Gov. Ned Lamont wants a $500 million rebate program that would send $200 to most taxpayers this October. Majority Democratic legislators have countered with a smaller rebate and more aid for local schools.

But legislative leaders now say there may be a way to give both sides most of what they want.

“I think we’ll be able to do much better than that,” House Speaker Matt Ritter said while speaking with reporters before Wednesday’s House Session. “So, stay tuned.”

The Hartford Democrat said legislators haven’t abandoned their request to divert at least $150 million to $170 million away from the $500 million rebate program and into local schools.

But were that to happen, Lamont would lose one-third of his rebate funds. Using rough math, a $200-per-person rebate would shrink to about $133.

Legislators could push that number up somewhat by tweaking eligibility but likely not back to $200 per person just by reducing the number of recipients.

Lamont wants to send checks to individuals making less than $200,000 per year and couples earning under $400,000. Some Democrats have questioned whether the highest of those earners should receive a rebate, given the financial struggles of lower-income households.

But Ritter predicted that when the legislature’s Finance, Revenue and Bonding Committee completes its proposals next week, “I think you will see substantial, targeted [rebate checks] well above the numbers that were floated back in January.”

Democratic legislators could find a way to give taxpayers a rebate greater than $200 per person by drawing more funds from the same source that Lamont wants to tap to finance the rebates.

The governor wants to take $500 million from a special savings program that bars lawmakers from spending a portion of annual income and business tax receipts. But the funds in that program — which is expected to capture $1.8 billion this fiscal year — are supposed to be used to reduce pension debt and maintain budget reserves.

Lamont, a fiscal moderate, has been reluctant to use those funds for other purposes in the past. And while he proposed a one-time exception to finance a rebate just days before voters will decide this November whether to reelect him to a third term, it is unclear whether he would be willing to draw more than $500 million for a giveback to taxpayers.

Ritter didn’t offer specifics on how legislators might beef up the rebate and offer extra aid to local schools without drawing even more dollars from the savings program.

But he offered a hint.

“I think it would be more around property taxes … I think it is what we’re leaning towards,” Ritter said. “But we’ve got to get everybody to agree on it.”

The state income tax includes a credit that offsets up to $300 of local property tax costs for more than 660,000 moderate-income filers. It costs the state about $138 million per year, according to nonpartisan fiscal analysts.

The General Assembly could effectively advance some or all of the credit taxpayers would otherwise claim next spring when they file their income tax returns for this year’s earnings.

For example, the state could: A) project how much property tax credit a household is likely to receive against income taxes in next year’s return; B) add an amount equal to that projected credit to the rebate sent this October; C) and then recoup the advance next spring by making the credit unavailable for one year.

Senate President Pro Tem Martin M. Looney, D-New Haven, said details of the rebate plan still are being negotiated and said his caucus would like to see municipal aid grow by as much as $250 million.

Looney added, though, that legislative leaders “want to recognize the governor’s interest in trying to do something with the rebate program” and predicted some form of tax giveback would be adopted.

Child tax credit could be in trouble yet again

But a compromise on a rebate program and municipal aid could spell doom for proposals from both parties for long-term relief for taxpayers.

The rebate would be a one-time payment, and many lawmakers from both parties say Connecticut’s cost of living is far too high and households need tax savings year after year.

House Republicans are pushing a plan to add up to $700 to the property tax credit.

The Senate GOP proposed big income and payroll tax cuts that could deliver more than $1,500 per year to middle-class households. But that plan also would eliminate most or all state budget surplus funds and potentially push finances into deficit in the next few years, based on the latest budget and revenue projections.

Meanwhile, more than half of the House of Representatives and nearly two-thirds of the Senate have co-sponsored at least one bill to create a new, ongoing income tax credit for poor and middle-class households with children.

The Committee on Children recently approved the most popular bill, which would create $600-per-child credit, up to a maximum of $1,800 per household. The credit would be refundable. That means even if a household with children earns so little it has no state income tax liability to apply the credit to, it still would have $600 per child added to its refund.

But it was unclear this week whether the finance committee, which has jurisdiction over tax-related measures, would endorse a credit this year, as it has in the past.

Rep. Maria Horn, D-Salisbury, co-chairwoman of the panel, declined to predict what the group would do.

But Horn said that while she and many other Democrats agree the affordability crisis is real, they don’t want to undercut assistance efforts already underway.

Lawmakers have bolstered education aid dramatically in recent years and are focused on sending more dollars to local schools in the next budget, which reduces the need to raise local property taxes, she said.

Legislators also are concerned because surplus funds pledged this year to a new initiative to expand affordable child care have been imperiled, and many want to find more dollars to keep pushing that initiative.

Further complicating matters, legislators and the Lamont administration still anticipate losing hundreds of millions of dollars in federal Medicaid assistance next fiscal year due to cuts ordered last July by Congress and President Donald Trump. And a new child tax credit would cost the state more than $300 million to $400 million per year.

If Connecticut commits to new, ongoing tax cuts, but then reneges on aid to schools and child care programs because the state budget is in chaos, that does nothing to help families, Horn said.

“I remain focused on the sustainability part of this,” she added. “We want to preserve our resources and our ability to respond to an inherently unstable situation.”

But advocates for ongoing tax relief aren’t walking away.

Sen. Ryan Fazio of Greenwich, ranking GOP senator on the finance committee and a gubernatorial candidate, said a one-time rebate would not provide sufficient relief for the high cost of living Connecticut households face.

“It’s not reasonable,” he said. People are looking for a better direction than this one-time gimmickry. No one is saying I want one-time relief.”

The push for a child tax credit has been going on for the past five years, despite strong backing from rank-and-file lawmakers. Lamont favors relief targeted at a broader group than just households with children.

The administration shares legislative leaders’ concerns about the growing pressures on state finances, said Josh Wojcik, the governor’s budget director.

“When we project out our revenues into ’27 and beyond, our General Fund revenues really would struggle to support that” child tax credit, he said.

But many of the governor’s fellow Democrats in the legislature counter that Connecticut is saving too aggressively to pay down its pension debt and could afford a new tax break for families and keep its pledges to invest in local education and child care.

More than 40% of households here, including more than 320,000 children, struggle to afford a basic survival budget, said Lisa Tepper Bates, president and CEO of the United Way of Connecticut.

“It has never been more important than it is this year to provide meaningful support directly to families through a Connecticut Child Tax Credit,” she said. “We will continue to make the case for this proven, practical measure, knowing that nearly three-fourths of Connecticut voters — those raising children, and those who are not — support this targeted tax relief.”

“I think we’re going to continue to make sure the child tax credit, a proven way to provide relief to families, is part of the conversation,” said Rep. Kate Farrar, D-West Hartford, who serves on the finance committee. “A lot happens between the [committee] deadlines and final negotiations” on a new state budget.

Lawmakers and Lamont hope to reach a deal on a new fiscal plan, including a possible rebate, before the regular 2026 session closes on May 6.