Dems mostly pleased, GOP ‘shocked' as state budget deal solidifies
State legislators clashed Monday over the final version of the state's two-year budget that was hailed by Democrats for providing additional money for Medicaid, nonprofit organizations, special education, and the working poor.
The plan calls for sending checks of $250 to about 85,000 lower-income households who already qualify for the earned income tax credit for the working poor. The money will be directed to the neediest families with children; budget negotiators dropped a previous Democratic plan that would have provided a child tax credit for families earning as much as $200,000 per year.
The massive, 693-page document pays for everything from dental care for prison inmates to pay raises of 3.5% for Superior Court judges and others whose salaries are tied to the judges.
Lawmakers were preparing to vote as early as Monday night on the two-year, $55.8 billion package. The debate did not start until 4:45 p.m. and was continuing Monday night.
House Speaker Matt Ritter of Hartford said Democrats are broadly pleased with the final compromises made in recent days with Democratic Gov. Ned Lamont.
'People are very happy to make the investments in child care that we're making, to have the child tax credit through the EITC program … to do the massive amounts of Medicaid funding we're doing, $20 million [in the first year] and $45 million,' Ritter said. 'People are really, really happy. A lot of people never thought we'd get to this point. It's a reminder that if you just keep going, if you keep negotiating, if you keep coming up with ideas, you can solve even the most difficult of problems.
But Republicans had a sharply different view, blasting the budget as a bloated document that did not closely follow the fiscal guardrails that were adopted in 2017 by the legislature and have been credited with restoring the state's fiscal health in recent years.
House Republican leader Vincent Candelora of North Branford quoted the phrase, traditionally credited to the French philosopher Voltaire, that the perfect should not be the enemy of the good.
'This budget is neither perfect nor good for the state of Connecticut,' Candelora told reporters Monday. 'This budget eviscerates all of our fiscal guardrails. They are destroying the volatility cap. It is creating a gimmick in the first year to get around the spending cap. Finally, we are devoting the surplus and the revenue cap permanently to an off-budget early childhood account. … In the long run, it is setting up the state of Connecticut for failure and tax increases. … I am shocked that the governor would agree to this budget.'
Democrats, though, said flatly that the budget remains under the spending cap in both years, as required by state law.
Candelora said Democrats are not setting aside enough money to pay down pension liabilities because some of the money will be earmarked for other programs like the early childhood endowment fund that is expected to receive $200 million this year.
'They are acting as if we are never going to see another recession for the rest of our lives,' Candelora told reporters at the state Capitol.
Rep. Tammy Nuccio of Tolland, the ranking House Republican on the budget committee, said the state is coming off the 'sugar high' of billions in federal money from the coronavirus pandemic and is now finding it difficult to pay for multiple programs. Even with the spending cap, the state is able to increase spending by about $1 billion next year to $27 billion, up from $26 billion.
A longtime accountant and financial analyst for large insurance companies like Cigna and Aetna, Nuccio said the breakneck pace of the legislative session, where staff members literally work through the night to cobble together documents at the last minute, is not common outside the Capitol building.
'In the real world, this doesn't happen,' Nuccio said on the House floor. 'They dropped a 700-page document at 4 o'clock in the morning. … We've gotta read it in less than 12 hours.'
Republicans and the Connecticut Business and Industry Association were also concerned that the budget includes Lamont's proposed change to the 'unitary' tax that they said would lead to tax increases for large, multi-state corporations like Electric Boat, Wal-Mart, Raytheon, Amazon, Home Depot, Lowe's, AT&T, Verizon, and the parent company of Sikorsky helicopters, among others. Amazon is now the fifth-largest employer in the state, and the unitary tax would hit about 20 major corporations, officials said. The tax has not been mentioned much at the state Capitol in recent years, but Fairfield-based General Electric Co. cited the tax among the reasons that the company decided to move its headquarters to Boston during the tenure of then-Gov. Dannel P. Malloy.
But Lamont and his team are in frequent contact with top business leaders, and he said after the initial proposal was released that the leaders had not raised major objections.
Despite criticisms, Lamont's chief spokesman, Rob Blanchard, said Connecticut is in much better fiscal shape than some other states.
