The General Assembly approved a measure Tuesday assigning $370 million in expiring federal pandemic grants to bolster higher education, social services, mental health, child care and town aid next fiscal year.
Shortly before 10:45 p.m., the Democratic-controlled Senate voted 26-10, largely along party lines, to send the package to Gov. Ned Lamont, who is expected to sign it. The House, where Democrats also hold an advantage, adopted the measure 103-48 Tuesday afternoon. Two GOP senators and five Republican representatives sided with Democrats to help pass the measure.
House voted 103-48, largely along party lines, to adopt the controversial measure and thereby avoid adjusting the preliminary $26 billion budget adopted last June for 2024-25. Two GOP senators and five Republican representatives sided with Democrats to help pass the measure.
Lawmakers crafted the budget stabilization bill rather than formally adjusting the $26 billion budget they adopted last June for the 2024-25 fiscal year. This enabled legislators to avoid spending cuts mandated by state budget rules and to spend a portion of surging state revenues that are supposed to be saved.
In return for helping his fellow Democrats circumvent these budget rules, known as “fiscal guardrails,” Lamont was granted expanded authority to shift funds from one account to another and to achieve $129 million in broadly defined efficiency savings after the next budget is in force.
House Speaker Matt Ritter, D-Hartford, said the package ultimately makes big investments in the core programs that matter most to residents while leaving state finances on pace for big surpluses. The plan, he said during a mid-morning press conference, deserves bipartisan support.
“You can vote against it, but you’ve got to be able to prepare and defend yourself against that,” he said.
But minority Republicans quickly made it clear they were largely opposed, charging the stabilization bill undermines not only the basic budget but also the state constitution’s balanced-budget requirement. Worse still, the GOP argued, it creates hundreds of millions of dollars in budget holes legislators must fill 12 months from now.
“He [Ritter] wants Republicans’ fingerprints on the murder weapons for the state of Connecticut,” said House Minority Leader Vincent J. Candelora, R-North Branford, who added that his caucus has asked Attorney General William Tong to assess the plan’s compliance with the constitutional balanced-budget provision. “This is a dangerous budget for the state of Connecticut, because what it is going to do is set us up for tax increases next year.”
Higher education gets nearly half of all stabilization funds
The bulk of new funding in this stabilization bill is earmarked for Connecticut’s community colleges, regional state universities, the University of Connecticut and UConn’s Farmington-based health center.
Rep. Toni E. Walker, D-New Haven, longtime co-chairwoman of the Appropriations Committee, said this should come as no surprise to anyone following recent developments in higher education.
Public colleges and universities already have ordered significant tuition and fee hikes and begun plans to cut staff and programs in anticipation of state funding cuts starting July 1. For example, full-time community college students will pay 11% more next fall than they did two years ago.
“We saw those things were being challenged,” Walker said. “We cannot do that to the children of the state of Connecticut.”
The New Haven lawmaker added that “education was what made all of us equal. … Education is what makes this state a great state.”
Higher education units had their operating costs supported in recent years with hundreds of millions of dollars from two temporary sources: federal pandemic aid provided Connecticut through the American Rescue Plan Act (ARPA) and state budget surplus dollars.
But most of the $2.8 billion ARPA allocation Connecticut received from Congress in 2021 has been exhausted, and the state must assign all pandemic aid for final use by Dec. 31.
Lamont, a fiscal moderate, had called for the legislature to allow overall aid to colleges and universities to shrink, arguing it would involve hard-but-necessary choices.
But the governor’s fellow Democrats in the legislature declined, arguing it would burden low- and middle-income families, limit access to higher education for many poor students and ultimately weaken Connecticut’s economy.
Faculty at Connecticut’s community colleges and regional universities, which faces more fiscal pressure than UConn does, are worried about a financial ‘death spiral,” said Sen. Derek Slap, D-West Hartford, co-chairman of the Higher Education and Employment Advancement Committee.
Funding challenges, decreasing enrollment, rising class sizes and tuition hikes play into each other again and again, “a dynamic that was only going to deteriorate and weaken our CSCU system,” Slap said. He added that for many students from low-income Connecticut homes, this is the higher education system “that lifts up and launches students into the middle class. This is their gateway. This is their on-ramp.”
