December 4, 2025 Legislative Preview

 Legislative Update

Rep. Anne Donahue

December 4, 2025

It’s just about a month away from the start of the 2026 legislative session, and this week we held the “preview meeting” to hear from our consultants about the state’s financial picture. In terms of predictions on the overall economic picture, our state economist said, “We’re tearing our hair out. We’re having to guess at it.” While they’ve always placed caveats on their reports, this is the first time they’ve said anything like that.

In terms of the two specific areas of staggering costs that are looming for Vermonters: it’s the parallel crises in health care and in education costs.

We pay the highest premiums in the country, driven by the highest priced hospital in the country. On average, Vermonters pay 19.6% of their income for health care. The national average is 7.9%. That is staggering. At the same time, quality and access have dropped. There were theories shared by different speakers about why the costs of care are so high, but there is no clear picture of why this is other than that prices at the University of Vermont Medical Center are the biggest factor, and it has a 47% market share.

Slides we were shown included this example: an MRI at UVMMC costs $6,520. At Dartmouth, it costs $4,884. At a sample regional hospital, Northwestern Medical Center in St. Albans, it’s $2,785. Independent facilities charge $1,799. (A standard birth at UVMMC is $17,373, while at Northwestern it’s $5,150.) On the flip side, some of the small hospitals in the state are in financial distress and on the brink of closing.

I know one piece of institutional knowledge, and I shared that. It hasn’t always been this way. Only 25 years ago, Vermont had average costs below the national average. The warning signs were there, because our cost increase trend was above the national average. We were catching up, and soon to exceed, the rest of the country. The entire time I’ve served in the legislature, we’ve been scrambling to try to address this, without success.

The push now is to regionalize high cost, high intensity services and to move more lower-intensity services out of hospitals and into less expensive community settings. Regionalization would help protect access to essential services over the long term, rather than risk losing them altogether. It may mean longer travel in some cases and less local hospital control over types of services, but the current trajectory is unsustainable.

On top of the cost increases that impact everyone, there has been a lot of worry about the pending loss of federal subsidies for those on the insurance exchange, Vermont Health Connect. It’s been on the news a lot, and it is a dramatic loss. But we were urged to make it clear for constituents that subsidies have not been completely lost. People should be applying to find out eligibility. What has been lost is the enhanced COVID subsidies, not the base ones.

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“Current trajectory unsustainable”

Does that phrase sound familiar? And does the push to create more regional planning and service delivery also sound familiar? With further travel and less local control? It is the identical scenario we have in our education system. The projection of a 12% property tax increase next year just hit the news. That estimate is based upon “if everything stays the same,” meaning, projected school budgets and votes on them, and legislative action.

This came as no surprise. We built it into last year’s budget with a temporary shift of $118 million in one-time (non-recurring) revenue so that last year’s tax increase was minimized. We knew the difference would have to be made up for this year.

Homestead property taxes are only 28% of the overall education fund; non-homestead are another 40%; the rest (32%) are other taxes. Those non-property tax sources will increase by about 2.6% this year, and when school budgets increase higher than that, it further increases the rate of the increase on the property tax portion. We could repeat a shift to add in other general funds like last year, but that assumes those “one-time” revenues are available and it would take back-up money away from urgent needs in the general fund.

It was done last year on the premise that we were planning some major restructuring of the education system and how we pay for it that would impact future growth. That bipartisan bill setting up a plan of action is now facing fierce pushback, and the reforms are in jeopardy.

The assertion is that there is a lack of evidence that it will save money. I said that last year. That’s a given. The major change is to have statewide funding controlled by the state legislature (that’s the reason there’s no certainty of less spending) instead of by each town. The problem with each town voting on a local budget is that it is paid for by a statewide pool of money.

When Northfield tightens its belt, it doesn’t get all of the tax benefit because the rest of the state saves; when Burlington votes for increases it doesn’t fully pay for it, the rest of the state pays. So, for those who worry about loss of local budget control: under the current system, there is only a make-believe type of local control.

The impact is inequitable, and what kids receive from their local schools is inequitable. It also makes the financing unpredictable and much more difficult to control. We’re the only state to do it this way. I very much hope we do not change course away from true reform this year.

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The Unknown Overall Budget Picture

Will federal policies send us over an economic cliff? Will they cause damage, but survivable damage? Could they help the economy? That was the “we have to guess at it” that our fiscal experts were referencing. The loss or delay of key national financial statistics due to the shutdown means, “we’re flying blind right now.” We may know more by January.

The two cross-currents that were detailed were the existence of “staggering” new investments and equity gains in the build-out of Artificial Intelligence, and the impact of “deglobalization” by the U.S., which, our consultants said, “is unwinding the postwar economic order through punitive U.S. tariffs assessed against friends and foes, and a reversal of immigration flows that have defined and shaped the U.S. for most of its history.”

