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.