2025 Vermont Legislative Session Wrap-Up
2025 Vermont Legislative Session Wrap-Up
The 2025 legislative session unfolded under growing pressure to address affordability, workforce retention, and economic stagnation across Vermont’s regions. Lawmakers responded with a mix of transformative and incremental legislation touching on education governance, public infrastructure, business financing, and labor protections.
Some key proposals passed with strong bipartisan support, while others stalled or drew vetoes—leaving unfinished business for 2026. The session's signature accomplishments include the launch of a first-in-the-nation project-based TIF program that municipalities and developers can use to finance housing infrastructure and sweeping education governance overhaul.
FY26 State Budget:
The $9.01 billion FY26 budget for the State of Vermont, was the product of a session that was odd for budgeting in a few distinct ways.
- The year without a Budget Adjustment Act (BAA): Disagreement between the Governor and the Legislature over the rules governing the general assistance program providing motel vouchers for those unhoused resulted in the demise of not one but two FY25 budget adjustment bills, due to the Governor’s insistence that they not contain such policy.
- Preparing for Federal Cuts: Due to possibly massive changes in the federal budget and Vermont’s heavy reliance on federal funding that makes up one-third of the state’s budget, the budget contains surplus and reserve buffers and instructions on how the e-board, Joint Fiscal Committee, and Administration are to handle cuts in the off session.
- Done Before Adjournment: Typically, the budget is the last bill to be passed, signaling the end of the session. This year, the legislation was wrapped up long before, and the education transformation bill dictated adjournment.
- Money For More Time: This budget included appropriations to keep the legislature open later and allow them to come back to respond to federal budget cuts.
View a summary of the budget here.
Housing:
Housing, Community and Housing Infrastructure Program (CHIP): Vermont’s First Project-Based TIF Program
A centerpiece of this year’s economic development agenda, S.127, creates the Community and Housing Infrastructure Program (CHIP), a major new financing tool designed to help municipalities build the infrastructure needed to support housing and economic growth. CHIP represents the first statewide, project-based TIF model in Vermont, enabling communities to access future Education Fund increment from new development to pay for upfront investments in water, sewer, stormwater, broadband, and site development.
Key provisions include:
- Authorizes up to $200 million/year in Education Fund tax increment retention, capped at $2 billion over 10 years.
- Municipalities may use tax increment to fund public infrastructure that directly supports new housing or job creation.
- Broad infrastructure eligibility with VEPC approval.
- No location criteria apply — CHIP is available statewide, regardless of designation status.
- Public votes are required for every CHIP district and for any municipal bonding.
- Projects must pass a “but-for” test unless they include at least 15% affordable housing.
- Affordability affects retention:
- Up to 70% of Ed Fund increment retained for market-rate housing.
- Up to 80% retained for projects with ≥15% of units at or below 80% AMI rent or 150% AMI ownership.
- Municipal increment may be retained at 100%.
- Primary residency requirement applies to new for-sale and rental housing during the debt period.
- Projects require VEPC approval, with findings on fiscal viability, housing impact, and public good.
- VEPC rulemaking due by Nov 15, 2025; applications open Jan 1, 2026.
- Program sunsets Dec 31, 2035, but districts may operate beyond that once approved.
CHIP is designed to support a pipeline of over $2 billion in needed infrastructure projects statewide, including housing-adjacent brownfield sites, rural growth centers, and infill redevelopment. It marks a major shift in Vermont’s infrastructure financing landscape by offering smaller communities access to growth-based funding tools traditionally only available in large downtown TIF districts.
Other housing provisions in the Act include:
- Substantive and technical amendments to the Vermont Rental Housing Improvement Program:
- Exempts entities administering the program from certain licensed lender requirements.
- Expands the populations intended to be served through the program to include those displaced due to a natural disaster and allows an organization to hold a master lease explicitly used to serve intended recipients.
- For 10-year forgivable loans, the act allows landlords to rent the rehabilitated units for fair market rent established by the federal Department of Housing and Urban Development.
- Mandates a minimum set aside for annual funding to be used for the five-year forgivable loans and grants and requires annual reporting on program outcomes.