The state budget stabilization bill would increase ARPA funding for the Connecticut State Colleges & Universities system by $80 million, from $48.8 million to $128.8 million in 2024-25.
Federal pandemic aid for UConn’s main campus in Storrs and its satellite branches would grow by $57.7 million, from $11.1 million to $68.8 million. The UConn Health Center in Farmington would get $48 million in ARPA money next fiscal year, an increase of $22.3 million from its original allocation.
The budget stabilization bill also stipulates that if an additional $40 million in ARPA funds is identified by the administration, those funds also would be transferred to higher education, with half going to CSCU and half to UConn, provided the next state budget does not slide into deficit.
The CSCU system was hoping to get at least $63 million extra next fiscal year to avoid further program cuts. UConn officials estimated they need about $150 million in total to balance the books at Storrs and at the health center.
GOP: Budget rules have been cast aside
House Minority Leader Vincent J. Candelora, R-North Branford, said the bill represents a huge end run around the budget controls or “fiscal guardrails” that Lamont has supported verbally since taking office in 2019.
Democrats conceded they didn’t formally try to adjust the preliminary $26 billion budget they adopted last June for the 2024-25 fiscal year because that plan already exceeds, by $30 million, the spending cap that keeps expenditure growth in line with household income and inflation.
In other words, the first step if that plan were to be reopened would be to reduce spending. But federal pandemic aid doesn’t count against the cap system and can be spent outside of the budget.
That $26 billion plan also allocates about $155 million less than what the state legally is required to contribute to its pension funds for state employees and for municipal teachers.
What happens to core services one year from now, Candelora asked, when the hundreds of millions of temporary ARPA dollars used to prop them up are gone?
“We are shirking our responsibility to actually adjust the budget,” said Senate Minority Leader Stephen Harding, R-Brookfield. “If we believe in the fiscal guardrails we cannot support this measure. It’s that simple. … Have we not learned our lesson?”
Candelora also chastised the legislature’s nonpartisan Office of Fiscal Analysis, charging it couldn’t produce an immediate assessment of how many temporary dollars were being spent on ongoing programs.
“They have been complicit in this,” he said. “They’re putting their heads in the sand and joining forces with the Democrats to say that this is a [balanced] budget.”
OFA traditionally does not comment beyond its written analyses. The office’s director, Neil Ayers, responded to Candelora’s late-Monday-night request for an assessment early Tuesday morning, writing that analysts can’t predict precisely how higher ed units, nonprofit social services or child care agencies might use the funds. If used, for example, as wage increases, it would create holes in future budgets. If used to pay down debt or cover one-time staff bonuses, it would not.
Democratic legislative leaders have conceded that much of the funds requests would be used for ongoing operational costs.
New plan hops over a ‘fiscal guardrail’
But Ayers’ written response also confirmed one of Candelora’s assertions about the Democrats’ plan running afoul of fiscal guardrails.
A provision known as the “revenue cap” requires legislators to budget for a healthy operating surplus as insurance against mid-year cost overruns that could push finances into deficit. Planned spending isn’t supposed to exceed 98.75% of projected revenues.
At first glance, the next budget’s General Fund is on pace for a $320 million surplus, about $35 million less than it needs to comply with that guardrail.
But once holes are considered — required spending like pension fund contributions that this plan hasn’t fully addressed — the General Fund surplus is just $137 million, according to OFA. And that’s well below the cushion demanded by budget controls.
“I don’t think any of us in this room realize the ramifications of what we’re doing today,” Candelora said on the House floor. “Is it really worth throwing this process out the window?”
Sen. Eric Berthel of Watertown, ranking Senate Republican on the Appropriations Committee, said “We’ve made such good progress and here we are about to make some questionable decisions that should raise a level of concern. This document, I believe, is setting Connecticut up for failure.”
Lamont, who has insisted repeatedly he will strictly follow all these rules, found himself stuck politically this spring, caught between his prior statements and the priorities of his fellow Democrats in the legislature.
