Tax collections have improved and pushed Connecticut’s budget surplus to $4 billion, but the state budget still relies heavily on federal funding and without it the state would end up running a “sizeable operating deficit.” 

The Office of Policy and Management told state Comptroller Natalie Braswell Wednesday that if not for the use of the one-time federal funds of $560 million this year and $1.2 billion next year, Connecticut would be running a budget deficit. 

“While the Governor’s recommended budget as presented to the legislature on February 9th eliminates reliance on this source to balance the General Fund budget in FY 2022 and reduces it by $250 million in FY 2023, to $944.9 million, the state will need to experience revenue growth this biennium to prevent a budgetary gap in FY 2024 and beyond,” Office of Policy and Management Secretary Jeff Beckham wrote in his monthly letter

The predictions come at the same time as the Democratic-majority in the legislature is struggling to get Gov. Ned Lamont to consider including a child tax credit as part of the revenue package. 

The legislature’s finance committee has endorsed a plan that would eventually fund a new child tax credit and expand child care programs, but does so by forgoing a fiscal safeguard called the revenue cap, which prevents the state from spending more than 99% of its expected revenue. 

The acceptance of the federal funds means lawmakers can only cut about $179 million in taxes or 1% of the budget in each of the fiscal years. 

House Speaker Matt Ritter said the budget would include around $100 million in car tax relief as well as an expansion of the Earned Income Tax Credit for the working poor.

Lamont has also pushed an increase in the property tax credit. A campaign promise from 2018 that he was unable to fulfill during his first year in office. 

Republican lawmakers, who have been left out of budget negotiations, cite the record 8% inflation residents are experiencing and want to get the tax dollars back into the hands of residents as quickly as possible. 

“Connecticut now has a choice. Are we going to return these tax dollars to struggling families to provide immediate relief? Or are we going to spend them on growing the size of government to unsustainable levels?,” Senate Republican Leader Kevin Kelly said Wednesday. 

He said Democrats are rushing to spend the money when they should be pushing for relief. 

Republicans are expected to hold a press conference today on the budget.