The Connecticut state Capitol.
Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee, said the legislature’s budget proposal “responds to the defining moment in history.”
Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee, said the legislature’s budget proposal “responds to the defining moment in history.”

{Updated at 7:40 p.m. with final committee action.}

The legislature’s Appropriations Committee approved a $46 billion, two-year state budget Wednesday evening that, at first glance, largely matches the spending level endorsed by Gov. Ned Lamont in February.

But the package, which makes major new investments in higher education, social services and municipal aid, also taps about $240 million from this year’s projected surplus and moves another $350 million in sales tax receipts to an off-budget account.

The dueling plans now become the foundation for negotiations between the legislative leaders and Lamont as they try to adopt a new, biennial budget before the regular General Assembly session adjourns on June 9.

“Our budget responds to the defining moment in history,” Rep. Toni E. Walker, D-New Haven, House chairwoman of the legislature’s budget-writing panel said during a live-streamed press conference prior to the meeting. “The COVID-19 pandemic demonstrated the vital importance of government investment in our society and our safety net, our health care system, and most importantly, the residents who live in our state.”

“This budget reflects our values and maintains vital services and programs,” added Sen. Cathy Osten, D-Sprague, the committee’s other co-chair, who added it makes key investments in health care, education, justice-related initiatives and workforce development programs while remaining under the statutory spending cap.

Like Lamont’s plan, the proposed budget would boost expenditures by slightly less than 2% next fiscal year — above the spending lawmakers authorized for the current fiscal year. 

But because the administration expects to save much more this fiscal year than lawmakers authorized, the actual spending growth in both plans tops 4%.

That savings has been a point of contention between the administration and the Appropriations Committee’s Democratic majority since the pandemic began in March 2020.

Lamont’s budget office spent $334 million less than was budgeted across all state agencies last fiscal year and projects to save $644 million this fiscal year. Much of that was helped by emergency federal pandemic relief, which covered a large part of state social service costs.

But Walker and Osten have said Lamont’s budget office has provided insufficient details on the savings, and the co-chairwomen worry state spending was peeled back too much amid a crisis, and what was spent may not be enough to meet Connecticut’s needs going forward.

Lamont, a fiscally moderate Democrat, and Republicans on the Appropriations Committee have warned against increasing spending too much before the state’s economy has fully recovered. Progressive Democrats counter that needs never have been greater than during the coronavirus pandemic and that the state can afford to help. Connecticut has $3 billion in its rainy day fund, projects to end this fiscal year with another $800 million left over, and received $2.6 billion in direct aid through the latest federal pandemic relief bill.

Lamont cast himself as occupying a reasonable middle ground on the budget, a Democrat not interesting in raising taxes, yet one who defeated a Republican intent on eliminating the income tax.

“There are two wings in the bird,” Lamont said during a mid-day press conference in Rocky Hill. “I got a group that wants to increase spending a lot and break the spending cap, and I ran against a guy who wanted to eliminate all progressive taxes. I’m trying to find the middle here so that we get this budget done on time and take care of people.”

Lamont was referring to his 2018 Republican gubernatorial opponent, Madison businessman Bob Stefanowski, who made the mathematically dubious claim that he would eliminate the state income tax over a decade, removing the source of nearly half of all revenue for the General Fund.

The governor declined to offer a detailed rebuttal or reaction to the committee budget.

“It’s pretty early,” he said, adding the his budget director, Melissa McCaw, had just given him an initial briefing. “Hopefully, it’s the second inning of a baseball game, but we’re still going to get it done on time. You know, people know my feelings — we don’t need to raise taxes. We’re going to put the federal money to work and take care of the services we need to. We surely don’t have to break the spending cap. I think that’s a promise that was made before I got here. But not that long ago, 2017.”

Lamont seemed especially wary about spending one-time surplus from the current fiscal year on recurring expenses.

“In 2017, they passed a budget that had billion-dollar deficits as far as you can see and resulted in a ratings downgrade and everybody’s leaving the state. We started to turn that around. Let’s keep turning it around.”

“Connecticut is growing more unaffordable by the day and families are struggling,” Senate Minority Leader Kevin Kelly, R-Stratford said. “Now more than ever we need to make sure state government is funding core needs, but also not overspending and adding new burdens onto Connecticut residents when they can least afford it.”

Investing in municipalities and higher education

Walker and Osten also said state officials have ignored longstanding problems for too long, such as racial inequities in health care and education, as well as property tax relief for municipalities and funding for the nonprofit agencies that deliver the bulk of state-sponsored social services. The pandemic, they said, only exacerbated these issues.

Cities and towns would receive more than $400 million in additional aid over the next two fiscal years combined.

The package reverses Lamont’s proposal to suspend slightly more than $90 million in Education Cost Sharing grant increases to local school districts over the biennium, and it would dedicate an extra $14 million to districts with large numbers of students from poor households or for whom English is their second language.

