MONTPELIER — Vermont Gov. Phil Scott proposed a $9 billion budget to state lawmakers Tuesday for the 2026 fiscal year, a spending plan that, once again, he said prioritizes making the state more affordable and tackling demographic challenges.

The difference Tuesday afternoon, of course, is that the Republican governor was addressing a state House and Senate made up of far more GOP allies than he had in the last legislative biennium, most if not all of whom campaigned on those same issues. Both chambers’ Democratic leaders said after the speech that they saw common ground with Scott on some of his ideas, but cautioned they needed to hear more details before taking positions on others.

Scott pointed to last fall’s election results as a call against raising taxes and fees, but said he would still use state dollars to build more housing, improve how safe people feel in their communities and fundamentally reform the state’s education system.

His administration unveiled the broad strokes of an education plan last week, though many details of the proposal are unclear, even after Tuesday’s address.

Scott’s latest budget would increase state spending by about 5% over the $8.6 billion budget he signed into law last year. Although state coffers are flush with better-than-expected revenues — about 4% higher than state economists had projected last year — he said substantial cost pressures limited what new investments he was proposing, or that lawmakers should propose.

That includes rising costs the state has been paying for public employees’ health insurance — an issue far from unique to state government, officials from Scott’s administration told reporters at a briefing previewing the budget Tuesday morning.

“Even with a surplus, we can’t do everything we want,” Scott said during his address, which started just after 1 p.m. “Because at the end of the day, Vermonters were very clear — they expect us to separate our wants from our needs.”

Tax relief

Some of Scott’s budget — which will first head to the House for its consideration before the Senate takes it up — would reduce how much some people would pay in taxes. That includes, notably, $77 million from the state’s main operating fund that he said would “eliminate” the 5.9% average increase in property taxes currently projected for this year.

Administration officials told reporters earlier in the day that in order to fully buy down that projected increase, though, the budget also proposes ending Vermont’s universal school meals program — something likely to face stiff opposition from many lawmakers. The governor did not mention returning to a program that provides free meals to lower-income students in his speech.

Scott also proposed a $13.5 million “tax reduction package.” The plan would increase eligibility for the state’s Social Security income tax exemption, broaden eligibility for an earned income tax credit for those without dependents and expand Vermont’s child tax credit to households with kids up to age 6 (it currently maxes out at age 5).

The package also includes something Scott has repeatedly proposed, to no avail, in his four previous terms in office — eliminating the state income tax on military pensions.

Scott’s budget would also provide $6 million of ongoing state funding for two housing improvement programs — one for vacant rental units and another for mobile homes — that had been supported with one-off federal funding in the past. It also proposes $9 million for a new program to support municipal infrastructure projects statewide.

The budget would add about $30 million to continue operating the state’s emergency housing program, which keeps unhoused Vermonters sheltered in hotels and motels — without any policy changes to how the program operates. But the governor noted that he sees creating new housing, not that program, as the long-term solution.

“More housing can help pay for schools without adding to your property tax. More housing for workers keeps employers in business and brings in more revenue,” Scott said. “It gives families financial security that can improve health and public safety. And it can brighten neighborhoods and revitalize downtowns.”

Policy aims

Scott also took aim at a number of laws the Legislature enacted last year, in some cases over his veto.

He called for expanding the exemptions to Act 250 jurisdiction carved out in last year’s sweeping revision of the state’s signature land use law, as well as revisiting — with a focus on “how much it will cost” — the legally binding carbon emissions reduction requirements laid out in 2020’s Global Warming Solutions Act.

Perhaps some of the most ardent applause during the speech — largely, if not entirely, from GOP lawmakers and members of the governor’s administration who were on hand — came when Scott called for changes to crime laws.

He called on lawmakers to repeal a law, known as “raise the age,” that’s meant to keep many 18 year olds out of criminal courts. A second stage of the law that would increase that age to include 19 year olds is slated to take effect in April — but Scott called the plan “a precarious path.”

Meanwhile, the governor said lawmakers should make it easier to revoke bail and to, broadly, “provide more tools to hold repeat offenders accountable.”

Administration officials told reporters the budget does not include funding for new judge or prosecutor positions — something leaders of the state’s judicial branch, among others, have argued in recent years is critical to addressing the state’s backlog of pending court cases.

Speaking to reporters after Scott’s address, House Speaker Jill Krowinski, D-Burlington, commended the governor for focusing on education and said there was “some common ground” on his housing proposals. But Krowinski also noted his speech lacked a plan on health care and said the state needed more “leadership” on flood recovery.

Overall, Krowinski expressed willingness, if not excitement, to work with the governor’s proposals.

She would not entirely rule out a repeal of the universal school meals program, and suggested she could prioritize education and housing over initiatives related to climate change.