February 17: Special Funding Proposals – Opioid Abatement, Appraisal, and Town Highways

The House is expected to take action later this week on H.660, an act relating to fiscal year 2027 opioid abatement special fund appropriations.  

Revenues to the opioid abatement special fund come from a number of negotiated settlement agreements with pharmaceutical companies and pharmacies understood to be at fault in the national opioid overdose crisis. Recommendations for how the state should spend its share of these settlement monies annually are made by the State Opioid Settlement Advisory Committee (OSAC), which includes seven members appointed by VLCT to represent local interests. The OSAC recommendations for FY27 are available here. 

The appropriations for FY27 made in H.660 total $6,317,277 (including prior year adjustments) and are generally in line with the committee’s recommendations, and include: 

Annual funding to Vermont Department of Health (VDH): 

One-time funding for existing programs: 

One-time funding for new programs: 

Last week the chair of the Senate Committee on Transportation, Senator Richard Westman, revealed a new outside-the-box proposal to help municipalities fill transportation funding shortfalls.  

In Governor Scott’s proposed budget, total proposed “Town Highway” program aid is down by over $7 million, or -7.3%, from $96,665,344 in FY26 to $89,648,226 in FY27. As we reported in our Legislative Preview, the overall $30 million revenue gap in the state Transportation Fund is made even more concerning as transportation construction and paving project costs have risen by 40-60% over the last five years.   

The Senate proposal includes a new municipal authority to assess a “Local Option Municipal Services Tax”. The new taxing authority would work like a 1% Local Option Tax (LOT), but the portion retained by the state would be dedicated to a new “Local Option Municipal Transportation Special Fund” instead of funding going to the Payment In Lieu Of Taxes (PILOT) fund. In the current draft language, first introduced on Wednesday, February 11: 

Since the start of the session, we have said we would support any effort to address this year’s transportation fund budget shortfall and minimize its effect on municipalities. VLCT is always supportive of efforts to grant new municipal revenue funding authority.  This proposal might not be perfect, but it’s a good place to start!  

We will be working, over the next few weeks, with both transportation committees to suggest improvements and maximize the municipal benefits in this proposal. Stay tuned and give us your thoughts at jhanford@vlct.org and ssheehan@vlct.org. 

According to the state’s FY25 end-of-year Special Fund Report issued in November, the PILOT Special Fund (SF#21485) has a surplus of more than $15 million. This money is from local revenues generated by Local Option Taxes (LOT) on meals, rooms, sales, and alcohol and retained by the state for the purpose of making annual Payments in Lieu of Taxes for state-owned buildings and lands. 

As the PILOT surplus has grown over the last two years, VLCT has held concerns that legislative appropriations would rob the special fund for non-municipal purposes or priorities – and has advocated that the surplus be returned to the more than 30 municipalities that raised it.  

In the governor’s FY27 budget, he recommends that $3.5 million of PILOT surplus be used for the state expenses related to property appraisal and the equalization study which is used to set the state education fund property tax rate. The House Committee on Appropriations agreed with this $3.5 million in their version of the budget, and doubled down, taking another $3.5 million for the same purpose in their FY26 Annual Budget Adjustment (BAA), which has passed the House. These appropriations would use half of the available PILOT Special Fund surplus for the purpose of setting the statewide grand list.  

Municipal leaders understand the acute budget challenges facing state appropriators this year. As state property taxes have increased more than 40% over the last five years, local budgets have suffered under the same driving budget pressures including the rising cost of health insurance and other benefits, high interest rates, sustained inflation, and increased salary and professional costs from a diminishing local workforce. That is why so many more towns are voting on create or add a Local Option Tax at their town meeting this year. Waitsfield, Milton, Swanton, Chester, and Morristown will consider LOT adoption. The town of Stowe will take up a charter change that would establish a unique 2% LOT authority.  

Local Option Taxes are one of the rare non-property revenue authorities that Vermont municipalities can use to alleviate the ever-growing property tax burden on Vermont families and businesses. VLCT objects to appropriation of the existing PILOT Special Fund surplus for annual payments to municipalities for property valuation and grand list maintenance.   

The work of maintaining and setting up the state’s grand list falls primarily on volunteer municipal listers and appraisers, many of whom are unpaid or receive moderate stipends. The current annual per parcel payment amounts granted to municipalities fall far short of the true cost of mass reappraisal, now required to be conducted every six years. Municipal governments are obligated to set the grand list for the purpose of setting the state education tax rate – and are required to collect those taxes. Furthermore, municipalities must remit state property tax payments regardless of whether the property owner falls delinquent.   

Given the high rate of state property tax increase over successive state budgets, more Vermonters are unable to pay their taxes, which creates an added cost for municipal budgets. Many municipalities are carrying forward hundreds of thousands of dollars of deferred revenues from delinquent property taxes in their FY27 municipal budgets. This burden is in turn passed on to Vermont taxpayers through the municipal property tax rate.   

Revenues created by the 38 Vermont municipalities using LOT should not be paying for any statewide expense – least of all for the current statewide property valuation and tax collection system which already overburdens local budgets. These are local revenues created by voter authority.   

We urge the legislature to reverse course and find a more appropriate revenue source from within the state’s general fund or education fund to support costs related to the state’s property valuation system.   

Last week opened with a press conference hosted by the leaders of the nonpartisan Rural Caucus calling for legislative action to slow down Act 181 implementation for the Road Rule and Tier 3 jurisdiction.  

VLCT Director of Intergovernmental Affairs Josh Hanford spoke at the press conference saying: “When town officials look at the draft Tier 3 map, they fear that this sweeping new Act 250 jurisdiction will freeze their community in amber. The draft rule would create new duplicative permit requirements along key highways and in existing neighborhoods for types of construction as incidental as a garden shed or one-car garage – as well as for the new housing that towns need, want, and allow in local zoning. If the state is going to apply Act 250 to 80% of the land area in Vermont, then local officials and citizen planners need time to see and understand what the LURB [Land Use Review Board] proposes while they make decisions about future Tier 1 areas that could be Act 250 exempt. VLCT urges the legislature to take action this session to slow down Act 181 and make sure we are striking the right balance between environmental protection and smart growth.” 

At least Senate leaders have heeded their call, as the Senate Committee on Natural Resources and Energy continued to hold joint hearings throughout the week on Act 181 along with the committees on transportation and economic development.  

The VLCT advocacy team testified twice at the joint hearings, first on Tuesday regarding our concerns related to the Road Rule and Tier 3, and again on Friday regarding the process for the adoption of Tier 1A and Tier 1B areas.  

VLCT is calling for legislative action this session to:  

Most stakeholders who have testified, including the Vermont Natural Resources Council (VNRC), have agreed that the current timeline for Act 181 implementation is misaligned and will support deadline extensions for the Road Rule and Tier 3 rulemaking and guidelines.  

Here are some recently released reports and news stories related to top issues for local government.