Governor Scott, the Legislature, Property Taxes & The Avoided Fix

The number

Between FY22 and FY26, Gov. Phil Scott and the Legislature enacted about $1.64bn in one-time spending, roughly 4 per cent of the combined $40.8bn all-funds budgets they passed over those years.

About $975m came from the FY22 federal American Rescue Plan Act (ARPA); the rest, around $664m, was state surplus. Both ran through budgets the Governor proposed and the Legislature passed, and in both cases those officials decided where the money went. A one-time sum that can be spent on almost anything raises the stakes of that decision rather than lowering them.

Four per cent reads as small because state budgets are large. The more useful question is what $1.64bn in discretionary capital actually bought, and whether any of it keeps paying after the year it was spent.

What compounds, and what doesn't

Measured against one test — does it produce a recurring, measurable return — only one category clearly passes.

Broadband (~$250m). A 2021 Purdue study of rural broadband found a benefit-cost ratio near 4:1, through higher property values, telehealth savings and new business activity. Fibre is a capital asset with a 20-to-30-year life. This is a defensible investment.

Water and sewer (~$225m). A real return, but mostly as avoided cost: deferred maintenance is more expensive than timely repair. Weaker than broadband, and no direct yield to the treasury.

Housing (~$250m). Sound logic — more supply eases labour shortages and widens the tax base — but no clean, citable return attaches to this specific sum. A development bet, not a measurable asset.

Climate (~$250m). Returns come as avoided future damage. Real in welfare terms, but not a financial return to the state, and not a figure anyone can pin down.

Property tax buydowns (~$289m, FY25–FY27). No return by design. Scott himself called the practice a "Band-Aid."

Motel and emergency housing. Appropriated at $23.5m in the FY25 budget, with $8.2m more via the prior-year adjustment; actual cost ran nearer $33m–$45m. No asset, no return, and the defining political fight of the session.

The buydown, four years running

The recurring story is not ARPA. It is the education property tax buydown, repeated every year from FY24 through FY27, which has dominated session after session without resolving anything.

• FY25 (2024 session). The yield bill, H.887, carried an average property tax rise of 13.8 per cent. Scott vetoed it; the Legislature overrode him on 17 June. Lawmakers used just under $70m of surplus to soften rates — Scott's own team had pushed to nearly double that, including draining the Education Fund's $47m reserve. The session's lasting output was a study commission.

• FY26 (2025 session). About $118m of one-time money held average rates flat. The Legislature ran past mid-June. The school-consolidation framework it passed became the deal lawmakers abandoned a year later.

• FY27 (2026 session). $101m held the average rise to 3.5 per cent. As VTDigger noted, another year of using surplus to buy down rates, largely at Scott's urging. One senator's summary: the state cannot keep buying down rates and has to bring spending down.

That is roughly $289m over three years to suppress rates that rose anyway. Education property taxes are up more than 40 per cent statewide in five years, and each buydown lapsed the following year.

The larger cost is time. Education forced the Legislature into overtime in both 2025 and 2026. Scott spent most of the 2026 session threatening to veto any bill without forced district mergers, then conceded near the end; the final bill settled for voluntary mergers that districts will not vote on until 2028. Vermont Public's assessment of the biennium: notable less for what got done than what was undone.

The revenue side

The buydowns are treated as unavoidable — a surplus exists, rates are rising, so the surplus is used. That logic holds only if revenue is fixed, and it is not.

In the 2026 session, House Democrats revived a proposal to add an income-tax surcharge on high earners: 3 per cent above $500,000 and a further 2 per cent above $1m. Legislative analysts estimated it would raise more than $110m a year, roughly the size of a single year's buydown.

The top bracket would apply to joint incomes above $586,634, Vermont's top 1 per cent. A household at that level keeps about $347,700 after tax. The state's median household income is about $82,700 (Census, 2024), which nets roughly $68,000 — so a top-1 per cent household takes home about five times what a median household keeps. The surcharge would take a few points off income above $500,000, leaving those households above $330,000 in take-home. The state has, by one senator's count, about a thousand millionaires and a single billionaire. More than 20 high earners signed an open letter asking to be taxed. Massachusetts, which enacted a comparable surcharge, raised more than $3bn in FY26 for roads, schools and childcare, with no measurable tax flight.

The proposed revenue was earmarked to backfill expired federal health subsidies or to cut taxes below $500,000. It could instead have funded property-tax relief directly. It did neither: House leadership pulled the amendment, citing the political cost in an election year; the committee bill had no path to law; and Scott had promised a veto, arguing high earners would leave.

So the two halves never met. A recurring revenue stream of about $110m was set aside in the same years a one-time buydown of about $100m was spent to hold rates down — a temporary measure against a permanent cost, drawn from surplus that could have gone to capital projects.

Editorial

Of $1.64bn in one-time spending, one slice — broadband, about $250m — carries a defensible compounding return. The rest is avoided cost at best, unaccountable, unmeasured bets in the middle, and rate suppression and consumed emergency spending at worst.

The buydown is the clearest waste because it repeats. Three years and roughly $289m went to holding down rates that rose regardless, while the dispute over it ran two sessions into overtime and produced commissions and a 2028 vote rather than a structural fix.

The point is not that the money should have gone unspent; it had to be allocated. The point is that the Governor and the Legislature keep choosing the weaker of two available tools. A surplus buydown lowers this year's rate and disappears. A standing source of revenue — the surcharge on the top 1 per cent is one option, scaled to roughly match the annual buydown — would do the same work every year without drawing down capital that could build something. Paired with the cost containment the 2026 education bill begins to set up, that would make the buydown unnecessary rather than perpetual.

These are choices made by named people: a governor who proposes the budgets and wields the veto, and 180 legislators who write and pass them. The surcharge died because House leadership judged it too costly in an election year and Scott promised a veto — political calculations, not fiscal constraints. Voters who return the same officials are choosing the same approach. The accountability for four years of patching, and for whether a fifth follows, rests with the people who cast those votes as much as with the people in Montpelier.

That is the choice on the table: keep spending one-time money to rent a year of lower rates, or fund the relief from a recurring source and free the surplus for projects that pay back. Scott and the Legislature have tried the first four years running. The second is still available, to them and to the electorate that sends them.

With the property tax bleeding stopped, actual work could start on right-sizing education in Vermont, especially the unaccountable and indefensible growing administration costs for a shrinking student and teacher population. And in an ideal world, we'd start on projects that will give short and long term returns through compounding gains in housing, vocational education and state voter benefitting tourism and second homes.