The legislature’s Appropriations Committee adopted a $55.7 billion two-year budget Tuesday evening that invests in K-12 schools, higher education, child care and other social services — but would require Connecticut to legally exceed its spending cap for the first time since 2007 and reform another key savings program.
The Democratic-controlled panel voted 40-13 to adopt the plan along party lines, which also delays raises for most state employees for one year, cancels pay hikes for constitutional officers, underfunds guaranteed health care benefits for retired workers, and rejects bus and rail fare increases sought by Gov. Ned Lamont.
The committee proposed $27.3 billion for next fiscal year, boosting appropriations more than 4% and exceeding the spending cap — which aligns spending growth with household income and inflation — by $215 million. Its budget would total $28.5 billion in 2026-27, boosting spending by about 5%.
A precursor to final budget negotiations with Lamont, the committee’s spending plan is more of a rough draft this year than it has been in previous years. Any state budget adopted before the regular session ends on June 4 likely will be revised dramatically this summer or fall.
“Government is not a business,” said Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee. “Government cannot fail. It cannot stop.”
Even before reckoning with shrinking federal aid, committee leaders say they faced difficult decisions after a series of state budget caps forced Connecticut to save excessively for the past eight years, weakening many core services.
“I think that government is what we do — when we need to have it — for those days that are the worst days of all,” said Sen. Cathy Osten, the other co-chairwoman of the committee. “There is a reason for good government, and this budget is a budget that’s about real people with real families and real problems. And I am not willing to let them go and try to figure it out on their own.”
Big investments in education
The committee identified many needs in education, particularly at the local K-12 level.
Legislators pushed back against Lamont earlier this year, ordering $40 million in supplemental aid this fiscal year to local schools to offset what many called a crisis in special education. The School and State Finance Project, a nonpartisan education policy group, estimated districts needed $108 million.
The governor has proposed sending schools an extra $40 million annually for special education, but not for another two years. The committee budget released early Tuesday maintained the extra $40 million in state payments in both the 2025-26 and 2026-27 fiscal years.
But during the debate, the committee boosted that figure, recommending $124 million in extra special education grants in each of the next two years.
Democratic legislators, frustrated by Republican calls to keep the plan under the spending cap, proposed the increase to $124 million to test whether the GOP would reject aid to their communities over the cap issue. The amendment passed 45-6 with broad, bipartisan support.
Republicans also offered an amendment to boost special education spending from $40 million to $124 million each year, but to offset that growth with $84 million in annual reductions to funds for public colleges and universities. Democrats rejected that amendment in a vote along party lines.
The Appropriations Committee also pushed back on Lamont over the Education Cost Sharing grant, the main funding program to support local elementary and secondary school operating expenses. The committee 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 ECS 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.
Legislators and the governor also are expected to clash over higher education.
The Appropriations Committee proposed adding about $15 million above current spending in each of the next two years to the Department of Higher Education, chiefly to fund scholarships.
And it 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 deceptive. 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.
“When we talk about cutting out higher education, that’s terrifying to me,” said Walker, who says community college is the only affordable higher education option for many in Connecticut’s poorest cities. “Because what we will be left with is very scary.”
Still, the governor, other moderate Democrats and Republicans have said higher ed institutions have amassed too much in reserves and should spend those down before they receive extra state funds.
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%.
More funds for child care, social services – but little for Medicaid
Gian Carl Casa, CEO of the CT Community Nonprofit Alliance, thanked the committee for its proposal but said only restoring a $19 million loss won’t prevent a further deterioration of services to some of the state’s most vulnerable residents.
“People will lose access to drug treatment, mental health services, programs for people with disabilities, homeless shelters and more,” Casa said. “We urge leaders and the governor to agree to a final budget that truly protects the people who need the services of nonprofits, who could lose the most if federal funding is also cut.”
The budget committee did agree with a proposal from Lamont to take $300 million from this fiscal year’s projected surplus and create an off-budget account to fund investments in early childhood care and education for many years to come. The proposal has been criticized by Republicans, though, who note the off-budget fund is merely an accounting gimmick used to circumvent the state spending cap, which only covers appropriations from within the formal budget.
The committee plan is likely to draw criticism from some rank-and-file Democratic lawmakers for not following through on what many party leaders said was a major priority this year: boosting Medicaid rates for doctors who treat the poor.
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.
Earlier this year, Democratic legislators announced a plan to boost spending on Medicaid rates by $300 million by 2028-29, starting with a $75 million jump next fiscal year.
Instead, the Appropriations Committee plan hewed closely to the increased spending Lamont proposed in February: adding about $15.4 million next fiscal year and $30 million in 2026-27 for a much more modest, incremental bump.
“We are doing everything we can to get to the funding level that we recommended,” said Sen. Matt Lesser, D-Middletown, a member of the Appropriations Committee and, as co-chair of the Human Services Committee, one of the leading advocates for a more aggressive increase in Medicaid rates.
