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February 9, 2023

Lamont budget ignites debate on wealth inequality in CT

STEPHEN BUSEMEYER / CT MIRROR Gov. Ned Lamont addresses a joint session of the Connecticut House and Senate as he presents his budget proposal for 2023-2024.

While Gov. Ned Lamont insists his new state budget proposal would reduce inequality statewide, legislators and interest groups raised a counter-question Wednesday:

Will it reduce inequality enough?

Lamont became first governor this week to propose a new state budget that includes an analysis on what provisions it offers to close the gaps in education, health care, housing, economic opportunity and other vital services that radically separate Connecticut’s wealthy suburbs from its poor urban centers.

Legislators mandated this focus last spring, directing the governor to particularly address how his plan to direct billions of dollars in state resources would address inequities along racial and socio-economic lines.

“Some of you may say, ‘OK gov, this is a good start, but we have not gone far enough,’” the governor told the General Assembly in his budget address. “For those of you, over here, who may want additional spending, or over here, who may want a much bigger tax cut, fine. But, tell me how you want to pay for it. The fiscal year ’24 budget is tight. Fiscal ’25 may have more flexibility if the economy holds up, so let’s talk.”

Lamont, a moderate Democrat and wealthy businessman from Greenwich, says Connecticut can afford to do more to close equity gaps.

The state holds a record-setting $3.3 billion in its rainy day fund and is on pace for a $3.2 billion surplus this fiscal year — the second-largest in Connecticut history — and has made $5.8 billion in supplemental payments against its pension debt over the past three years.

But there’s another side to that coin.

Despite its great wealth, Connecticut also has a long track record of fiscal irresponsibility — and the debt to prove it — having failed to save properly for public sector pensions and other retirement benefits for decades, chiefly between the late 1930s and 2010.

With more than $88 billion in bonded debt, unfunded pension and retiree health care obligations, Connecticut is one of the most indebted states, per capita, in the nation.

Legislators launched a major savings program in 2017 that helped build the rainy day fund and strengthen Connecticut’s fiscal position in the short term. But with a global recession still at risk and federal coronavirus pandemic aid expiring over the next two years, Lamont says caution still must be taken.

The guardrails

Critics of the governor’s budget questioned whether major gains toward equity can be made, and sustained, if Lamont and the legislature continue with plans Thursday to renew the savings program and other budget controls first enacted in 2017.

Those provisions could prevent the state from accessing billions of dollars between now and 2026 alone, funds that could be used to address communities of concentrated poverty, some groups argue.

“The fiscal controls included in the 2017 bipartisan state budget have clearly improved Connecticut’s fiscal situation and are worth celebrating,” said Emily Byrne, executive director of the New Haven-based policy group Connecticut Voices for Children. “However, these current fiscal controls were created at a different time, and it would be a tremendous mistake for the people of Connecticut if we renewed all of these fiscal guardrails without updating them in order to ensure that we as a state can build a more equitable future.”

Byrne said locking the state into these budget controls for another 10 years, as Lamont and legislative leaders announced earlier this week they have agreed to do, is “deeply problematic."

“Locking our state into a restrictive fiscal regime for 10 years handcuffs us to these policies even if our fiscal situation changes dramatically,” she said.

Puya Gerami, campaign manager for Recovery for All CT, a coalition of more than 60 faith-based, labor and community groups, said “in many ways [Lamont’s budget] falls short on the urgent need to build a more equitable Connecticut.”

And the coalition said Tuesday it was disappointing that legislative leaders and Lamont were rushing to renew the budget controls Thursday without even holding a public hearing first on the issue.

But Lamont also has his allies that say preserving these “fiscal guardrails,” as the governor calls them, is essential to keep state finances — and all existing programs they support — financially stable.

Steps toward equity in the new budget

Lamont says the big middle-class income tax cut he proposed, coupled with an expanded tax credit for working poor families, will send hundreds of dollars annually to households.

Committing $20 million in pandemic aid to a new initiative could help erase up to $2 billion in medical debt for needy families over the next two years.

New investments in child care services and municipal education grants represent some of the largest increases in the governor’s proposal.

And there are smaller initiatives, such as a new position in the Department of Public Health to study infant deaths, a doubling of asset limits to help households on Temporary Family Assistance save thousands of dollars more per year, and $3.3 million in new funding for community violence prevention programs.

“Gov. Lamont has made addressing and remediating inequities a key tenet of his budget recommendations throughout his time in office,” the administration wrote in its budget narrative, adding that the governor wasn’t starting from scratch, either.

Despite the tremendous income and wealth inequality in Connecticut, the state income tax is relatively progressive when it comes toward lower-earning households. Filers who make less than $40,000 have little or no tax liability, and Lamont says if his tax cut for the working poor is enacted, the threshold would move closer to $50,000.

Connecticut offers an $8 billion-per-year HUSKY program that is one of the most generous of any state’s Medicaid-funded healthcare programs.

The state offers a $2.2 billion Education Cost Sharing grant program to help local school districts, and more than two-thirds of those funds go to financially distressed municipalities. The state also offers a debt-free community college program.

Is Lamont moving the needle enough toward economic fairness?

But critics counter that all is a matter of perspective. In other words, is Connecticut moving toward greater equality or just offering enough to keep a highly inequitable system limping along?

The United Way of Connecticut has utilized its ALICE methodology in recent years to show how the federal poverty level is all but useless when trying to identify households in need in this state with a high cost of living.

The FPL says that a family of four earning more than $27,500 annually is above the poverty threshold. ALICE — an acronym for Asset Limited, Income Constrained, Employed — says the basic “survival budget” for a family with two adults and two young children is about $90,000 in Connecticut.

Key elements like health and child care, transportation, utilities and other housing costs aren’t major factors under the FPL, but they are in the United Way’s calculations.

And the only two tax fairness studies prepared for the Department of Revenue Services concluded the state and municipal tax system effectively burdens low- and moderate-income households far more than it does the state's wealthiest families.

The School and State Finance Project, a nonprofit education advocacy group, says Lamont’s plan to bolster the Education Cost Sharing program falls short, particularly given the financial strain put on school districts during the worst years of the coronavirus pandemic.

“Students are struggling to recover from the pandemic’s impacts on their learning and mental health,” said Lisa Hammersley, the project’s executive director. “School districts are on the edge of a catastrophic fiscal cliff that may require them to lay off teachers, counselors and paraprofessionals. Businesses are having difficulties finding skilled applicants to staff over 100,000 unfilled jobs.”

Rep. Toni E. Walker, D-New Haven, and Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, said the governor’s budget is concerning for what it does not do as much as for what it does.

Walker said the governor’s proposal to replace only a portion of the temporary federal pandemic aid to public colleges and universities jeopardizes higher education, particularly in a community college system already under significant financial stress.

“This is not an investment in Connecticut,” Walker said. “This is an abandonment.”

And Osten added Lamont erred when he proposed no rate increase this year for the private, nonprofit social services safety net that delivers the bulk of state-sponsored programs for the disabled and for people suffering from mental illness or substance abuse.

Carol Platt Liebau, president of the Hartford-based fiscal think-tank The Yankee Institute, said the group “applauds the governor and lawmakers for their recommitment to the spending cap. We stand with the people of Connecticut in support of this kind of responsible governance.”

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