Vermont lawmakers are moving forward with a mid-year adjustment to the state’s fiscal year 2026 budget, adding tens of millions in updated spending and revenue changes while reserving nearly $75 million for next year amid uncertainty around federal funding and property tax pressures.

The Fiscal Year 2026 Budget Adjustment Act (H.790), introduced by the House Committee on Appropriations, would bring total unduplicated appropriations across all funds to roughly $9.2 billion, including $2.498 billion in General Fund spending and $313 million transferred into other funds and reserves.

A key feature of the adjustment is that lawmakers are leaving $74.9 million unspent and reserved for FY2027, money that could be used to address federal funding shortfalls, provide property tax relief, or support other priorities determined later by the Legislature.

“This budget adjustment fills all statutory reserves, meets all pension obligations, and adjusts essential investments in human services, housing, health care, and other major areas,” the overview states.

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Revenue Forecast Increases Drive the Adjustment

The budget adjustment is built on Vermont’s January 2026 consensus revenue forecast, which projects $2.4759 billion in revenue — an $80.6 million increase from the budget as originally passed.

In addition, lawmakers are incorporating other General Fund sources totaling $410.1 million, representing an additional $111.3 million in anticipated revenue compared with the forecast used to construct the original FY26 budget (Act 27).

Altogether, total revenue utilized in the adjusted budget equals $2.886 billion, according to the Joint Fiscal Office highlight sheet.

Medicaid Caseload Growth and Nursing Home Relief

One of the largest drivers of new spending in the adjustment is health care, particularly Medicaid utilization and provider support.

The bill includes $34.3 million in Medicaid caseload adjustments, reflecting increased demand and utilization across Agency of Human Services programs.

The adjustment also provides $14.1 million through Global Commitment for “Extraordinary Financial Relief” for nursing homes, a sector that has faced persistent financial strain from staffing costs and patient acuity changes.

Additional funds are included for Medicaid-related rate changes, including a rate increase for Area Agencies on Aging case management providers beginning April 1, 2026, and restoration of certain enhanced residential care rates.

Lawmakers also allocate $800,000 in additional Global Commitment funding to mitigate deficits in non-emergency medical transportation providers.

Corrections Costs Rise With Facility Population

Another notable pressure point in the FY26 adjustment is the Department of Corrections, where increased facility populations are driving higher health care costs.

The bill provides $4.6 million in General Fund spending for a DOC health care contract amendment “to address average daily population increases” in state correctional facilities.

The summary sheet also reflects multiple smaller correctional services adjustments, including payments of prior-year invoices and operational cost increases.

The funding comes as Vermont continues to navigate capacity constraints and rising costs across its corrections system, particularly in contracted health care services.

Housing and Homelessness Programs Receive Targeted Support

Housing remains a significant area of focus in the adjustment, though much of the funding reflects reallocations and targeted program support rather than broad new initiatives.

The bill includes $1.3 million in General Fund support for Housing Opportunity Program partners to sustain homelessness prevention services.

Lawmakers also direct the Agency of Administration to utilize $5 million from a previously appropriated $50 million housing allocation to provide housing voucher funding.

Another $1 million in reverted General Fund money is restored to the Land Access and Opportunity Board for the Homes for All and Secure Housing Coaching programs.

State Police Overtime and Wildfire Costs

The adjustment also includes smaller but notable public safety appropriations.

The bill provides $870,000 in General Fund support for Vermont State Police overtime costs and $180,000 for sheriff transportation, overtime, and administrative expenses.

The Agency of Natural Resources receives $105,217 to cover increased costs associated with summer wildfires, reflecting the growing fiscal impact of extreme weather events on state operations.

Pension Contribution Fully Funded

On the one-time spending side, lawmakers propose an additional $3 million General Fund appropriation to the Vermont State Teachers’ Retirement System to ensure the actuarially determined employer contribution is fully funded in FY26.

The move is intended to maintain pension funding discipline and avoid compounding liabilities in future years.

Vermont Health Connect Cloud Migration

The budget adjustment also includes $2.7 million to migrate Vermont Health Connect to a cloud-based platform in order to maintain compliance with federal requirements.

The investment highlights ongoing modernization needs in Vermont’s health care eligibility and enrollment infrastructure, particularly as federal systems evolve.

A Stabilization Budget With an Eye on FY27

While the FY26 Budget Adjustment Act includes a wide range of appropriations, much of the package reflects a familiar set of mid-year pressures: Medicaid caseload changes, corrections contract costs, housing instability, and federal compliance obligations.

At the same time, lawmakers are reserving nearly $75 million for FY27 — a signal that uncertainty remains high, particularly around federal funding levels and property tax dynamics.

With total appropriations climbing and major cost drivers concentrated in health and human services, the FY26 adjustment sets the stage for a potentially more difficult budgeting environment ahead.

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Dave Soulia | FYIVT

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