Connecticut lawmakers extend spending limits, but is the state saving too much?

Connecticut lawmakers have led to record-setting surpluses and pension payments, but some advocates say the state is squirreling away too much money at the expense of vulnerable groups.

John Craven

Feb 9, 2023, 11:08 PM

Updated 501 days ago

Share:

Connecticut lawmakers unanimously extended several automatic spending limits on Thursday. They have led to record-setting surpluses and pension payments, but some advocates say the state is squirreling away too much money at the expense of vulnerable groups.
In his budget address, Gov. Ned Lamont said the “fiscal guardrails” made his historic tax cut proposal possible.
“Families earning less than $60,000 per year will receive a 20% tax cut,” Lamont told lawmakers. “Less than $150,000 – a 6.5% tax cut worth $500.”
The state can afford tax relief, in part, because of the spending restrictions put in place in 2018. It works a bit like your retirement account, where part of your paycheck automatically goes into your 401(k). In the state’s case, revenues are automatically diverted into a savings account -- the Budget Reserve or “Rainy Day” Fund. Once the fund is full, any extra funds go toward pension payments. Just like your own loans, the more pensions are paid down, the lower the state’s payments over time.
The spending restrictions include:
- A "volatility cap" that limits spending from taxes tied to investment earnings, which can swing wildly based on the stock market
- A "revenue cap" that forces lawmakers to spend 1.25% less than the state brings in
- A "bond cap" that limits how much the state can borrow each year. However, lawmakers did agree to raise the limit.
On Thursday, lawmakers extended the fiscal restrictions and a “bond lock” that places such restrictions in Wall Street bond covenants for another decade, with the ability to opt-out after five years.
Both political parties argued that saving more has placed Connecticut in the strongest financial position in decades.
“All the fiscal policy that has allowed us to come here and have a unique problem of having too much money,” said state Rep. Jason Rojas (D-East Hartford), the Connecticut House majority leader.
The legislation also allows more money to go into the budget reserve fund.
But some nonprofits say Connecticut is saving too much – arguing some of the money should be invested in things like making free school meals permanent. Lawmakers have extended the program through June, but it’s unclear if it will continue beyond that.
“We've seen some school districts where 40 to 60% decrease in kids getting the meals,” said Lucy Nolan of End Hunger Connecticut. “We've seen a lot of kids who are hungry.”
Since Thursday’s vote was emergency legislation, the public did not get to weigh-in. Lawmakers said they had to act fast.
“I think it's important to get it out of the way before we engage in budget negotiations. We need to know what our parameters are,” said state Rep. Vin Candelora (R-North Branford), the top House Republican.
In addition to “fiscal guardrails” and school meals, Thursday’s legislation also made changes to a bottle deposit law.
Lamont praised legislators for approving the bill.
“The ability of our administration and all four caucuses to work together in a bipartisan manner to quickly get this bill approved for the benefit of the residents of Connecticut is a good sign for what the remainder of this legislative session has to offer,” he said in a statement.


More from News 12