The General Assembly approved a plan Monday to cover $466 million in state agency overspending — including a $284 million problem in Medicaid — even though it means Connecticut’s budget would exceed the constitutional spending cap for the first time since 2007.
The legislation, which now heads to Gov. Ned Lamont, also helps him and the Democrat-controlled legislature compromise on a new state budget for the next two fiscal years.
The Senate approved the bill 24-10 shortly before 5:45 p.m. The House passed it earlier by a 98-46 tally. Both votes, which followed party lines, provided the 60% vote of approval needed to exceed the spending cap, which limits most budget growth to increases in household income or inflation.
Also included in the bill were provisions that clarify Connecticut’s workers’ compensation law in response to a state Supreme Court decision that would radically increase insurance premiums paid by municipalities and businesses.
“If we did not have a Medicaid deal, we would have been here a very long time,” House Speaker Matt Ritter, D-Hartford, said shortly before Monday’s debate, referring to a related understanding with the Lamont administration that will make it easier for legislators to fund key programs next fiscal year. “We believe that will help us pay for things like municipal aid [and] special education.”
Maneuvering around the spending cap
Despite the Medicaid challenges, the overall, $26 billion state budget for this fiscal year, which wraps June 30, is headed for the second-largest surplus in Connecticut history.
Analysts project a General Fund operating surplus of $462 million, with surging revenues offsetting hundreds of millions of dollars in anticipated overspending involving more than a dozen state agencies. And a program that forces legislators to save a portion of income and business tax receipts will capture another $1.9 billion.
But the spending cap limit must be followed regardless of the $2.4 billion fiscal cushion that’s projected.
And legislators could not retroactively approve much of that overspending Monday without pushing the current budget about $25 million over the cap.
The alternative, leaders said, would have been to delay Medicaid payments to health clinics, social service agencies and other providers until after the new fiscal year starts on July 1 — a move providers said would have forced layoffs and service suspensions.
The state Constitution allows legislators to exceed the cap legally provided the governor declares a budget emergency in writing and each chamber gives the extra spending a 60% vote of approval.
The spending cap and other budget controls, which last were set in 2017, are largely fixed by law and contract until July 2028, but still can be adjusted with the governor’s consent.
Critics, including some Democrats in the legislature, say the state has overcompensated for its past poor savings habits, stashing cash too aggressively to pay down its hefty pension debt while dangerously weakening education, town aid, health care and other core programs.
Lamont, who told business leaders in mid-January that the spending cap was “sacrosanct,” issued the declaration of a budget emergency early Monday and said he’s not abandoning his budget principles.
“What can you say? ‘It’s a slippery slope. Oh my God, here we go again, just like we did in the early 2000s,’” Lamont said. “I think people know me. That’s not going to happen.”
State officials have legally exceeded the spending cap seven times since it was created in 1991 but not since 2007. That’s when Republican Gov. M. Jodi Rell and a Democratic-controlled legislature, with GOP support, appropriated $690 million above the limit to significantly boost municipal aid and payments to doctors and other providers that treat the poor.
But minority Republicans in the House and Senate both chastised the Democratic governor on Monday and predicted the cap overage was the first step in a journey that would end with state budget deficits and tax increases.
“Get your pocketbooks, your wallets ready,” Senate Minority Leader Stephen Harding of Brookfield said during a press conference prior to Monday’s debates. “You're going to give over more of your money [to] the state of Connecticut.”
Sen. Heather Somers of Groton, ranking GOP senator on the Appropriations Committee, added that “we have a governor who has literally folded like a lawn chair over this.”
Lamont’s communications director, Rob Blanchard, said Senate Republicans “have short-term memory loss,” noting lawmakers from both parties recently voted to order $40 million in additional special education grants for local school districts — despite warnings from Lamont that the current budget was in jeopardy of exceeding the spending cap.
“Nothing about this deficiency proposal will result in a tax increase and will ensure our Medicaid providers can care for our state’s most vulnerable,” Blanchard added.
House Minority Leader Vincent J. Candelora of North Branford noted during Monday’s debate that the latest budget problem could have been avoided had Democrats not ignored projections one year ago that showed Medicaid costs were surging.
Candelora called Monday’s bill a spending cap “end-around that I don’t think I have seen in quite a number of years.”
Medicaid bill opens door for more spending in next budget
Lamont’s declaration, though technically only allowing a spending cap exception this fiscal year, is part of a larger deal that provides some relief down the road as well.
Ritter confirmed Monday that the administration has agreed to carry forward a portion of this fiscal year’s $462 million operating surplus — roughly $255 million to $260 million — into the next, two-year state budget.
And because those carryforward funds had been appropriated in the 2024-25, they count toward that fiscal year’s spending cap calculation.
In other words, that’s $255 million to $260 million extra that legislators can spend in the coming biennium without pushing the spending cap tally up by one penny.
Democrats and Lamont have struggled to find room under the cap in their plans for next fiscal year to accommodate additional investments in health care, early childhood development, education, and municipal aid.
They also are seeking additional funds to bolster the nursing home industry and services for people with developmental disabilities. The state's largest health care workers' union has set a May 27 strike deadline involving about 6,400 caregivers spread across dozens of nursing homes and group homes. The union says its members can earn more serving fast food than caring for Connecticut's elderly residents and clients with disabilities.
CT Mirror reporters Mark Pazniokas and Ginny Monk contributed to this story.
This story was originally published by the Connecticut Mirror.
