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House lawmakers have given final approval to a state budget that relies on hundreds of millions of dollars in federal funding that might evaporate by summer.

Members of the House Committee on Appropriations have spent the last three months crafting a $9 billion spending plan that, according to the committee’s Republican vice chair, stays mostly within the fiscal parameters set by Gov. Phil Scott back in January.

But Middlebury Rep. Robin Scheu, the committee’s Democratic chair, acknowledged this week that a federal budget reconciliation vote, tentatively scheduled for sometime around Memorial Day, could send state budget writers back to the drawing board just as the 2025 legislative session is set to adjourn in June.

“It could all change in an instant,â€� Scheu told ¿ªÔÆÌåÓý Tuesday. “Everything could be out the window.â€�

U.S. Sen. Peter Welch said last week that Republican budget proposals in Congress, which include steep reductions in federal spending in order to fund the tax cuts promised by President Donald Trump, would have “massive implications for Vermont.�

Scheu said state lawmakers are keenly aware that their budget plan � which funds state government from July 1, 2025 through June 30, 2026 � relies on hundreds of millions in dollars in funding that may soon not exist. But she said the Legislature isn’t yet in a position to modify spending to account for the potential losses.

“Unfortunately we have to be reactive because we don’t know what’s coming,� Scheu said. “We want to be as nimble as we can and be as prepared as we can, but at the end of the day we just don’t know.�

Washington County Sen. Andrew Perchlik, the Democratic chair of the Senate Committee on Appropriations, said he’s especially worried about cuts to Medicaid, a health care program for low-income residents that is by far the single largest source of federal funds in Vermont.

Brian Stevenson

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“If what the federal Republicans are talking about happens � that would be devastating to Vermont, where we don’t have enough money to fill the hole, so we would have to do something pretty drastic,� Perchlik said. “That’s my concern, that it’s not just, ‘Oh, we need to find $20 million to make sure we don’t kick people out of nursing homes,� it’s like, ‘Oh, we have to find $200 million.� And we don’t have it.�

Some lawmakers have already signaled interest in a temporary increase in state income taxes in order to soften whatever fiscal blows land from Washington, D.C. But even they acknowledge that Vermont lacks the financial wherewithal to raise anywhere close to what those losses could tally.

Perchlik said lawmakers could face the difficult position of cutting or eliminating state programs they know will result in harms to vulnerable residents. He said it could also force lawmakers to revisit the merits of using more than $100 million in state funding to buy down property tax rates for homeowners next year.

“What’s more important? Property tax relief? Or not kicking seniors out of assisted facilities?� Perchlik said. “We could have some really tough decisions that I would think would supersede property tax relief.�

Chittenden Rep. Jim Harrison, the Republican vice chair of the House Committee on Appropriations, said committee members tried to exercise fiscal restraint in anticipation of potential federal cuts.

“There were some requests, for example, for new positions that are needed and we would have loved to add. And in some cases we said, ‘No, we can’t. This is not the time to build up an increase in state spending,’� Harrison said.

If Vermont does see significant reductions from the feds, he said, shifting line items in the state budget won’t solve the problem.

Brian Stevenson

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“We cannot by any stretch of the imagination backfill what we don’t get from Washington,� he said. “Some very, very difficult conversations and discussions may need to happen.�

The House budget includes a provision that allows the governor and the Legislature’s 10-person Joint Fiscal Committee to make budget amendments on the General Assembly’s behalf if Vermont sees more than a 1% cut to federal funding (about $32 million). It also authorizes the use of up to 10% of the state’s Rainy Day Fund, which currently stands at about $100 million, though Scheu said that’s hardly a reliable backstop.

“If something happens to Medicaid, which is over $2 billion, $10 million is rain drops in the ocean,� Scheu said.

Lawmakers likely won’t have a clear picture of where their budget stands until shortly before, or perhaps after, they adjourn the legislative session.

Scheu and Perchlik say it’s possible the Legislature might opt to reprise the approach they took to the fiscal uncertainty at the outset of the COVID-19 pandemic, when lawmakers passed a six-month state budget, and then reconvened in September to finalize spending for the remainder of the fiscal year.