The full power point of the presentation, with a lot of detailed explanation and graphs, is well worth reading and can be seen at: https://ljfo.vermont.gov/assets/Publications/All-Legislative-Briefing-December-3-2025/December-2025-Legislative-Economic-Review-REV.pdf

Vermont revenues are seeing direct losses from reduced Canadian tourism. Uncertainties for our state budget also include the fact that federal funding directives are arriving without explanations or specific directions, data is missing, and the discretion given to the executive branch has resulted in pauses, cancellations, and reissuance of funds. There are still unknowns about what, if anything, might change based on pending court decisions.

The coming year will remain an unknown until Congress addresses the 2026 budget in January, and the perils to Vermont are significant. In the current year, of our $9.1 billion budget, $3.1 is paid by federal dollars. What happens on the federal level is a very big deal in terms of what we can provide. While the future details are still not well known, the general goals (and impacts we can assume for Vermont) are clear: cut taxes, cut mandatory spending, cut discretionary grants, shrink the federal footprint and expand executive power.

One direct, known change is that Vermont will need to budget a new $8.4 million annually for the administration of the food stamp program. That used to be paid fully by the federal budget; now 50% is being charged to the states. All of our ordinary pressure will also be there: the fact that our increases in revenues are outpaced by inflation and fixed costs. The Transportation Fund already required rescissions this year due to lost revenue (drop in gas usage) and increased road construction costs.

All of the briefings can be seen at: https://ljfo.vermont.gov/publications/legislative-briefing/all-legislative-briefing-december-3-2025

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 Once we are underway in January, lots of issues beyond the financial ones will be on the table. Please contact me (adonahue@leg.state.vt.us) or Rep. Ken Goslant (kgoslant@leg.state.vt.us) with questions or input. We look forward to serving you in the new year.

August 8, 2025 Special Update on Budget Status

 While our state legislature is out-of-session, the House and Senate Joint Fiscal Committee meets regularly to review the budget status. The Vermont legislature meets from Jan-May and therefore will not be in session again until next January.

There is particular concern this year because of the pending impacts of federal policy and budget changes, given that Vermont relies on federal funds for more than a third of its total annual state budget. Because of the uncertainties, legislators are receiving more detailed updates from our colleagues about the state’s financial status, and I am sharing, here, the summary we received this week. Note that there are many documents referenced, and they are available on the Joint Fiscal Office website if you are interested in a greater level of detail.

 

Update from Emergency Board and Joint Fiscal Committee Meetings from Reps. Robin Scheu (D-House Appropriations Chair) and Jim Harrison (R-House Appropriations Vice-Chair):

E-BOARD

On July 31, the Emergency Board held its semi-annual meeting to hear and accept the Consensus Revenue Forecast. As a reminder, by statute, the Emergency Board (four money chairs and the Governor) meets twice a year, once in July and again in January, to establish the official consensus revenue forecast that the budget is based upon. The forecast is developed by the General Assembly’s Economist in collaboration with the Governor’s Economist.

You can find a copy of our economist’s, Tom Kavet’s, July 2025 Economic Review and Revenue Forecast Update report on the featured publication links at ljfo.vermont.gov/

General Fund (GF) revenues for FY27 (the budget we will be working on next session) are projected to increase by 2.5% or $61.2 million. The good news is that there wasn’t a downgrade in GF, but the bad news is that $61.2 million is not sufficient to cover state employee salary and benefits increases, pension payments, and a myriad of other fixed costs. As a result, we can probably expect some adjustments to programs and services.

Further, policy changes, some of which are contradictory to one another, tariff uncertainly, and significant budget reductions coming out of Washington mean that projections may need to be revisited, possibly before January.

However, it is unlikely that the General Assembly will need to be called back into session before January. Many, but not all, of the programs that are being pared back through the Federal Reconciliation Bill will not take effect prior to January 2026 so the triggers we built into the budget for a special session are unlikely to be hit.

Finally, our economists reminded us that personal income tax is the key driver of our GF revenue. It will be important to pay attention to job growth, the labor market, and inflation as they are indicators of which direction future GF revenue may be headed.

 

JOINT FISCAL COMMITTEE

You can find the July 31 JFC Agenda and all supporting documents at ljfo.vermont.gov/committees-and-studies/joint-fiscal-committee/meetings/2025-07-31

We heard the usual year-end closeout updates, the Medicaid Year-end Report, and a review of the consensus revenue forecast. Some key points:

·       We ended FY25 in solid condition and were able to fully fund all our contingencies in the budget.

·       Our reserves are in very good shape, totaling about $300 million, so we are in a strong position. We continue to have a high credit rating as well.

·       Regardless of the above, Vermont received over $3.1 billion in federal funds so we will not be able to backfill all potential losses of federal funds.

We also spent time hearing about several items related to federal funds changes.

JFO presented an overview of the 2025 Federal Reconciliation Act and how programs such as Medicaid, other health care programs, and SNAP are affected, as well as revenue and tax changes, recissions, and other changes. [This is included in the list of supporting documents on the JFC meeting link, above.]

