Tentative CT Budget Deal Struck: Here's What It Means For Taxes

HARTFORD, CT — Democratic legislative leaders and Gov. Ned Lamont announced a tentative $43 billion two-year budget deal that is expected to be passed by the end of the regular session. The final numbers are in the process of being crunched.

The budget does not increase income or sales tax rates, invests more money into education and workforce development, and does not cut municipal aid to towns and cities, the Governor's office says. The budget also comes on heels of an agreement negotiated by Lamont and Connecticut’s hospitals that will save taxpayers billions of dollars in the future, Democratic officials say.

Passing a budget on time will come as a welcome move in a state where budget deals have been pushed out months after the normal due date.

Details of the tentative deal will be made available to Democratic legislative caucuses and then will be made public later, including details on how much aid each town will get from the state. Towns won’t be asked to pitch in to cover a portion of teacher pension contributions, which will come as a relief to local officials across the state.

Lamont said the budget will close a $3.5 billion two-year budget deficit without raising tax rates on anyone. The deal does call for sales tax on digital purchases and some other previously exempt items. The expansion of the sales tax has been significantly pared down from Lamont’s original proposal and is estimated to bring in $50 million in new revenue by the second year of the budget, said state budget chief Melissa McCaw.

Lamont’s original proposal called for nearly $800 million over two years for the expansion of the sales tax.

“Passing an honest budget on time was our number one priority, and I am proud that we were able to deliver on behalf of the state. This budget is fair, balanced, promotes economic growth and working families, and was delivered on time, enabling our towns and cities to know what they can expect in their budgets over the coming biennium and plan accordingly," Lamont said in a statement. "This budget provides the foundation from which our state can grow and provide confidence to residents and businesses alike that we are serious about stabilizing our finances and getting our economy growing again. Importantly, this budget does not raise income tax rates on anyone in our state.”

The state will have an estimated $571 million operating surplus from fiscal year 2019, with $381 million going into a reserve fund for teacher pensions and the remainder being used for a tentative agreement with the state hospital association to resolve a legal feud. The legislature will have to approve a tentative settlement with hospitals and details on the settlement aren’t publicly available yet.

The deal will also extend out teacher pension contributions so that the state doesn’t hit a massive surge in the future, which was scheduled to peak at $3.4 billion by 2032. The payments will be extended out over time and will push liabilities onto future generations of taxpayers.

The budget will add money to the Rainy Day Fund, which will give the state more than $2 billion for emergencies or economic downturns.

Lamont said the budget included $80 million more for distressed school systems over two years along with money pledged by the Dalio Foundation.

And it appears the topic on everyone’s mind, tolls, will not be debated until a special session sometimes next month.

Preliminary agreement items

More funding to schools

Maintains the Education Cost Sharing formula and brings underfunded districts closer to full funding

Creates a partnership with Dalio Philanthropies that will provide matching funds for disconnected and disengaged youth

Maintains funding for Minority Teacher Recruitment

Increases funding for the Manufacturing Pipeline to help workforce demand

Includes a plan for Debt-Free Community College that will be supported by a dedicated revenue source

Saves $185 million in state employee healthcare over the biennium

In coordination with the State Comptroller, the state will negotiate a maximum price it will pay for state employees and retirees at hospitals, clinics and providers, instead of paying costs that are all over the map and have nothing to do with quality care.

Expands on the successful “Smart Shopper” and “site of service” programs that encourage plan members to utilize high-quality, lower-cost providers that promote health behaviors an encourage participants to make informed provider choices.

Streamlines state government

Provides resources to develop a new digital service that will move the public’s interactions with state government online, and provide services that are personalized, more secure, efficient, and cost-effective.