Exceeding the spending cap for the first time in nearly two decades
Legislators faced many tough choices in this plan — even before cuts in federal aid have been ordered — because of a controversial series of state budget caps that a growing number of Connecticut officials insist need reform.
These “fiscal guardrails,” as supporters call them, have generated annual surpluses of $1.8 billion in their first seven years. Another $1.8 billion cushion is projected for the current year.
These surpluses represent 8% of the General Fund, and critics say they have leached too many dollars away from education, health care, child care and other core programs.
The Appropriations Committee’s plan hinges on making two key changes to this “guardrails” system.
A program that has barred legislators from spending $1.4 billion in annual income and business tax receipts since 2017 would be scaled back by $300 million, effective immediately.
And the spending cap that ties budget growth to household income and inflation would be exceeded and reset to allow an extra $131 million in appropriations next fiscal year. That can be done with a three-fifths vote in the House and Senate, provided the governor first declares a fiscal emergency in writing.
Lamont, a fiscally moderate Democrat who called the spending cap “sacrosanct” during a January meeting with state business leaders, is expected to challenge that aspect of the committee plan.
“My administration has stressed careful spending that can be sustained into the future,” Lamont said shortly after the committee plan was released. “Unfortunately, some portions of this budget proposal include spending that may not be sustainable and could unfortunately result in cuts or tax increases under future state leaders. Connecticut has gone down this road before and the result was financially harmful for taxpayers, municipalities and nonprofits.”
The governor added, “My administration will continue to meet with legislative leaders to find a compromise.”
Lamont wasn’t the only one criticizing the committee plan early Tuesday.
“This is fiscally irresponsible to say the very least,” said Senate Minority Leader Stephen Harding, R-Brookfield.
“The fact that we’re going over the spending cap is definitely an area of concern,” said Rep. Tammy Nuccio of Tolland, ranking House Republican on the Appropriations Committee.
House Minority Leader Vincent J. Candelora, R-North Branford, said the committee budget shows no fiscal responsibility.
“Free bus fare, growing illegal immigrant health care costs, earmarks for Democrat legislators, student loan forgiveness — the math doesn’t work for residents struggling under the weight of costly government programs and bureaucracy,” he said. “They can’t afford it. This plan may be a starting point, but it’s far from where it needs to be. House Republicans are ready to help build a budget grounded in the reality families, business owners, and local leaders live every day.”
Legally exceeding the spending cap is far from unprecedented, though it hasn’t happened in a long time.
Unlike the other “fiscal guardrails,” the spending cap has existed in various iterations since 1991, when it was enacted — and later added to the state Constitution — to temper public outrage over creation of a state income tax.
From the late 1990s through 2007, Republican Govs. John G. Rowland and M. Jodi Rell teamed up with Democratic-controlled legislatures to legally exceed the cap seven times.
The last time, in the spring of 2007, Rell and the legislature approved a new biennial budget that exceeded the cap by $690 million in the first fiscal year.
But those cap overruns largely have been criticized by both parties as excessive and irresponsible.
Nuccio also noted the new committee spending plan underfunds a major contractual obligation, heatlh benefits for retired state workers.
Comptroller Sean Scanlon recommended that the committee find another $228 million over the next budget cycle — in addition to what Lamont proposed — 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.
The committee also ignored this recommendation and, like Lamont, is hoping Scanlon can negotiate savings with the state’s health insurance carrier to at least mitigate this gap.
Delaying raises for most state employees
Because the new Appropriations Committee proposal already exceeds the spending cap for the upcoming fiscal year, the panel assumed raises for most state employees, which are due July 1, would be delayed at least one year.
The governor, who is negotiating with the State Employees Bargaining Agent Coalition, has announced no agreement to date.
SEBAC unions have received about 4.5% annual raises — a 2.5% general hike and a step increase that normally is worth another 2 percentage points — for the past four fiscal years. According to nonpartisan analysts, this year’s raises cost the General Fund about $120 million.
If Lamont doesn’t ask lawmakers to ratify a new wage agreement before the regular session ends on June 4, that doesn’t mean workers would forfeit raises. A pay hike eventually ordered for 2025-26 might be delivered late — as has been done on occasion in the past.
Other elements of the Appropriation Committee’s budget proposal include:
Adding about $120 million over the next two fiscal years combined to the Department of Correction. State employee unions and many legislators say the department, which spends more on overtime than most agencies, is badly understaffed. The department is projected to overspend its salary account this fiscal year by almost $41 million.
Rejecting Lamont’s call to increase bus fares by 25 cents in 2026-27 and rail fees by 5% in each year of the upcoming biennium. Those changes would generate an extra $35.5 million and are necessary, the administration says, because ridership remains below pre-pandemic levels.
Adding 53 employees to the Public Defender’s Office and 13 in the Secretary of the State’s Office.
Maintaining $384,000 in the Department of Aging to support the fall prevention program and $1 million for nonprofit library programs.
This story was originally published in the Connecticut Mirror.
