Two Connecticut governors have tried — and failed — to shift some of the massive cost of teacher pensions onto municipalities, arguing it’s inherently unfair for the state to foot the entire bill. Education equity advocates hope to resurrect that debate this year — with a big twist. Rather than trying to bolster the state’s coffers, the Connecticut chapter of Education Reform Now (ERN) wants the state to bill the wealthiest school districts and use at least some of those resources to help the poorest communities.
Connecticut’s second-largest education-related expenditure — about 7% of the General Fund or $1.44 billion this fiscal year — is the required annual contribution to the teachers’ pension fund. That hefty pension contribution consumes resources that normally would be spent on school operations or other core programs in the state budget. For most states, this pension expense is much less. According to ERN, Connecticut is one of only seven states that spare towns from contributing toward teacher pension costs.
That doesn’t mean there’s nothing important in the budget. Connecticut is in the midst of a two-year plan to put nearly $6 billion in federal coronavirus aid to work to bolster its schools, health care system, economy, and state and local governments.
While the plan is generating big surpluses in state finances, the jury is still out on the overall Connecticut comeback. And since the state will invariably face a fiscal shock in 2024 — when $6 billion in federal aid has expired — Lamont is cautious about tackling anything more ambitious right now.
The state has the legal maximum in its rainy day fund, $3.1 billion or 15% of annual operating expenses, and already made a supplemental $1.6 billion payment last fall to reduce pension debt.
But with a nearly $2.5 billion surplus projected for the current fiscal year, the state can keep its reserves full, reduce more pension debt and help do more for those hardest hit by the pandemic, Walker said.
Yet an analysis by the CT Mirror shows that more than six out of every 10 federal relief dollars built into the new state budget that began July 1 effectively will wind up in public-sector pension accounts.
And while Gov. Ned Lamont and others insist the new state budget — and the billions Congress sent to Connecticut via the American Rescue Plan Act — will be used to heal the state’s wounds, others question whether the administration’s priorities are askew. Pension debt deserves to be addressed after being ignored for decades, they say, but that shouldn’t come at the expense of the state’s response to a once-in-a-century health and economic crisis.
Analysts project the newly adopted $46.4 billion, two-year state budget will close in July 2023 with $2.3 billion left over — an amount that exceeds the $1.8 billion in federal coronavirus relief built into the budget. Because the state’s rainy day fund already is filled to the legal maximum, those dollars must go into either the pension fund for state employees or the retirement system for teachers.
And that’s in addition to the nearly $6 billion in required pension deposits Connecticut already plans to make as part of the two-year budget. That’s a supplemental payment of more than 35%.
Even though the state’s coffers, for now, are awash in money, a huge fiscal cliff looms two years from now, when billions of dollars in federal stimulus grants expire.
Despite a record-setting rainy day fund and a new biennial state budget free of major tax hikes, unprecedented unemployment and deep pockets of urban poverty could easily shift Connecticut’s tax fairness debate — which accelerated this past spring — into high gear in 2024.
“We came out of a year from hell, and I think it was really important we came together in terms of our budget,” Gov. Ned Lamont said last Thursday, one day after lawmakers had adjourned a session that adopted a $46.4 billion, two-year state budget that makes big investments in municipal aid, education, health care, social services and economic development — all without major tax hikes.
But about 4% of that plan, nearly $1.8 billion, was propped up by one-time federal coronavirus relief, most of which will have expired after the coming biennium, which starts July 1.
Question: When was the last time a Connecticut legislature was poised to adopt a state budget with a $2.3 billion surplus built into it?
Answer: Never, until now.
Democrats and Republicans alike were expected to vote for the $46.4 billion, two-year package when it goes before the House of Representatives on Tuesday. But even though about 5% of the funds appears to be left unspent, the anticipated surplus would become a payment into the state’s pension accounts.
That’s because the budget, which boosts spending 2.6% in the fiscal year beginning July 1 and by 3.9% in 2022-23, really is the first of its kind under a new system designed to bring stability to state finances.
Connecticut is four years into a savings program that limits spending of income tax receipts tied to capital gains and other investment earnings, but this is the first time since 2017 that analysts are projecting big revenues from Wall Street before legislators actually approve a budget.
Gov. Ned Lamont said Monday he is throwing out the state’s current playbook for the COVID-19 vaccine rollout – which had prioritized people with underlying medical conditions and certain types of workers, such as grocery store and agricultural employees – and is shifting to a system that is strictly age-based, with the next round of shots open to people who are 55 to 64 beginning March 1.
The announcement came just as the state was supposed to open up the next round of vaccines to “essential workers” such as teachers and other school staff, grocery store employees and transportation workers, as well as people 16 and older who have underlying health conditions like heart disease and diabetes.
State officials said teachers and others who work in the schools will still be prioritized in the coming weeks, with special clinics devoted just to those employees. Schools staff is expected to become eligible beginning March 1, with a goal of giving all workers who want a shot access to a first dose by late March.
For some municipal leaders, the state legislature’s 2015 promise to send hundreds of millions of dollars in sales tax revenue to cities and towns is one of the worst examples of fiscal bait-and-switch in Connecticut politics.
And for the Democratic state legislators — who won re-election after making that pledge — the promise is something they’d like to forget.
That’s because the Municipal Revenue Sharing Account, the mechanism through which municipalities would receive a portion of the state sales tax, also has become a recurring pain in the legislature’s side.
While the ongoing rollout of the COVID-19 vaccine is promising, federal and state policymakers, as well as business leaders, will have to act to reverse an economic decline that has exacerbated longstanding inequalities, the president of the Federal Reserve Bank of Boston warned Friday.
Speaking at Yale University’s Economic Development Synmposium, Eric S. Rosengren predicted the national and regional economies could see significant gains in the second half of 2021, provided the vaccine distribution is successful.
“The disparate economic outcomes for some individuals and groups during the pandemic have further exacerbated longstanding issues in our economy,” Rosengren said. “The uneven nature of this downturn has highlighted the need to rebuild the economy in a more inclusive way.”
Urban Democratic lawmakers attacked Gov. Ned Lamont’s new budget proposal Thursday, charging the two-year package does little to nothing to reverse long-standing gaps in education, health care and economic opportunity.
During a two-hour hearing with Lamont’s budget director, the governor’s fellow Democrats on the Appropriations Committee also questioned whether the $46 billion biennial package sets Connecticut up for another budget crisis after the next state election.
“I am so disappointed in this budget when it comes to human services,” said Rep. Cathy Abercrombie, D-Meriden. “Again, here we are, balancing a budget on the backs of our most vulnerable.”
Gov. Ned Lamont proposed a two-year, $46 billion budget Wednesday that relies on federal funding and state reserves to close a major deficit without significant tax hikes while bolstering aid for municipalities and school districts.
But the package also leaves Connecticut with several budget challenges to be resolved in the not-so-distant future.
The package would channel more than $400 million in emergency federal relief to low-performing school districts. But it also would suspend plans to bolster regular state-funded aid for municipal schools by $90 million in the next two-year budget cycle.