'This biennium budget makes smart investments in our future, our communities and schools, all while prioritizing affordability, holding the line on taxes, and keeping us on a sound fiscal path,' Blanchard said. 'More importantly, it averts the mistakes of the past by making significant payments on our pension liabilities, preserves the strength of our fiscal guardrails and continues to grow our historic $4.1 billion Rainy Day fund—all of which will guard against economic headwinds. While other states are cutting services, raising taxes or wishing for a Rainy Day fund as robust as our fund, Connecticut has worked hard to turn things around economically and maintain the progress that avoids those tough choices.'
Rep. Maria Horn, a Litchfield County Democrat who represents multiple towns, said the state is operating under various constraints that make budgeting difficult.
'We cannot do everything,' Horn said, adding that choices were made to help the most vulnerable citizens.
Republicans and hospitals were also concerned about an increase in the hospital tax that is designed to raise an additional $375 million in the first year and $400 million in the second year. They argued that the money is dependent on Connecticut receiving a waiver from the federal government, but the state has not received the waiver yet.
'It's really a hope and a prayer,' Candelora said.
The Connecticut Hospital Association, whose lobbyists testify on multiple bills, said the budget would not be good for hospitals.
'The tax increase on hospitals and proposed cuts to healthcare providers contained in this budget will be devastating for hospitals, their workforce, and their patients,' the association said. 'This tax increase is far greater than what Governor Lamont proposed earlier this year. It will leave hospitals facing a staggering cut of hundreds of millions of dollars, while the state uses federal dollars to balance its budget without any action to increase Medicaid reimbursement for care provided to patients in hospitals. These policies will move Connecticut backward in our collaborative efforts to make healthcare more affordable and accessible.'
Lawmakers were also concerned about a narrowly written provision that they believe could benefit only one company in the state. In order to obtain tax credits for research and development, the company must be 'a single member limited liability company that has more than three thousand employees in this state and is engaged in manufacturing, with expertise in mechatronics, alignment and sensor technology and optical fabrication.'
Chris DiPentima, the president of CBIA, said the provision was designed to help ASML Wilton, a major company in Fairfield County. The company's website says it specializes 'in mechatronics, alignment and sensor technology,' which is exactly the language mentioned in the budget.
DiPentima, though, says the research and development tax credits need to be expanded to much smaller companies like in Massachusetts, where companies with as few as five employees can earn the credits.
Despite statements by various leaders that they had crafted a 'no-tax-increase budget,' DiPentima said that characterization is incorrect.
'There are business tax increases,' he told The Courant on Monday. 'We're losing sight of the importance of the business community to Connecticut's economy. … I've got major concerns with the work-around on the spending cap.'
He added, 'This is the first time in five years where we've had business tax increases and a changing of the guardrails. … Is Connecticut losing its fiscal discipline again? That's this question mark. Are we going to get back to fiscal discipline?'
Democrats have been pushing for years for a child tax credit, and their latest proposal called for a permanent, refundable credit of $150 per child for a maximum of three children, or $450 per year. That represented a sharp drop from an original proposal of $600 per child for an overall total of $1,800 per year. With various pressing needs on the tax and spending sides of the complicated state budget, lawmakers say they are often unable to award as much tax relief as they would like.
The overall plan would have saved families a combined $82.7 million per year, but the idea was dropped as being too expensive and helping too many families at higher income levels.
Lawmakers also dropped Lamont's proposal for an increase in the popular property tax credit to $350, up from $300, per tax filer. Lamont's proposal was expected to help 800,000 tax filers, officials said, as the income eligibility would have increased, an issue that had restricted the credit in the past.
Nonprofit organizations, including those who hold contracts to perform various services that otherwise would be performed by state employees, were pleased with a funding increase in the second year.
'The budget is not everything we requested, but in the context of this year's discussions about budget restrictions, we are grateful for their choice to support programs that will improve thousands of lives and even save some,' said Gian Carl Casa, a former top state budget official who now leads the statewide nonprofit alliance. 'Rank-and-file lawmakers, including progressives, moderates and members of the Black and Puerto Rican Caucus, responded by making it clear that the people served by community nonprofits are a priority.'
The nonprofits are expecting to receive $76 million in the second year, plus an additional $30 million for non-developmental disability providers. The deal also calls for an additional $66 million union settlement for providers and an additional $15 million for Medicaid rates above the appropriations committee total, officials said.
'Is this a perfect budget? No,' said Rep. Toni Walker, a longtime New Haven Democrat who co-chairs the legislature's budget committee. 'But we have a situation where we have a spending cap problem and a revenue problem.'
Christopher Keating can be reached at ckeating@courant.com
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