In addition to some Agency reports, we heard from three senior staff members from our congressional delegation. It will be important to keep in close contact with the delegation so we all understand what is happening both in Vermont and in Washington, DC. Expect more communication with our delegation in our committees next session.

At the end of this nearly 5-hour meeting, we made time for public comment so we could hear from community partners affected by the loss of federal funding. The JFC will be doing something similar at each of our future meetings this year. The impact on many of our constituencies may be significant.

In closing, we offer the following points:

·       We expect the upcoming state budget cycle to present a number of challenges that most of us have not experienced as legislators before, due to uncertainty in the economic forecast and changes in the federal budget.

·       Our goal is to meet necessary changes to our budget in a bipartisan manner.

·       We may need to ask policy committees to review existing programs to see if there are any that can be scaled back or may no longer be the priority they once were.

We are all in this together and are confident we can find a path forward that will minimize harm to Vermonters yet continue investments in our collective priorities.

 

Thank you for the honor of representing you. You can reach me at adonahue@leg.state.vt.gov or Rep. Ken Goslant at kgoslant@leg.state.vt.gov For input or questions; we welcome your contacts.

June 17, 2025 Legislative Update, Ed Fund bill

The Education funding reform bill passed after split votes in both House and Senate on Monday, with lots of angst even among some voting yes. It brought an end to this year’s extended session.

For many years, I’ve believed that “local control” over education funds has been a façade, given the actual funding mechanism. I believe that a state obligation for a crucial statewide system should have funds raised and budgeted at the state level for all students equally, across the state. Setting a path – a work plan -- for that shift is the only thing this bill actually does, and I supported it.

Contrary to discussions or opinions:

1.       It does not save money.

It spends more for transition needs, and could theoretically save money in the future. It could just as theoretically spend more. The difference will be that it will be in the hands of the legislature, accountable to voters, instead of in the hands of individual towns’ votes combining into a statewide fund imposed on all. Statewide fund, thus state budgeted spending… like roads, social services, court systems and the rest.

There are built-in new costs, such as re-starting school construction aid (and assuming the need for new construction for regional needs.) The future cut in property taxes for lower-income homeowners may cost more than the current income sensitivity system. Future consolidation may save some money, but not enough to offset new costs. Increasing class sizes will save some money, but the required increases are minimal. (At least 10 students for first grade; 12 for 2nd-5th; 15 for 6th-8th; 18 for high school.)

2.       It does not close small rural schools.

There are multiple exemptions for size to meet needs; the decision-making process for closure is yet to be defined. I think upper grades need and benefit from larger regional schools, but not elementary schools.

3.       It does not mean teachers will be laid off.

Again, class minimums requirements remain low; at most, there could be reductions achieved through attrition. There is a timeline for any changes, and a soft-touch consequence for not meeting them.   

4.       It is not happening too fast for good decisions.

Almost every aspect is yet to be determined over the next several years after more work by sub-groups that include professionals. If those steps aren’t achieved (after being fought over in future legislative sessions), the process ends. A map for proposed larger districts next year will be the first test for whether consensus will be possible for moving forward.

Note that even pieces that are “established” in this year’s bill don’t take place immediately, which means they can be changed if new information demonstrates the direction should change.

5.       It does not “privatize” education and place the public system at risk.

It actually cuts back on some access to independent schools. Yes, in theory it could make it easier in the future to expand a private school voucher system, but that would require a whole, new, controversial change in law.

6.       It does not impose big tax increases on thrifty towns, or force cuts.

Sorting out the issue of addressing changes from up or down from current local tax rates or budgets is one of the many work areas yet to be resolved. If it does have unfair results, the opportunity will be there to say, stop; this doesn’t work.

7.       It does not ignore the major cost drivers in school budgets.

Some of those drivers, such as special education, are elements that are part of the further work outline in the bill. Others are not addressed because they are not direct education system issues. Health care’s staggering cost increases are a separate problem for all of our budgets. Yes, it helps drive school budgets in a big way, but that is a component that will now be a shared problem for the state to address in funding, rather than for each town to react to by rejecting a local budget that has soared upwards because of health care costs.

 

What was I happy to see in the final version of the bill that came forward?

Two things:

First, an intent to try for a faster timeline: three years instead of four to start actual changes. It is unlikely to meet the timelines because there is so much work and so many decisions yet to be made. We will likely be voting regularly on time extensions, something we do often. But dragging out change can be a detriment; I think a goal to move decisions forward as soon as reasonably possible is good.

Secondly, it was the first time a transparent statement was made in the bill that clarifies that there is not necessarily an intent to reduce the taxes needed to support our schools. The intent is to reduce the increases in the property tax, which is being perceived as the main thing taxpayers are upset about: increased property taxes, not taxes overall.

