The House of Representatives approved a two-year, $ 46.4 billion state budget shortly after midnight on Wednesday that avoids major tax hikes, injects huge new dollars into municipalities and social services and tax breaks for the working poor and for restaurants.
The measure passed 116-31, with 22 of 53 Republicans joining 94 Democrats in the first bipartisan budget vote since 2018. The bill is now heading to the Senate.
The budget doesn’t touch Connecticut’s record-breaking rainy day fund, but it relies on $ 1.75 billion in federal coronavirus relief grants to keep it in balance.
And with the regular legislative session approaching its mandatory adjournment at midnight on Wednesday, it is not clear whether lawmakers will need a special session later this summer to address other budget issues, including a new plan for two-year government loan that is expected to include major new funding to support Connecticut’s poorest towns and villages.
“The pandemic has hit every community in Connecticut,” said Rep. Toni E. Walker, D-New Haven, longtime co-chair of the Credit Committee, who has struggled for the past year with both COVID- 19 and against breast cancer.
âWe all understood the pain,â she said, citing more than 512,000 jobless claims statewide, devastated industries, disrupted education systems and isolated people with disabilities without services. âIt’s time for us to come together and solve these problems in the best way. “
The new budget would spend $ 22.7 billion in the fiscal year that begins July 1, an increase of 2.6%, before climbing a further 3.9% in 2022-23.
At the insistence of Governor Ned Lamont, the package does not include any major tax increases, although lawmakers approved the governor’s proposal for a new charge for the use of highways on large commercial trucks through a separate bill. The move cleared the House on Tuesday and the Senate on Wednesday morning, with Republicans unanimously opposing it in both chambers.
“This is exactly the result that the residents of our state are looking for: they want our elected officials to work together from start to finish and develop collaborative public policies for the benefit of our residents,” said Lamont, whose administration negotiated the budget agreement with the legislator. leaders, after the vote in the House.
The Democratic governor called it a “historic budget” not only for the lack of tax increases, but also for “making transformative investments in our communities.”
Connecticut has its first bipartisan budget vote since 2018
The new budget “maintains all of our important tax policies,” said Parliamentary Minority Leader Vincent J. Candelora, R-North Branford.
This includes not only staying under the statutory expenditure ceiling, but also preserving the state budget reserve.
Technically, the rainy day fund, which closed the previous year at just over $ 3 billion, cannot grow much, since it is already equal to 15% of General Fund expenditure, the maximum legal.
That means most of Connecticut’s $ 1.4 billion projects that would remain at the end of the current fiscal year on June 30 would be deposited into its underfunded retirement programs for state employees or teachers. municipal.
Other Republicans still weren’t comfortable with the new budget.
Representative Michael France de Ledyard, a senior GOP House member on the Credit Committee, voted against the package, saying he wanted a lighter spending plan given all the fiscal chaos the Connecticut economy has been through. faced over the past year.
âWhat are we trying to accomplish when we come out of the pandemic? France said, adding that it was particularly disappointed that spending increased by almost 4% in the second year of the budget. âWe should have looked at this with a little more caution. “
Republicans, who have not held a majority in the House since 1985 and in the Senate since 1996, drastically slashed margins as they entered the 2017 session and worked with Democrats to end a nine-month political stalemate and adopt a bipartisan budget that year that included many tax reforms, including a new savings program that led to the heavy budget reserve.
Legislators on both sides cooperated again in 2018 by amending the second year of the biennial budget adopted in 2017.
But Republicans voted unanimously against the first biennial budget passed under the Lamont administration in 2019. The 2020 session ended early, with adjustments to that two-year package, due to the pandemic.
Tax break for the working poor, lots of money for towns and villages
Republicans might have unanimously opposed the state budget this year if liberal House and Senate lawmakers had done what they wanted. Progressive Democrats have tried to impose income tax surcharges on Connecticut’s wealthiest households and establish a new tax on digital media ads and use the proceeds to provide even more aid to cities and tax breaks for low- and middle-income households.
Yet the budget increases the state’s earned income tax credit, which provides $ 118 million in total refunds to about 194,000 working poor households. The EITC, equal to 23% of the federal income tax credit of the same name, would drop to 30.5% in the new budget, providing additional annual relief of $ 40 million.
Progressive Democrats also hoped for a one-time tax break of nearly $ 50 million for the pandemic-stricken Connecticut restaurant industry, but that relief was reduced to $ 7 million. Restaurants will be allowed, for one week in the 2021-2022 fiscal year, to keep seven days of sales tax receipts.
Businesses have not been as successful. While the new budget would extend the research and development tax credit as part of the corporate tax, saving businesses $ 24 million over the next two fiscal years, cuts to previously approved corporate tax valued at $ 180 million to come into effect in the next suspended biennial budget cycle.
“Anyone can celebrate the restaurants that have suffered so much from the pandemic,” said Rep. Sean Scanlon, D-Guilford, co-chair of the Tax Drafting Finance Committee, who had also fought for major tax relief for average household incomes by creating an income tax credit of $ 300 per child.
That proposal was blocked by the Lamont administration, which argued the state might not be able to afford it in two years, when federal pandemic aid has been largely depleted.
But by keeping most taxes at the same level, and thanks to other features, Scanlon added, the new state budget still brings relief and gives Connecticut’s economy a boost in its recovery.
One of the most important elements of the new budget concerns a major expansion of municipal aid.
The plan greatly increases the PILOT [Payments In Lieu Of Taxes] grants that reimburse communities for lost income related to property exempt from local taxes.
This would increase by over $ 120 million each year from the budget. It would also increase education cost-sharing grants to local school districts by a total of approximately $ 140 million in the biennium.
Cities and towns could also be online for more help when the legislature passes a new two-year bond package, though that action may not be completed until the end of the regular session on Wednesday.
Democratic legislative leaders and Lamont negotiated a plan to invest hundreds of millions of dollars a year in capital projects and programs in urban centers across the state. While details were not worked out on Tuesday evening, House Speaker Matt Ritter, D-Hartford, said officials were talking about spending around $ 175 million a year for five years. This would involve a combination of state borrowed funds and federal pandemic relief grants.
More funding for nonprofits and to expand access to health care
Another top priority in the new budget focuses on the community nonprofit agencies that provide the bulk of state-sponsored social services in Connecticut.
The industry has not received a major funding increase in over a decade, and the CT Community Nonprofit Alliance estimates that after adjusting for inflation, compensation has actually declined by $ 461 million per year. since 2007.
The new budget significantly bridges this gap, spending on average about $ 105 million more per year during the biennium on these agencies.
But the budget states that nearly half of that money, roughly $ 100 million, is actually to be used to resolve a labor dispute involving unionized caregivers in group homes that serve clients with developmental disabilities.
More than 2,000 group home workers called off a last-minute strike on June 3 after the Lamont administration pledged to increase funding for wages and benefits. But owners of nonprofit agencies had assumed the state would allocate additional dollars to cover that expense, rather than designating part of the industry’s rate hike for that purpose.
“Given the state’s fiscal position and the size of the projected surplus, the state has the ability to treat all suppliers – and the people they serve – fairly,” said Gian-Carl Casa, president and CEO of the alliance.
The new budget would also increase the eligibility of low-income residents to receive government grants to help them purchase health insurance on the state stock exchange. The Lamont administration estimated that approximately 30,000 low-income residents would be assisted by this initiative.