While state legislators were poised Monday to cut taxes on working families and motorists, the new budget they plan to adopt won’t do as much for businesses and private-sector workers on the pandemic’s front lines — even as the current $4 billion budget surplus grows yet again.
Despite that massive fiscal cushion, the budget that begins July 1 will include about $40 million to help businesses replenish a $495 million hole in Connecticut’s unemployment trust, according to sources.
It also has $35 million for special pay for the thousands of health care and social service workers, grocery and department store employees, emergency personnel, utilities workers and others who operated essential services when COVID-19 struck Connecticut hard in 2020. That’s 1/25th of the level that labor advocates said was necessary to provide a one-time bonus of about $2,000 for each full-time essential worker.
Gov. Ned Lamont and his fellow Democrats in legislative leadership released many details last week of the $24.2 billion budget they negotiated but acknowledged a few key elements, including the business and labor initiatives, hadn’t yet been settled.
But talks wrapped up on those items over the weekend with the House of Representatives set to debate the budget Monday. The Senate tentatively is scheduled to vote either late Monday or Tuesday, depending on when the House resolves the budget.
Leaders of the Democratic majorities in the House and Senate have said they’re confident a new budget will be adopted before the regular 2022 General Assembly session ends at midnight Wednesday.
Businesses on the hook for big unemployment debt
Legislators are expected to focus much of their debate on a tax-cutting plan that includes:
• An expanded property tax credit within the state income tax for the middle class;
• A one-time, $250-per-child credit for low- and middle-income families;
• A cap on municipal property taxes on non-commercial passenger vehicles at 32.46 mills;
• Expanded income tax relief for Connecticut’s working poor;
• And an extension of the state’s gasoline tax holiday through Dec. 1. That holiday, which was adopted earlier this spring and suspends the 25-cents-per-gallon retail tax on fuel, originally was supposed to end on June 30.
Businesses were hoping to make that list, noting they’re on the hook for a big state assessment this fall.
Connecticut borrowed more than $800 million from the federal government during the worst of the pandemic to keep its unemployment trust solvent and provide jobless benefits to more than 290,000 filers.
The state dedicated $155 million last year to reduce that debt, and the state Department of Labor reported last week that $495 million remains to be paid.
Businesses normally are assessed to replenish the fund, but the Connecticut Business and Industry Association has lobbied hard for the state to cover most or all of that.
With $3.1 billion in the emergency budget reserve and $4 billion projected for this fiscal year’s surplus, there’s no reason the state can’t write that check, said Chris DiPentima, president and CEO of the business lobby.
“We’ve got one of the biggest workforce crises in the country,” he said, noting that roughly 109,000 jobs lost during the pandemic still haven’t been regained. “Yet we’re playing with small dollars on the UI [trust] when we could afford much more.”
Sources close to the budget process said that surging state income and business tax receipts would push the current surplus several hundred million dollars above the $4 billion mark. Fiscal analysts for the legislature and governor must submit updated revenue projections Monday to leaders of both branches.
DiPentima also predicted the state’s refusal to cover more trust fund debt would weaken overall business confidence.
“It’s going to make the business community question [officials’] commitment to making Connecticut more affordable and to economic development in general,” he said.
But Lamont and many legislators have noted that Connecticut still carries far more long-term debt than most other states. Connecticut has more than $95 billion involving unfunded pension and retirement health care program obligations, as well as bonded debt.
Because the $3.1 billion rainy day fund is at its legal maximum — at 15% of annual operating costs — any unspent surplus would be used to pay down pension debt.
Over the past two years, the state has used surpluses to make $1.7 billion in supplemental debt payments, and administration officials have said the state could make another $2 billion or more in debt payments after this fiscal year closes on June 30.
Essential workers get a tiny fraction of pandemic pay sought
Businesses weren’t the only ones disappointed by final budget negotiations.
The $35 million included for pandemic pay for the private sector comes after months of lobbying by labor unions, the Connecticut AFL-CIO and other advocates for front-line workers who said anywhere from $500 million to $1 billion should be spent rewarding those who risked their lives.
Rob Baril, president of the SEIU 1199 NE, the state’s largest health care workers’ union, reminds lawmakers frequently that thousands of his members stepped up to protect Connecticut’s elderly, disabled and others at risk in nursing homes, group homes and clinics.
“The state of Connecticut is nursing a $4 billion surplus and $3 billion in the rainy day fund, while front-line caregivers in group homes and nursing homes struggle to survive,” the union wrote in a statement last week, adding that 25 members died due to COVID-19 complications, and many others struggle with medical debt.
Dozens of 1199 members rallied outside of Lamont’s home in Greenwich in December, chastising the wealthy businessman for not prioritizing a “hero pay” package that met labor union standards.
“Where’s our Thanksgiving and Christmas?” asked protestor Cynthia Johnson of New Haven, who wore a Grinch hat while dozens of fellow protestors chanted “Fix the broken system” and “Shame on you.”
The governor and legislature earmarked $34 million in ARPA resources last year to cover a portion of lost wages and medical expenses incurred by front-line workers.
But critics say this is far too little.
The $34 million, they say, was a bone thrown by lawmakers who couldn’t convince the governor to alter the workers’ compensation system. Labor advocates argued that any worker exposed to COVID and facing wage losses or health expenses should be able to tap workers’ compensation benefits automatically.
Nonpartisan analysts estimated that would be sufficient to provide about $2,000 to most full-time workers in front-line jobs and $1,000 to part-timers.
It was unclear how much relief per person might be provided with a $35 million pandemic pay allocation reserved only for private-sector workers.
But Rep. Robyn Porter, D-New Haven, who co-chairs the labor committee, said a majority of essential workers are in the private sector, and $35 million would not provide benefits remotely close to $2,000 per person.
Porter added the irony is that proposals for pandemic pay continue to be scaled back, even as the state surplus forecast has grown by more than $1 billion in less than one month.
“Why are we scrambling [now] to find money for pandemic pay? Why weren’t essential workers our heroes from the start?” she said.