When legislators and Gov. Ned Lamont last renewed an aggressive package of fiscal controls that generated billions in state budget surpluses, critics decried a process kept mostly behind closed doors.
But those who want to scale back savings efforts and those committed to keeping these so-called “fiscal guardrails” unchanged already have found one patch of common ground as they brace for a landmark debate in the coming weeks on Connecticut’s fiscal future.
The process this time, they say, must occur in the light of day. For the General Assembly session that convenes Jan. 8, that means public hearings, open meetings, nonpartisan analyses and other elements of the transparent, legislative committee process.
Reformers want to ensure enough funds are redirected to core services like education and health care, while backers of the status quo want every chance to stop change dead in its tracks.
“To keep it in the dark, as it was in 2023, would allow for more mistakes,” said Rep. Jillian Gilchrest, D-West Hartford, co-chairwoman of the Human Services Committee and one of the most vocal critics of the current system of budget controls.
“The people of the state deserve an opportunity to weigh in on this,” said Senate Minority Leader Stephen Harding, R-Brookfield, who opposes any scaling back of current savings efforts. Harding added the stakes in the upcoming debate are much greater than those in 2023.
Gilchrest and Harding were referring to a controversial decision two years ago by legislative leaders and Gov. Ned Lamont to negotiate an emergency bill — just six weeks into the legislative session and with no review by committees overseeing budget matters — to extend the budget controls for at least five more years.
Almost immediately after the measure’s unanimous adoption, majority Democrats in the House and Senate began complaining these caps on spending and borrowing and other savings mechanisms were too restrictive and badly in need of an adjustment.
Huge funds have been diverted to reduce pension debt
A January 2024 analysis by The Connecticut Mirror showed one key savings program, crafted in hurried fashion in October 2017 at the tail end of a nine-month budget debate, was pulling far more out of core programs than designers had intended, amassing huge funds quickly that were then used to reduce pension debt and build reserves.
The “volatility adjustment,” which bars legislators from spending a portion of annual income and business tax receipts on grounds they are too unreliable to commit to programs, has been anything but unreliable. These “volatile” revenues have poured into the state’s coffers year after year, generating an average of $1.4 billion annually since 2017 and less than $1 billion only once — in 2020, when an economic slump driven by the arrival of the coronavirus limited collections to $530 million.
Since 2020, more than 20% of all revenues — excluding those assigned to special budget funds — have gone into the pensions. During the prior decade, pension contributions ate up between 10% and 12.5% of General Fund revenues.
A recent analysis prepared for The Connecticut Project by former Hartford Mayor Luke Bronin and researchers at Yale University echoed the CT Mirror’s findings.
Despite those payments, pension debt remains high — more than $35 billion entering this fiscal year — and is expected to remain a significant burden on state finances well into the 2040s. Meanwhile, other programs are struggling in this era of big budget surpluses.
Community college tuition this fall is up 11% from two years ago. At regional state universities it’s grown 7% over the same cycle.
Connecticut hasn’t broadly adjusted Medicaid rates for doctors who treat low-income patients since 2008. A 2019 analysis by KFF, the health care think-tank formerly known as Kaiser Family Foundation, found that Connecticut’s Medicaid rates for most specialists ranked 42nd among all states.
And nonprofit agencies serving clients with intellectual disabilities or struggling with mental illness say they lose hundreds of millions of dollars annually because state payments haven’t kept pace with inflation for more than 15 years.
No legislator has proposed repealing these budget controls entirely. Critics say Connecticut could ease savings efforts somewhat, invest more in education, health care and social services, and still whittle down pension debt — albeit at a slower pace.
And reform advocates, who were frustrated when they never got a chance to make that argument two years ago, are hoping to discuss it with lawmakers in the coming weeks and months.
“I never believe anything should be decided by a couple of people, nothing this big,” said Fran Rabinowitz, executive director of the Connecticut Association of Public School Superintendents, and a former superintendent in Bridgeport and Hamden.
The association estimates that local, K-12 districts face a $90 million gap next fiscal year between the cost of serving students with special needs and available state funding for these programs.
Rabinowitz also noted that districts — like state government — largely have exhausted their emergency federal pandemic relief and will need more from the state next budget cycle.
“Our members are telling us in no uncertain terms that they’re in distress,” said Gian-Carl Casa, CEO of the CT Community Nonprofit Alliance, which represents the hundreds of private, community-based agencies that deliver the bulk of state-sponsored social services. “Programs are being cut back… and they want the chance to talk to legislators about that and explain what the need is.”
