Analysis: Vermont Has No Formal Budget Stress Test for a Recession. Its Own Report Identified the Gap.
A national database flags Vermont as one of 25 states missing key fiscal planning tools. A report state government produced 17 months ago confirms the gap — officials are now working to close it.
When the Economy Turns, Maine Has a Playbook. Vermont Doesn’t.
When COVID-19 shut down the economy in March 2020, Maine’s budget officials didn’t have to guess what was coming. They pulled out a stress-test report their state had published two years earlier, ran the severe recession scenario, and estimated a revenue shortfall of roughly $200 million for the remaining quarter of the fiscal year. They determined the state could absorb it without emergency cuts. They were right — the actual shortfall came in at less than half that figure.
Vermont had no comparable published budget stress-test report to reach for. It still does not.
A database maintained by The Pew Charitable Trusts, updated through April 2026, tracks which states have adopted two analytical tools that Pew and all three major credit rating agencies identify as best practice for sustainable state budgeting: long-term budget assessments, which project revenues and spending across multiple years, and budget stress tests, which model what happens to a state’s finances when a recession hits or a major funding source disappears. Vermont does not appear in either category.
Only eight states have both tools. Twenty-five states have at least one. Vermont has neither.
Josh Goodman, who helps lead Pew’s research on fiscal management and long-term budget sustainability, confirmed Vermont’s status directly. “Vermont is one of 25 states that has used neither of these analytical tools,” Goodman said, adding that Vermont’s absence from Pew’s records dates to at least 2018, the start date of the organization’s research on the subject.
Why It Matters Now
What makes this more than an abstract governance gap is the moment Vermont finds itself in. The state’s General Fund relies on personal income tax for 50 percent of its revenue — a source Vermont’s own fiscal experts have flagged as highly volatile over the business cycle. Federal funding uncertainty has become a concern for state budget writers, including around agricultural programs, which saw freezes and cancellations as of early 2025, and Medicaid reimbursement, which faces potential cost shifts to states under federal legislative proposals currently moving in Washington. Taken together, those factors point to a period of elevated fiscal risk — without a formal model for how that risk plays out.
Vermont’s Own Report Said So
Vermont’s own government acknowledged this gap in December 2024.
Pursuant to Act 87 of 2024, the Legislature directed the Treasurer’s Office to produce a State Reserves Study and a Stress-Testing Report, in consultation with the Department of Finance and Management and the Joint Fiscal Office. The resulting 28-page report, submitted to the Joint Fiscal Committee on December 15, 2024, directly acknowledged the gap.
On reserves, the working group delivered good news. The report noted that Vermont is rated AA+ by S&P, Aa1 by Moody’s, and AA+ by Fitch — each the second-highest available rating — and that prior downgrades were related to Vermont’s longer-term economic and demographic outlook, not to reserves or financial management, which the agencies continue to score very highly. The General Fund alone holds $306.6 million in reserves, representing 14.6 percent of prior-year appropriations.
On stress testing, the working group delivered something different: an acknowledgment that the gap is real, paired with a recommendation to act only “should personnel and financial resources become available.”
The full sentence from the report is worth reading: “Should personnel and financial resources become available, Vermont could consider conducting a one-time stress-testing and multi-year budget projection exercise to determine its value to the State’s planning and budgeting process.”
One-time. Consider. If resources become available.
The working group was also candid about a structural gap that stress testing is designed to reveal. Vermont currently has a multi-year revenue forecast, produced by the State Economist. It does not have a corresponding multi-year expenditure forecast. That asymmetry means policymakers can see one side of the ledger into the future — but not both sides at once, which is precisely what a stress test requires.
What State Officials Say Now
Adam Greshin, Vermont’s Commissioner of Finance and Management and one of the co-authors of the December 2024 report, said the work has not moved forward — but not for lack of agreement on its value.
“We have not, not because we disagree with the proposal but because we have many other projects on our plate,” Greshin said.
He described the multi-year expenditure forecast as an ongoing internal discussion. “Producing a multi-year budget has been, and continues to be, an active discussion in the executive branch,” he said. “The fluidity of our revenue streams, federal and state, has dissuaded us in recent years but the discussion continues.”
The phrase is notable: federal funding uncertainty — the very condition that makes a stress test most valuable — is also, by Greshin’s account, part of what has made one harder to produce.
Greshin also raised a potential path forward that the December report did not explore. Asked what it would realistically take to conduct a one-time stress-testing exercise, he said the state might not need to build internal capacity at all. “This may be something we could contract out,” he said.
He noted Vermont’s current financial position as context: the state set aside more than $100 million in last year’s budget to meet contingencies, and statutory reserves are fully funded. According to the December 2024 State Reserves Study, Vermont’s unrestricted cash balance peaked at $2.6 billion in June 2023 and stood at over $1.6 billion as of November 2024, though it is expected to decline further as pandemic-era federal funds are drawn down.
