Promise Kept or Law Overruled? Vermont's Solar Showdown Exposes Federal Funding Fight
After $62 million vanished from the state's accounts, Vermont's AG has joined 20 other states suing the government, arguing that the funding for solar was a legally binding commitment.
This fall, Vermont was supposed to be gearing up to launch a landmark program to install solar panels on the homes of thousands of low-income families, funded by a federal grant of over $62 million. Instead, that money has vanished from the state’s accounts, and Vermont has joined a multi-state lawsuit against the U.S. government to get it back.
The dispute pits the state against the Trump Administration in a high-stakes legal battle over broken promises, executive power, and the future of clean energy. But to understand what’s really going on, you have to look past the political rhetoric and examine the two very different stories being told by each side. This is a guide to the core issues so you can understand the conflict and decide for yourself what the best path forward might be.
The Promise: What ‘Solar for All’ Meant for Vermont
In April 2024, Vermont was awarded $62.45 million from the federal “Solar for All” program, an initiative created by the 2022 Inflation Reduction Act. The goal was simple but ambitious: bring the cost-saving benefits of solar power to the communities that could least afford the high upfront cost of installation.
According to Vermont’s Department of Public Service, the state had a detailed plan ready to go. The money was set to fund three key initiatives:
RAISE (Residential Assistance in Solar Energy): This program would have provided loans and incentives to help low-income homeowners install their own rooftop solar systems, in some cases covering 100% of the cost.
MASH (Multi-Family Affordable Solar Housing): Recognizing that many low-income Vermonters are renters, this initiative allocated over $22 million to the Vermont Housing Finance Agency. The funds would help developers of affordable housing install solar panels, with the benefits passed directly to tenants through lower utility bills.
ACRE (Affordable Community Renewable Energy): This would have expanded an existing, successful community solar program run by local utilities.
Combined, these programs were projected to serve approximately 8,300 Vermont households and cut their monthly electricity bills by at least 20%. According to state officials, the grant agreements with the U.S. Environmental Protection Agency (EPA) were finalized in the fall of 2024, and the first benefits were expected to roll out to Vermonters in the second half of 2025.
The Conflict: Two Sides of the Story
The heart of the dispute lies in why the program was suddenly terminated. The Vermont Attorney General’s office calls it an “unlawful cancellation,” but the federal government claims it was legally required to end the program.
Vermont’s Argument: A Deal is a Deal
Vermont and the 20 other states suing the government argue that the funding was a legally binding commitment. Their case rests on a key legal concept: “obligated funds.”
The states’ argument is that once the EPA announced the grant winners in April 2024 and finalized the formal agreements later that year, the money was no longer just a federal asset. It was a contractual debt owed to the states. From this perspective, the federal government went back on a done deal. The EPA’s action in August and September 2025 to drain over $57 million from Vermont’s account was, in their view, an illegal “clawback” of funds that were already promised and legally protected.
The Federal Government’s Argument: A New Law Changed the Rules
The Trump Administration and the EPA tell a different story. Their justification, which was omitted from the Vermont Attorney General’s initial press release, is a new federal law.
On July 4, 2025, President Trump signed the “One Big Beautiful Bill Act,” a major tax and spending bill. A key provision in that new law explicitly repealed the Greenhouse Gas Reduction Fund—the pot of money that funded the entire Solar for All program.
According to the EPA, this act of Congress eliminated its legal authority to administer the program. EPA Administrator Lee Zeldin stated that because the law was repealed, the agency was simply complying with its new congressional mandate by terminating the grants. The administration has also politically framed the program as a “slush fund” and a “boondoggle,” arguing that its termination was a fiscally responsible move to protect taxpayer dollars from a wasteful program.
The Legal Battlefield
This isn’t a simple lawsuit. The states are fighting on two separate legal fronts to maximize their chances of success.
A Contract Dispute: The first lawsuit, filed in the U.S. Court of Federal Claims, treats the grant agreement as a binding contract. The states are suing for breach of contract and are seeking financial damages equal to the funding they lost.
A Constitutional Challenge: The second lawsuit, filed in a U.S. District Court, makes a broader argument about government power. The states claim the EPA’s action was “arbitrary and capricious” and violated the Administrative Procedure Act. More fundamentally, they argue the administration violated the separation of powers by unilaterally canceling funds that Congress had appropriated and the agency had already committed, essentially usurping the power of Congress. Here, they are asking a judge to declare the termination illegal and force the EPA to reinstate the entire program.
The Bigger Picture: What This Means for Vermonters
This lawsuit is about more than just one grant program. It highlights a deeper and ongoing tension in American politics that directly affects Vermonters.
Policy Whiplash: This is a classic example of how major policies can be created by one administration and dismantled by the next. This creates immense uncertainty for states and individuals who make long-term plans based on federal commitments.
The Role of States: The lawsuit is part of a larger trend of state attorneys general using the courts to challenge the actions of the federal government. This has become a primary tool for states to push back against a presidential administration with which they have fundamental policy disagreements.
A Deep Ideological Divide: At its core, this conflict is about two different philosophies. One view holds that the government should invest taxpayer dollars to speed up the transition to clean energy and address economic inequality. The other view, according to analysis from conservative think tanks like the Heritage Foundation, argues that the government should not be subsidizing the energy market, believing it distorts the free market and leads to wasteful spending.
Ultimately, the courts will decide the technical legal question: Was the Solar for All money a binding promise that couldn’t be broken, or was it subject to a new law passed by Congress? For Vermonters, the outcome will determine not only the fate of a $62 million investment in clean energy but also how reliable federal partnerships will be in the future.