For the first time since Congress and President Donald Trump slashed health care and nutrition assistance last July, Connecticut legislators heard a projection of how much the state stands to lose next fiscal year.
It wasn’t pretty.
Connecticut Voices for Children, a New Haven-based policy group, used its 25th annual Tax and Budget Forum Thursday to project the impending financial hit at nearly $1 billion, more than double the $500 million emergency fund legislators created in special session to offset vanishing aid from Washington.
The progressive research organization also offered numerous options to mitigate forces it says are pushing thousands of Connecticut residents into poverty or farther below subsistence levels.
The General Assembly could pump hundreds of millions into health care and food assistance by boosting taxes on the wealthy households that are chief beneficiaries of new federal tax cuts financed with human service program cuts, the organization reported.
But, given 2026 is a state election year and tax hikes are unpopular, lawmakers and Gov. Ned Lamont also could achieve similar results by curbing aggressive state savings policies and by working harder to collect the nearly $4 billion in unpaid taxes Connecticut misses out on annually.
“The income and wealth divides are widening by the day, and it’s on full display when some of the most powerful people and corporations are profiting … while many of our neighbors have no choice but to visit a food pantry to feed their families,” Emily Byrne, executive director of Connecticut Voices, said to open the online forum.
General Assembly must solve next CT budget in February
Since Trump and the GOP-led Congress ordered more than $1 trillion in cuts to various human service programs over the next decade to finance $4.5 trillion in tax relief, Connecticut officials have been waiting to learn how big the local hit would be.
Lamont’s budget staff was supposed to issue projections this fall but did not do so, saying it should wait until after Congress resolves the next federal budget — something that still hasn’t happened.
But the General Assembly must begin revising state finances for the 2026-27 fiscal year when its next regular session starts on Feb. 4. State lawmakers have been bracing for the worst.
House Speaker Matt Ritter, D-Hartford, who has pressed the Lamont administration repeatedly for its analysis of the congressional fiscal mega-bill, said the Connecticut Voices’ tally seems on the mark.
That $1 billion gap reflects not only cuts to Medicaid and to the Supplemental Nutrition Assistance Program, or SNAP, but also vanishing federal tax assistance to families that purchase health insurance offered through the state exchange.
Connecticut Voices’ analysts assume about 150,000 state residents would lose health insurance, either because policies on the exchange have become unaffordable or due to cuts in federal Medicaid funding.
And though the state Department of Social Services estimated as many as 36,000 residents here would become ineligible for SNAP benefits by March 31 because of new work requirements and other rules changes Congress ordered in July, other changes will continue to tighten the program over the coming decade. By the early 2030s, Connecticut Voices estimates those removed from the program here will approach 58,000.
Considering both cuts to human service programs and federal tax relief, the poorest 20% of households are estimated to lose more than $1,600, on average, in annual resources, while the richest 10% are projected to gain more than $9,200, Connecticut Voices’ analysts project.
The General Assembly this fall set aside $500 million from last fiscal year’s $2.5 billion surplus to backfill vanishing federal aid in certain human service programs. Lamont already has directed $168 million from that fund to assist food pantries, Planned Parenthood and programs to combat homelessness. The administration also dedicated another $70 million to mitigate cutbacks in federal assistance for health insurance premiums.
Lamont’s direct control over the $500 million ends when the General Assembly reconvenes Feb. 4, but Ritter said he expects lawmakers will continue working with the governor to spend the rest of those funds, and possibly more, to soften the harshest cuts to human service programs.
“We have, I think, a responsibility to do the best we can to help our residents,” the speaker said, adding he remains hopeful that if Democrats gain control of at least one chamber of Congress during the November 2026 elections, some of the federal budget policies can be reversed.
Report: Poverty was growing in CT before federal cuts
Connecticut Voices argues in its report that Connecticut’s middle class had been slipping closer to poverty — and its poor falling even further — well before last July.
Over the past three years, the share of Connecticut residents living in or near poverty ticked up from 21.8% to 22.8%, according to the Supplemental Poverty Measure, a metric that considers not only household income and expenses but also public assistance benefits.
