Gov. Ned Lamont offered the state legislature on Wednesday a budget proposal that would spend more than $50.5 billion over two years, lock in fiscal guardrails for another decade, and adopt a historic reduction in the state income tax.
The budget package, the first of Lamont’s second term in office, will serve as a starting point for negotiations with the state’s Democratic-controlled General Assembly. Together, the two branches of government will be expected to approve a budget for the next biennium before the legislature adjourns in June.
Lamont detailed his proposal Wednesday during a joint session in the crowded House chamber. He touted Connecticut’s strong fiscal position. Currently, the state enjoys a projected $3.1 billion surplus and a flush rainy day fund.
“For the first time in over a generation, Connecticut has enjoyed strong economic and population growth and more taxpayers, a growing economy, coupled with our shared fiscal discipline, has resulted in four balanced budgets – soon to be five,” Lamont said.
The governor credited that progress to fiscal constraints adopted by the state legislature in 2017, when the state Senate was evenly divided between Democrats and Republicans.
They include a spending cap and a volatility cap that requires that certain types of extra revenue be saved rather than spent. Lamont’s budget proposal includes an agreement to renew those constraints for another 10 years and lawmakers are expected to codify part of that agreement through an emergency-certified bill on Thursday.
“These guardrails have contributed to a full rainy-day fund which provides protection in case of the unforeseen risk – we’ve seen a few of those whether they be geo-political disruption, a recession, a pandemic, or a federal government shutdown,” Lamont said. “Connecticut is well positioned to weather that storm.”
As a result of the fiscal management, Lamont said he’s able to offer a cut in personal income tax rates – the first in 30 years.
“I want a sustainable tax cut that we can support in good times and not so good times. We’ve had a number of false starts, and promises and on again off again tax cuts – not this time,” Lamont said.
Another tax cut initiative included in Lamont’s budget would expand the state’s Earned Income Tax Credit, which benefits working low-income families. Together, the income tax reduction and the EITC expansion would virtually eliminate state income tax for around 215,000 families who qualify for the tax credit.
The two-year budget increases spending 3.5% and reduces taxes by around $543 million.
Lamont’s budget also includes additional funding for the Education Cost Sharing grants, which the state sends to municipalities in order to fund the cost of running schools and educating students. The governor is seeking to boost that funding by an additional $135 million.
However, some members of the legislature have a significantly larger funding increase in mind. The legislature is considering a bill that would hike ECS funding by an additional $275 million through grants targeted more aggressively at the state’s lower-income and underfunded districts.
Rep. Jeff Currey, an East Hartford Democrat who co-chairs the Education Committee, said Lamont’s proposal merely funded already scheduled increases in the grant’s formula. Currey said the governor’s budget did not include adequate school funding to support districts through the coming expiration of the federal pandemic relief funds that have supplemented education costs for the last several years.
“We have under-resourced and under-funded districts that are struggling, that, yes, have seen an infusion of federal dollars that [the governor] has noted, but we have to all be reminded that those go away,” Currey said. “We have to do something to fill that gap and ensure those supports that should have been there all along continue to be provided.”
Meanwhile legislative leaders on both sides of the aisle seemed generally supportive of Lamont’s tax reduction proposals. Senate President Martin Looney said he was pleased that the income tax relief was targeted at lower income tax brackets.
“It does make the income tax more progressive, which has been our struggle for more than 30 years since the income tax was first enacted to try to build more progressivity into it,” Looney said.
House Minority Leader Vincent Candelora said he liked what he heard of Lamont’s income tax plan and was glad the budget proposal complied with the state spending cap.
“The governor is focusing on the right areas. We need middle [class] tax relief,” Candelora said. “Our residents have been hit with inflation and a lot of extra costs and the governor is finally recognizing that and, frankly, adopting proposals that Republicans have been pushing over the last year.”
However, lawmakers have their own tax priorities that will factor into the coming budget negotiations. Looney said legislative Democrats still hoped to make permanent a one-time child tax credit, which the state offered to Connecticut parents last year. Lamont has been skeptical of the proposal.
Lamont seemed to anticipate pushback from the progressive wing of his own party.
“Some of you may say, ‘Ok gov, this is a good start but we have not gone far enough.’ For those of you who want maybe a little more spending here, for those of you who want a bigger tax cut there, that’s fine,” Lamont said. “Tell me how you’re going to pay for it. I can tell you that this next fiscal year our budget’s pretty tight, there’s no surplus built into it. Fiscal ‘25, if the economy holds up, we do have a little more flexibility there. So let’s talk,” he said.
The governor began his remarks with a remembrance of the late Rep. Quentin “Q” William, a Middletown Democrat who was killed in a January car crash as he was traveling home after being sworn in for a third term.
“Q fought for a more equal and just Connecticut. Let us all dedicate ourselves to that work,” Lamont said.