Catherine Benham, Chief Fiscal Officer of the Legislative Joint Fiscal Office and a co-author of the December 2024 report, said conversations about closing that gap are already underway — though they were not reflected in the report itself.
“We have talked to Pew about working with Vermont on learning more about, and perhaps developing a stress test for Vermont,” Benham said. “I expect to continue those conversations with the understanding that it will take staff resources to undertake this work.”
She framed the tool as additive rather than corrective. “Stress testing is one tool that could be added to the assortment of tools already used to manage and plan for the future,” she said.
Pew: Vermont Isn’t Starting From Scratch
Goodman pushed back on the resource-constraint rationale. “Many smaller states with staffing constraints have proven that they can regularly produce high-quality analyses,” he said, naming Alaska, Maine, Montana, New Mexico, and Rhode Island as examples. He also noted that Vermont would not be starting from scratch: the state’s consensus revenue estimates already include five-year revenue projections that “could serve as a starting point for long-term budget assessments if combined with spending projections.”
That combination — adding an expenditure forecast to match Vermont’s existing revenue forecast — is precisely what the December 2024 working group report itself identified as the missing piece, without recommending a standing statutory requirement to build one.
The Maine Model — And Connecticut’s
Maine offers a nearby New England comparison with a similarly small economy and revenue base. Maine’s Legislature mandated biennial stress tests in 2017 via Public Law 2017, Chapter 284. The tests are prepared jointly by the state’s Consensus Economic Forecasting Commission — composed of independent economists — and its Revenue Forecasting Committee. The results go to the Governor, legislative leadership, and the joint standing committee of the Legislature having jurisdiction over appropriations and financial affairs every two years by October 1, by law — not contingent on appropriation or available staff bandwidth.
Maine’s most recent stress test, published October 1, 2024, ran two recession scenarios against five years of General Fund revenue projections. Under a moderate recession beginning in early 2025, Maine’s model estimates a General Fund revenue decline of 6.1 percent in FY2026, with revenues still 2.9 percent below baseline in FY2029. Under a severe recession, the peak decline reaches 14.8 percent in FY2027, with Maine’s rainy day fund — currently holding $908 million, or 17 percent of prior-year General Fund revenue — exhausted by early FY2027. The report gives the Governor and Legislature a concrete timeline: approximately 15 to 18 months to respond before reserves run out.
That kind of specific, scenario-based planning information is what Vermont currently lacks the institutional machinery to produce.
Goodman noted that Maine’s model built directly on existing staff capacity. “Maine’s approach has been to task the state’s revenue forecasters with conducting stress tests,” he said. “This work builds directly off their regular forecasts — both involve estimating how economic conditions would translate to revenue collections.”
Connecticut offers a newer model still. According to Goodman, Connecticut passed a law in 2025 requiring budget stress tests, using historical recessions as a guide for estimating revenue declines — an approach he described as producing “reasonable estimates without the need for more complicated models that require more staff time and specialized training.”
Vermont’s working group cited both Maine and Connecticut approvingly in the December 2024 report. What it did not do was recommend Vermont follow their example by statute.
The Defensible Case — And Its Limits
There is a defensible version of Vermont’s current position. Vermont’s credit ratings — AA+ from S&P, Aa1 from Moody’s, AA+ from Fitch — reflect genuine fiscal strength. Vermont’s rainy day fund balances have ranked above the mean and median of peer states in each of the last three fiscal years. Research has not demonstrated a clear correlation between having a formal stress test and having a strong credit rating — a point the working group itself noted in recommending against requiring the exercise.
But Vermont’s credit ratings carry a specific caveat worth noting. Vermont lost its triple-A rating from Moody’s in October 2018 and from Fitch in July 2019 — downgrades the working group attributes explicitly to Vermont’s longer-term economic and demographic outlook, not to any failure of fiscal management. That is precisely the kind of structural, multi-year trend that a long-term budget assessment is designed to surface and quantify before it becomes a crisis. Vermont did not have one then. It does not have one now.
Goodman framed the broader national stakes plainly. “States across the country face tightening budget conditions, with both short-term shortfalls and long-term structural deficits common,” he said. The pressures driving those gaps, he said, include aging populations, increasingly frequent natural disasters, federal decisions shifting costs for programs including Medicaid and SNAP to states, and states’ own decisions to cut taxes and increase spending. “These challenges make high-quality long-term analysis even more important.”
The Bottom Line
Vermont knows the tools exist. It knows it doesn’t have them. The December 2024 report left the question of whether to build them contingent on resources that, seventeen months later, have not materialized — even as the officials who wrote that report have quietly begun conversations with Pew about changing that.
Maine built its stress test with a statute. That cost nothing.
Compass Vermont contacted the Vermont State Treasurer’s Office, the Vermont Department of Finance and Management, the Legislative Joint Fiscal Office, and The Pew Charitable Trusts for this story. The Treasurer’s Office did not respond to multiple requests for comment. Responses from all other parties have been incorporated.
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