Committee Invests in Childcare, Ignores Unemployment Debt

The General Assembly’s Appropriations Committee approved a $24.2 billion budget April 7 for fiscal 2023, increasing spending by 8% over current levels.

The committee’s budget remains under the statutory spending cap by $200,000 this fiscal year and $4.6 million in fiscal 2023. 

Spending will increase 6.2% this year and 2.3% in fiscal 2023 over the original two-year budget adopted in the last legislative session.

As with Gov. Ned Lamont’s proposed budget, the Appropriations Committee did not tap the state’s Rainy Day Fund, allowing additional funds to be deposited into the state employee pension system.    

The budget invests about $125 million in childcare and provides additional workforce development funds, but fails to provide any relief for businesses facing a 22% hike in unemployment taxes to pay off federal pandemic loans.

‘Optimistic’ Revenue Projections

Continuing last year’s funding theme, the committee’s budget relied on a combination of optimistic revenue projections and one-time federal American Rescue Plan Act funding.

The budget reallocates a series of funds, resulting in a total of $748.7 million in new ARPA allocations for a variety of initiatives and grant programs. 

The remaining unallocated federal funding totals approximately $373.7 million. It should be noted that budget allocations using ARPA and related federal funds do not count under the state’s spending cap.  

The committee’s budget relied on a combination of optimistic revenue projections and one-time federal funding.

Committee co-chair Sen. Cathy Osten (D-Baltic) called it a “COVID relief budget—a budget that meets the immediate challenges of today while investing in an equitable future.”

Committee Democrats said the budget, which passed on a 35-15 party line vote, made investments in much-needed areas, including childcare and workforce development.

Republicans opposed the budget, highlighting the use of one-time funding to support recurring expenses—creating potential structural issues in the future.

Ranking member Rep. Mike France (R-Gales Ferry) expressed concern about the legislature creating a funding cliff with stakeholders expecting this level of funding in succeeding years.

Unemployment Debt Relief

CBIA president and CEO Chris DiPentima said he was disappointed the committee did not follow through on earlier proposals to mitigate the impact of tax hikes and special assessments that employers face later this year to pay off the state’s unemployment fund debt.

“The lack of legislation to encourage business investments and address the challenges facing small businesses—the backbone of our economy—ignores Connecticut’s once-in-a-generation opportunity to rebuild our state stronger and better than before the pandemic,” he said.

“There is still time for state lawmakers to do the right thing and help small businesses navigate an overwhelming number of obstacles.”

CBIA’s Chris DiPentima

“State and federal unemployment taxes will jump 22% by 2026, money better invested by employers in addressing the labor force crisis, the biggest threat to Connecticut’s economic recovery.

“It took six years of higher unemployment taxes on employers to pay off federal loans following the 2008-2010 recession, we can’t hold that debt over small businesses again. There is no question this prolonged the economic downturn and hampered job recovery. 

“There is still time and opportunity for state lawmakers to do the right thing and help small businesses navigate an overwhelming number of obstacles, from the labor shortage to supply chain bottlenecks and inflation.”

Governor’s Budget

The committee’s budget retained much the governor’s proposed appropriations, although it rejected the centralization of IT services to the Department of Administrative Services.

According to committee co-chairs, the rationale behind this shift was to wait to see how the human resources centralization process performs before taking similar action with the state’s IT system.  

The committee also rejected the governor’s proposal to move the state’s Contracting Standards Board to the Auditors of Public Accounts.

The budget instead appropriated five paid staff positions. The committee also intends to designate the agency’s budget as a pass-through budget, providing additional future protections.  

The committee rejected the governor’s proposed centralization of IT services.

The legislature provided additional funding in addition to the governor’s recommendations: 

• $23 million for the personal care agreement
• $52 million for private providers offering direct health and human services for clients of various state agencies (some funding also comes from ARPA dollars)
• $3.7 million for residential care home supports and $2.25 million for the rental assistance program under the Department of Mental Health and Addiction Services
• $100,000 for one new position within the Office of Workforce Strategy. The first new position is designed to support and manage OWS communication and legislative initiatives.
• $1.4 million targeting the Eastern Connecticut Manufacturing Pipeline
• $1 million for adult education
• $1.57 million to fund additional charter school seats at Park City Prep, Odyssey, and the Integrated Day School
• $600,000 for internship recruitment and pay within the Department of Transportation

One-Time Funding Sources

The budget proposal relies heavily on federal funding and carry forwards to fund spending increases, transferring many of the governor’s appropriations to ARPA funding, including: 

• $20 million in operating assistance for the University of Connecticut
• $20 million in operating assistance to UConn Health 
• $24 million in operating assistance to the Connecticut State College and University System
• $3.5 million in various social service programs

The committee budget uses significant carry forward dollars to fund programs, including: 

• $100 million to DOT to support the anticipated federal competitive/non-competitive grants under the Infrastructure Investment and Jobs Act
• $74 million to the Office of Early Childcare 
• $23 million for nonunion employee wages to address compression issues
• $65,000 to assist in the creation of an E-Commerce Training Program at community colleges
• $25 million in the Salary Reserve Fund to help recruitment and retention of healthcare, engineering, and other difficult to recruit positions

The budget proposal relies heavily on federal funding and carry forwards to fund spending increases.

The committee reallocated the governor’s ARPA funding recommendations, including: 

• $10 million for grants to businesses for electric vehicles
• $3 million re-entry training for commercial learners’ permits in the Department of Correction  
• Eliminates $15 million for the CareerConnect Program
• Eliminates $20 million for the Innovation Corridor Program 
• $7 million for climate smart farming
• Reduces funding for outdoor recreation through the Department of Energy and Environmental Protection by $12.5 million
• $7 million for school-based health centers
• $50 million for various childcare programs, including Care4Kids
• $20 million for private provider support
• Reduces funding for student loan repayment program under the Department of Public Health by $14 million 
• Eliminates $50 for support for affordable housing

SEBAC Impact

This is the second version of the budget and faces additional revisions.

The Appropriations Committee and legislature must act on the Lamont administration’s wage and bonus contract agreement with the State Employees Bargaining Agent Coalition.

That deal will have a significant fiscal impact, estimated to add $287 million to state spending this fiscal year, and an additional $403 million next fiscal year.

The SEBAC deal will increase state spending an estimated $287 million this fiscal year and an additional $403 million next year.

Legislative leaders also must reconcile the Appropriations budget with the revenue package approved by the Finance, Revenue, and Bonding Committee.  

While there is only $4.6 million under the current spending cap for fiscal 2023, the legislature will be presented with new revenue numbers later this month that may lead to increased room.

The spending cap limits growth for state spending to the greater of inflation or growth in personal income in Connecticut. 

CBIA will continue to monitor the budget moving forward to ensure it prioritizes programs that maximize taxpayer return on investment and moves the needle forward with the state’s economic recovery.

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For more information, contact CBIA’s Ashley Zane (860.244.1169) | @AshleyZane9