The bill now states that within the intent to prevent property tax increases, if need be, we will transfer current spending into other budgets that have other revenue sources (income tax, sales tax… anything other than property tax.) Some of these could be very appropriate. Are school lunches or mental health supports a part of education, or are they social services that should be in our social services budget? But the outcome will be more pressure and increases to those other budgets. It shifts funding to increase other tax categories.

Speaking of mental health support – which a majority believe are a critical need in our schools – that is one of the clear examples of how inequitable the current system. Schools must pay the matching funds for the federal Medicaid support for having mental health clinicians. Many of our schools, in communities that don’t believe it’s affordable for their town, don’t have those services. These supports should not be dependent upon where you live.

If one wants to consider whether our current convoluted system of education spending represents local control while also creating equal tax burdens for equal education support across the state, one need only consider the Northfield budget over the past two years.

In 2024, Northfield tightened its belt compared to many other districts in the state. Northfield spends less than the statewide average per pupil. Yet in the final outcome, the average property tax rate increase across the state was 14%. In Northfield, it was 18%. This year, Northfield (or, the full district) tried to catch up on some pressing needs. The budget increase was 14%. Yet the tax rate will only increase by 2% to meet that increase.

This is why I term “local control” a façade under the current funding structure

While many folks are scared about potential implications, the bottom line is that this bill, this year, only begins a process for a statewide system of equal taxing for equal resources for the opportunities for each student. And it uses the same system that the majority of states use for education funding. This bill is about doing the necessary groundwork to address the many complex issues that will determine how, and even whether, it is able to move forward. It sets out intent, but no final decisions.

Most of the big decisions are still ahead of us and will present major challenges to resolve.

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This year’s session is over, but I’m still available if you want to discuss legislation or other state issues. Stay in touch at adonahue@leg.state.vt.us (and with Rep. Ken Goslant at kgoslant@leg.state.vt.us.) We appreciate being able to serve you.

June 6, 2025 Legislative Update

 

Legislative Update

Rep. Anne Donahue

June 6, 2025

 

As a student many decades ago, I was one of those who put off studying for exams until the last minute and then crammed. If I had received a time extension, I likely would have still waited until the last minute to cram. The legislature reminded me of my early self this year. We extended the session by two weeks in order have added time to resolve differences between House and Senate on education reform. Nonetheless, lots of other major bills were still crammed into the final few days.

As a result, during the interim of those extra two weeks many committees had time on their hands; the education bill conferees, meanwhile, did not end up with a final bill. As a result we have suspended adjournment until June 16 in order to give those six conferees more time. We should have done that two weeks sooner! It would have saved a lot of money if members had completed the other work on time and left only the unfinished education reforms for more work.

At this point, the interim “progress” after six days is that the conferees finally negotiated a date – next Wednesday – to meet again to hash out a compromise. In the meantime, they will try to work on revisions to current proposals. We won’t really know where the final draft ends up until their work is done.

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What Else Was Left Hanging?

Besides education reform, a key tax bill got temporarily stuck in the Senate. It includes the partial income tax exemption for military retirement and survivor’s benefits, which I’ve fought to achieve for many years, knowing how much it would help recruit workforce at Norwich. (Virtually every other state offers this exemption.)

The bill isn’t dead. The Senate knew it was going to get the added days in mid-June to finish its work and since the bill was approved by House-Senate conference committee members, it shouldn’t face any problem getting passed.

The bill also increases the age for the $1,000 child tax credit from 5 to 6, increases the state portion of the earned income tax credit, makes slight increases in the income percentages for exemption of social security and civil service retirement income, and adds a veteran’s tax credit.

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What Got Finished?

The budget, which is usually the bill that closes a session, was voted out early this year. The final increases were less than the legislative proposals but more than the governor’s starting point. It was an indicator of the increase in balance when a Democrat-controlled legislature that no longer has a super-majority (the 2/3rds majority needed to overturn a veto) can no longer allows for completely ignoring a Republican governor.

With most other controversial bills, the legislature held to its own priorities but gave in enough so that the governor reluctantly supported the end result. Here’s the quick synopsis on some of the major responses to current state crises:

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Housing

The governor got a watered-down version on one initiative, and no progress on the other. Construction costs have skyrocketed, and developers are held back on projects when they cannot turn any profit at all. Time and uncertainty add costs, but efforts to ease some of our difficult permitting processes have failed.

One new tool was created to allow investments in necessary infrastructure by towns. The money comes from property tax revenues and is paid back by the increased tax revenue created by the new properties. Near the end of the bill process, the House added some new hoops to get access to those advance funds, making it harder for towns to work with developers to achieve the desired outcome (more housing development.) It remains to be seen whether it will still be of any use for the intended target, which was smaller towns that can’t afford the investments in water, sidewalks and the like.

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Health Care

The scope of our health care crisis became more visible as the year progressed. Smaller hospitals are losing money to the extent of facing risk of closure, and our one primary insurance company is on the brink of bankruptcy as claims come in at higher-and-higher costs. This is no longer just about skyrocketing cost – it’s about basic access.

