The Update from Montpelier April 27, 2025
Community Housing Infrastructure Program (CHIP) Update
The House Commerce Committee is nearing completion of its work on S.127, which would establish the Community and Housing Infrastructure Program (CHIP). Designed as an infrastructure investment tool—not a traditional housing subsidy—CHIP aims to address Vermont’s urgent need for housing-supportive infrastructure.
Over the past week, lawmakers worked through several key amendments to strengthen the program’s reach and effectiveness. They include:
— Tier 2 Access Lawmakers are considering ways to ensure projects in Tier 2 areas with existing Act 250 permits will be eligible for CHIP funding immediately, rather than waiting for Tier maps to be finalized in 2026.
— Simplified Affordability Requirements Instead of a complex system that requires income verification, the lawmakers are considering one of two affordability tiers that could offer greater flexibility for mixed-use developments.
— Lower Housing Threshold The residential use requirement for mixed-use projects, currently at 60%, may be reduced to 40%, making building redevelopment more viable.
— Increment Management Following VEPC’s recommendation, a 10-year review modeled after the TIF statute could become part of the CHIP process, which would ensure surplus tax revenues are either used appropriately or returned to the Education Fund.
— Local Enforcement Lawmakers may direct that affordability and floor area compliance be primarily overseen by municipalities rather than a “CHIP Board.”
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Education Funding
The Senate Education Committee is considering significant changes to H.454, the House’s education reform bill, to address concerns about local representation during district consolidation. Separately, Governor Scott’s education plan proposes consolidating districts, boosting early childhood education funding, and expanding technical training. The Senate version of H.454 keeps 2026 as the trigger for consolidation planning but replaces the House’s retired-superintendent Redistricting Subcommittee with a legislator-led School District Boundary Task Force. Additionally, new district maps must guarantee access to Career Technical Education. Senate Chair Seth Bongartz introduced a governance reform plan that simplifies administrative structures while preserving most tuitioning and interstate districts. Mandatory class size minimums and penalties for noncompliance with Education Quality Standards were removed. Senate Finance continues discussions on how to equitably structure any supplemental district spending. Coming to a compromise between the House, Senate, and Governor on this key issue is what could push adjournment into June.
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FY 2026 Vermont Budget Overview
The Vermont Legislature is advancing a $9.1 billion state budget for Fiscal Year 2026, representing a 2.4% increase over the previous year. The budget prioritizes major investments in housing, education, healthcare, and economic development, while also planning for potential federal funding cuts.
Housing remains a central focus, with $47.1 million allocated across six programs, including the Vermont Housing Incentive Program (VHIP), the Rental Revolving Loan Fund, and the Middle-Income Homeownership Development Program. While these investments aim to address Vermont’s ongoing housing crisis, much of the funding for VHIP is one-time, raising questions about the program’s long-term stability. The budget also commits $9.1 million to the Vermont Bond Bank Infrastructure Sustainability Fund to support critical community infrastructure projects.
To ease pressure on property taxpayers, $77 million from the General Fund is being directed into the Education Fund, a move expected to lower anticipated property tax increases from around 6% to roughly 1%. Additional education investments include $4 million to advance educational transformation initiatives and a 3% base funding increase for the University of Vermont, Vermont State Colleges, and the Vermont Student Assistance Corporation (VSAC).
Recognizing uncertainty at the federal level, the budget grants the state's Emergency Board access to Vermont’s nearly $100 million "rainy day" fund to guard against potential cuts to federally supported programs, including Medicaid.
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Health Care
The budget provides $4.4 million to enhance rates for certain healthcare providers, aiming to leverage additional federal Medicaid dollars. Vermont’s healthcare crisis took center stage in a recent joint hearing of the House Health Care and Senate Health and Welfare Committees, where lawmakers heard stark warnings from state officials, hospital leaders, and the Green Mountain Care Board. The message was clear: the system is nearing collapse, and businesses may soon face the fallout through skyrocketing insurance costs, reduced access to care, and further strain on the workforce. A Green Mountain Care Board member underscored the urgency, noting that employers and their commercially insured workers can no longer afford to shoulder the financial burden of the system.
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Economic Development
Regional Planning Commissions (RPCs) provided testimony on the impact of federal grant cuts, which threaten key local initiatives in Vermont. Losses include an $875K EPA grant for bike and pedestrian projects, $150K for health equity work, paused energy project funding, and canceled FEMA disaster mitigation grants. Cuts to emergency management grants could further strain rural communities. The Department of Tourism also raised concerns about declining Canadian visitors. In response, the Senate advanced a resolution (S.R. 11) urging Congress to halt new tariffs on Canadian imports and reassert its authority over trade policy.
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Tax Policy
The House Ways & Means Committee reviewed H.483, exempting military retirement pay from state income tax. Vermont’s 3,594 retirees contribute nearly $99M in local spending annually. While the exemption’s $3.9M cost raised concerns, advocates argue the economic benefits outweigh the loss. The Senate heard from former Brigadier General Brian Carpenter, who emphasized that military retirees, with an average age of 47, bring valuable leadership and skills to Vermont’s workforce. While there is bipartisan support for a military pension exemption, it is uncertain whether it will pass this year.
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Energy & Transportation
Congress could vote as early as next week to repeal the Biden administration’s approval of California’s plan to phase out the sale of gasoline-only vehicles by 2035. Eleven other states—including Vermont, Rhode Island, Massachusetts, New York, and New Jersey—have adopted California’s electric vehicle (EV) mandates. Vermont’s rules begin with Model Year 2026, requiring manufacturers to deliver 35% battery electric vehicles (BEVs) for sale. A separate regulation requires that 10% of new medium- and heavy-duty trucks sold and registered in Vermont be battery electric.
The Vermont Vehicle Index shows that just 12% of vehicle sales in 2024 were either BEVs or plug-in hybrid electric vehicles (PHEVs)—well short of the 35% target for 2026. The situation for trucks is even more challenging. Only 32 medium- and heavy-duty vehicles registered in Vermont meet the new truck mandate, representing just 0.16% of those currently on the road. These are the "big trucks" that haul milk, plow snow, and provide critical services across the state.
While Congress is moving quickly, a legal challenge is expected, which could drag the issue through the courts for another 18 months. Vermont, however, has the option to act sooner by delaying implementation, similar to the action Maryland took in April. Although there is a bill in the Vermont Legislature to repeal the regulation, it is unlikely to pass during the final days of the session. Efforts to delay enforcement of the truck rule are gaining momentum in Montpelier, with lawmakers responding to concerns from businesses that most of these electric trucks either do not exist, are prohibitively expensive, or cannot meet operational demands. Even more troubling is that orders for new diesel trucks are already being canceled because of the regulation. A coalition of trade associations representing hundreds of businesses recently submitted a joint letter urging lawmakers to delay implementation.
Meanwhile, the Vermont Climate Council is finalizing its second Vermont Climate Action Plan, scheduled for completion on July 1. The plan continues to rely heavily on electric vehicle mandates as a primary tool to meet Vermont’s legally mandated target of reducing greenhouse gas emissions by 40% below 1990 levels, in accordance with the Vermont Global Warming Solutions Act (GWSA).
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