This story has been updated.

State House Republicans proposed a $54.4 billion two-year budget Thursday that would trim electric rates and bolster local schools, social services and child care, while cutting medical assistance for undocumented residents.

The plan, which would spend less than both Gov. Ned Lamont and majority Democratic legislators have proposed, also would freeze state employee wages for two years, require big savings from hiring limits and across-the-board cuts to all agencies, and force public colleges and universities to tap their robust reserves.

House Republicans would boost spending 3.8% next fiscal year and another 1.8% in 2026-27 and note their plan, unlike the $55.7 billion package the Democratic-controlled Appropriations Committee offered last week, would fall under the constitutional spending cap.

But the Republicans, whose plan falls $46 million under the cap in the first year and $929 million under in the second, needed some special help to get there. It would cancel a popular youth-in-poverty assistance program while shifting its funding — almost $381 million — outside of the budget and spending cap, an accounting maneuver that GOP lawmakers have decried in the past as a fiscal gimmick.

The House Republican budget avoids tax hikes and would allow up to $320 million in annual tax relief to residents and businesses, provided Connecticut successfully challenges New York over a disputed tax issue involving residents working for out-of-state employers.

“Our plan is rooted in reality — the reality that Connecticut families are already stretched thin by the high cost of living that’s driven by the cost of government,” said House Minority Leader Vincent J. Candelora, R-North Branford. 

House Republicans faced pushback Thursday afternoon from the governor and his fellow Democrats in the legislature.

Lamont’s communications director, Rob Blanchard, thanked House Republicans for submitting ideas but criticized a lack of detail.

“At first glance, there appears to be vague cuts, such as agency operating expenses with no details and unrealistic staffing savings,” said Blanchard, who added some of the Republican proposals overlap with the governor’s and are worth discussing.

Democratic legislators are unlikely to accept plans to slash benefits for undocumented residents, to freeze wages or positions in state agencies many insist already are badly understaffed, or to eliminate a program to reduce poverty among youth.

“It’s not the most serious document I’ve ever seen, so we’ll probably have to write this one off,” said House Speaker Matt Ritter, D-Hartford.

House Republicans also offered their plan without endorsement or criticism from the Senate’s Republican minority, which has chosen not to propose any comprehensive fix to Connecticut’s challenging budget situation. 

Policymakers have found it increasingly difficult to adhere to a strict series of budget caps and have drained an average of $1.8 billion from programs over the past seven years. Meanwhile, legislators and Lamont also anticipate that ongoing congressional efforts to cut the federal budget could cost Connecticut hundreds of millions or even billions in annual assistance from Washington.

More dollars for K-12 education, social services – but not for higher ed

Despite several sharp differences, House Republicans and Democratic legislators do see eye-to-eye in several areas. 

The GOP budget and the Democrats’ $55.7 billion biennial spending package both add $84 million in special education aid for local K-12 schools in each of the next two fiscal years, on top of a $40 million increase the legislature approved in March.

Both parties also proposed an extra $26 million in funding over the next two years combined to ensure that about 80 communities would not face a reduction in Education Cost Sharing grants as called for under the state’s statutory formula. The system weighs local wealth, enrollment totals and past local education spending in calculating the state’s contribution.

And Democrats and House Republicans agreed that private nonprofit agencies that deliver the bulk of state-sponsored social services to people with disabilities would not face a funding cut next fiscal year.

But the parties differ when it comes to higher education.

The Appropriations Committee added about $280 million over the coming biennium to support the University of Connecticut and its Farmington-based health center, as well as $108 million to back regional state universities and community colleges.

Both of those gains, though, are offset somewhat by expiring pandemic grants. The Connecticut State Colleges and Universities system, which oversees the regional universities and community colleges, will lose $140 million in emergency federal pandemic aid after this fiscal year that has been supporting operating expenses. Similarly, UConn will lose about $130 million.

House Republicans capped growth in traditional state funds for higher education at a little more than 14% over current spending, which would send almost $117 million extra to public colleges and universities over the next two years combined. That doesn’t cover the expiring federal pandemic aid.

But Republicans note that the CSCU system and UConn are well positioned to deal with that loss.

The Connecticut Mirror reported in late March that the CSCU system entered this fiscal year with $611 million in reserve, equal to more than 50% of annual operating expenses. UConn’s main branch in Storrs held a $171 million cushion equal to 10.2% while the health center had $297 million or 18%.

Trimming electric bills and aiming for tax cuts

House Republicans hope to save the average Connecticut household $10 to $20 monthly by reducing the public benefits charge, a fee the state adds to monthly bills to finance state-mandated conservation, renewable energy, consumer assistance and other programs.

They specifically would cancel $170 million in charges used to help low-income residents pay their electric bills but maintain the program by adding the expense to the state budget. 

Another $80 million in charges that supports electric vehicle charging stations would be taken off consumers’ bills and maintained instead using state borrowing.

Relief from high energy bills “is still one of the top things we are hearing about from constituents,” said Rep. Tammy Nuccio of Tolland, ranking House Republican on the Appropriations Committee.

House Republicans didn’t propose any specific tax cut but instead offered a menu of 13 different tax and fee reductions.

The caucus believes Connecticut could gain $320 million in annual revenue by challenging the remote workers tax rule that New York and certain other neighboring states follow. These states effectively hold that Connecticut residents who work from home for out-of-state employers first must pay income taxes to the state in which their employer is based.

If Connecticut is successful, that $320 million could finance relief for local households and businesses in many ways, the House GOP says.

