Appropriations panel reviews how federal funding could affect Vermont budget adjustment

The House Appropriations Committee on Thursday heard a briefing from Emily Byrne of the Joint Fiscal Office on how federal grants and matching requirements could affect the FY2025 budget and the pending Budget Adjustment Act.

Byrne told the panel federal funding is a major part of the state budget: “federal funds make up over a third of the appropriations that are made by the general assembly,” and “in any given year, we're talking about $3,100,000,000 of federal funds coming to this state.”

The presentation aimed to give lawmakers a high-level map of where federal money flows through state government, who receives it and what budgetary risks exist if Washington changes funding levels or terms. Byrne said the briefing covers FY2025 budget numbers and is intended to help members as they build the FY2026 proposal.

Nut graf: Committee members heard that Medicaid and a handful of departments receive the bulk of federal support, and that changes in federal rules, match rates or timing could require state adjustments. Lawmakers asked staff to obtain more granular agency breakdowns and to confirm estimates of the federal Medicaid assistance percentage (FMAP) used in budget planning.

Byrne emphasized that federal funds flow in multiple ways: some are routed through state agencies and appropriated by the General Assembly; some go directly to entities such as the University of Vermont or towns and therefore are not part of the state budget. She said federal dollars support grants to towns and nonprofits, Medicaid payments to health providers, and core state staff whose positions are partially federally funded.

Committee members were told Medicaid and the Agency of Transportation are among the largest recipients of federal money. Byrne said Medicaid/global commitment is “over 60% federally funded” in the FY2025 figures she reviewed and that transportation, along with several other agencies, also shows federal shares near or above 50%.

The presentation covered federal match and timing complexities, including that the FMAP changes with the federal fiscal year and that the state often works from spring estimates while final rates can be set later. Byrne said, “the federal Medicaid assistance percentage that we get on Medicaid changes every year, and it changes on the federal fiscal year,” and noted that small changes in FMAP can have noticeable effects on the state’s billion-dollar Medicaid budget.

Lawmakers raised specific questions about program mixes. Emily Byrne explained that some departments’ federal shares are concentrated within the “global commitment” Medicaid match line item rather than shown on department-level federal lines; she gave the example that DCF’s federal line items on the slide are exclusive of global commitment and that an additional amount flows through that central appropriation.

Members also asked about housing and conservation funding. The committee discussed the Vermont Housing and Conservation Board and the role of tax-credit syndication and HUD funds; Byrne said agency budget packets on the JFO website include more detail and encouraged members to consult them.

Committee members asked operational questions about one-time and competitive grants, maintenance-of-effort rules and clawback/audits. Byrne and others noted that some federal grants require the state to incur allowable expenses and supply matching funds before drawing down federal dollars, and that federal audits can require returning funds if they were improperly spent.

On a separate item discussed near the end of the meeting, committee staff identified a DCF planning item for a child support system update: the total is $1,000,000, of which $340,000 is state funds and the remainder federal, described as the state’s share of a federally-required feasibility study.

No formal committee votes on budget adjustments or grant acceptances were recorded in the transcript. Several members asked staff to follow up with agencies and the Agency of Human Services to confirm FMAP estimates and to request more detailed breakdowns of federal funds in department budgets as the Budget Adjustment Act is finalized.

The committee closed the presentation and moved on to spreadsheet items and line-by-line review work still in progress; members said they would return to outstanding language and line-items as staff provided updated figures.

Ending: The briefing underscored how federal policy and timing create uncertainty for the state’s budget process. Members asked staff and agencies for follow-up detail and for the treasurer’s office group and Administration to continue stress-testing reserves as federal decisions unfold in Washington.