- Adds the Vermont Manufactured Home Improvement and Repair Program to provide funding for development and rehabilitation for manufactured housing in mobile home communities.
- Establishes the Vermont Infrastructure Sustainability Fund. This revolving fund will be administered by the Vermont Bond Bank to provide low-interest loans or to purchase bonds from municipalities to expand infrastructure capacity. The Bond Bank must work with the Department of Housing and Community Development to establish program guidelines and award terms. Projects funded through the program must demonstrate a connection to housing development with municipal commitment to own and operate the project.
- Under the Rental Housing Revolving Loan Program administered by the Vermont Housing Finance Agency (VHFA), the act authorizes VHFA to set annual rent increases above the three percent statutory cap.
- Creates the State Housing and Residential Services Planning Committee to generate a State plan to develop housing for individuals with developmental disabilities with a report issued on or before November 15, 2025. The Committee ceases to exist on November 30, 2025.
- Requires municipalities to provide additional property information to the Department of Taxes and amends the information provided by landlords on the landlord certificate.
- Requires the Department of Housing and Community Development to issue a report on or before November 1, 2026, on how to establish a State land bank with an interim report on January 15, 2026.
- Amends the State public accommodation and unfair housing practices act to prohibit discrimination against individuals based on citizenship or immigration status.
- Authorizes a landlord to accept different forms of identification to conduct criminal or background checks and prohibits landlords from requiring a Social Security number on a residential rental application.
- Authorizes differential treatment on the basis of citizenship or immigration status if required by federal law and authorizes lenders to take into account immigration status when making credit determinations.
- Moves the date for the Land Use Review Board Act 250 Appeals Study to November 15, 2025.
- Authorizes management of development soils at locations permitted for that purpose under the State’s Solid Waste Management Rules when the authorization meets certain minimum requirements.
- Requires the Agency of Natural Resources to report on the status of the management of development soils as part of its biennial report to the General Assembly.
- Requires the Secretary of the Agency of Natural Resources to prioritize review of remediation under the State Brownfield Property Cleanup Program for sites that contain housing and requires a report from the Agency of Natural Resources on or before November 1, 2025, with proposals to make the Brownfields Program substantially more sufficient.
Taxation:
Education Reform and School Redistricting
After multiple false starts and a near collapse in conference committee, the Legislature passed H.454, a landmark education reform bill that reshapes how Vermont funds and governs its public school system. The bill:
- Replaces the pupil weighting system with a foundation formula, intended to equalize funding per student across districts.
- Establishes statewide per-pupil spending standards, graduation requirements, and class size minimums.
- Creates an 11-member District Design and Reorganization Committee, charged with presenting three statewide maps for redrawing school district boundaries.
- Requires the General Assembly to select a redistricting plan by January 2027, with new consolidated districts operational by July 2028.
- Launches a Commission on the Future of Public Education to address governance roles, staffing levels, and long-term cost pressures.
One of the most significant inflection points will come in 2026, when the State Board of Education is tasked with presenting three statewide redistricting designs. The Legislature must choose one in 2027. Once district lines are finalized, the shift to regional governance models may have far-reaching implications for school facilities, workforce planning, local engagement, and capital investment—particularly in regions facing declining enrollment or high per-pupil costs.
The redistricting phase will likely be the most controversial element, as it could dramatically alter local governance structures, regional staffing patterns, and future school capital investments. For communities already grappling with enrollment decline, aging facilities, or budget volatility, the impacts could be transformative—economically, politically, and socially.
Tax Relief Bill
A vehicle for a long-debated slate of tax cuts, the $13 million in cuts will take effect retroactively as of January 1, 2025.
- Expanded Child Tax Credit (CTC): Increases age eligibility from 5 to 6 years old.
- Earned Income Tax Credit (EITC) Expansion: Childless workers will see the credit boosted from 38% to 100% of the federal EITC amount.
- Social Security and Retirement Income Tax Relief: Increases the AGI threshold by $5,000 for partial Social Security exemptions.
- Exemption for military retirement and survivor benefits: Fully exempt up to $125,000 AGI, with a phase-out up to $175,000. Taxpayers may claim this in addition to Social Security or Civil Service Retirement exemptions (must choose one).