Some of the options include new income tax deductions for households with children; exempting all Social Security earnings from state taxation; boosting the income tax credit that offsets a portion of local property tax bills by $50; canceling the 1% sales tax surcharge on prepared meals; allowing a longstanding surcharge on corporation taxes to expire; and repealing the highway mileage tax on large commercial vehicles.

“This budget is a step toward what residents deserve — affordability, accountability and flexibility in the face of uncertain federal funding,” said Rep. Joe Polletta of Watertown, ranking House Republican on the tax-writing Finance, Revenue and Bonding Committee.

Boosting Medicaid rates and cutting care for undocumented residents

The House GOP budget would spend almost $38 million next fiscal year and $100 million in 2026-27 to raise Medicaid rates for doctors who treat poor patients.

The last broad-based rate adjustment plan took effect in early 2008, and critics say many children and adults enrolled in Connecticut’s HUSKY program effectively are uninsured, unable to find doctors willing to accept more Medicaid patients.

Leaders of the legislature’s Human Services Committee say Connecticut needs to be spending $300 million more on rates by 2028-29 than it does now to adequately address growing needs.

The House Republicans’ plan proposes more spending than did either Lamont’s or the Appropriations Committee’s. To help pay for that, though, the GOP would eliminate Medicaid coverage for undocumented adults and children.

Nonpartisan fiscal analysts estimate Connecticut will spend $55.1 million from its Medicaid program on this population next fiscal year and $61.2 million in 2026-27.

Nuccio said hospital emergency rooms could not refuse care to undocumented residents.

No raises for state employees for two years

House Republicans would save $330 million over the next two fiscal years combined by blocking raises for all state employees — including elected state officials.

Most unionized workers have received 2.5% general wage hikes and a step increase for each of the past four fiscal years. A step increase typically adds another 2 percentage points to the value of the raise.

“The rest of Connecticut hasn’t seen those raises,” Candelora said.

Unlike municipal legislative bodies, the General Assembly can reject an arbitration award granting raises. But lawmakers haven’t done that in decades.

Further complicating this element of the House GOP budget, Lamont recently negotiated a tentative deal with state police troopers — a union that traditionally has enjoyed strong support among Republicans — that calls for a 2.5% general wage hike and a step increase next fiscal year.

Both Candelora and Nuccio have acknowledged that if raises are provided to state police, it would be difficult for the state to argue before arbiters that it could not afford similar increases for other employee groups. 

Canceling ‘Baby Bonds’ and struggling with the spending cap

House Republicans would shift $381 million into an off-budget child care trust that would not be subject to the spending cap. Both Lamont and the Democratic-controlled Appropriations Committee have proposed investing about $300 million in child care in similar fashion outside of the formal budget.

Senate Republicans are expected to resist this proposal because the investment would be funded off-budget.

Senate Minority Leader Stephen Harding, R-Brookfield, issued a statement earlier this week that, while not aimed at the House GOP budget proposal, made general comments about circumventing state budget caps.

“Even the spirit of the fiscal guardrails must not be violated,” Harding wrote in a joint statement with Sen. Ryan Fazio of Greenwich, ranking GOP senator on the Finance, Revenue and Bonding Committee. “But under one-party Democrat rule, the guardrails are already being broken this year by the governor and legislature. Budget gimmicks are back in style. So are job-killing future tax hikes.”

The House GOP budget also would carry $384 million from this fiscal year’s projected $2.3 billion surplus into 2025-26 — another accounting move Republicans have criticized in recent years.

But, Candelora said, “I think Senate Republicans share our commitment in having a balanced budget that doesn’t violate the caps.”

Democrats also likely would strongly oppose the GOP plan because that $381 million would come from a big Democratic initiative in recent years: the “Baby Bonds” program.

The majority party launched a plan to invest an estimated $600 million across 12 years in the economic futures of children in poverty. It involves depositing $3,200 in trust for each baby covered by HUSKY, the state’s Medicaid program.

Those $3,200 deposits — expected to be made on behalf of 15,000 or more children annually — would grow over the course of their youth and early adulthood. Recipients still living in Connecticut could tap these resources between the ages of 18 and 30, to buy a home, pay for college or invest in a business.

GOP wants big savings from limited hiring

For the House Republican plan to work, the state must budget significantly less for staffing over the next two fiscal years. The GOP needs to save $178.6 million in the first year and $210 million in the second.

Nuccio said she believes the state has over-budgeted for staffing consistently in recent years. Most of the Republican savings target involves keeping positions unfilled that are currently vacant. The plan eliminates all deputy commissioner positions.

“Government has gotten kind of fat, and I think it’s time to trim,” she said.

The House GOP also wants to save $67 million over the coming biennium by asking all state agencies to absorb a 5% cut in their “other expenses” account. But the full impact of the cut is hard to determine because departments use this line item for a wide range of purposes, including studies, legal services, consulting fees and small projects.

But Nuccio also noted that while Lamont and Democratic legislators left big holes in their respective plans involving retiree health care for state employees, her caucus does not.

State Comptroller Sean Scanlon recommended that officials budget another $228 million over the next budget cycle to cover this contractual obligation. The comptroller made a similar recommendation to the Lamont administration in December, but the governor didn’t add the money into his February budget plan. Nor did the Appropriations Committee in its last week.

Both the governor and the committee are hoping Scanlon can negotiate savings with the state’s health insurance carrier to at least mitigate this gap.

Nuccio said she also would welcome any savings but said legislators cannot budget based on wishful thinking when it comes to its legal obligations.

“I don’t know anybody in the real world who does something like that,” she said.