One day after legislators unveiled modest spending-cap-constrained proposals for education, health care and social services, top leaders insisted officials must do more for core services in the next budget.
Neither Senate President Pro Tem Martin M. Looney, D-New Haven, nor House Speaker Matt Ritter, D-Hartford, mentioned the controversial spending cap in their joint statement. But any of the options they could pursue — legally exceeding the cap, effectively shifting revenues outside of the budget or borrowing for operating expenses — could draw opposition from Gov. Ned Lamont, who has frowned on such options in the past.
“As we move forward, we will be looking at finding ways to bolster funding in a number of critical areas — including nonprofits, public schools, higher education, health care and child care workers, paraprofessionals and group homes,” Looney and Ritter wrote.
At the same time, leaders of the Democrat-controlled legislature added, the General Assembly must still protect the state’s long-term fiscal health and deliver the “historic tax relief” officials have been discussing for months.
Those comments came one day after the Appropriations Committee recommended a $51 billion biennial budget that would boost spending by more than 3% in each of the next two fiscal years.
But in the context of inflation that topped 8% much of last year and still stands at 5%, an economy that hasn’t fully rebounded from the worst of the coronavirus pandemic, and a workforce crisis that has weakened many state agencies, many legislators were not satisfied with the committee’s budget.
Under the proposal, private, nonprofit agencies that deliver the bulk of state-sponsored social services would receive a $20 million bump next July in their annual payments, but they say they need $480 million just to offset the toll inflation has taken on their state funding since 2007.
Both the University of Connecticut and the system that includes regional state universities and community colleges would receive less in the coming biennium than they received across this fiscal year and last.
Education advocates decried the committee’s decision not to rapidly accelerate an ongoing program to bolster state aid to local school districts. The proposed budget would boost grants by $136 million in the coming biennium, but additional scheduled increases would not arrive until 2027. Democratic legislators had pledged at the start of the session in January to fully fund all planned increases by 2025.
A request for at least $90 million to cover a projected gap in local school districts’ meal programs also was not funded.
The committee proposal included $67.5 million for rate hikes for child care providers, $15.5 million for other state-funded school readiness programs and $35 million in emergency federal pandemic aid for a one-time boost through the CT Care 4 Kids program.
And while that matches what Lamont proposed in this area, legislators had said the governor’s plan didn’t do enough for an industry hurt badly by the pandemic.
Also among those not satisfied with the Appropriations Committee budget were the panel’s co-chairs, Rep. Toni E. Walker, D-New Haven, and Sen. Cathy Osten, D-Sprague, who warned earlier this week that the spending cap would greatly restrict the state’s ability to boost funding for core programs in need.
Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance — who also was the spokesman for Gov. Dannel P. Malloy’s budget office in the early 2010s — said most stakeholders understand that the cap system, not the Appropriations Committee members’ preferences, drove the proposals released Wednesday.
But Casa also said leaders need to address the issue now, or many important programs could be harmed.
“We’re encouraged, appreciative and pleased that the General Assembly leadership heard nonprofits’ concerns about the proposed budget and that they are so quickly responding with promises of help,” he said.
Many ways to deal with the spending cap
On paper, the spending cap tries to keep most spending growth in line with inflation and changes in household personal income.
Connecticut has had a cap since 1991, when it first enacted the spending control to temper public outrage over the next state income tax.
But there always has been a mechanism to legally exceed the cap: The governor must declare a state of emergency, and the legislature must adopt the budget with at least a 60% majority in both the House and Senate.
But that hasn’t happened to start a new biennial budget cycle since 2007, when then-Gov. M. Jodi Rell and a Democrat-controlled legislature agreed to rebase state finances.
But legislatures and governors have found many other ways around the limit.
One practice involves using state bonding or borrowing to cover operating expenses. Debt service payments on borrowing are cap exempt, though the practice usually is heavily criticized because it incurs interest charges.
Another common approach involves using a “revenue intercept.” This mechanism targets dollars before they arrive in the General Fund and assigns them for specific purposes. Because the cap only applies to budgetary appropriations, these dollars then could be used for a specific purpose without counting against the spending cap limit.
Lamont generally has opposed such maneuvers, but the fiscally moderate Democrat also has something he wants very much in the next state budget — the first state income tax rate cut since the mid-1990s. The administration did not comment immediately after Looney and Ritter issued their statement other than to indicate it was being reviewed.
Minority Republicans in the House and Senate also generally are wary about working around the cap.
But the GOP also supports the income tax cut and also has been supportive of increasing education aid to cities and towns.
House Minority Leader Vincent J. Candelora, R-North Branford, said a cap workaround could a “a tough sell” but also said Republicans appreciate Democratic efforts this year to include the GOP in drafting the Appropriations Committee budget.
Ultimately, Candelora added, Republicans would have to weigh how much spending was moved outside of the cap against the programs being helped and also whether the final budget includes significant tax relief for families and businesses.