Rainy days are beginning; Vermont should prepare for federal cuts

The federal government is making massive cuts to government functions that Americans—and Vermonters—count on and is planning to make more cuts. Layoffs of federal workers, funding freezes, tariffs, and cuts to government programs, including public benefits for those most in need, could threaten the well-being of Vermont’s people and its economy.

While we may not know the scale of these cuts, the timeline, or where cuts will occur, this crisis needs attention. To address funding gaps and ensure that families can meet their basic needs, now is the right time for the legislature to craft its response to federal actions before the end of the legislative session, which is rapidly approaching.

By considering options to raise revenue and prepare to expand state benefits, the state can protect Vermonters and avoid the worst impacts of federal cuts.

Several federal actions have already occurred but are on hold. For instance, federal courts have reinstated fired workers and temporarily paused layoffs across 19 agencies. The Justice Department is appealing the courts’ decisions. While this is at least a temporary relief for the state’s 4,500-plus federal employees, many still don’t know how long they will have a job.

Federal funding freezes are also supposedly on hold. But the impacts of these freezes in Vermont would be astronomical. Federal funding accounts for roughly 35 percent of the state’s budget, or more than $3 billion. This funding helps to build infrastructure, educate kids, provide health care, and more. The University of Vermont has already instituted a temporary hiring freeze in response to federal actions.

Congress is expected to pass massive cuts to social benefits programs such as Medicaid and food stamps. The final details and impacts of this plan are currently unknown, although cuts are expected to be passed into law this summer. Under proposals on the table, over a third of the 140,000 Vermonters currently enrolled in Medicaid and nearly 70,000 receiving food stamps risk losing some or all of their benefits.

Washington just passed legislation that extends last year’s funding levels for federal programs. Given sharp cost increases, level funding translates to cuts, including an estimated loss of 32,000 housing vouchers nationally.

All this uncertainty and pain is exacerbated by Trump’s tariffs, which are expected to cost the average Vermont consumer roughly $672 a year. Local businesses are also already experiencing the impacts of the trade war against Canada.

Although the Trump administration and Department of Government Efficiency say they are attacking “waste, fraud, and abuse,” these cuts could help pay for tax cut extensions that overwhelmingly benefit the wealthiest. In Vermont, the top 20 percent of taxpayers reap 69 percent of all proposed tax cuts. These cuts are expected to save the most affluent Vermont taxpayers an average of up to $54,000, nearly 500 times the cut for the bottom fifth.

The details are changing daily. But we know that proposed federal cuts could put families at risk of losing access to necessities like food and housing. The legislature does not need to know the specifics to take the first and perhaps most important step to protect Vermonters: Raise revenue to fill funding gaps.

In response to the federal government’s plan to slash taxes for the highest earners and cut critical public benefits, lawmakers have an opportunity to strengthen the state’s revenue streams and make its taxation fairer. The top 1 percent of earners have disproportionately benefited from federal tax cuts over the last five years; they also already pay a smaller portion of their income in state and local taxes than middle-income Vermonters. By increasing taxes on the wealthiest, the state will have resources to protect Vermonters from policy changes in Washington.

We talk about saving money for a rainy day—but the rain has started to fall. Decisions on where to direct state funds to meet Vermonters’ basic needs most effectively can be decided later. For now, the legislature can shelter Vermont by figuring out how to raise revenue to ensure the well-being of all its residents.