More state budget winners than losers as session ends
There were far more winners than losers when the state Senate gave final approval Wednesday to a $46.4 billion, two-year state budget. The biggest winner, politically speaking, was Democratic Gov. Ned Lamont.
From the start, Lamont had sent the message this was not the time to raise taxes. On that count, he prevailed. The two-year spending plan contains no major tax hikes and, instead, provides tax relief to low-income working families.
On top of the generally high grades he has received for his management of the state during the pandemic, signing this budget can only help Lamont’s approval ratings. And it was ratified in bipartisan fashion, 116-31 in the House, 31-4 in the Senate, attracting significant Republican support, particularly in the Senate.
Of course, you should always expect the unexpected in politics, but right now Lamont heads toward a 2022 re-election bid with a strong tailwind (he has not formally announced).
State taxpayers are winners, which means most all of us.
Connecticut’s struggling cities will benefit from this budget, including in our region New London and Norwich. For those communities there will be big increases in the PILOT (Payments in Lieu of Taxes) program that partially compensates municipalities for the property tax income they lose due to heavy concentrations of nonprofit, government and other nontaxable properties. PILOT aid will grow by $120 million in each year of the two-year budget. In addition, Education Cost Sharing grants to school districts will increase $140 million over the two years.
Low-income worker households, struggling paycheck to paycheck, also benefit from this budget. It expands the Earned Income Tax credit from 23% to 30.5% of the federal credit, expending an additional $40 million to the benefit of about 200,000 households. Many of these families will also benefit from increases in eligibility for low-income residents to receive public subsidies to obtain health insurance on the state’s exchange, Access Health CT. An estimated 30,000 low-income residents will be helped.
The budget provides significant relief to the struggling nonprofit agencies that receive state funding to provide many of its human services. The spending plan will send about $105 million more per year over the biennium for these agencies.
The stability of the grossly underfunded state worker and teacher pension plans improves significantly, with more than $1 billion in surplus funds set to go into the pensions, while the state still maintains a record rainy day fund of around $3 billion. This does not fix the pension system, but it makes it far more manageable and, moving forward, reduces the need to starve other programs to meet required pension payments.
Schools in more affluent communities win. A long-term plan had called for diminishing state aid to some communities to help meet the needs of struggling schools elsewhere. In large part due to Lamont's insistence − he argued that cuts in state aid did not make sense now, given the impacts of the pandemic − these school systems will be “held harmless,” their funding maintained.
Politically, in addition to Lamont, incumbent Democrats running in toss-up districts will benefit. With no significant tax increases to complain about and a healthy rainy day fund, Republican challengers will be hard pressed to make a case for change.
Republicans thinking about challenging Lamont for governor in 2022.
In the state legislature, Republicans lost many seats in large part because of the unpopularity of Donald Trump in Connecticut and his name at the top of the ticket. It will be harder for the GOP to start regaining those seats given a budget that will likely satisfy most voters. But there is always the economy.
Progressives in the Democratic caucus wanted to transfer wealth from the state’s uber-rich into its poorer cities. Proposals included raising the capital gains tax by more than 25% and creating a new consumption tax on the very rich. They swung and missed.
There was no relief for small businesses looking for help in being able to affordably provide health insurance to employees, or likewise for middle-class workers needing individual health insurance plans. Proposals to offer a public option or, alternatively, to create a reinsurance program to lower premiums, both failed for lack of support.
The trucking industry "lost" because trucks will now be subject to mileage fees, helping pay for transportation needs.
How did the legislature manage to produce so many “winners” without raising taxes, but still increasing spending 2.6% on July 1, and 3.9% for the following fiscal year? Rising tax revenues due to a growing stock market played a role. But the bigger factor is the use of $1.7 billion in federal pandemic relief aid. Two years from now the legislature may have to turn to spending cuts, use of the rainy day fund, or tax increases — or hope the economy grows its way out of the problem — to balance the budget without those federal dollars.
Paul Choiniere is the editorial page editor.
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