JFO: Expanding "10% for Vermont" could unlock $30M for housing but cost state interest income in worst case

Ted Barnett of the Joint Fiscal Office told the Committee on General Policy on Feb. 19, 2026, that a proposed expansion of the state's "10% for Vermont" lending program could free up roughly $30 million for housing investments while creating modest risks for state revenue.

"We're talking about 1% to 2 and a half percent depending on the loan term or amortization period," Barnett said, describing typical interest-rate ranges for loans made through the program. Under current law the program caps lending at 10% of the state's average cash balance; the bill before the committee would raise that cap to 12.5% and set aside up to $12 million for an off-site (manufactured) construction credit facility.

Barnett said the expansion would increase the treasurer's capacity to make housing loans but that the change carries a potential budgetary cost. Using a conservative, worst-case set of assumptions'higher market returns on cash and lower returns on housing loans'he estimated the general fund could lose "about $600,000 per year" in net interest income if the full expanded capacity were deployed. He described that figure explicitly as a worst-case scenario and noted the actual impact would depend on how much of the additional credit capacity is used.

Peter Tomley, director of budget, and committee members pressed staff about assumptions tied to the state's average cash balance and loan-rate averages. Barnett and staff clarified that money invested in short-term instruments is counted as part of the state's average cash balance for the 10% calculation and that a roughly 1.5% average on housing loans informed JFO's estimates.

The bill would also change where interest income is retained. Barnett said that within current lending activity the treasurer expects roughly $70 million drawn in fiscal 2027 that generates about $1,000,000 in interest now going to the general fund; the proposal would redirect that interest to a newly created housing special fund. Combined with the 2.5% climate-investment expansion in the proposal, Barnett presented a combined, worst-case revenue shift of about $3.3 million, while cautioning that it is unlikely the full amount would be used.

On program details Barnett explained how an off-site construction credit facility might operate as a short-term revolving loan or backstop to support bulk purchasing by intermediaries, and that the $12 million set-aside would function as credit support rather than a direct grant in many scenarios. He noted section 4 references municipal planning grants for participating towns but does not specify the source or amounts for those grants, and that section 7 creates two positions without identifying a funding source.

Committee Chair and members requested clarifications about the assumptions and potential budgetary impacts as the bill moves through additional committees. Barnett said he would provide cleaned-up notes and a visual flowchart of the financing assumptions to help committee members, and the committee scheduled the next presentation on the agenda.

The committee did not take formal action on the bill during this hearing; Barnett said the JFO's role is to present conservative ("worst-case") scenarios to inform the budgeting process and to note uncertainties that finance staff and the treasurer's office will continue to refine.

Next steps: the bill will proceed to additional committees (as determined by legislative routing) and the committee expected follow-up information from JFO and the treasurer's office on the loan-rate assumptions, the structure of the credit facility, and funding sources for planning grants and the two new positions.