Proposal would add 2% meals-and-rooms surcharge to fund School Construction Aid special fund; first-year revenue estimated at about $53M

The Senate Finance Committee reviewed a proposal to add a 2% surcharge to Vermont’s meals‑and‑rooms tax and dedicate all proceeds to the School Construction Aid Special Fund.

Patrick, presenting the measure, said: "This puts a 2% surcharge on the meals and rooms tax base" and explained how the added revenue would be allocated to the special fund created under Act 73. Under current statewide allocations, the committee was reminded, the meals-and-rooms tax flows to the General Fund, Education Fund and Clean Water Fund; this surcharge would direct 100% of the additional revenue to school construction aid.

Staff estimated the surcharge would raise about $53.1 million in fiscal year 2027 (a first-year implementation estimate) and roughly $60 million in FY28. The presenter described a proposed award structure for the special fund: base awards equal to 20% of debt‑service costs, bonus incentives up to an additional 20% and a provision for emergency needs.

Rate and competitiveness concerns: the presentation showed the surcharge would raise the meals rate from 9% to 11% and short‑term rental rates from 12% to 14% (local option and city provisions layered on top where applicable). Members asked for comparisons with neighboring states and for a breakdown of resident‑versus‑out‑of‑state consumption to estimate how much of the surcharge would be borne by tourists versus Vermont residents.

Next steps: Patrick said ACCD tourism market research can be used to estimate resident/out‑of‑state splits and staff will invite ACCD to testify and provide tables. Committee members requested testimony from stakeholders likely affected (wedding planners, hospitality and short‑term‑rental operators) and further modeling of competitiveness effects before any final decisions.

The committee recessed to take additional witness scheduling and modeling actions.