What’s the plan when pandemic aid ends?

In the past few years, Vermont has gotten a taste of what it would be like to have a state that worked for everyone who lives here. Thanks to extraordinary federal relief in the wake of the COVID-19 pandemic, the state received billions of dollars that allowed policy makers, at least for a time, to acknowledge and address gaps that had been lingering for decades: health care, child care, livable incomes, and clean water to name a few.

The state budget for fiscal 2023, which begins July 1, will top $8 billion for the first time. State spending for next year will be about 40 percent higher than fiscal 2019, the year before the pandemic. In normal times, we might expect the budget to grow about 12 or 13 percent over that period. To be sure, much of the additional money was needed to cover extraordinary costs related to the pandemic. But some of the federal aid also was intended as economic stimulus, so the administration and the Legislature had latitude in how to spend a lot of the money.

In State of Working Vermont 2021, we tracked $11 billion in federal funds that flowed into the state through the CARES Act, the American Rescue Plan Act (ARPA), and other pandemic relief and economic stimulus legislation from Washington. Much of that money went directly to businesses and individuals—as loans, grants, household stimulus payments, and unemployment compensation—so it was not part of the state budget.

But a portion of the federal funds did go directly to state government as it fought both the health effects and economic effects of the pandemic. Some were earmarked specifically to expand health care services, for example, extend broadband availability, or provide emergency rental assistance. There also were increases in regular federal funding—for Medicaid, for example, or the Supplemental Nutrition Assistance Program, which we call 3SquaresVT.

It’s difficult to isolate every dollar of pandemic-related funds or economic stimulus money state government received since March 2020. However, from the pattern of federal funding prior to fiscal 2020, we can estimate how much additional funding Vermont received related to the pandemic. Our analysis shows that for fiscal 2020 through fiscal 2023, the Legislature had approximately $3.6 billion in additional federal funds to appropriate. ¹ That was almost a 43 percent increase over the federal funds Vermont most likely would have received during this period had there been no pandemic.

A big chunk of the federal money that went to state government had relatively few strings attached. Through the CARES Act and ARPA, Vermont got about $2.4 billion that the Legislature and the administration can spend through 2026. The final $546 million of this discretionary funding was allocated by the Legislature in the fiscal 2023 appropriations bill passed last month.

Vermont will continue to benefit from additional federal funds for the next few years. Money allocated for broadband, housing, and education, for example, is expected to be spent over the next two years. This includes around $400 million passed through the state budget to school districts for COVID safety and addressing pandemic impacts on students. The state is also still receiving ongoing funds tied to the end of the public health emergency, including increased Medicaid and 3SquaresVT dollars. The federal Infrastructure Investment and Jobs Act of 2021 guarantees over $2 billion to Vermont through 2027, and possibly more in competitive infrastructure grants.

The billions in federal relief helped stimulate the economy, which in turn boosted state revenues available to support Vermonters during the crisis. According to official state revenue forecasts, personal and corporate income taxes for fiscal 2020 through fiscal 2023 are expected to be $777 million above the amount that had been forecast for the same period just before the start of the pandemic.

Some of the extraordinary federal aid Vermont received was emergency funding to cover expenditures we all hope will not recur. Some will cover infrastructure projects that should serve Vermonters for years. But for the challenges that existed before the virus struck and that require ongoing attention to keep _Vermont moving forward, policy makers must find the needed resources to sustain Vermont as a livable state. And they need to do it before the federal money runs out.

1. Projections of federal funding without pandemic relief for fiscal 2020 through fiscal 2023 were based on the trend in federal funds in the adjusted appropriations for fiscal 2014 through fiscal 2019. There is some duplication of federal funds appropriations because in some cases unspent federal funds are reappropriated in the following year.[↩]