Connecticut Gov. Lamont unveils $50.5 billion budget with middle-class tax cuts

Connecticut Gov. Ned Lamont unveiled his new, two-year, $50.5 billion budget Wednesday that includes the largest cut in the personal income tax in state history, provides universal free lunch for all public school students and makes further gains in paying down the state’s long-underfunded pension debt.

Lamont’s fiscal plan includes cuts in the personal income tax that would provide the largest relief to single individuals earning about $65,000 per year and families earning about $100,000 per year.

About 1.1 million of the state’s 1.7 million tax filers would benefit, but the vagaries and structure of the tax system provides a varying range of tax cuts at different income levels.

During a 30-minute budget address in the historic Hall of the House at the state Capitol that was interrupted repeatedly by applause, Lamont outlined a vision of tax cuts and incentives for issues including day care, job creation, and affordable housing, among others.

Lamont is increasing the earned income tax credit, which chiefly benefits families with children. Under the plan, a family of four earning $50,000 per year with two children who qualify for the earned income tax credit would pay no state income tax.

The tax cuts, he says, would not be possible without fiscal prudence — calling for a continuation of the policies that were enacted in the historic, bipartisan 2017 budget deal.

“One of the smartest actions the General Assembly has taken over the past decade is the enactment of the fiscal guardrails that have provided predictability and stability to our budget process,’' Lamont told lawmakers in the historic Hall of the House at the state Capitol. “These fiscal controls have ended the era of wishful budgeting and the so-called permanent fiscal crisis. Together, we have made historic payments towards our unfunded pension liabilities — honoring our commitment to teachers and state employees and saving taxpayers billions of dollars in the future.’'

Lamont referred to a large, multifaceted bill, scheduled to be debated Thursday in both chambers, that would provide more money for school lunches as many town officials have complained that the federal money from the coronavirus pandemic has run out. The bill is also designed to clarify the confusion over a recent contretemps concerning bottle deposits related to hard seltzers and hard cider, along with continuing the fiscal guardrails.

“Tomorrow, you will have the opportunity to extend the bond covenants and related fiscal controls for another 10 years,’' Lamont told lawmakers Wednesday. “Every dollar we eliminate from fixed costs are dollars we can use to provide tax relief and additional services to the residents of our state.’'

One of the most important guardrails is the “volatility cap’' that prevents the legislature from spending huge tax receipts from capital gains taxes on Wall Street after they reach a certain level. Before the law, the legislature was able to spend that money, but now it must be sent to the rainy day fund for fiscal emergencies and to pay down pension debt.

“These guardrails have contributed to a full rainy-day fund which provides protection in case of the unforeseen risk — whether that be another geopolitical disruption, a recession, a pandemic, or a federal government shutdown,’' Lamont said. “Connecticut is well positioned to weather that storm. While we cannot predict the future, we have the responsibility to be ready for it. This budget builds on the momentum of the last four years — COVID be damned — and we are just getting started.’'

Reaction

While both Republicans and Democrats praised the concept of a middle-class tax cut, some legislators said they were withholding judgement on various issues because they were still digesting a complex, massive budget that provides funding for scores of agencies and departments ranging from the University of Connecticut to the huge system of courthouses stretching to every region around the state.

Mayors and first selectmen in the Connecticut Conference of Municipalities were hoping for more funding at a time of booming budget surpluses for the state.

“CCM is disappointed that there is not more in the budget to address the regressive nature of the property tax and provide municipalities with additional financial support or mandate relief that would enable towns and cities to enact meaningful reductions to the property tax,’' the group said. “The additional money [for education] will help our towns and cities as they work to avoid increasing property taxes, but does not provide the needed support to reduce property taxes. Municipalities are facing rising costs across the board and may be burdened with additional costs imposed by unfunded mandates currently under consideration by the legislature. Maintaining municipal aid at or close to current levels does not offset the impact of increased costs and or new unfunded mandates.’'