That is aligned with findings reported last September by the United Way of Connecticut, which found a record-high 581,000 Connecticut households, about 40%, couldn’t afford a basic “survival” budget in 2023.
“If the state does not act, and holding all other factors constant, the new federal policies will lead to even more low- and middle-income households struggling to make ends meet and higher poverty rates,” Connecticut Voices’ research and policy director, Patrick O’Brien, wrote in his report for the forum.
Connecticut is home to some of the most extreme income and wealth inequality in the country.
The top 1% of households nationally, or those who earn more than $730,000 per year according to CNBC, have an average income of $2.27 million per year, about 127 times the average earnings of the poorest 20%, which is $17,870, O’Brien said.
But in Connecticut the top 1% enjoy a much wider gap, averaging $3.66 million in yearly income or almost 183 times that of the $20,050 earned by the poorest 20%.
CT could tax the rich – or save less – to help poor and middle class
Given that taxpayers with incomes topping $500,000 per year are slated to receive one-third of the entire federal tax break — which is paid for, in part, with deep cuts to assistance programs — Connecticut Voices’ officials repeated recommendations they’ve made in several recent forums for state tax hikes on some the highest earners.
Adding or adjusting business tax surcharges could raise as much as $110 million per year.
Similarly, placing a surcharge on the capital gains-related earnings of households with overall income that exceeds $500,000 per year would generate $235 million.
Raising the effective tax rate on Connecticut’s largest estates could collect up to an extra $70 million.
And if state officials don’t want to talk tax hikes while running for reelection this year, there are other ways to raise funds, O’Brien noted.
The state has used an aggressive series of budget caps to force unprecedented surpluses since 2017. Unspent dollars have averaged more than $1.8 billion annually over the last eight years, a huge total that represents 8% to 9% of the General Fund. One cap alone that restricts legislators’ ability to spend certain income and business tax receipts has captured an average of $1.5 billion per year.
Connecticut has used those dollars to bolster its reserves and whittle down its pension debt, which still exceeds $33 billion, according to Lamont’s budget office.
Many Democrats in the legislature have criticized the caps in recent years, arguing they force excessive surpluses and draw needed funds from health care, education, municipal aid and other core programs.
Connecticut Voices’ analysts say moving between $925 million or more from this savings program and into the budget would eliminate the need for any tax hikes.
They also note the state projects a $3.7 billion annual “tax gap” that reflects the difference between what is owed and collected. If Connecticut were to increase auditing staff sufficient to reduce that gap by even 10%, it would provide almost $400 million extra annually to mitigate losses in federal aid.
But minority Republicans in the General Assembly, as well as many moderate Democrats, are expected to fight many of these proposals.
House Minority Leader Vincent J. Candelora, R-North Branford, said Thursday that his caucus still favors a major state income tax cut aimed solely at Connecticut’s middle class. The House GOP in October pitched increasing an income tax credit that offsets local property tax bills by as much as $700 per filer.
But Candelora said Republicans aren’t looking to boost taxes on any households or businesses at this time and added Connecticut officials should try to find efficiencies in the existing state budget if they want to identify money to offset federal cutbacks to human service programs.
Lamont, a moderate Democrat, has steadfastly opposed increasing taxes on Connecticut’s wealthy, including finance investments in social programs, arguing that doing so would prompt higher earners to flee the state.
The governor also has been wary about changing any of Connecticut’s budget caps, despite complaints from his fellow Democrats in the legislature.
Lamont did sign the first major state income tax rate cut into law three years ago, which gave middle class families about $300 per year. And his budget spokesman, Chris Collibee, noted the governor recently secured legislative approval for a new endowment to dramatically expand affordable child care, largely by using state surplus dollars.
Collibee didn’t comment on specific proposals from Connecticut Voices but added that “Gov. Lamont is eager to hear any thoughtful ideas that can help make life more affordable for Connecticut families.”
Byrne said that “affordability” is a popular buzz word “that politicians feel compelled to say,” adding that it’s unclear which households’ budgets leaders are trying to assist.
“While the state may not have created the chaos we’re experiencing, it owns it now,” Byrne added. “And so the choices made by elected [state officials] will determine whether federal harms are made worse or mitigated.”