While Lamont and some other state officials tout the billions the budget controls have channeled into debt reduction, “the reality of our clients tells a different story — one of financial strain and uncertainty,” said Wilfredo Medina, president of the union representing state social workers.
When food stamp benefits can’t keep pace with the rising cost of food, Medina added, “How can our state claim to be on solid fiscal footing when our social safety net is buckling under the weight of rising demand?”
Are ‘fiscal guardrails’ saving CT from tax hikes and budget deficits?
But others argue these budget controls are ensuring Connecticut won’t return to the 2010s, a decade marred by frequent annual deficits and some of the largest tax hikes in state history.
Covering the state’s pension debt, a problem created by more than seven decades of inadequate savings prior to 2011, does place a strain on other programs.
But Connecticut Business and Industry Association President and CEO Chris DiPentima noted the minimum, required pension payments would be $730 million larger next fiscal year were it not for the roughly $8.6 billion in surplus funds these retirement programs have received since 2020.
And while critics of the controls say funding growth for core services doesn’t match inflation, DiPentima said these programs would be facing stiff cuts were it not for savings efforts in place since 2017.
The CBIA, which opposes any changes to these “guardrails,” nonetheless agrees with critics that any revisions — whether proposed by Lamont, legislative leaders, or rank-and-file lawmakers — need to be discussed in a transparent fashion.
“It should be a public conversation, especially in light of the number of studies that have come out around the guardrails,” DiPentima said, adding that there’s no consensus among policy analysts about how to proceed.
For example, a late December report from Connecticut Voices for Children, a progressive policy group, concluded that at least half of the $1.4 billion the state has saved annually through the “volatility adjustment” is likely to pour into the state’s coffers year after year and could be used to support core services. At the same time, Connecticut Voices warned, these services are slipping significantly.
But just two months earlier, the Yankee Institute for Public Policy, a conservative group specializing in fiscal issues, said Connecticut has an opportunity to purge itself of this legacy pension debt by the early 2040s — and possibly even by the late 2030s if economic factors break the right way.
But to retire this problem early, Yankee analysts wrote, lawmakers not only must resist efforts to save less, they must intensify annual savings by almost 30%.
House Minority Leader Vincent J. Candelora, R-North Branford, also has opposed efforts to curb savings programs, though he is open to using a portion of those surpluses to expand tax relief.
The House GOP leader said he believes the Democrat-controlled legislature is “obligated” to keep any reform debate in a public setting, especially given that Connecticut’s long-term fiscal health is at stake.
Lamont, Democratic leaders noncommittal about public debate
But Lamont and his fellow Democrats in legislative leadership aren’t ready to say exactly how any reform debate will proceed.
State law requires Lamont to deliver his proposal for the next biennial state budget to the General Assembly by Feb. 5. From there it will go through multiple committees, generating numerous public hearings and meetings before lawmakers offer counterproposals.
Top leaders and the governor then typically negotiate a final compromise that is sent for a vote before the full House and Senate in late May or early June.
Senate President Pro Tem Martin M. Looney, D-New Haven, said he would prefer any changes to the guardrails to be developed as part of that process, but added “I think it’s too soon to tell.”
House Speaker Matt Ritter, D-Hartford, said he also would prefer any reforms take that path, “but I’m never going to going to tie the hands of people who have to make decisions.”
When the CT Mirror asked Lamont’s office this week whether any reform proposals should be reviewed by legislative committees and presented at public hearings, spokeswoman Julia Bergman didn’t address the question specifically.
She said that the “common-sense budgeting rules” of the existing guardrails system has helped “to provide more opportunities for working middle class families,” and that “the governor will propose, and looks forward to negotiating with the legislature, a budget that continues to build upon those efforts and protects Connecticut values.”
Lamont told reporters following the Dec. 20 State Bond Commission meeting that “I’m always open to alternate” perspectives, “but I think people know where I stand as well.”
But Sen. Gary Winfield, D-New Haven, who voted against the 2017 state budget that generated the current system of fiscal controls, said officials should be wary of taking a stand on anything they don’t fully understand.
Legislators — who were pressed for time in 2017 — locked themselves into an aggressive savings program seven years ago without fully discussing or analyzing the potential impact, the New Haven lawmaker said.
A member of the Black and Puerto Rican Caucus, Winfield is one of the legislature’s most vocal critics of Connecticut’s significant disparities in access to education, health care, affordable housing and economic opportunity. And he frequently reminds his colleagues that “revenue is required in order to get equity.”
“To me it is critical, not just important,” he added, “that this discussion be had in full public view.”
