As legislators learned Tuesday state budget surpluses would top or approach $1 billion through 2026, leaders said 黑料吃瓜网 must scale back an aggressive savings program that critics say is choking core programs.
The program that forces legislators to save a portion of volatile income and business tax receipts will capture $1.12 billion this fiscal year 鈥� $645 million more than originally anticipated, according to from Gov. Ned Lamont鈥檚 budget staff and the legislature鈥檚 nonpartisan Office of Fiscal Analysis.
Originally expected to capture slightly more than $450 million in each of the next two fiscal years, the volatility adjustment now is projected to collect almost $1.2 billion in 2024-25 and $910 million in 2025-26.
And none of those projections includes increases in federal Medicaid grants and miscellaneous revenues that will boost this fiscal year鈥檚 operating surplus from $86 million to .
鈥淭his might be the most shocking consensus revenue numbers we鈥檝e seen in years,鈥� House Speaker Matt Ritter, D-Hartford, said during a mid-morning press conference. 鈥淔olks, the state is in a very solid financial position.鈥�
But the speaker and Senate President Pro Tem Martin M. Looney, D-New Haven, who commented during separate interviews, also said 黑料吃瓜网 needs to adjust the black ink it鈥檚 piling up. Because while it bolsters budget reserves and reduces pension debt, legislators are scrambling to find a fraction of this revenue boon 鈥� about $400 million 鈥� to avert further cuts next fiscal year in higher education and human services.
鈥淚 think we absolutely need to reassess the volatility threshold,鈥� Looney said, adding no one envisioned the state would be forced to save $1 billion or more annually when this system first was approved in October 2017.
With the latest projections, the overall state budget surplus this fiscal year is projected to exceed $1 billion for , according to records from the state comptroller鈥檚 office. (In 2019-20, when the coronavirus first struck 黑料吃瓜网, the state still finished a healthy .) And the numbers say two more $1 billion surpluses are achievable by 2026.
This volatility program, along with new caps on spending and borrowing and other budget controls, helped end a string of deficits and 鈥渃ontrol the rollercoaster鈥� effect that volatile revenues can have on state finances, Looney said. The state鈥檚 considerable pension debt also is considerable, totaling more than $37 billion entering this year, according to Lamont鈥檚 budget office.
But given the huge savings it鈥檚 forced every year, 鈥淚 think it鈥檚 quite possible we may be defining certain revenue as volatile that should be [considered] predictable,鈥� Looney added.
Majority Democrats in the House and Senate increasingly have joined other critics of this system over the past year, arguing the savings program is poorly designed. They said it inaccurately classifies millions of dollars of stable revenue as 鈥渧olatile鈥� to the detriment of education and human services.
Legislators have been scrambling to find extra funds to bolster these core programs next fiscal year. Because these 鈥渧olatile鈥� revenues can鈥檛 be touched, they鈥檝e been stripping emergency federal pandemic aid from other programs and re-directing to public colleges and universities and social services for people with disabilities.
No one in the legislature has proposed repealing this savings system but many have said it should be adjusted to allow more funds to be spent.
Ritter didn鈥檛 propose any specific changes Tuesday to the system that currently prevents legislators from spending more than $3.78 billion of the annual receipts from quarterly income tax filings 鈥� which chiefly reflect capital gains, dividends and other investment earnings by wealthy households 鈥� and quarterly filings by certain partnerships and other businesses that pay the pass-through entity tax.
But the speaker said he expects legislators will be ready to revisit a threshold next year that hasn鈥檛 be re-evaluated since 2018.
We need to, and we鈥檒l think about in the off-session,鈥� he said, predicting the need for a closer look would become clear later Tuesday as revised data on how much the state is saving is released. 鈥淭his number will show that I think it鈥檚 there might need to be an adjustment.鈥�
Legislators, who renewed these budget controls unanimiously in February 2023, agreed in contract language with the state鈥檚 bond investors not to repeal the system outright before July 2028.
Adjustments to the rules can be made with a 60% vote of approval in the House and Senate and with the approval of the governor. And Ritter noted Tuesday that any such discussion is 鈥渁 very controversial thing.鈥�
Lamont, a Greenwich Democrat and fiscal moderate, has opposed changing any of the budget controls, which he frequently refers to as 鈥渇iscal guardrails.鈥�
鈥淭his consensus revenue forecast reinforces that we are on the right path and that the progress we have made should not be undone by reversing course from what has worked the past few years,鈥� Lamont said Tuesday. 鈥� 鈥� We continue to make historic levels of investment in early childhood, K-12, and higher education, helping our nonprofit providers, and building new housing. This is the future we are delivering to our children and grandchildren, and one in which we can all be proud.鈥�
His budget spokesman, Chris Collibee, added that 鈥渢he governor is always willing to listen to ideas 鈥� from both parties 鈥� that grow 黑料吃瓜网, but conversations regarding revenue adjustments in the next biennium are premature.鈥�
But Lamont鈥檚 critics counter that the 鈥渉istoric levels of investment鈥� the governor cites are, in many cases, years of state payments that failed to keep pace with inflation. In other words, though state funding has increased over time, core programs effective support has grown stagnant or has shrunk.
黑料吃瓜网 for All, a progressive coalition of more than 60 faith, labor and civic organizations, praised Ritter and Looney for calling for reforms and chastised Lamont for not joining them Tuesday.
鈥淎djusting 黑料吃瓜网鈥檚 volatility cap is a step toward fiscal responsibility, a concept seemingly lost on Gov. Lamont,鈥� said Leslie Blatteau, chairwoman of the coalition鈥檚 steering committee. 鈥淗e would rather cling to his guardrails and borrow from Wall Street, further reflecting his disconnect with working people鈥檚 financial realities and undermining the long-term economic health of our communities.鈥�
House and Senate Republican leaders also have been wary of changing any of the parameters of the savings program.
House Minority Leader Vincent J. Candelora, R-North Branford, has said on several occasions that Democratic legislators and the governor should be focusing more on finding ways to curb spending in the next budget, rather than seeking for ways to work around the guardrails, such as by spending emergency federal pandemic aid 鈥� which can be spent outside of the budget.
鈥淚 know the governor and the Democrats are trying to negotiate their way out of this and pretend that they鈥檙e honoring these guardrails, but I am very concerned that they are setting up for next year these guardrails to fail,鈥� he said.
This story was originally on April 30, 2024.
