CT governor's proposed $55.2B budget includes income tax cut, early childhood development
Gov. Ned Lamont unveiled a $55.2 billion biennial budget Wednesday that would loosen Connecticut's fiscal 'guardrails,' launch a major early childhood development initiative, provide a $50 income tax cut and restructure hospital taxes to secure more federal aid.
Thanks to a controversial maneuver that shifts about $300 million outside of the budget, the governor's proposal falls a razor-thin $1.8 million under the spending cap in the first year and a more comfortable $261 million under the limit in 2026-27.
Lamont's blueprint begins what's anticipated to be a four-month-long debate with lawmakers over Connecticut's fiscal priorities. The General Assembly, which will offer its own budget recommendations in late April, is expected to adopt a compromise plan with the governor in early June.
Here what Lamont's budget proposal would mean for several areas of state funding.
The governor's budget included some increases in general operating grants and special education for K-12 schools — though not as much as educators and advocates were seeking.
And it left the state's higher education institutions, the University of Connecticut and Connecticut State Colleges and Universities, bracing for cutbacks as they would have to absorb the loss of more than $200 million in expiring federal pandemic funding that legislators have used to keep them afloat since 2021.
Without that federal aid, both UConn and CSCU officials will be forced to draw down reserves and look to cut spending, unless they can convince legislators to pony up more state funds than Lamont would.
For the state's K-12 schools, a$54 million investment in special education, announced earlier this week, was allocated in the second year of the governor's biennial budget. But districts had called for about $90 million more from the state to cover growing costs — funding many say can't wait.
Increasing Medicaid reimbursement rates, restructuring hospital taxes and reining in pharmaceutical costs topped Lamont's list of health care priorities in his proposed budget.
The proposal includes an increase of $35.4 million in state funding for Medicaid reimbursement to providers over the biennium, including $10.4 million in FY 2026 and $25 million in FY 2027.
Legislators and physicians for years have been sounding the alarm that the prevailing reimbursement rates were too low, making it unaffordable for health care providers to treat patients with Medicaid coverage.
Additionally, Lamont wants hospitals to pay an extra $140 million in the second year of the new budget but also would increase payments back to the industry by a matching amount. The administration estimates this arrangement would qualify Connecticut for an additional $94 million in federal Medicaid reimbursement.
The arrangement would help to dig the Medicaid program out of its fiscal deficit, projected to be $290 million in FY 2025. But, it also essentially asks hospitals again to trust that increased taxes won't lead to fiscal abuses by the state down the road.
Lamont's budget also includes several provisions aimed at tackling the high cost of prescription drugs.
The budget would allow the purchase of out-of-pocket and out-of-network prescription drugs to count toward consumers' health plan deductibles, provided they pay a lower price for those drugs than they would at an in-network pharmacy with insurance.
And the governor pitched adding funds for oversight of hospitals and home care programs following news of Prospect Medical Holdings filing for bankruptcy. The company owns three Connecticut hospitals — in Waterbury, Manchester and Vernon.
Investments in child care that Gov. Ned Lamont hopes will eventually allow Connecticut to establish a universal preschool program formed the signature piece of his proposal for spending on human services in the coming biennium.
Lamont's proposal would invest $300 million of the state's surplus fund for fiscal year 2025 into a new Universal Preschool Endowment. Each subsequent year, certain surplus funding could be transferred into the endowment, with the state treasurer investing the money to increase profit.
But the proposal does not fully address the needs of othernonprofits who provide a slew of state services including food assistance, shelter for the homeless, therapeutic services, and aid for people with disabilities.
The governor's budget includes an additional $157 million over the next two years for nonprofit service providers. Nonprofits would receive $31 million the first year, with a boost of $126 million coming the following year.
But providers received $50 million in one-time federal COVID relief dollars for this fiscal year, which will not be renewed. That means in fiscal year 2026, when they receive an additional $31 million, they'll actually see a net loss in funding ahead of another increase in fiscal year 2027.
Compiled by Gabby DeBenedictis and Kat Struhar. Copyright 2025 © The Connecticut Mirror (https://ctmirror.org).
This article originally appeared on The Bulletin: Gov. Lamont's CT budget proposal has income tax cut, education funding
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'The states are going to have a huge incentive to drop their coverage because the alternative is a massive increase in spending,' he said.