As with many of our crises, this is much bigger than Vermont can solve on its own, and both housing and health care are critical issues for many states. We are small enough that our non-profit hospitals each have their own “catchment areas” that create a near monopoly. That eliminates competition as a cost control, and likewise for insurance companies who see there is no market to compete for here.

Twenty years ago, Vermont’s health system was running at below average cost but was increasing in costs at a faster rate than elsewhere. We are now one of the highest costs per person in the country, and our largest medical center is the most expensive, anywhere.

When there are no market pressures (and those pressures have much less impact in health care dynamics than in any other area, regardless) the only alternative become increased regulation. This year’s new bills pressed mostly in that direction, in particular in efforts to squeeze the UVM Health Network to reduce expenses in order to keep all the other parts of the system alive.

None of these bills will be game-changers. The largest initiative includes creation of a new “Statewide Healthcare Deliver Strategic Plan,” the first effort at a comprehensive tool to prioritize needs since my bill in 2002. Certainly overdue!

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Homelessness

We should be hearing any day whether the governor vetoes the bill my committee developed in response to a dysfunctional system that pays a lot of money to put some people up in hotels, but leaves others out. The focus of the bill is a transformation into an actual unified system, run by our community action agencies (Capstone in Central Vermont), to coordinate services to move people into permanent housing and reduce the use of motels.

The governor has expressed concerns as to whether it may cost more money in the long run, although it does meet his criteria for a program that actually provides services to help folks, rather than just pays hotels to house them.

I supported this bill because I don’t see a better alternative. I don’t think the alternative of leaving people who are seeking help on the streets is acceptable. It will take a year to make these changes in the system, and they need to start now.

It was ironic – and mystifying – to see the legislature pass a budget that left in place the exact status quo as last year for funding hotels in the interim. It uses a broad definition for the eligible group of “most vulnerable” but leaves in place the same caps on the number of rooms that can be funded, and the number of days a household can stay. The result is not enough capacity for all who are eligible.

Those limits were what drew outrage from legislators when people were being evicted both last fall and this spring. There was a standoff with the governor, who would not agree to add more money to the current year budget to change what had been passed into law. We have now put into place a recurrence for the year ahead.

In the meantime, changes to the new reform bill at the last moment removed additional funds for creating new shelter programs to replace isolated hotel rooms. There are advocates who press for private accommodations for those in need of support, saying that shelter programs lack dignity. I think we are doing too much for too few, and it would be better to put our resources into less costly shelter capacity that allows fewer people to be left on the street. The new program our bill proposes is a compromise but makes headway.

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Stay Tuned

Although not meeting until June 16, we haven’t officially adjourned. Anything, in theory, will be up for debate when we regroup.

In education reform – as with homelessness, and health care, and housing – there is both urgency and a need for enough time to make change thoughtfully. Those operate in tension, but anything that ends up being rejected because it does not respond to a crisis quickly enough, or as ideally as we might like, only means another year of delay.

If we do not move forward this year with education reform to allow us to use money more efficiently and to seek more equitable outcomes, consider this: Last year, the average property tax increase was “only” 14% because the original increase (18% on average) was reduced by transferring extra money from the general fund.

For the 2026 budget we have transferred $77 million from the general fund to the education fund to defer what would have been an additional 7% percent average increase in property taxes (it will average 1% instead.) That creates a false sense of less urgency. Taking money from the general fund means other priorities that lose out. Sooner or later, the bill will come due.

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Thank you for all of your engagement this year. Please stay in touch with me (adonahue@leg.state.vt.us) and Rep. Ken Goslant (kgoslant@leg.state.vt.us) as we work to represent you.

May 5, 2025 Legislative Update

 

Legislative Update, May 5, 2025

Rep. Anne Donahue

It seems odd to not be reporting final, major legislation heading into the second week of May. We’d typically be in the final days of the session. However, it’s been predicted for a while that we will run late this year because of the complex task of laying out the planning for major restructuring of our education system.

The Senate has not yet finalized its proposed revision to the House bill, and only after that will negotiations begin on the differences. The conference committee on the annual budget has begun this week, so that is much closer to the regular schedule. There have been several other significant bills making their way through the process.

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Veteran’s Pension Exemption

The bill exempting some specific income taxes will be on the House floor this week, and with its unanimous vote out of committee, it will likely pass without significant opposition. The Senate will then have to review it.

It includes a compromise version – but with significant progress – on the veteran’s retirement pension exemption. This has primarily always been a critical workforce issue. These veterans, in peak wage-earning years, often fill critical positions that help increase our income tax base. Other states are way ahead of us in exempting such pensions, creating a disincentive for moving here. It’s been a big issue for Norwich in recruitment over the years.

The House proposal will exempt all military retirement pay for residents with incomes less than $125,000 and then scale it up to $175k. There was a $250 credit added for all veterans with incomes under $25k.