When asked about the potential for a huge crisis one year from now, Chris Collibee, the governor’s budget spokesman, said only that the governor would present his plan to solve the next budget in February 2025, as required by law. Officials could discuss then how or whether to replace expiring federal pandemic aid in various core services with state funds.
The state budget stabilization bill, though, does show the administration has some concerns about balancing the books over the coming fiscal year.
Lamont asked, and legislators agreed, to expand his authority to move funds around once the budget is in force.
Normally, the administration must go to the Finance Advisory Committee, a panel of legislators and Executive Branch officials, when it wants to transfer more than $125,000 or 10% from one account to another. The bill raises that threshold to $350,000 or 25%.
Lamont also was supposed to find $129 million in savings from staffing next fiscal year. The bill would expand that to allow him to find savings in nearly all budgeted accounts.
Democrats: CT still on pace for many big surpluses
But Democrats said all is not as dire as Republicans have described it and Connecticut’s overall fiscal picture remains strong.
A controversial program that requires the state to save — outside of the budget — a portion of quarterly income and business tax receipts is capturing huge sums of money.
State analysts say this volatility adjustment will collect $1.1 billion this fiscal year, $1.2 billion in 2024-25 and $910 million the year after that.
These funds are supposed to be used to build budget reserves and pay down pension debt. But critics say they are saving too aggressively and drawing stable revenues away from core services that need them.
“We are not facing fiscal calamity under any circumstances,” said Sen. Cathy Osten, D-Sprague, the other co-chairwoman of the Appropriations Committee.
Ritter said Connecticut has enough funds to solve any budget problems, balance its books and continue to pay down debt in an accelerated fashion.
Meanwhile, the plan makes critical investments in programs that were battered during the first year of the coronavirus pandemic in 2020 and continue to struggle, said Senate President Pro Tem Martin M. Looney, D-New Haven.
“The guardrails are guardrails. They are not supposed to be straitjackets,” he said. “There is a balance to be found.”
The plan would provide $50 million for nonprofits, equal to a 2.5% rate increase, next fiscal year, for the nonprofit agencies that deliver the bulk of state-sponsored social services for people with disabilities or patients struggling with mental health or addiction issues.
That’s a small portion of the $480 million the CT Community Nonprofit Alliance says the industry loses annually because state payments haven’t kept pace with inflation for a decade-and-a-half.
But legislators have said repeatedly over the past three years that this gap is too large to addressed in chunks and that significant progress only can be made gradually over many years.
Sen. Tony Hwang of Fairfield, one of the few Republicans to vote for the stabilization bill, also criticized Democrats for not formally adjusting the next state budget. But Hwang said he was swayed by the significant funding made available for social services for some of Connecticut’s most vulnerable residents.
“Because at the end of the day, we have a responsibility to take [care] of those that are falling through the safety net,” he said.
The bill includes $18.8 million for the CT Care 4 Kids program, a partnership between the state and various child care services. It also includes $8.2 million for other child care and early childhood development programs.
And another $26.2 million will be used to expand behavioral health services for children and other related programs.
Towns get more, but Medicaid takes a hit
But Republicans countered there’s plenty of unessential spending in the stabilization bill.
Millions of dollars were earmarked for smaller projects in legislators’ home districts. And not all of the projects that would receive funding seemed vital, Republicans said.
Reps. Devin Carney, R-Old Saybrook, and Gale Mastrofrancesco, R-Wolcott, both asked why Wilton, one of Fairfield County’s wealthiest communities, was receiving $20,000 in emergency pandemic aid to fund a dishwasher and related utensils for the town’s high school.
The American Rescue Plan Act was a $1.9 trillion stimulus bill designed largely to help states, municipalities and school districts recover from the worst problems created by the coronavirus pandemic.
“How does that [dishwasher] go in line with relief to an American family bearing the brunt of the crisis?” Mastrofrancesco asked.
Walker responded only that its appearance in the bill must have involved legislators trying to meet needs in their district.
And while lawmakers emphasized new funding during Tuesday’s debate, some key human services programs took a step back as the legislature tightened eligibility rules in two Medicaid programs.
