Nonprofits, low-income families are winners in two-year, $46 billion Connecticut state budget; lawmakers also seek to help cities as state House prepares to vote Tuesday

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With increased funding for cities, nonprofits and working families, the state House of Representatives is expected to vote Tuesday on a two-year, $46 billion state budget that has no tax increases.

In a last-minute change announced Monday, Democrats achieved a key goal by increasing the state’s earned income tax credit to 30.5% of the federal credit, which was beyond the recent agreement for 30% and up from the current level of 23% that was reached in a bipartisan legislative deal in 2017. The increase is designed to help low-income working families with children who also receive the federal credit. Democrats also pushed for creating a new child tax credit against the state income tax, but that was postponed at least until the third year because of sharply increased funding by President Joe Biden’s administration for the federal tax credit under the coronavirus stimulus package.

“In the final negotiations, the Senate president [Martin Looney] and I were able to get it to [30.5%], and we’re very happy about that,” said House Speaker Matt Ritter of Hartford.

Another winner in the budget battle is the community nonprofits that will receive about $190 million in additional funding.

For years, officials with the nonprofits have traveled to the state Capitol to tell legislators that their minor increases have not kept up with their growing costs, causing them to fall behind.

Gian Carl Casa, chief executive officer of the Connecticut Community Nonprofit Alliance, said the new money is “a significant increase that will begin to address more than a decade of underfunding of services for some of the state’s most vulnerable citizens.”

The increase, however, falls short of a seven-year, $461 million plan that had been pushed by the nonprofits and the top two Democrats on the budget-writing appropriations committee.

“We await more detail on how the funding increases will be allocated and if there will be sufficient flexibility to respond to ongoing fiscal pressures, but we are grateful for the unprecedented support that community nonprofits have received from the General Assembly for the biennium,” said Casa, a former top state budget official.

Gov. Ned Lamont’s chief spokesman, Max Reiss, said, “The commitment to nonprofits is historic and transformative. This support is going to be essential to helping countless residents get back on their feet.’'

The nonprofits hold numerous contracts to provide state services, such as group homes, at a rate that is lower than similar work by state employees, who have more costly pensions and health care benefits.

Lawmakers were still putting the finishing touches on the plan Monday as legislators scrambled to find out how much money each town would receive — an annual ritual that is reliant on complicated formulas to generate the final numbers.

In a year calling for improvements in equity, top Democratic legislators are still working in the final days of the legislative session to gain hundreds of millions of dollars for the state’s cities. Lawmakers are crafting a bonding compromise to help the cities and other cash-strapped communities with $875 million over five years. The latest version of the bill, which has changed in recent days, calls for $175 million per year to be overseen by an equity board in a measure that was still being negotiated Monday by Lamont’s administration and the legislature. If reauthorized for another five years, the proposal could provide another $250 million per year.

Lamont opposed the original legislative plan for a 10-year bonding program, saying that he did not want to tie the hands of future governors. Lamont’s own hands have been tied by various long-term deal in the state that he could not change when he came into office in 2019, officials said.

Some officials had been concerned that an equity board would have too much power, and the authority of the 10-member State Bond Commission, chaired by Lamont, would be sharply diminished. But the latest draft language, as of Monday night, ensured that Lamont would retain power. The new Community Investment Fund Board 2030, with a bipartisan group of legislators among the members, would be created within the state Department of Economic and Community Development, which is overseen by the governor.

“The governor shall review the eligible projects on the list and may recommend changes to any eligible project on the list,” the draft language states. “The governor shall determine the most appropriate method of funding each project and shall provide to the members of the board, in writing, such determination for each eligible project on the list and the reasons therefor. The board may reconsider at a future meeting any eligible project for which the governor recommends a change. For any such project for which the governor recommends allocation of bond funds, such project shall be considered at a State Bond Commission meeting not later than two months after the date of submission.”

While Democrats crafted the two-year budget deal with Lamont, Democrats are now asking Republicans if they want to join in a bipartisan vote because the bill no longer includes items such as raising the capital gains tax by more than 25% for the state’s highest earners, creating a consumption tax on the rich that Republicans said was actually an increase in the personal income tax and imposing a digital advertising tax on technology giants that retailers said would trickle down to mom-and-pop stores.

On the tax side of the budget, Lamont withdrew his controversial transportation climate initiative after legislators told the governor it lacked enough support. The proposal, which seeks to reduce carbon dioxide pollution from cars and trucks and fund clean transportation, was blasted by Republicans, who said it could raise gas prices.

Negotiators also dropped a plan to raise $50 million through a controversial tax that was strongly opposed by insurance companies that employ thousands of workers in the Greater Hartford area.

Aside from the bonding plan that will receive a separate vote, the state budget will include a new, three-tiered program for state payments in lieu of taxes that will deliver more money for Hartford, New Haven and Bridgeport, among others. Collectively, the increase would be nearly $150 million for PILOT.

“There’s a lot,” Looney said of money for the cities. “There is a major infusion of municipal aid in virtually any category that you might think of.”

In addition, municipalities will also receive an additional $4.5 million per year from a new fee on miniature “nip’' liquor bottles that will stay with the local communities for the first time. The highest amounts of money will go to the communities that sell the most nips, which include New Haven, Hartford and Bridgeport.

The money from the nips, for example, could be used by the towns to hire a recycling coordinator, supporters said. The fee on the nips will be a surcharge, not a deposit — and the money will go directly to the municipalities.

Christopher Keating can be reached at ckeating@courant.com.

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