Once again, Gov. Ned Lamont’s administration has identified a big pile of money, almost $190 million, shortly after legislators have adopted a new budget and closed their regular legislative session.
Leaders who’ve already watered down new investments in health care and special education while scrapping income tax relief for middle class families are getting frustrated.
Over the past seven years, Lamont’s budget office has upgraded revenue estimates an average of $285 million in the first 2 ½ months after lawmakers leave the Capitol.
In other words, there’s often considerably more money available than projected. And leaders from both parties this week said it’s time to reevaluate Connecticut’s forecasting process.
“It’s occurring year after year, said Senate President Pro Tem Martin M. Looney, D-New Haven. It’s a pattern now.”
Connecticut lawmakers can’t invest in new programs, cut taxes or otherwise craft a new state budget without knowing what’s available to spend. But their most crucial forecast — delivered just 15 days after the mid-April income tax filing deadline — has being viewed by some as unreliable.
Gilchrest: ‘We need to have an honest conversation’
The $285 million average variance between what Lamont’s analysts reported in late April of the past seven years and what they projected by mid-July is more than three times the $92 million average gap lawmakers dealt with between 2011 and 2018 under then-Gov. Dannel P. Malloy, according to state budget records.
The coronavirus pandemic may have inflated Lamont’s numbers somewhat. The traditional April 15 income tax filing deadline was pushed to July 15 in 2020 and to May 15 in 2021, severely limiting data for analysts to use in projections.
But even after excluding those two years, the average gap during Lamont’s tenure is almost $200 million.
And sometimes, legislators say, the timing on these changing projections is particularly hard to swallow.
The administration increased this year’s tax receipts estimate by $188 million on June 20, 16 days after the regular 2025 session ended and 18 days after lawmakers adopted a new state budget, which Lamont hadn’t even signed into law by Thursday night.
Surging revenues just before the fiscal year closes on June 30 typically translates into extra revenue in the next year or two.
“Had we been aware of the likelihood of that money,” Looney added, “clearly there would have been advocacy to fund some of our priorities at a higher level.”
Majority Democrats, already frustrated by budget controls that save aggressively at the expense of core programs, watered down several big initiatives. Administration officials note budget caps might have blocked more spending anyway, but lawmakers used several accounting maneuvers to work around those, often collaborating on them with the governor.
An Appropriations Committee proposal to add $84 million for special education grants next fiscal year became just $30 million, well below what local school districts need to meet rising costs.
Hopes for a new $600-per-child state income tax credit aimed at hundreds of thousands of households eventually became a flat $250 payment — and only to families making about $67,000 per year or less. It would distribute about 1/8th of the projected $300 million cost for a full child tax credit.
“When we find money like this, after the budget is done but before the end of the new fiscal year, it’s going to raise concerns among my members,” House Speaker Matt Ritter, D-Hartford, said of the administration’s new projections.
“We need to have an honest conversation about Connecticut’s revenue and our budget,” said Rep. Jillian Gilchrest, D-West Hartford, co-chairwoman of the Human Services Committee, who watched in disappointment as 80% of a planned $75 million increase in long-neglected Medicaid rates for doctors who treat the poor vanished from the first year of the new budget.
“People pay their taxes so that government can support them when they need that” help, Gilchrest said. “It’s just very frustrating.”
And with Congress and President Donald Trump debating massive cuts in state assistance for Medicaid and other human services programs, Connecticut can’t miss opportunities to bolster its safety net because of outdated revenue projections, said Norma Martinez HoSang, director of the progressive grassroots coalition Connecticut For All.
“This money needs to immediately be invested in many programs our communities are crying out for — housing, health care, education — to safeguard us from Trump’s cuts,” she said.
Republican leaders, who often are hoping for a revenue surge to finance tax relief, were equally annoyed.
The House and Senate minority leaders, Vincent J. Candelora of North Branford and Stephen Harding of Brookfield, said unsuccessful GOP efforts to block tax hikes on corporations would have been aided by the knowledge that revenues already were on the rise.
Under the new budget, corporations will pay an extra $213 million in taxes over the next two years combined due to changes in income reporting and other rules. And a corporate tax surcharge that was supposed to expire would be extended to 2028, raising another $128 million over the coming biennium.
“I think that this budgeting process has now become political rather than policy-oriented,” Candelora said, adding he fears Democratic efforts to circumvent budget caps have prompted Lamont to become hyper-conservative when projecting revenue.
“I think a sitting governor has joined that chorus and is trying to outmaneuver the legislature,” Candelora said.
The Lamont administration irked many legislators earlier this year when the Connecticut Mirror disclosed hundreds of millions of dollars in interest earnings on federal COVID grants, dating back to 2021, weren’t deposited into the General Fund until January 2025.
The governor’s budget director, Jeffrey Beckham, said it stemmed from a misunderstanding with the treasurer’s office.
GOP lawmakers were frustrated in June 2022 when they pitched a plan to cut hundreds of millions of dollars in income, fuel and transportation taxes but were blocked by Lamont and Democrats, in part by arguments that revenues wouldn’t support the cuts.
By mid-July 2022, the administration identified an extra $568 million in tax revenues.
“I always believe in transparency,” Harding said. “I know the governor says he believes in transparency. … There’s something that’s not adding up.”
Revenue forecasting isn’t an exact science
But the Lamont administration noted that revenue forecasting is hardly an exact science, and receipts from the income tax — which generates more than $11 billion annually or roughly half of the resources for the General Fund — can vary significantly in a short period of time.
“These are estimates, and there has been significant international macroeconomic uncertainty over the past several years, including the pandemic, supply chain disruptions, tariffs, and wars,” said Lamont’s budget spokesman, Chris Collibee.
And given how much the income tax generates, he added, a variance of $285 million isn’t unusual.
The legislature’s nonpartisan Office of Fiscal Analysis recently confirmed revenue growth like what Lamont’s staff reported on June 20.
Analysts for the governor and the General Assembly, working largely off data provided by the Executive Branch, jointly prepare an April 30 report, projecting revenues for the current fiscal year and the next three. Legislators chiefly rely on this forecast to craft new budgets and make any final adjustments to the outgoing one.
But many years that work isn’t finished until early June. And by then, the revenue numbers often seem to change.
Legislative leaders didn’t accuse the Lamont administration of intentionally withholding data on revenue growth, but they did say it’s time to revisit the process and ensure lawmakers have more up-to-date information before they make decisions.
Connecticut’s legislature meets for roughly three months, from early February to early May, in even-numbered years. But during the longer sessions, which run from early January to early June, legislators could receive an updated revenue projection entering the final week or two, Looney said.
“I think we need to find a way to adjust the calendar to gather as much information as we can,” he said.
Rep. Maria Horn, D-Salisbury, co-chairwoman of the tax-writing Finance, Revenue and Bonding Committee, noted legislators imposed new reporting mandates this spring to better anticipate growth in program costs.
A natural next step, she said, is better estimates on the revenues that can support new investments or finance additional tax relief.
“Obviously, as you negotiate a budget,” Ritter added, “this is pretty critical information to have.”