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February 7, 2025
This week’s theme is, in one word, “uncertainty.” That’s because everything is cloaked in a degree of uncertainty;
- The week kicked off with tariff uncertainty, as there were about 24 hours where we thought they were happening before a month’s delay.
- Meanwhile, that’s not the only thing from D.C. causing agita, as Vermonters try to understand a flurry of executive orders and watch congressional budgeting that might cut substantial funding.
- In Montpelier, a slow start has folks wondering if they can get everything done in time, as multiple legislators have uttered the unthinkable only five weeks into the session, “I wouldn’t make plans for June.”
- Finally, substantial past policies are colliding with complex realities right now, as the Clean Heat Standard is dead on arrival, the State is sued for failing to meet Global Warming Solutions Act goals, and the Clean Car and Truck standards get pushback.
Rewind: We all experienced years of uncertainty around the global pandemic, and we know what that means: when the economy is uncertain or disrupted, it causes inflation, delay, and, ultimately, human damage.
The Bottom Line: Whether you like or dislike any of the policies we’ve mentioned here, we’d like to set aside your political perspective and acknowledge that uncertainty is bad for business and our economy so we can roll up our sleeves and address it.
Take a moment to share with us how tariffs may adversely affect you, your business, or Vermont by clicking here.
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In this week’s update:
- Education overhaul slowly sails into rougher waters
- Vermont’s vehicle market on a collision course with regulation
- Tariff-ied and uncertain economy the next four years?
- Will the Legislature SPARC housing growth?
- Vermont towns seek to renegotiate with state for tax boost
We strive to make these concise and easy to read. Feedback is not just welcomed, it’s encouraged – [email protected]
Education Overhaul Conversation: Slow Sailing Through Rough Waters
4-5 minute read
We are now capping week five of the legislative session and there are still more questions than answers about the Governor’s education overhaul plan as it still is being rolled out in drips and drabs.
- While we still do not have clarity on the details of the foundation formula and questions abound around administrative consolidation, the Governor served up a provocative proposal: school choice.
- A combination of a slower start and election dynamics have meant the Governor has been free to roll out his proposal to a waiting Legislature.
Catch up quick: The Governor’s proposed education overhaul aims to cut spending by $183.6 million from the state’s $2.3 billion in spending in two years through a combination of staffing adjustments, district consolidation, and other policy proposals. His administration is proposing a move to a:
- A foundation formula sets a base grant of $13,200 per student and marks a shift from the current weighted system, which provides tax capacity rather than directly funding student needs, effectively setting a floor on per-pupil cost.
- Consolidating Vermont’s 119 school districts into five with boards of five that represent wards in each district and school advisor committees for individual schools.
- Questions remain about local spending flexibility and compliance with the Brigham decision on educational equity.
- We are still waiting on important details and clarity, such as how special education would be funded as well as excess spending procedures.
Unease from the education sector: This week, Legislators heard caution urged from those in the education space, many of which expressed the same unease last session. That unease led to the creation of a Commission on the Future of Public Education, which didn’t deliver proposals for reform in December and has seen its existence called into question.
- The Vermont NEA reported that this year’s current education budgets are on track to eliminate 300 educators across Vermont, and they estimate that there will be about 3,000 jobs cut if we pass the Governor’s foundation formula as proposed.
“Provocative proposal” As if the Governor’s team weren’t taking big enough swings, they came forward with a discussion of school choice that will further create rough negotiations.
- Current context: Many towns offer school choice if their local school districts do not operate public schools for all or certain grades.
- Proposed change: The Governor’s team pitched having districts assign schools to students with the opportunity for them to enter a lottery to attend a different school by choice.
Drawing battlelines: Many legislators are already fierce proponents of public schools and are critical of Vermont’s existing school choice. The potential for independent schools to enter the mix and compete is troubling to influential stakeholders and will make things messy.
Time Check: we are now ending week five, or what is typically an 18-week session, and it will likely be another week or two until the Administration’s plan is fully delivered and another week until it is digested.
