Ryan Fazio, the Republican gubernatorial nominee, hasn’t minced words when it comes to Gov. Ned Lamont’s handling of state budget caps imposed as part of a bipartisan deal in 2017, the year before he was elected to his first term.
“The governor has inherited the only good budgeting policy that the state has adopted in my lifetime,” Fazio told the Connecticut Mirror, “and has essentially destroyed [it] by the end of his second term.”
The reality is more nuanced.
Over the past two legislative sessions, Lamont and the Democratic-controlled General Assembly have used off-budget accounting to circumvent a spending cap by more $750 million, formally exceeded that restriction three times by another $1.2 billion and repeatedly underbudgeted for Medicaid and guaranteed employee benefits.
But while Lamont has engaged in alterations and workarounds, the two-term governor insists they are still keeping the state on a routine that has generated huge savings, paid down pension debt faster than any of his predecessors and offset unprecedented federal cuts to nutrition, health care and other vital services.
Meanwhile, Fazio and other Senate Republicans were the only caucus not to propose a state budget or show how they would resolve cap challenges either of the past two years.
“Ryan Fazio wants to lecture Connecticut about fiscal guardrails, as a member of a caucus that couldn’t even be bothered to put forth a budget,” Lamont campaign spokeswoman Lauren Gray said Tuesday, noting the contested spending chiefly involves affordable childcare, K-12 education and other aid to cities and towns.
“The truth is, the governor strengthened our state’s fiscal guardrails, using them to pay down billions in pension debt while still investing in what actually matters to families,” she added. “That’s what responsible budgeting looks like.”
Budget ‘guardrails’ worked because of huge federal COVID grants
Fazio and Lamont are sparring over a series of spending, borrowing and other caps adopted nine years ago with bipartisan support to stem a string of budget deficits and several major tax hikes.
Those caps have forced unprecedented savings.
In the two decades prior, the average state budget closed with a surplus equal to 1/10th of 1% of the General Fund. In the nine years under the “guardrails,” as supporters call them, the average surplus is nearly 9%.
But most of that isn’t due to bull markets on Wall Street or new operating efficiencies.
The 2017 legislature created a controversial program that captures huge chunks of income and business tax receipts before they even arrive in the state budget — without projecting how much would be removed or the ramifications for programs.
But despite generating massive surpluses averaging $1.8 billion yearly under Lamont, who inherited this system in 2019, the budget challenges were masked by COVID. Specifically, the federal Coronavirus Relief Fund and American Rescue Plan Act gave state government directly $4.2 billion officials could use — outside of cap rules — to cover almost any operating expense.
As the “guardrails” were extracting nearly $2 billion a year from core programs, Lamont and legislators could use COVID grants to blunt the pain.
Think of it as fiscal Novocain.
But state officials had assigned the bulk of those dollars by the end of the 2024 session, and nearly all have been spent by now.
Lamont initially insisted ‘guardrails’ didn’t need adjustments
Still, when the CT Mirror outlined the impending problems as these grants wound down, Lamont, a fiscal moderate, said there was no need to “fuss” about the numbers. “I think we’re OK,” he said.
We weren’t.
Connecticut would overspend its Medicaid account by almost $160 million in 2024. Rather than tightening program eligibility to cut costs or budgeting more funds, Lamont and legislators did neither, relying on the guardrails-generated surplus to clean up the mess.
Lamont and the legislature legally exceeded the spending cap to close a $284 million Medicaid shortfall in 2025 and by $80 million to plug a gap last spring.
Republicans cried foul, noting surplus dollars were supposed to pay down Connecticut’s hefty pension debt — not to cover hidden Medicaid costs intentionally left out of the budget.
Similarly, Democrats underbudgeted by nearly $130 million over the past two years for healthcare benefits guaranteed by contract for retired state workers, ignoring cost projections from state Comptroller Sean Scanlon. The retiree healthcare account had a special reserve with roughly a matching amount of funds, but that’s now largely been exhausted.
“The governor has taken magic and deception to the levels of Harry Houdini,” said House Minority Leader Vincent J. Candelora, R-North Branford.
And while Candelora declined to engage in semantics about whether they were destroyed, he said Lamont clearly has departed significantly from the budget caps he followed earlier in his administration.
The governor and Democratic legislators also have worked around the cap in a more open fashion.
They created a $40 million account outside of the budget in 2025 to mitigate a financial crisis in local schools’ special education programs.
Their biggest end-run around the cap, an off-budget endowment to dramatically expand affordable childcare, has received $712 million in surplus over the past two years.
And while this year’s budget legally exceeded the cap to cover Medicaid costs, it also did so to send an extra $280 million in aid to cities and towns, which Lamont says will help many communities stave off property tax hikes.
But government will be expected to maintain those investments in future years, and there is no additional federal pandemic aid on the horizon.
“We’re going to have to pay the piper, and it’s going to be on the taxpayers’ back,” Fazio said.
Ritter: Governor compromised on caps for the right reasons
House Speaker Matt Ritter, D-Hartford, said the Democratic track record speaks for itself.
The single-largest move around the cap was aimed at a childcare shortage that threatens all communities and the state’s economy.
Reducing municipalities’ reliance on local property taxes to fund schools and other services is equally essential, he said.
And the last large chunk of funds set outside the cap, about $550 million, was provided so Connecticut could mitigate the most painful human service cuts ordered last year by President Donald Trump and the GOP-led Congress.
When roughly 143,000 residents lost a collective $295 million in federal tax subsidies that had helped them purchase health insurance on the state exchange, Lamont used $115 million from the state response fund to mitigate the loss.
Another $8.5 million was used to provide $300 grocery store gift cards to 25,000 residents who lost federal nutrition assistance, while more than $20 million went to bolster food banks and pantries.
But Fazio and other Republicans say Lamont’s maneuvers around the cap have served his political agenda.
Working around the cap allowed Lamont to provide most unionized state employees with annual raises around 4.5% since 2022, compensation that tops most private-sector pay hikes, Republicans argue.
Many in the GOP balked last month when the governor used $5 million to support residents affected by federal changes to immigration rules and particularly to Temporary Protected Status provisions.
But Ritter added, “There will be some people on both sides” of the budget caps debate. Many progressives argue Lamont should have compromised more on budget caps and remains too focused on shrinking debt.
The governor committed more than $1.4 billion in surplus to reduce pension debt following each of the past two fiscal years. Between 2020 and 2024, the average pay-down was $1.5 billion. Before Lamont, Connecticut never had used budget surplus to reduce its unfunded pension obligations.
When the budget caps were created in 2017, legislators hoped to end deficits, build reserves and possibly shrink pension debt, Ritter said. But now, even while continuing to attack unfunded pension obligations that still top $30 billion, officials want to assess services in need and temper problems created by massive federal spending cuts.
“Government is not static. There are changes,” Ritter added. ““Am I confident we will strike the right balance? Yes.”
Mark Pazniokas contributed to this report.
