Governor Phil Scott’s Fiscal Year 2027 Budget Address outlines a spending plan centered on affordability, economic stability, workforce growth, and systemic reform. While the Governor emphasizes no new taxes or fees, the budget reflects a shift back to pre‑pandemic fiscal constraints due to downgraded revenue forecasts and the tapering of federal stimulus funds.

For Vermont’s construction industry, the implications are direct and significant. The budget affects public infrastructure funding, project pipelines, regulatory environments, workforce availability, and housing‑related development. 

The construction industry remains central to solving Vermont’s housing crisis, climate resilience needs, economic growth, and infrastructure modernization.

AGC/VT members should prepare for a year marked by tight capital budgets, shifting priorities, and potential regulatory improvements that may either accelerate or slow project delivery.
 
Key Impacts on Contractors
1. Transportation Fund Shortfall = Pressure on Infrastructure Projects
Structural Deficit. The Transportation Fund faces a $33 million structural deficit, driven by:

• Reduced gas-tax revenues from fuel efficiency and EV adoption
• Reduced forecasted revenue
• Increased costs for materials, labor, and winter maintenance

Impact on Contractors

• Fewer new projects in FY27 as AOT focuses on maintaining existing commitments.
• Potential slowing or deferment of planned roadway, bridge, and safety projects.
• Increased competition for a smaller pool of DOT-funded work.
• Continued uncertainty around long-term funding mechanisms as the gas tax becomes obsolete.

AGC/VT Position:
We support the Governor’s proposal to gradually return Purchase & Use revenue to the Transportation Fund, but contractors need a long-term, stable funding model for transportation, something Vermont has yet to establish.
 
2. Housing Investments & Act 250 Modernization Could Increase Construction Demand
Positive Developments

• Continued commitment to housing as a crisis-level priority.
• Extension of Act 250 interim housing exemptions to 2030.
• Renewed effort to repeal the Road Rule, which has stalled rural housing projects.
• Permanent funding sought for VHIP, which creates renovation and small‑unit rehab opportunities.

Projected Impact

• Increased permitting certainty may accelerate project starts.
• More housing development opportunities across Vermont.
• Strong demand for contractors in:
• Multi-family housing
• Infrastructure to support new housing (water, wastewater, roads)
• Rehabilitation and adaptive reuse projects

3. Education Funding Crisis Could Crowd Out Capital Spending

• Budget Context
• Education spending has grown 39% in five years, driving significant property tax increases. The Governor proposes $105 million to soften the property tax spike but warns that uncontrolled education spending drains funds from other priorities.

Contractor Impact

• School capital projects may face greater scrutiny or delays as districts tighten budgets.
• Pressure to defer maintenance or renovations, which could reduce K–12 construction volume in FY27.
• Municipal budgets could also tighten, affecting local public works.

4. No New Taxes or Fees: Good for Businesses, but Budget Tightens Elsewhere
Governor Scott reaffirmed he will not raise taxes or fees.
 
Impact on Contractors
Positive:

• No increases in business, fuel, or construction-related fees.
• Predictable cost environment for contractors.

Negative:

• Limited state revenue growth restricts major new investments in:
• Capital construction
• State buildings
• Road and bridge expansion
• Water, wastewater, and municipal upgrades

Gawd, I hate this: business stability improves, but project volume may tighten.
 
5. Commitment to Public Safety and Regulatory Reform Helps Workforce Stability
Governor’s Priorities

• Increased public safety funding
• Expanded mental health, addiction, and recovery services
• Policies aimed at reducing repeat-offender crime

Impact on Contractors

• Safer downtowns and communities support workforce recruitment and retention.
• Improved recovery infrastructure helps stabilize employees affected by addiction.
• Contractors will benefit from improved conditions on and around job sites.

6. Energy Policy: Potential Effects on Commercial & Industrial Projects
The Governor calls for:

• A revised clean energy standard utilizing hydro, nuclear, and solar flexibility
• Policies aimed at lowering electricity costs

Industry Impact

• Lower projected utility costs improve operating environments for contractors.
• Potential new investment in grid modernization, renewable infrastructure, and resiliency projects.
• A more flexible energy policy may stimulate commercial development.

7. Workforce Implications: Mixed Outcomes
Positive

• Housing expansion efforts improve workforce recruitment.
• Better public safety and addiction services support worker retention.

Concerns

• State budget constraints mean limited new investment in workforce development programs, except in healthcare.
• No major new funding to expand skilled trades training pipelines.

AGC/VT will need to continue leading the trades‑focused training effort.
 
Conclusion: What FY27 Means for Vermont Contractors
Governor Scott’s FY27 budget is a tight fiscal plan, shaped by slowing revenues and the end of federal stimulus.

For Vermont contractors:
Challenges

• Shrinking Transportation Fund = fewer highway projects
• Tight overall state budget = smaller capital pipeline
• Municipal and school budget pressure = delayed local projects

Opportunities

• Act 250 modernization
• Housing expansion (30,000 units over 4 years)
• Permanent VHIP funding and rental rehab incentives
• Regulatory reductions that lower construction costs
• Energy policy shifts that may spur new infrastructure

AGC/VT’s Role Moving Forward

AGC/VT will:

• Advocate for long-term transportation funding reform.
• Support Act 250 modernization that accelerates development.
• Push for sustained investment in trades workforce training.
• Ensure contractors are represented as housing and energy policy evolves.

The construction industry remains central to solving Vermont’s housing crisis, climate resilience needs, economic growth, and infrastructure modernization. FY27 presents challenges, but also major opportunities, if regulatory reforms proceed and housing investments continue to grow.