the sunset on the clean-water surcharge (section E715). The governor’s proposal to raise the downtown and village center tax-credit cap from $3 million to $5 million was described as an attempt to meet high demand for a program that leverages private investment to rehab buildings.

No formal votes were taken in the committee during this presentation. Members scheduled follow-up testimony: a joint hearing with the Education Committee on school-related budget items and testimony by the Agency of Education, plus likely appearances by the chief recovery officer and Joint Fiscal Office staff for annotated revenue and expenditure analysis.

Looking ahead, committee members asked for additional data on underlying drivers of school spending, longer-term modeling of exemptions and credits, and the methodology behind the administration’s buyout estimate. The Natural Resources Committee will separately take testimony on progress under the clean-water program and on whether to repeal the clean-water surcharge sunset.