Bottom line: It’s looking like with everything proposed, details still needed, and battlelines being drawn, perhaps, as one chair put it, no one should make plans for June
Vermont’s Vehicle Market on a Collision Course with Regulation
3-4 minute read
The old saying goes, “the road to hell is paved with good intentions,” but no one ever specified what types of cars need to be on it. Vermont auto dealers were in Montpelier this week to outline concerns with mandates on how many electric vehicles they need to bring into the state and why, when they collide with reality, it will be more than a fender bender.
Rewind: In 2022, Vermont passed the Advanced Clean Car (ACC) and Advanced Clean Truck (ACT) Rules:
- ACC: impending regulation requires 35% of the new cars delivered to Vermont this coming year to be battery-electric or plug-in electric hybrids, and that percentage will ramp up to 100% of new vehicles in 2035.
- ACT: Would require 10% of the new trucks delivered to Vermont this coming year to be battery-electric or plug-in electric hybrids, and that percentage will ramp up to 75% of new vehicles in 2035, depending on the class of truck.
Zoom Out: Vermont is not alone here, to date, 13 states have adopted these rules, making up over 40% of the market share nationwide; however, there are some differences here: Maine, for example, is staying with emission standards but dropping the EV mandate.
“We can’t go back … we can’t go forward:” Environmental groups and their legislative champions understandably don’t want to go backward on climate legislation, however, they’re in a precarious position where they’ve put the cart before the horse.
- Customers: Auto dealers outlined for legislators that customer satisfaction varies based on a multitude of factors, primarily if they have access to fast charging.
- Infrastructure: They highlighted technological and infrastructure hurdles that have not been addressed and are preventing them from winning overall customers.
- Technical feasibility: not all of the needs heavy duty trucks have can be met by electric vehicles at this time.
- Economic feasibility: EV markets saw a bump in recent years due to large government subsidies, however, those are drying up and have some adverse effects on the market along the way.
Reality check: As one auto dealer put it in a room with lawmakers this week, “You can’t regulate to make people want to buy.”
- The regulation requires manufacturers to comply with the prescribed percentages of electric vehicles they send to the lots of Vermont auto dealers; however, their customers can quickly go to other states without these regulations, where they have the cars they want.
- Nothing is stopping Vermonters from shopping elsewhere for their next ride, meaning the only thing the state would do is alienate the economic activity at the dealership, affecting thousands of jobs and millions in tax revenue.
What’s Next? Legislators will need to grapple with their desire to move forward with their desire to transition what manufacturers send to Vermont auto dealers and what ends up on our roads as it runs into the reality of what is economically and technologically feasible.
Tariff-ied and Uncertain Economy the Next Four Years?
3-4 minute read
This week’s experience with tariffs felt like a cruel mock execution for many Vermont businesses.
- “We cannot be in a constant state of fear, panic, and disruption over the next four years,” Governor Scott said in a press conference this week.
- As we jump into this section, it’s important to note that while such policy is politics, what we are outlining are just the facts because that policy creates disruptions, price impacts, and prevents long-term planning.
Vermont businesses and employers shared specifics about how energy, housing, pharmaceuticals, and food economies would all be disrupted and those products would get more expensive in a roundtable with Senator Welch this week.
- Energy: Vermont Gas and the Vermont fuel dealers shared how these tariffs will need to flow through to customers, with the 10% tariff on energy, including heating oil, natural gas, kerosene, propane, gasoline, and diesel fuel. Legislators heard from the Department of Public Service that this would apply to much of the state’s electricity too.
- Housing: Homebuilders and construction companies outlined how building materials are an international market with lumber from Canada, drywall from Mexico, and electrical components from China, often with no domestic alternatives, resulting in certainty in price increases.
- Food: Canada’s proximity means food naturally makes its way across the border. Even seemingly simple industries, such as maple syrup, are complex as Vermont and Canadian syrup is packaged and distributed together.
Zoom in: Nothing better defines the tariff disruption than housing.
- As we outlined above, a house is the end product of international supply chains with lumber from Canada, drywall from Mexico, and electrical components from China, often with no domestic alternatives.