The bill also includes an increase in the threshold for partial exemption of Social Security income (another area where we fall well behind other states), an increase in the Earned Income Tax Credit and in eligibility for the Child Tax Credit, and a new tax credit of up to $1,000 for persons providing uncompensated care for a disabled family member.

The total cost of these measures in lost revenue is $13.5m.

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Right To Form Unions

We also moved a constitutional amendment forward that would guarantee the right to organize unions. It has now finished its two-session legislative requirements and will go to a statewide ballot. These rights are firmly established in current Vermont law, but there has been backsliding in other states so it was felt to be important to place it in our constitution to prevent future change.

I did support it, but with some reticence. It includes the right to negotiate a requirement that employees must belong to the union as a condition of being employed there. I get the importance of this. If folks can have a free ride of the benefits without paying dues, it could undermine the ability to unionize.

But I philosophically disagree with forcing union membership in order to get a job at a given place, and this will lock it into our constitution. I do support union organizing, so I voted in favor and leave that balancing to the decision of voters.

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More on Clean Heat

Several efforts have failed in getting a bill through to repeal the Clean Heat standard. As with many of our climate initiatives, it was well-intended but not economically feasible, and the plan to implement it this year no longer has any support and will not be moving forward.

It was controversial enough that repealing the underlying law would make sense for now – we can always come back to a revised effort – but the legislative majority want to keep it in place. It is a reminder that the Democratic majority still controls, despite no longer having a “super-majority” capable of overriding any veto single-handedly. Controversial new legislation can be blocked by a veto with enough votes to sustain it if there is no compromise, but nothing new can be pushed through without Democrats behind it.

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Health Care

Still a bit below the radar is a regulatory overhaul of the health care system to attempt to slow down skyrocketing cost increases. Maintaining the kind of access to services that we currently have may become impossible without (or even with) some major changes, and this bill shapes some of that planning. The House Health Care Committee is working to finish its review of the Senate bill before sending it back.

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Education Proposals

To touch on a few of the current Senate proposed changes to the Education bill:

The Senate draft replaces a work group with an eight-member School District Boundary Task Force (four House, four Senate members) to develop the new, larger districts. The Senate would require the task force to propose at least one school district/supervisory union map and to consider continuing access to independent schools in tuitioning towns. It must also recommend an alternative process if new boundaries are not enacted by Jan. 31, 2026. This is a faster process than the House proposal and could move full implementation from four to three years.

Removed from the House version are the immediate setting of class size minimums, the intent language on school size, the goal of a 4,000-student minimum per district, and the school closure designation provisions. Independent school tuition differences would broaden access compared to the House version.

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Rare Disease Advisory Committee

A special congratulations is in order for Mary Nadon Scott for her public advocacy for the creation of a state advisory committee on rare diseases. My committee passed out the bill to establish it last week, and it will be ready to go for Senate action next January. No new appropriations are needed to support the activities of the committee.

Diseases that affect large numbers of people have organizations to provide guidance and recommendations on public education and to the legislature, and support for individuals. The new committee would facilitate those with rare diseases in combining to gather experts and identify common interests and needs in those same areas.

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Thank you for the honor of representing you. Please reach out any time with feedback or questions to me at adonahue@leg.state.vt.us or Rep. Ken Goslant at kgoslant@leg.state.vt.us.

Education Funding Bill Update

This update is framed in part by a message to Northfield voters who will vote this week, for a second time, on a school budget. That budget decision demonstrates how messed-up our education funding system is, and how urgent the current reform efforts are.

As a Northfield resident, I will be voting “yes” on the Paine Mountain (Northfield-Williamstown) school budget. To do otherwise would be, in effect, to hand over our property tax dollars to other towns. That’s how gummed up the system is.

We know that in the legislature. The urgency of the need for reform efforts after last year’s soaring property tax rates made it a priority for this year and for the bill that passed the House last week. But the public is led to believe that we have local control because we vote on our own budget for our own schools. The reality is that most of the education property taxes go into a big statewide pot of money. Out of that state pot, school districts receive the money that matches what they voted for, whether that budget is high or low, above average or below.

Last year, Northfield’s property tax increase was higher than even the high average statewide increase by several percentage points, despite a major budget cut after a failed first budget, and even though the district is spending less than the statewide average on our schools.

How could that happen? How could a town’s taxpayers be required to pay more for spending less? It was because other districts were increasing their budgets much more than we were, and we had to contribute to their decisions to spend more.

This year, Northfield can regain a bit of that and make up for some of what was lost last year. The pent-up pressures that are causing its budget increase are higher than other towns’. They got their increases last year. If the Northfield budget passes, the schools will get 15% more for students at a 2% rate increase for property taxpayers. That is because other towns will be contributing to cover Northfield’s budget increase. It will be a bit of a payback for the increase Northfield paid last year.

Northfield will still be spending less per pupil than what the average district spends, but those other districts will refund some of its losses from last year. If it is voted down and the budget is cut,  it will benefit those other districts and hurt Northfield students. That is exactly how gummed up our current funding system.

