Appropriations committee hears Finance Department outline of FY26 general fund plan

The House Appropriations Committee on Jan. 28 heard a wide-ranging Fiscal Year 2026 general fund overview from Adam Greshen, Commissioner of Finance and Management, and Arty Merrill, deputy commissioner, who outlined revenue sources, cost pressures and both 1-time and base spending proposals.

Greshen said the budget begins with the Emergency Board's current-law revenue forecast and several supplemental sources, including additional property transfer tax receipts and a larger-than-typical unclaimed property estimate. He told the committee the administration's base revenue assumption is about $2.493 billion, supplemented by roughly $131.3 million in one-time revenues for a total resource pool in the mid-$2.6 billion range.

Why it matters: committee members pressed on several items that drive long-term affordability for households and the state's capacity to meet growing employee and health-care costs. The presentation emphasized that much of the budget increase reflects "current services" pressures'the cost of doing the same work next year'rather than broad new program expansions.

Key revenue and formula changes

Greshen described changes to the property transfer tax distribution formula used this year, noting Vermont Housing & Conservation Board (VHCB) will "get their full allotment this year." He said the administration projects roughly $3 million of additional property transfer tax available after required set-asides (including a $2.5 million session-law allocation to service a housing bond and a 1.5% set-aside for the current-use program). Greshen summarized how the current-use administration budget (estimated this year at just under $600,000) is netted against the 1.5% set-aside and the remainder is swept to the general fund.

Other receipts called out included a lower projected liquor-control transfer (around $14.8 million, versus $20'$21 million in past years), a larger-than-usual unclaimed-property estimate and a modest assumption for attorney-general settlement receipts (the AG's office provides a conservative annual estimate, Greshen said).

Current-service cost drivers

Greshen and Merrill said the FY26 current-service total includes large labor-related cost pressures. The administration identified roughly $133 million in current-service increases, of which about $90 million stem from salary-and-benefit items. Highlights included a roughly $43 million increase in salaries and wages (driven by bargaining-unit pay adjustments, shift differentials and reclassification requests), a nearly $19.8 million general-fund increase for employer health-benefit contributions (the administration said recent premium actions have caused a roughly 15% increase in employee premiums) and a roughly $19.5 million increase tied to the state's employer retirement contribution rate (the contribution rate moved from about 26.7% to about 28.8% and the administration attributed roughly $19.5 million in general-fund impact to that change).

The presentation also listed rising Global Commitment (the state Medicaid match) costs and pension-plus payments for the State and Teachers' retirement systems (pension-plus payments that were $12 million each in FY25 rise toward $15 million in FY26). Greshen said those items, plus other non-labor pressures, account for most of the current-services increase.

Child care, Medicaid and provider funding

Committee members pressed on childcare and Medicaid. Merrill said an upgrade in the childcare special-fund forecast allows roughly $19 million of general-fund relief by shifting costs into the special fund, and that caseloads for Medicaid remain broadly stable while unit costs and utilization trends are raising the state match. The presenters emphasized that some provider rates (for example, Choices for Care and developmental services) receive increases only when included as initiatives; the current-services table does not include new rate increases for providers.

Education fund transfer and property-tax stabilization

The administration proposes a one-time transfer of $77 million to the education fund to help stabilize average statewide property-tax rates in FY26. Greshen said the proposal was designed to hold average statewide rates steady based on the December 1st education-spending estimates used for the calculation, but he cautioned school budgets and final local decisions could change the outcome and that the final needed amount would be clearer by April after town-vote results are known.

Information technology, ADS billing change and other one-time items

The budget includes a one-time $15 million payment tied to the Agency of Digital Services (ADS) internal-service allocation model. Committee members asked whether the $15 million was for a new software system; Greshen characterized it as a one-time transition payment to move ADS from billing primarily in arrears toward a forward-billing model and to avoid a disruptive double-billing spike in FY27. He described the payment as money the state would otherwise pay over time but taken earlier to smooth agency budgeting.

Cannabis revenue and substance-misuse fund changes

Greshen described a proposal to change how cannabis excise-tax receipts are treated: create a dedicated special fund for substance-misuse work and route 30% of the excise tax into that special fund rather than allowing all excise revenue to flow into the general fund. He also described a smaller, limited sweep from the Cannabis Regulation Fund to the general fund in FY26 while leaving a portion of the cannabis fund balance in place so the Cannabis Control Board can operate through FY26; the administration said a longer-term funding solution will be required in FY27.

Committee process and next steps

No votes were taken. Committee members and the presenters agreed to reconvene for language review and follow-up questions; several members requested more department-level detail on ADS billing, Green Mountain Care Board staffing, PCS/PCB school remediation and how much of the budgetary pressure is driven by Medicaid reimbursement rates.

Ending

Greshen and Merrill said they would return with more detailed departmental line items and language; the committee scheduled further work on the budget adjustment and the specific statutory language that implements the proposals.

"VHCB will get their full allotment this year," Greshen told the panel when describing the property transfer tax distribution, and he added the administration had tried to reflect the latest Emergency Board forecast and other revenue upgrades in the FY26 package.

The Appropriations Committee will continue review and language sessions in coming days, and presenters said additional department briefings will follow to answer member questions raised during Tuesday's overview.