While recovering from the coronavirus at home, Gov. Ned Lamont cautioned legislators Friday about scaling back future budget reserves to launch a new tax break for families with children.
“I just want to make sure we don’t get tempted to go back to the old days where we got in trouble,” said Lamont, who announced his COVID-19-positive status Thursday, during an online press conference streamed from the governor’s residence in Hartford.
Lamont was referring to a proposal from the Finance, Revenue and Bonding Committee to redirect revenues that, since 2017, have been held back annually to help avoid a budget deficit.
Designed to stop legislators from creating budgets with no room for error, the so-called “revenue cap” prohibits appropriations from exceeding 99% of projected revenues this fiscal year. That’s a built-in cushion of $275 million.
By 2024, the cap grows to $320 million.
That’s when the Democrat-controlled finance committee says this budgetary safety net should be removed, and the funds used chiefly for two purposes.
About half would go back to taxpayers annually in the form of a new child tax credit within the state income tax. The credit would begin at $300 per child, though its chief architect, Rep. Sean Scanlon, D-Guilford, wants it eventually increased to $600 per child, with a maximum benefit of $1,800 per household.
It would only be available to low- and middle-income households, groups Scanlon says have been most hurt financially over the past two years by the pandemic and by skyrocketing inflation.
The second half of those “revenue-cap” funds would be invested in early development and child care programs for infants and toddlers.
Sen. John Fonfara, D-Hartford, who is spearheading this initiative, says it’s vital to reduce the education achievement gap and foster greater economic opportunity in poor urban centers.
But state government struggled through most of the 2010s with annual budget deficits, some very deep, prompting major state tax hikes in 2011 and 2015. And Lamont noted that both parties in 2017 demanded better fiscal planning to stem the problem.
“Follow the rules of the road that you yourselves set up,” the governor said.
Those who now want to re-purpose the reserves counter that the budget still would have a huge safety net. That’s because lawmakers in 2017 created a second, even-larger savings program along with the revenue cap.
The “volatility adjustment” forces legislators to save a portion of state income tax receipts tied to capital gains and other investment earnings, revenues that historically have fluctuated greatly from year to year.
And since the stock market generally has been robust since 2017, the volatility adjustment never has failed to save less than $500 million per year since its creation.
The state already holds a record-setting $3.1 billion in its rainy day fund — equal to 15% of annual operating costs and the maximum allowed by law.
It’s also on pace to finish this fiscal year with an equally unprecedented surplus that tops $2.7 billion.
Even without the revenue cap, and after emergency federal pandemic relief expires in 2024, Connecticut is poised to remain fiscally stable, Scanlon and Fonfara say.
Lamont not sure where he contracted COVID
Also Friday, the governor said his COVID-positive status hasn’t triggered many symptoms yet beyond a scratchy voice.
“I think I’ll be fine early next week,” he said, adding he consulted with a doctor Thursday and was unsure whether he would seek any treatment over the weekend.
The governor said he also is uncertain how he contracted the coronavirus, though he acknowledged his trip to Minneapolis last week to support the University of Connecticut women’s basketball team in the NCAA national championship game created some risk.
“We saw hundreds of people out at the basketball game,” he said.
“I’m afraid there’s community spread right now, especially in the Northeast, especially here in New England,” Lamont added. “We’re not as severely hit as New York and New Jersey and Rhode Island and Massachusetts, and I’m afraid that means we will be.”
Connecticut’s rolling seven-day positivity rate has been steadily increasing, reaching 4.88% on Thursday. One hundred and twenty-seven people were hospitalized with COVID-19 as of Thursday, up from 88 a week earlier. Nineteen additional deaths were recorded.
Lamont also said Friday he was surprised by state Treasurer Shawn T. Wooden’s decision Thursday not to seek re-election. With one month to go before state conventions, the governor said he’s unsure whether he will back any treasurer candidate before the party makes nominations.