The plan also would dedicate a portion of sales tax receipts to keep the legislature’s pledge to increase non-education aid. Lawmakers could not fit this money into the plan without exceeding the spending cap, though, so the committee proposed effectively moving it off budget.

The process involves a revenue “intercept” —  an accounting tool that targets dollars before they arrive in the budget and assigns them for specific purposes. Because the cap only applies to budgetary appropriations, these dollars then can be used without violating the cap.

The committee plan also focuses heavily on public colleges and universities, which took a huge hit during the pandemic as campuses closed early in the spring of 2020 and millions of dollars in student fees had to be funded.

The state university and community college system was facing a $90 million hole earlier this fiscal year, while the University of Connecticut’s deficit topped $100 million.

Federal relief covered about 80% of those gaps, but higher education systems had to close the rest with pay cuts, layoffs, job freezes and other cost-cutting measures. And both systems project significant built-in deficits for the next two-year budget cycle.

And Walker said higher education was struggling long before the pandemic. Surging state retirement benefit costs — tied to pension debt accumulated over more than seven decades — has eaten away at state support for higher education operating costs.

The committee’s proposed budget sends a total of $75 million extra across the next two fiscal years combined to assist the community colleges, regional state universities and the University of Connecticut to offset this problem.

Social services, health care also top list of budget priorities

Many progressive Democrats also charged Lamont’s budget did too little to address growing healthcare and social service needs, and the committee plan expands funding in several areas.

The package would add $46 million for nursing homes over the next two fiscal years combined.

Industry officials say facilities have lost millions of dollars since the pandemic began due to increased costs and lost revenue. A significant portion of nursing homes’ revenue comes from residents assigned there for a few weeks or months to rehabilitate after surgery. But many patients deferred non-emergency procedures during the pandemic.

SEIU District 1199 New England, the state’s largest healthcare workers’ union, representing about 5,000 nursing home caregivers in the state, warned last week of a potential strike later this spring involving 51 facilities where its members are working under contracts that expired March 15.

The committee budget would make a huge, multi-year investment in the private, nonprofit agencies that deliver the bulk of state-sponsored social services. The investment actually would begin this fiscal year with an extra $50 million for these agencies, many of which have received no major increase in state support for more than a decade.

The CT Community Nonprofit Alliance estimates the nonprofits, collectively, lose $461 million this year due to inflation and stagnant state funding for more than a decade.

Osten said that $50 million is just the first step of a seven-year plan to close more than half of that $461 million gap and assist “the backbone of all social services.” The committee also is proposing funding increases of $30 million in both 2021-22 and 2022-23.

Gian-Carl Casa, president and CEO of the alliance, called the proposal a “remarkable and historic investment,” adding that nonprofits “have struggled for more than a generation for proper funding to provide vital services every day to thousands of people across the state.”

Similarly, municipal and regional health districts were “the little engine that kept us going” through the pandemic, Walker said, and the committee proposal adds $5.4 million across the biennium for this group.

Another $34 million would be added to the budget over the biennium under the committee plan to expand income eligibility for HUSKY A, the state’s Medicaid-funded health insurance program for children and parents from low-income households as well as for pregnant women. The limit would rise from 160% to 175% of the federal poverty level.

GOP: Committee budget relies too much on one-time revenue

The Democrat-controlled committee voted shortly after 7 p.m. to approve the bill. The tally was 32-16 along party lines.

Republicans on the Appropriations Committee said were united in opposing the package, but said it nonetheless contained some good components.

Sen. Craig Miner of Litchfield, ranking GOP senator on the panel, endorsed an increase in the personal needs allowance for nursing home residents.

Nursing home residents receiving care funded by Medicaid must forfeit most of any income they earn to the state, but are allowed to keep $60 per month for clothing or other personal items. The proposed budget would boost that limit to $75.

And Rep. Kathleen McCarty, R-Waterford, backed the decision to continue increasing Education Cost Sharing grants for local school districts.

But they and other Republicans said the overall package was unsupportable because it is too volatile.

By supporting ongoing programs with one-time reserves, and effectively maneuvering around the state spending cap, the committee budget retreats from a number of financial reforms that both parties enacted in 2017, Miner said.

When the reserves and federal coronavirus pandemic relief run out, future state taxpayers will be on the hook, he said.

“We are only setting up the next generation … for a very heavy lift,” Miner said.

Other components of the committee budget include:

  • A new Office of Pandemic and Public Health Preparedness;
  • Five new positions for the state Contracting Standards Board, which has been forced to operate with minimal staffing for more than a decade;
  • And $2.3 million to bolster the consumer contact center for unemployment claims to accelerate processing of benefits and job counseling at the Department of Labor.

State Capitol Bureau Chief Mark Pazniokas contributed to this story.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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