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February 8, 2023

Lamont asks legislature to stay the course on fiscal restraint

RYAN CARON KING / CONNECTICUT PUBLIC RADIO Gov. Ned Lamont addressing the Connecticut legislature.

Gov. Ned Lamont took the first substantive policy and political steps of his second term Wednesday, urging lawmakers to embrace his proposed budget as a balanced mix of tax relief, new spending on vital needs and, above all, a continuation of the fiscal discipline central to his victorious reelection campaign.

Lamont, a Democrat whose party controls the General Assembly, shared credit for Connecticut’s strong fiscal position with both parties, an acknowledgement that reforms forced by Republicans and moderate Democrats six years ago facilitated his desire to use surpluses for budget reserves and debt reduction. 

“One of the smartest actions the General Assembly has taken over the last decade has been the enactment of the fiscal guardrails that have provided predictability and stability into our budget process,” Lamont told lawmakers. “You did that. Thank you.” 

Passage of those guardrails, which included a volatility cap that ensured a significant percentage of surpluses would go to budget reserves and paying down Connecticut’s huge unfunded pension debt, came when Republicans were more influential and held half the seats in the Senate.

Republicans faltered badly in three successive elections since then, winning only 12 of 36 seats in the Senate and 53 of 151 in the House in 2022. But they see Lamont’s insistence on preserving the guardrails as making the diminished GOP relevant as a counterbalance to fiscal progressives in Lamont’s party.

“That’s what this budget looks like,” said House Minority Leader Vincent J. Candelora, R-North Branford. “There’s a lot of decisions that were made here that are fiscally prudent, that are going to continue with this success story for Connecticut to get out of the deep hole that was created over decades. And so for those proposals, I think you’re gonna see Republicans get around them.”

As a result, Republican response to his televised midday speech before the General Assembly ranged from enthusiastic to mildly polite, a stark contrast with the raucous heckling Republicans heaped on President Joe Biden during his State of the Union the previous night.

“It was well scripted in the fact that I think we’re going to see great synergy between the governor’s office, the governor and our caucus,” said Sen. Heather Somers, R-Groton. “I really do.”

Lamont hardly ignored his own party, emphasizing the benefits to the working poor of his proposals to reduce income tax rates and increase the value of the earned income tax credit, the latter a priority of Senate President Pro Tem Martin M. Looney, D-New Haven.

“I’m proposing a 31% increase in the earned income tax credit,” Lamont said, pausing as lawmakers applauded. He smiled at Looney and said, “What do you say, Marty? Thirty-one percent.”

Mindful that Democrats also would like to see a child tax credit, Lamont said that 97% of the earned income tax credit benefits families with children.

“Look, increasing this tax credit is one of the most impactful things we can do to  target direct relief to those more than 200,000 low-income workers who are struggling to provide for their families,” Lamont said.

Lamont noted that the federal earned income tax credit was developed by the administration of President Richard Nixon, then teased Rep. Anne Hughes, D-Easton, one of the legislative progressives who applaud Lamont’s position on the EITC but are urging him to also offer a child credit.

“Just as an aside, I can tell you that for the first time in recorded history, this is the one issue where Anne Hughes and Dick Nixon agree — the earned income tax credit,” Lamont said. 

Hughes said she appreciates aspects of Lamont’s budget but faulted it for doing too little to address inequality in a state where the poor and middle class pay a disproportionately higher rate of taxes, when all state and local tax levies are considered.

The Democratic left will seek more, but she said the push will be constructive, not polarizing.

“We push each other, and that’s our job,” Hughes said.

Looney gave his own nudge, saying he would seek a “modest increase” in the highest income tax brackets in Connecticut, effective in 2025.

Senate Majority Leader Bob Duff, D-Norwalk, and Looney later issued a joint statement noting that the governor’s budget proposal is now in the hands of the legislature and subject to change.

“Connecticut’s strong financial position means we can make critical long-term investments while also providing progressive tax cuts,” they said. “The General Assembly’s Appropriations and Finance committees will now begin their process of crafting the legislature’s budget proposal, determining the best ways to support Connecticut’s working- and middle-class families.”

House Speaker Matt Ritter, D-Hartford, emphasized that Connecticut does not have a revenue problem right now, indicating he shared the governor’s distaste for raising tax rates.

Ritter said his focus is making sure lawmakers don’t jeopardize the state’s fiscal stability with tax cuts or spending increases that would produce deficits if the economy falters.

“It’s tempting to be the speaker who funds everything. You can be a hero for two years,” Ritter said. “We’re not going to do that.”

House Majority Leader Jason Rojas, D-East Hartford, said the Democratic majority will explore greater investments while respecting the governor’s demand for fiscal discipline.

“I don’t think there’s any disagreement about the general parameters of the budget, the fiscal constraints,” Rojas said. “I think there’s going to be opportunities for investment.”

Lamont is proposing added spending for affordable housing and day care, two progressive Democratic priorities that also are backed by business groups like the Connecticut Business and Industry Association as vital to maintaining a workforce in a tight labor market.

“It’s clear he’s making investments in a lot of areas we care about, whether it’s child care or the housing piece,” Rojas said. 

Lamont said he looks forward to the legislature’s expected vote Thursday on legislation extending the fiscal guardrails.

“These fiscal controls ended the era of wishful budgeting and the so-called permanent fiscal crisis,” Lamont said. “And together we have made historic payments towards our unfunded pension liabilities, honoring our commitments to our teachers and state employees and saving the taxpayers billions of dollars into the future.”

Anticipating calls for both more tax cuts and higher spending, he warned against nudging him too hard from the left or the right.

“So some of you say,  ‘Okay, gov, that’s a good start, but you haven’t gone far enough.’ There are those of you who want maybe a little more spending here, those of you who want a bigger tax cut there,” Lamont said. “That’s fine. Tell me how you’re gonna pay for it.”

Lamont said his budget is “built to expand growth and opportunity for all of our residents, anchored by a middle-class tax cut, keeping faith with and expanding assistance for those most in need.”

“This is my budget, and within it, our values,” he said. “Each and every one aimed squarely at economic growth and inclusive opportunity.”

Lt. Gov. Susan Bysiewicz embraced him and flashed a thumbs up as he finished.

Lamont, who ended his first term with a high approval rating that translated into a 13-percentage point reelection victory, arrived and left to applause, accompanied by his wife, Annie Lamont.

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