One change reduces HUSKY A income eligibility limit for parents and other adult relatives caring for children from 155% of the Federal Poverty level to 133%. This year, 155% of the FPL for a family of three is $40,021 per year, while $133% is $34,340.
A second provision effectively repeals most of a previously approved expansion for HUSKY C, the state’s Medicaid program serving poor residents age 65 and older, as well as people that are blind or living with other disabilities.
Legislators last year voted to expand eligibility starting Oct. 1, 2024. Rather than following a complicated eligibility formula tied to welfare payments, lawmakers instead set a limit of 105% of the poverty level. This new system also disregarded about $6,100 in income a potential recipient might earn.
The stabilization bill would remove that $6,100 adjustment, effectively wiping out the bulk of the expansion.
Nonpartisan analysts say the state could save as much as $23 million annually by 2025-26.
But these changes could affect thousands of vulnerable residents, said Sheldon Toubman, an attorney with Disability Rights CT.
Legislators recognized last year that Medicaid program eligibility rules are less generous for older adults and clients with disabilities.
Bond package gets late approval
Also late Monday, the House of Representatives overwhelmingly approved a $420 million bond package for capital projects next fiscal year that includes the launch of a new seven-year building program for UConn and would eliminate at least $500 million in transportation bonding debt.
The bill would increase all borrowing to be repaid from the state budget’s General Fund — not just projects for UConn — by $309 million next fiscal year, from $2.45 billion to $2.76 billion. It also would boost borrowing for highway, bridge and rail projects, which are repaid from the budget’s Special Transportation Fund, by $112 million in 2024-25, from $1.53 billion to $1.64 billion.
The state’s flagship university could receive up to $625 million in new financing over the next seven fiscal years — plus another $67 million million in previous bond authorizations that haven’t been used to date.
But the measure, which passed 134-9 and which the Senate is expected to approve before the regular 2024 session adjourns at midnight Wednesday, also features a new wrinkle.
State government has been launching major multi-year capital programs for the university since 1995, and each one carries the name of the first: “UConn 2000.”
But for the first time, legislators are setting specific fundraising goals for the university. And if they aren’t met, bond authorizations would shrink.
To remain eligible for the full $625 million, the university’s fundraising efforts must secure at least $100 million in philanthropic commitments over the next eight years.
UConn President Radenka Maric outlined several pressing capital needs to legislators in late March. Most of the new investments would support science, technology, engineering and mathematics programs, including construction of a new science facility and renovations to the Gant Science complex on the main campus in Storrs.
Maric said Connecticut faces annual worker shortages of 6,000 in manufacturing and 7,000 in health care. In addition, about 5,000 new life sciences workers are needed over the next five years.
UConn officials also want to launch a $100 million renovation to Gampel Pavilion. The home to the university’s men’s and women’s basketball teams was constructed in 1990.
The bond measure also includes a proposal from Lamont and state Treasurer Erick Russell to eliminate a huge chunk of state debt tied to highway, bridge and rail projects.
Connecticut’s $2.15 billion Special Transportation Fund, which represents 8.5% of the overall $25.1 billion state budget and covers the operating costs for the departments of transportation and motor vehicles, has been running well in the black in recent years.
Lamont and Russell want to use at least $500 million of the fund’s projected $960 million reserve to shave down Connecticut’s outstanding transportation debt, which exceeds $7.4 billion. Most of that debt was borrowed at 5%, though some of the notes are marked at 3% to 4%, according to Russell’s office.
The administration estimates the early retirement of this debt would save the state about $60 million annually by 2026 and as much as $75 million by 2028.
A third element in the bond measure would launch a new analysis of the more than $10 billion worth of state tax credits, exemptions and other breaks Connecticut provides annually.
Rep. Maria Horn, D-Salisbury, co-chairwoman of the Finance, Revenue and Bonding Committee, pushed for the study earlier this spring, noting many of the sales and business tax breaks approved to jump-start one segment of Connecticut’s economy or another rarely are revisited.
Horn also said the goal of the study isn’t necessarily to repeal any specific tax break. But if a credit or exemption is no longer driving job creation or some other positive economic impact, legislators should consider redirecting those breaks in some other way that can stimulate growth, she said.