The Senate overwhelmingly adopted the new, $46.4 billion, two-year state budget Wednesday evening, sending the package to Gov. Ned Lamont’s desk with strong bipartisan support.
The Democrat-controlled chamber voted 31-4 to approve the package, which makes major new investments in municipal aid, education and human services, avoids major tax hikes, and delivers tax relief to working poor families.
The biennial plan, which does not touch the $3 billion-plus rainy day fund, also leaves the state poised to deposit more than $1 billion in surplus funds from the outgoing budget into Connecticut’s cash-starved pension funds. But the package does rely on about $1.75 billion in federal coronavirus pandemic relief to remain in balance, setting up a huge potential hole in state finances when that aid is exhausted in 2024.
“I am extremely proud of this budget,” said Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, who hailed new funding for social services and nursing homes, and public subsidies that will help 30,000 more poor individuals buy health insurance on the state’s exchange.
“There is much to celebrate here,” said Senate President Pro Tem Martin M. Looney, D-New Haven, who called the budget “an extraordinary achievement for the people of our state.”
The House approved the package 116-31 shortly after 1 a.m. Wednesday. In both chambers, a significant number of Republicans joined with the Democratic majority to pass the plan.
At Lamont’s insistence, the package includes no major tax hikes, though the legislature did approve the governor’s proposal for a new highway usage fee on large commercial trucks through a separate bill.
“The bipartisan approval of the 2022-2023 biennial state budget sends a clear message to all of the residents of our great state – this is the most progressive, transformative, and life-changing budget our state has ever seen,” the governor said after the Senate vote. “We agreed across party lines that now is the time to ensure thousands of families have access to affordable childcare, the expansion of access to free and affordable healthcare will provide security to households, and investments in our future through workforce development will make our state stronger.”
“This budget is good for Connecticut families because there’s no new taxes in this,” said Senate Minority Leader Kevin Kelly, R-Stratford, who voted for the plan. “Connecticut families didn’t need more financial burdens. What they needed was a financial break.”
But other Republicans thought the budget simply wasn’t frugal. It would spend $22.7 billion in the fiscal year that begins July 1, an increase of 2.6% over the current year, before climbing another 3.9% in 2022-23.
“This budget just feeds the monster that has become our state government,” said Sen. Rob Sampson of Wolcott, one of four Republicans who voted against the package.
The new budget does include some tax cuts.
It expands the state income tax’s Earned Income Tax Credit from 23% to 30.5% of the federal credit of the same name, providing an additional $40 million in annual relief to about 194,000 working poor households.
A Finance Committee proposal to deliver major relief for middle class families by creating a $600-per-child credit within the state income tax — which would have cost the state about $300 million per year — was left out of the budget.
The package also provides significant tax relief to businesses by depositing $150 million into Connecticut’s unemployment trust, which pays benefits for the jobless. The state has borrowed more than $700 million since the coronavirus pandemic began in March 2020 to keep the trust afloat and is expected to borrow $300 million more this year. Businesses are assessed to repay that debt.
The new state budget also is expected to help cities and towns avoid property tax increases through a dramatic increase in municipal aid.
The PILOT [Payments In Lieu Of Taxes] grants that reimburse communities for lost revenue tied to property that is exempt for local taxation would increase by more than $120 million in each year of the budget. And Education Cost Sharing grants to local school districts would grow by a total of about $140 million over the biennium.
Even with Lamont’s signature on an appropriations bill, the General Assembly isn’t entirely finished preparing its finances for the next two fiscal years.
The legislature traditionally must adopt one or several detailed policy bills to implement new services and programmatic changes tied to the spending priorities.
Legislative leaders confirmed late Wednesday the so-called “implementer” bill would not be ready for consideration before the regular session’s mandatory midnight adjournment deadline.
A special session will be scheduled later this month to consider this task and other bills, House Speaker Matt Ritter, D-Hartford, said.
Final approval given to bond package, investment program for distressed municipalities
In other business, Wednesday, the Senate also gave final approval to a new $1.5 billion, five-year investment program in Connecticut’s poorest cities and towns.
The Senate voted 34-2 to approve the Community Investment Fund 2030 along with the rest of a $5.7 billion bond package to finance a wide array of capital projects over the next two fiscal years.
The state borrows billions of dollars annually to finance municipal school construction, economic development initiatives, capital projects at public colleges and universities, sewage treatment plant upgrades and other clean water projects, and state building maintenance.
But the community investment fund is the key new initiative in the latest bond package.
Spearheaded by House Speaker Matt Ritter, D-Hartford, the fund is designed to make investments in economic development, education, housing, information technology infrastructure and other initiatives in low-income communities.
The measure authorizes $175 million in annual state financing for this initiative for each of the next five years. It includes a provision to renew the program for another five years.
And it also directs the Lamont administration to utilize at least $125 million each year in federal grants tied to the governor’s statewide economic development plan for projects in fiscally distressed communities.
Roughly one-quarter of Connecticut’s 169 cities and towns would be eligible.
The Community Investment Fund will be overseen by a 21-member board that includes top legislative leaders, other legislative appointees and representatives of the Lamont administration.