- New Vermont Veteran Tax Credit: Up to $250 refundable credit for low-income veterans, phasing out at $25,000 federal AGI.
Yield Bill – Property Tax Buydown
H.491, Act 24
The annual bill that sets property tax rates, utilized a $77 million general fund transfer to lower the tax rate with a uniform buydown across all property taxpayer classes, reducing the increase from 5.9% to 1.1%.
More Local Options Tax for Municipalities
The final vehicle for language first discussed in H.164, which lowers the amount of LOT revenue that the state withholds from 30% to 25%, allowing towns to retain a greater portion of the revenue. The state uses the revenue it retains from municipalities to fund the Payment in Lieu of Taxes (PILOT) program, which compensates towns for municipal taxes not collected on state-owned buildings. However, this program was running a $10 million surplus for the state, which was projected to grow.
Economic and Community Development:
Alcohol to-go
Repeals the sunset on alcohol to-go and allows the practice to continue, making this practice, which started during the pandemic and has been extended multiple times, a permanent part of our liquor law allows businesses greater stability.
Economic and workforce development bill
- Creates a task force to investigate the potential creation of a convention center.
- Tasks the Agency of Commerce and Community Development with examining ways to improve funding opportunities for small businesses.
- Establishes the Vermont-Ireland Trade Commission.
- Appropriates $150,000 for an International Business Office.
- Includes language from H.34, pertaining to workforce leadership, which was sent by the House and stalled in the Senate.
Data Privacy (No final bill)
S. 71; S. 93; H.208
Data privacy conversations were a source of contention in the last legislative session, and the conversation continued this session. The business community clearly communicated its preference for a Senate bill, S.93, early in the session due to its clearer guidelines and alignment with existing regulations.
- The Senate was pragmatic, understanding that the business community and the Governor would prevent the passage of legislation that contained a private right of action, so they replaced the language of S.71 with that from S.93, and that legislation passed the Senate unanimously.
- The bill did not have a warm welcome in the House, whose sole privacy aim was contained in H.208, the House privacy bill that had the same language as was originally in S.71 when it was introduced.
- The privacy bill sat idle for weeks and ultimately did not move in the House. Discussion will resume next year.
- Another privacy bill, H.342, which dealt with private data of law enforcement and public officials, received greater attention, as well as accusations that it was “litigation entrepreneurship” in the House and was the subject of some tense negotiations before passing the House; however, it received little attention in the Senate and languished.
Business Financing and VEDA Modernization
Updates the Vermont Economic Development Authority (VEDA) to respond to today’s business and capital landscape. The bill:
- Expands VEDA’s toolkit to include forgivable loans and grants.
- Encourages co-financing with federal and philanthropic programs.
- Clarifies statutory authority for clean energy and innovation financing.
These changes position VEDA to play a broader role in post-pandemic business support, energy transition projects, and rural economic development.
Cottage Food Producers:
Increases the exemption threshold for cottage food producers from $10,000 in annual sales to $30,000 per year.
Labor and Employment Law Updates:
Wage, Unemployment, and Workers’ Comp Reforms:
S.117; Act 40
Contrary to early debate, the enacted law does not create just cause termination. Instead, it:
- Increases penalties for employers who willfully withhold wages.
- Improves transparency and reporting for unemployment insurance (UI) administration.
- Modernizes rules and penalties around workers’ compensation, including stricter deadlines and late-payment penalties for insurers and employers.
- Prepares the UI system for a major IT overhaul, slated for 2026.
Public Sector Bargaining
S.125; Vetoed
Would have expanded bargaining rights for employees at certain quasi-public and municipal entities. Governor Scott vetoed the bill, citing financial and administrative burdens on local governments. The Legislature did not attempt an override.
Expanding Vermont’s Parental & Family Leave Act
Allows up to 12 weeks of unpaid, job-protected leave for bereavement, safe leave (for domestic violence, sexual assault, or stalking), military family exigencies, miscarriage recovery, foster-child bonding, and broader family definitions including grandparents, siblings, and domestic partners.
