Gov. Lamont says lawmakers' budget is close, but he sees flaws

Gov. Ned Lamont expressed optimism that the budget proposal Democratic lawmakers approved is not far off from the one he presented in February.

But he also told reporters at a press conference in Cheshire Thursday that, in his view, the plans presented by the Appropriations and Finance, Revenue and Bonding committees have some big flaws.

For starters, the two-year, $55.7 billion spending plan the Appropriations Committee approved Tuesday is $215 million above the spending cap in the first year.

“Obviously, I'm a little stricter on the spending cap than both sides of the aisle, but we’ll be able to get there,” he said.

The spending cap is tied to inflation and limits how much state spending can grow, regardless of how much revenues increase.

Sen. Cathy Osten (D-Sprague) a co-chair on Appropriations, said Lamont was able to get under the spending cap because it didn’t include funding Democratic lawmakers see as critical.

“Our budget is a real budget for real families,” Osten said.

The Appropriations Committee budget restored funding for local volunteer first responders.

Other areas where the committee wants to spend more than Lamont include $26.2 million to ensure no local school district faces a cut under new formula for education aid, an additional $124 million for special education and a combined $281 million for the University of Connecticut, UConn Health and the Connecticut State College and University System.

Republicans maintain they will not support a spending plan that goes above the spending cap, even if they agree with Democrats on some of the increases.

“We've seen what happens in the state of Connecticut when spending gets out of control and I encourage everyone to go back and look at the spending increases we’ve had in the last six years,” Rep. Tammy Nuccio (R-Tolland) said before Tuesday’s vote.

Lamont also disagreed with his fellow Democrats on some key parts of their tax plan, notably on a capital gains tax.

Democrats on the Finance, Revenue and Bonding Committee made a late change to their proposal Thursday to include a 1.75% capitol gains tax on individuals earning at least $1 million and households making at least $2 million.

The tax would expire in 2029 and apply when those people sell stocks, bonds, real estate or other assets. The proposal includes an exemption for their first sale of a home or business.

After the amendment, Democrats decided not to approve a separate bill for a conditional income tax increase on people earning at least $250,000.

That would have gone in effect if Republicans in Congress cut the federal income tax rate on the top tax bracket.

Rep. Maria Horn (D-Simsbury), a co-chair of the Finance Committee, said she is hesitant to impose a capital gains tax but thinks it's necessary to start looking for revenue amid fears of a federal aid cut.

Congressional Republicans have said they want to find at least $1.5 trillion in savings in the federal budget.

“I think it’s responsible for us to think around that corner and try to figure out what we’re going to do rather than sit here with our fingers in our ears pretending this is not – this is ordinary times,” Horn said.

Lamont warned a capital gains tax could drive away some of the state’s wealthiest residents.

“Look at the 10 states that are adding population, they either have zero or lower income tax than we do and they’re not all sunbelt states,” he said. “They're not all going down there for sunshine.”

Republicans blasted the plan, just as they did when Lamont’s proposal included increases in business taxes.

They also criticized Democrats’ idea of freezing a $700 million surplus to the pension fund, instead putting the funding into a special account in case of additional federal aid cuts.

The surplus in the current budget is the result of the volatility cap – a limit on how much the state can spend from income tax on investments and other inconsistent revenue streams.

Money above the cap is supposed to go toward paying down the state’s pension debt.

Sen. Ryan Fazio (R-Greenwich) said the state has enough in its rainy day fund -- $4.2 billion – to absorb cuts if that happens.

“It’s not a Trump fund, it’s a legislator slush fund,” he said. "It’s $700 million without any object for what the money should be spent for.”

Democratic lawmakers also included a child tax credit in their plan. It would start at $150 for individuals earning up to $100,000 and households making no more than $200,000.

Lamont said he’s open to talking but prefers his planned $50 increase in the property tax credit, bringing it up to $350.