A key part of the legislature’s efforts to remedy this is through changing from a pool of money that funds what each town decides to spend, into a pool of money that is paid out equally for each student in the state, so that each student has equal opportunities (including an equal amount extra for students who have special challenges in accessing equal learning opportunities.) It also improves the system for equity among what taxpayers in different towns pay in. All of this requires a change to large school districts.

This type of “foundation” funding is used in the major of states; our funding system has been one-of-a-kind. The legislature – both House and Senate – have been fairly unanimous on this change, which was first proposed by the governor as the core to reform. There has been disagreement on some of the further components, such as the size of the larger districts, the role of independent schools and the impact on rural districts, but not on the fundamental concepts.

The House passed its version of the concept in a bill last week. The biggest current flaw is that it won’t go into effect for four years. Four more years of funding inequity, and four more years of voting on (and fighting over) local budgets each year that don’t align with equality for either taxpayers or for students.

Last week, I tried to amend the bill to set a goal of making it happen a year more quickly. It was aspirational: if we are able to pull all the parts together sooner, we should try to do that. I urged that we needed to give the message to our constituents that we wanted, if reasonably possible, to address the funding system crisis with some degree of urgency. Opponents said that it was more important to give the message to school boards, administrators and educators that we were committed to making the changes thoughtfully. The amendment to change the intent language to aim for 2028 instead of 2029 was voted down.

The bill is now in the hands of the Senate. If you want to see faster relief from the inequities created by the current system – and which hurt Northfield so badly last year – contact our three Washington County Senators to urge them to expedite the timeline for reform.

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It is an honor to represent Northfield and Berlin. Please stay in touch with me (adonahue@leg.state.vt) and Ken Goslant (kgoslant@leg.state.vt). We value your input.

 

March 29, 2025 Legislative Update

 

Legislative Update

Rep. Anne Donahue

March 29, 2025

A total of 32 bills were passed by the House over the past two weeks and are enroute to the Senate. There they could be passed, could be abandoned, or could be rewritten and sent back for our reconsideration. So, they are a ways away from reaching the final stage of going to the governor, apart from the controversial budget adjustment act (BAA), which was vetoed and is still in flux.

Many were updates to existing law and not controversial, or were initiatives with broad support. The most prominent included a new BAA (political gamesmanship); next year’s annual budget (104-38 vote after a unanimous bipartisan committee vote); election law changes (a very controversial provision limiting write-in votes was removed); the homestead property tax rate (reduced by injecting added general funds, risking a big spike next year); the capital construction and transportation bills (I raised concern about the new Dog River bridge in Berlin being constructed without a sidewalk); expansion of access to unpaid leave (I pointed our concern for small businesses); protection of personal information of public service employees from data brokers (badly written, but a start; vote was 106-38); and state advertising restriction to use a minimum of 70% in local media organizations (overly prescriptive but also with a huge loophole that will negate its good intent.) Ask me for details on any or all.

Meanwhile, we still await hearing how our Ways and Means Committee will respond to the amendment that proposes a military pension exemption from the state income tax. It’s ironic to me that we were willing to pay out $5,000 in cash to entice folks to move to Vermont a few years ago but haven’t been willing to pay a much lower per person cost to attract this skilled workforce to further their careers (or maintain them) here.

Our House version of initial steps for education and funding transformation is emerging shortly and will be certain to result in a lengthy House-Senate process of attempting to reconcile the significant differences in approach. Predictions are that we will be in session for at least several weeks longer than usual in order to get this done.

***

Rather than speculate on the outcomes of these multiple moving targets, I want to use this update to focus on a picture of the kinds of “work behind the scenes” legislators can get pulled into, and that don’t usually make it into news media.

Two years ago, the legislature passed a bill to create “Vermont Saves,” a very positive way to support Vermonters in building retirement savings if they do not have access to an employer-sponsored plan. The way it was set up, employers are required to send the employee information to the state Treasurer, who runs the program. It is promoted as a voluntary program, but in order to help foster participation, it is an “opt-out” rather than “opt-in” program.

That means that anyone can give notice that they do not want to participate, and they will be removed, but silence is consent. If you don’t object, five percent of your net income is deducted from your paycheck and becomes a contribution to a Roth IRA established through the Treasurer’s office.

Obviously, for many wage earners, five percent is a whole lot of money to carve out. Fortunately, they can ask for a lower contribution rate if they prefer. Starting to save for retirement early and regularly is a good move, but some people who are just scraping by simply can’t do it, and we certainly want to preserve their choice in such decisions, right? The problem with any “opt out” system, however, is that someone can only choose to opt out if they receive clear information that they have been automatically enrolled and that they need to take action if they do not want to take part. Otherwise, it’s no longer actually voluntary.

