Budget Update:
Governor Lamont unveiled his second biennial budget to the General Assembly earlier this
month. Connecticut is enjoying a $3.1 billion dollar surplus, a 14% cushion, which is the second
largest in State history. The Governor’s proposed budget included income tax cuts for the middle
class. This is the first time that there has been a proposed income tax cut since it was enacted in 1991. The budget also increases the earned income tax credit, continues payments to pension
debt, and includes a full restoration of the pass-through entity tax credit to 92.01%. This proposal
is estimated to save over 123,000 small businesses $60 million dollars a year. The budget has been
met with praise from both Democratic and Republican legislative leaders.
In addition, the Governor’s budget also invests in the construction of affordable housing, expands
the State’s paid sick leave policy, incentivizes green buildings, and establishes an ongoing child tax
credit. All these proposed tax cuts and expansions are made possible because of fiscal constraints
that were enacted in 2017, which included spending and revenue caps as well as a volatility cap.
For the past 5 years CT has been forced to live within its means, save for a rainy day, and pay down
years of unfunded pension liabilities.
After the budget was unveiled, the Governor and House and Senate leadership, on both sides of
the aisle, committed to extend these guardrails for another 5 years. Although there were some
critics, who wanted increased spending in services that had been drastically cut, a resolution
passed both chambers to continue this prudent fiscal policy, unanimously. An earlier version of
the bill would have extended the constraints for 10 years, but lawmakers felt 5 years worked in the
past and it was the best time frame to reassess CT’s fiscal situation. Budget surpluses have enabled
CT to make nearly $6 billion in unscheduled payments on the unfunded pension liabilities over
several years.
What was not included in the Governor’s proposed budget was a repeal of the HUT tax, that was
recently implemented, or additional payments to the Unemployment Compensation Trust fund.
A hearing on the repeal of the HUT tax is expected to take place in the next several weeks in the
Finance Committee.
Now the Governor’s budget heads through the legislative hearing process and negotiations
begin. LDAC will be working hard to have the two initiatives that were excluded in his initial draft
part of the final budget (HUT tax repeal & UC Trust Funding). Both measures, if enacted, would
save CT businesses millions.
The legislative session ends June 7, and it is hopeful a bipartisan budget can be achieved.