House Speaker Matt Ritter of Hartford, a key player in the final budget negotiations, said some lawmakers have raised concerns about funding for UConn and the public higher education system that includes the community colleges.

“There’s concerns based on the briefings that my appropriations chair received and higher education chair received,’' Ritter said when asked by The Courant. “We’re going to have to look at it.’'

The union-backed Working Families Party, which endorsed Lamont in last year’s election against Republican Bob Stefanowski, has concerns about the proposed budget.

“Proposals like expanding the earned income tax credit, and increased public education funding are commendable, but insufficient,’' said Sarah Ganong, the party’s state director. “To really create opportunity for all, we must further expand access to early care and education, put resources towards even more affordable housing, and truly revitalize our cities and towns.’’

House Republican leader Vincent Candelora of North Branford, who has clashed with Lamont on various issues, sees areas of agreement and compromise.

“I’m definitely more pleased than not, and I think it’s a good starting point,’’ Candelora said.

Day care increases

Besides the tax cuts, Lamont is pushing for increases in day care funding so that parents can return to work after the birth of a child.

“Our commitment to day care in this fiscal year kept more of our centers open, provided up to $70 million in wage support payments for child care workers, and $25 million to subsidize 1,300 additional slots for infants and toddlers,’' Lamont said. “Our proposed budget increases child care rates in the state’s largest child care program – Care 4 Kids – by 10% a year for each year of the biennium.’'

In addition, Lamont said that Early Childhood Commissioner Beth Bye will be gathering families, employers, and day care providers with the intent of “designing the next generation of child care, with incentives for the business community to provide more on-site support and to ensure the child care system works for all stakeholders.’'

Employers would get a 25% tax credit as part of the package.

Education

Numerous governors have tried to improve public education as the state has spent billions of dollars through the years.

The largest grant to municipalities, known as the education cost-sharing grant, would increase by $135 million. That would be added to $720 million in federal funding from the coronavirus pandemic that has not yet been spent.

“Recruiting and retaining the best teachers in the world builds on our strengths as one the first states to get our schools open – ranked some of the best schools in the country,’' Lamont said. “The most important education reform is a great teacher in the classroom.’'

The state will be making a special effort to recruit candidates from the University of Puerto Rico and historically Black colleges in order to have a more diverse group of teachers.

Jobs, trains and more

With nearly 100,000 jobs remaining unfilled in Connecticut, Lamont is providing incentives for on-the-job training and expanding the state Office of Workforce Strategy in an effort to find the proper candidates for open jobs.

“A high-paying job in less than six months of training – that’s a pay raise for you, a stronger economy for all of us,’' Lamont said.

With his longtime goal of improving transportation, Lamont said there will be 5G internet service on the Metro-North Commuter Railroad.

“The train can double as your high-speed office,’' Lamont said.

While he did not highlight them in his speech, Lamont’s package also includes a series of gun-control proposals in an attempt to reduce gun violence in the cities and around the state.

House majority leader Jason Rojas, an East Hartford Democrat, said his 98-member caucus is generally on board with Lamont’s ideas.

“We’re largely aligned,’' Rojas said. “He hit on a lot of key priorities, whether it’s education, whether it’s childcare, whether it’s housing. Of course, I think we need to dig into the details of all that to figure out exactly how strongly we’re aligned. But for the most part, I think our caucus is very supportive of where the governor’s coming right now.”

He added that Lamont hit the “bread and butter issues for the people that we represent.”

The next step in the months-long process is a series of public hearings with presentations by more than 50 different agencies, departments, and commissions that will defend and explain their fiscal priorities in front of the budget-writing appropriations committee. That starts on Feb. 15 with testimony by UConn, UConn Health Center, and other higher education agencies.

The committee will make its recommendations by the April 21 deadline, and the final budget compromise with Lamont is not expected to be finalized until near the end of the legislative session on June 7.

Courant staff writer Alison Cross contributed to this report.

Christopher Keating can be reached at ckeating@courant.com