- There is a big lag between budgeting, getting a loan, and buying the material.
- Builders can go bust if the numbers change during that time, as they just contracted to build a home that is 25% more expensive.
Zoom Out:
- The Tax Foundation estimates that tariffs on those two countries would be an effective tax of more than $670 per U.S. household this year.
- The Budget Lab at Yale University forecasts that households will lose about $1,000 of purchasing power a year.
The Governor tasked the Commerce Secretary to lead a multi-agency team to assess potential impacts and analyze risks, costs, and opportunities around the impending tariffs while ensuring decisions are data-driven.
Will the Legislature SPARC Housing Growth?
3-minute read
A component of the Governor’s PATH Plan for expanding Vermont’s housing stock is the Strategic Projects for Advancing Rural Communities (SPARC) framework—a streamlined, more accessible alternative to Tax Increment Financing (TIF) that legislators are considering.
Helpful Background: TIF is a proven tool for financing public infrastructure that supports economic development. While its administration requires some expertise, the core concept is straightforward:
- Establish a TIF District – A municipality designates an area for redevelopment.
- Set a Base Property Tax Revenue Level – The current tax revenue from the area is recorded.
- Invest in Infrastructure – The city or town funds improvements (roads, utilities, etc.).
- Property Values Increase – Development raises property values, generating additional tax revenue.
- Repay the Investment – The tax revenue above the original base (the “increment”) is used to pay off the infrastructure costs.
A Simple Analogy: Think of TIF as renovating a rundown home:
- A homeowner takes out a loan to make improvements.
- They renovate it to increase the home’s value.
- When the home is sold or refinanced, the homeowner repays the loan using the increased value.
What’s Changing? SPARC is a scaled-down, more flexible alternative to TIF, specifically for Vermont’s smaller, rural communities. Key differences include:
- More Accessible – Unlike TIF, which is capped and often benefits larger municipalities with dedicated staff, SPARC is designed to be easier to administer.
- More Inclusive – TIF’s competitive nature can limit access to growing municipalities. SPARC aims to provide more rural communities with access to similar growth tools.
- New Funding Mechanism – SPARC would allow tax increment revenue to be allocated directly to private developers under Community Agreements (CAs), providing an alternative pathway for financing housing projects.
What’s Next? Legislators are evaluating how SPARC could fit into Vermont’s broader housing strategy. Whether it moves forward or not will depend on how existing misconceptions and concerns about TIF are addressed.
Vermont Towns Seek to Renegotiate with State for Tax Boost
2-3 minute read
Vermont’s 34 municipalities with local option taxes (LOTs) are pushing to keep a bigger share of them to ease property tax burdens.
Catch up quick: Currently, the state keeps 30% of LOT revenue plus a fee, creating a $10 million surplus. Last year, the Legislature changed state law to allow municipalities to adopt new LOTs without a charter change, so this surplus is expected to continue to grow.
- The state uses what it keeps from municipalities to pay for the Payment in Lieu of Taxes (PILOT) program, which compensates municipalities for municipal taxes they are unable to collect on state-owned buildings.
What’s proposed: H.164 is gaining traction in the House with 56 cosponsors and aims to change the state’s portion to 20% and return a growing surplus to towns.
Why It Matters: It could significantly reduce reliance on property taxes and provide a windfall for towns facing budget pressures.
What about the surplus? The Scott Administration was in committee outlining the use of some of that surplus to compensate communities that lose tax revenue from buy-outs of properties experiencing continued flooding.
The Laundry List
Hundreds of hours of committee discussion each week culminate into our advocacy update, so not everything makes it into the overall update; however, we often cover what is left on the cutting-room floor here for our most dedicated readers.
- Eight legislators have introduced a bill for a “Restaurant Meals Program” that mirrors what was done during the pandemic to support Vermont families on state assistance by providing them with meals from local restaurants.
- The House last week passed H.35 which prevents the re-merging of Vermont’s health insurance risk pools, which would result in a 7% or $23.2 million rate increase for small businesses. This week, the Senate Committee on Finance quickly took up and passed the legislation.
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