HARTFORD, Conn. (AP) - Democratic Gov. Ned Lamont and Democratic legislative leaders announced Thursday they’ve reached a “handshake agreement” on a new two-year state budget they said doesn’t increase personal income tax rates or include a proposed capital gains tax, but applies the state sales tax to some new goods or services.
Only a few details were revealed Thursday during an announcement in Lamont’s office. Lawmakers said the roughly two-year $40 billion agreement still needs to be drafted and presented to rank-and-file lawmakers.
But Democrats, who control the General Assembly, said they’re optimistic the bill can be approved before the regular legislative session adjourns June 5. Unlike the previous two years, when Republicans held more seats in the Senate and House of Representatives, the GOP was not part of these final budget talks. The last two-year budget was a bipartisan one, passed after a nearly 17-week impasse, just before Halloween.
“I’m very pleased to be able to announce today that we have a handshake agreement with the leaders of the House and Senate,” Lamont said. “We’re going to have an honest budget done on time so people can plan accordingly.”
Republican Senate Minority Leader Len Fasano of North Haven hadn’t received any details of the plan from the Democrats, but he wasn’t impressed with what he saw.
“While Democrats have yet to release details about their plan, what we do know about their budget is that it will expand taxes, burden future generations with over $27 billion in new debt, and completely wipe out this year’s surplus,” he said in a written statement.
The newly elected Lamont has said it was a top priority of his to get a budget done before the session ends.
Melissa McCaw, Lamont’s budget secretary, said the plan closes a projected two-year, $3.7 billion gap in the new two-year budget beginning July 1. She said the rate of growth is equal to or less than inflation, adding how the tentative budget agreement is “balanced, it’s honest, it’s gimmick-free.”
She said planned sales tax changes - essentially imposing Connecticut’s current 6.35 percent sales tax rate on some new goods or services - will add up to “just shy” of $50 million by the second year of the plan. In an attempt to modernize Connecticut’s sales tax structure, Lamont said the proposal addresses “the digital economy” but offered no details.
Lamont’s initial budget proposal, unveiled in February, applied the sales tax to numerous new goods and services, ranging from tax preparation services to boat storage. But the new governor has since received strong pushback on many of those proposals.
Democrats got a little help in crafting their tax-and-spending plan from better-than-expected state revenue collections. The budget plan sets aside more than $2 billion in the state’s budget reserve account so Connecticut will be “well-positioned to weather a possible downtown in the economy, Lamont said. McCaw said about $381 million will be reserved for a plan that reschedules the debt payments for Connecticut’s underfunded teacher retirement plan, setting that money aside in a special reserve account to protect bondholders. McCaw said the budget does not include a contentious proposal to require cities and towns to cover some of the teacher retirement fund costs.
About $160 million of the state’s projected surplus funds will be set aside as part of a tentative agreement between the Lamont administration and Connecticut’s hospitals to settle a legal battle over a state hospital tax, she said.
If that deal is ultimately approved by Connecticut Hospital Association member hospitals and health systems and the Connecticut Attorney General, lawmakers will have to return to Hartford in a special session to approve or reject it. Lawmakers will also likely have to return to address other matters, such as electronic tolls and some economic development initiatives. It’s unclear when that might happen.
Fasano questioned the Democrats’ plan to “suck dry the state’s current surplus.” He said Connecticut has a “legitimate and significant surplus” for the first time in years as a result of the recent bipartisan budget.
“While it took years to grow a surplus, it will take just days for Democrats to wipe it out,” he said.
A news release distributed late Thursday from Lamont’s office said the budget also includes a plan for debt-free community college that will be “supported by a dedicated revenue source;” a plan to save $185 million over two years in state employee health costs; increased funding to train manufacturing workers; and resources to move more of the public’s interactions with state government online.
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