So I was shocked several weeks ago when a constituent sent me the copy of a “Vermont Saves” program notice he had received. It was an email that came from an unknown company and the headline was, “You’re in! Your Vermont Saves account is ready to be set up.” Note in particular the terminology: “ready to be set up,” future tense. It goes on to laud the program, which “puts you in control of your financial future by offering you a safe, secure, and simple way to save for your retirement with every paycheck.”

Some lines further down the page, a boldface bullet point states, “Participation is voluntary” and continues, in regular font, with, “Stay enrolled or opt out…” That’s the very first reference to the auto-enrollment that has already occurred. The account isn’t “ready to be set up.” It is already set up. This isn’t “offering” something. It’s already done, unless you act to stop it.

In today’s world of email scams, I think it’s likely that some folks will see that the email isn’t from the state or their employer, and say, “Wow, I know better than to hit that ‘set up account’ link on this email. I’ll be hacked.” Others will skim the beginning and say, “well, this is an offer I’m not interested in; I’m not going to set up an account to participate.” By appearance, they have not taken up the offer. In reality, they needed to set up access to their account in order to then withdraw from participating. Even when the first paycheck with a deduction arrives, some will see it and just sigh (or curse) over a new payroll tax being imposed, unaware that it is “voluntary.”

Employers didn’t receive transparent information, either. They were told that they were required to send in the information on their employees, but that then their employees would be able to choose whether they wanted to participate. I spoke to one local employer who was absolutely stunned to learn that it required an active opt-out by the employee to prevent automatic payroll deductions.

But it gets worse. The notice announces, “Your paycheck contributions have the potential to grow into big savings over time” – with “have the potential to grow” boldfaced. True. But a Roth IRA is an investment account. It includes the risk of loss as well as the potential of gain. (I think we’ve all seen ads for investment opportunities that specifically state that, in a manner that suggests they are required to do so. Apparently, our Treasurer is not under that requirement… yet.) It makes no reference at all to the difference between a savings account and an investment account.

Last week, I met with our State Treasurer, Mike Pieciak, to share my concerns. He defended the information as being tested and evidence-based by the company contracted to produce it; it runs the same program in other states and uses the same communication with good results. After all, people should be saving for retirement, and this helps people stay on board. That’s the program goal. He agreed the notices might lack some clarity and said he’d talk to the company to see if they could rework some of the placement of information. I was unimpressed by his response.

By coincidence of timing, that same day our 2026 state budget bill was on our House calendar. In reading it, I discovered there was a section about Vermont Saves, which included a change to allow the Treasurer to adjust the automatic annual contribution rate increase by up to 10 percent, instead of the original eight percent. You are not merely automatically enrolled, you also have an automatic increase in your contribution rate each year… unless you give notice that you don’t want it increased. What will the phrasing be like to tell employees about that right?

So I introduced an amendment to the budget bill to put a pause button on that change.The first auto-increase isn’t until next year, so there’s no rush. The Treasurer’s Office objected to the amendment and began giving broad testimony on the purpose of the program and the importance of encouraging savings, including that optimal rates to save for retirement are actually more like 15 percent… so they want to be able to get the deduction up to at least 10 percent of net wages.

As it turned out, the Appropriations Committee had never heard any testimony about the rationale for the proposed change and for including the Treasurer’s language in the budget bill. He had bypassed the process of bringing the issue to the policy committee for review before asking to have it added to the budget. It had then slipped in as a “technical” change almost without being noticed.

The Committee voted 10-1 to support my amendment. The Chair suggested that the Treasurer should go to the Senate Government Operations to make his case in full and enable that policy committee to discuss it, before seeking to add it back into the budget bill during the Senate’s work on it. It was really only a symbolic victory, but what was important was that presenting the amendment on the House floor was an opportunity for me to ring the alarm on the much bigger underlying issue – the misleading communications – to the full body.

I’m not planning to let it end here. I talked with the Chair of House Government Ops and he is going to have me meet with the committee about the need for more transparent communications to the people who are about to have their paychecks raided (for their own benefit, of course…), and how we might address it. I’ve also already given a heads’ up to the Senate Gov Ops chair that I’d like to meet with him to share this same background information. That committee would have the best opportunity to get protective language through the legislative process this late in the session.

How could we have put something like this in motion two years ago? Well-intended, of course, but also passed in the very last week of that legislative year, a time during which bills are passed at dizzying speed, despite the attempts of some of us to be allowed more time to be thorough in our work. We are a citizen legislature with no individual staff and who must rely heavily on the expertise of others.

But if we were going to pass a bill that would automatically deduct money from Vermonter’s paychecks to invest in an IRA, we owed it to Vermonters to have made sure they would get full, clear information about how they could turn the program down. Not everyone is in the place to give up the “as little as $105 a month” that the notice cheerfully uses as an illustration. To some of us, that’s a lot of money.

So now, we need to fix it.

***

It is a pleasure to be representing you. Please contact me at adonahue@leg.state.vt.us with questions or concerns, or my district-mate Ken Goslant at kgoslant@leg.state.vt.us. All of my past updates are accessible at representativeannedonahue.blogspot.com