Welcoming workers
Establishes a study on the creation of the Office of the New American to assist new Vermonters in navigating services, obtaining credentials, finding housing, and securing employment.
Energy, Environment, and Telecommunications:
Stormwater Management and Three‑Acre Permit Changes & Support
Extends compliance deadlines for Vermont’s Three-Acre Stormwater Permit by five years, authorizes municipalities to charge stormwater fees with majority property-owner approval, preserves the 0.22% Clean Water Surcharge permanently, directs new stormwater grant funding, and creates a study committee to explore regional stormwater utility districts.
The Clean Heat Standard and Global Warming Solutions Act
Were resolved outside of the Legislature this session.
- After months of advocates asking the Legislature to address the Advanced Clean Car and Advanced Clean Truck standards, Governor Scott took action and signed an executive order postponing their implementation.
- Congress also passed a Congressional Review Act resolution repealing Environmental Protection Agency waivers that allow California, and 16 other states that follow its lead (including Vermont), to set regulations for emissions from cars and light-duty trucks.
- The Vermont Public Utilities Commission ruled that they would not be pursuing the implementation of the fuel dealer registry in the Clean Heat Standard, which was the only component of legislation that would go into effect without the Legislature approving the “check back” provision.
- The PUC action doesn’t kill the Clean Heat Standard, rather renders it a vestigual organ, like an appendix that lays dormant and inactive with the potential to burst in the future, if for example, a lawsuit challenging the state for not meeting the goals of the GWSA is successful and a court wants to force the state to act.
PFAS Legislation
Builds off the work of previous legislation to further limit the sale and production of consumer products containing PFAS, expanding existing bans to cleaning products, dental floss, and containers lined with PFAS.
Healthcare:
Healthcare Reform Bill:
Authorizes the Green Mountain Care Board (GMCB) to;
- Implement reference-based pricing by hospitals in FY27, capping hospital charges using Medicare or similar benchmarks.
- Task AHS with making recommendations on reducing hospital spending by 2.5%, or about $100 million, statewide for FY 2026, with a first report by July 1, 2025.
- Transition to global hospital budgets, starting with pilot hospitals in FY2028 and expanding to all non-critical access hospitals by FY2030 (resource-dependent).
- Coordinate spending cuts in FY2026 (initially 10%, later updated to 2.5%).
- Expand budget review criteria, requiring detailed reporting on executive compensation, service cuts, administrative costs, and alignment with strategic objectives.
- Support long-term reform by tasking the Agency of Human Services (AHS) with creating a Statewide Health Care Delivery Strategic Plan to guide care access, quality, and cost across sectors, including mental health and primary care.
- Invest over $5 million for staffing, implementation, and integration of a statewide data system to monitor spending, outcomes, and delivery reform.
Emergency Budget Powers
Intended as an emergency financial stabilization tool for the state’s healthcare system, H.482 empowers the GMCB to temporarily reduce reimbursement rates to stabilize an insurer on the brink of insolvency, adjust hospital budgets retroactively, and appoint independent observers for hospitals that misrepresent finances or fail to comply.
Health Insurance Market Unmerger
Signed into law early in the session, H.35 prevents an estimated 7% ($23.2 million) rate hike for small businesses by making permanent the separation of individual and small-group health insurance markets.
Outpatient Drug Price Caps
Caps what hospitals can charge insurers for outpatient prescription drugs to 120% of ASP starting January 2026, following an amendment to delay the full cap for hospital planning. Proponents claim the cap could reduce BCBS premiums by 4% and school plan premiums by 3%, however, hospitals argue this could lead to over $40 million in lost revenue, straining critical services.
Medical Debt Relief
Uses $1 million from the State Treasurer’s Office to erase up to $100 million in Vermonters’ medical debt through a nonprofit partnership.
Medicaid Rates for Community-Based Providers
Sets Medicaid payment rates to better support community-based health and social service providers.
Certificate of Need (CON) Threshold Reform
Aims to modernize oversight and reduce unnecessary regulatory burdens by increasing the monetary thresholds for healthcare facilities required to seek approval via the CON process.
Our thanks to the Lake Champlain Chamber of Commerce and Downs, Rachlin, Martin for their weekly legislative information.