To bolster local schools in crisis, Gov. Ned Lamont and the General Assembly will legally exceed Connecticut’s spending cap in a fashion not seen in nearly two decades. But unlike the last time, when Gov. M. Jodi Rell and the 2007 legislature leapt way past cap limits just as a major recession was beginning, officials now will take a far more modest step, protected by surging tax revenues and layer-upon-layer of fiscal safety nets. “A lot of schools and a lot of our municipalities are going through complicated times,” Lamont said earlier this week at an event in Wethersfield. “Inflation is hitting hard. Healthcare costs are hitting hard. The price of gasoline is making transportation a little more expensive. And we wanted to do what we could to be there.” There are two ways to exceed CT’s spending cap legally The governor and his fellow Democrats in the legislature’s majority announced they would take $270 million in unspent funds this fiscal year and give it to communities for the next budget cycle, which starts July 1. That includes $100 million in one-time aid for non-education programs and $170 million for schools that communities could expect year after year. But there’s no room for that $270 million under the cap system, which tries to keep budget growth in line with household income and inflation yet allows for two types of exceptions. Lamont could carve out a one-time exception by declaring a fiscal emergency and securing approval from 60% of the House and Senate. That’s all that would be needed to accommodate the $100 million in non-education aid pledged just for next fiscal year. Or the governor can artificially raise the cap limit on an ongoing basis, also through an emergency declaration and a three-fifths’ endorsement from lawmakers. Education advocates are hoping to see $170 million added permanently to the spending limit. That decreases the odds this extra state investment won’t be reduced in future years as other programs compete for limited dollars within the cap system. Lamont plans to split the difference, according to sources familiar with the next budget. That means building a roughly $85 million ongoing exception into the cap. Allowable spending grows annually under the cap system, and that means legislators effectively would have to pay for the other half of that $170 million out of this growth. CT government is far stronger fiscally than two decades ago That also would mark the first ongoing spending cap exception since June 2007, when Rell, a Republican, and a Democratic-controlled legislature approved an ongoing cap exception of $690 million. That represents nearly $1.1 billion in present-day funds, according to the U.S. Bureau of Labor Statistics’ inflation calculator. Rell and the 2007 legislature were roundly criticized for the move, coming right as the nation was slipping into what economists would later call “The Great Recession.” Connecticut would face huge deficits within two years, and by 2011, Gov. Dannel P. Malloy and the General Assembly would order more than $1.8 billion in tax hikes. But the context is far different now. State government’s rainy day fund held nearly $1.4 billion in 2007, equal to about 8% of annual operating costs. Connecticut now holds $4.3 billion or 18% in reserve. In addition, it maintains a special savings program that withholds a portion of income and business tax receipts from the budget. This buffer has averaged more than $1.5 billion since its inception in 2017. Collectively, these safeguards now cover roughly 24% of operating costs. State officials also have used $10 billion in surplus since 2020 to reduce pension debt. And given that Connecticut is now planning an ongoing cap exception that is 1/13th the size of the over-spending ordered two decades ago, House Speaker Matt Ritter, D-Hartford, said the state has found a prudent way to assist struggling local schools. Many Democratic legislators say Connecticut has overcorrected from past fiscal mistakes and the spending cap and other fiscal controls are too stringent. Some critics note the cap partly ignores Connecticut’s tremendous investment wealth and capital gains — especially in Fairfield County — when calculating what the state can afford. “There should be some limits on what the legislature should spend,” Ritter said, but added some reforms need to be explored. “I think there are going to be conversations next year.” Progressive groups also have called for reforms to the spending cap and other budget limits, arguing they siphon dangerously large amounts from town aid and other core programs. When state analysts upgraded revenue projections Thursday for this fiscal year and next combined by more than $580 million yet noted most of that growth was in an off-budget savings program, calls for reform increased. “The consensus revenue report shows us what we’ve already known: Connecticut has the money to fund the basic needs of children and families,” said Norma Martinez HoSang, director of Connecticut For All, a progressive coalition of more than 60 labor, faith and other civic organizations. With federal cutbacks threatening health care and human service programs here, “Connecticut is not acting with enough urgency to protect our people. It’s not too late to make different choices,” she added. But House Minority Leader Vincent J. Candelora, R-North Branford, said earlier this week that while much of the Republican minority likely will support the next budget from a desire to help towns, they’re disappointed with how Democrats are handling the spending cap. “My concern always is making sure that spending is sustainable in the state of Connecticut,” he said. Lamont, a fiscally moderate Democrat, largely has been reluctant to work around the cap, though he did order a one-time exception last year to cover $284 million in cost-overruns in the Medicaid program. ...read more read less