Lamont Budget Adjustments Target Affordability, Workforce

Gov. Ned Lamont’s proposed fiscal 2027 budget adjustments include several important initiatives that signal a continued commitment to strengthening Connecticut’s business climate, expanding workforce capacity, and enhancing affordability for small businesses.  

The governor’s proposal, released Feb. 4 on the opening day of 2026 legislative session, increases fiscal 2027 appropriations by $85.1 million, raising spending from 5.4% to 5.7% over the original budget approved last spring.  

The revised $28.7 billion budget proposal is only $1.1 million below the state spending cap, setting the stage for negotiations with the legislature on what spending priorities will be this session. 

R&D Tax Credits

The proposal to extend Connecticut’s existing research and development tax credit to pass‑through entities beginning in income year 2026 allows LLCs, LLPs, and S‑corps to receive a 6% credit for qualifying expenditures, with caps by firm and statewide.

This extension supports early stage biotech, manufacturing, and technology companies, among others, and enhances Connecticut’s competitiveness. 

The tax credit will be capped at $25 million per year with a maximum $1 million per year allocation to one entity. 

CBIA has long advocated for small businesses to be eligible for R&D tax credits. 

Because the credit would be made available to pass-through entities, a majority of the cost will impact revenues subject to the volatility cap rather than reducing revenue to the General Fund. 

If the issued tax credit exceeds a pass-through entity’s tax liability, the excess amount will be refundable at 90% for biotechnology firms and 65% for all non-biotechnology firms, further incentivizing investments in Connecticut. 

CBIA has long advocated for small businesses to be eligible for R&D tax credits.  

Workforce Measures

Removing application and renewal fees for electricians, plumbers, HVAC technicians, sheet metal workers, educators, and certain healthcare professionals reduces barriers to entry for trades experiencing significant workforce shortages.

This proposal adds to licensing reforms pass last session and will strengthen Connecticut’s manufacturing, healthcare, and construction labor pipeline. 

CBIA’s 2026 policy solutions agenda also advocated for the removal barriers  to occupational  licensing to help workers enter high demand fields more easily.

"The question is not whether Connecticut can compete—it can," CBIA's @ChrisDiPentima writes in this @hearstcmg op-ed. "The question is whether we will act with the urgency needed to ensure growth is broad-based, sustainable, and inclusive." #reimaginect https://t.co/9ppG6S9UMo

— CBIA (@CBIANews) February 4, 2026

A new tax credit proposal included in the governor’s budget adjustment recommendations offers small employers up to $1,000 annually per participating employee for two years when offering ICHRAs through Access Health CT’s BusinessPlus platform. 

The budget proposal includes $150 million in additional bonding for a replacement Windham Technical High School. Modernized facilities strengthen Connecticut’s career‑technical system and would support workforce needs in advanced manufacturing, defense, and related sectors. 

The tri‑share model—splitting childcare costs among employer, employee, and the state—helps employers expand workforce participation among parents, particularly women.

CBIA championed the pilot program’s passage in 2024. Funding for the program expires this year, so the governor has proposed extending this important workforce development program. 

Decoupling, Fiscal Guardrails

The budget decouples from federal bonus depreciation for qualified production property and delays conformity with federal immediate expensing rules for domestic R&D expenses until 2026.

This proposal would prevent abrupt revenue impacts while maintaining competitiveness once full federal alignment begins.

A controversial element of the governor’s proposal adjusts the state’s volatility cap threshold to fund a one‑time tax rebate for families making less than $400,000. 

The proposal adjusts the state’s volatility cap threshold to fund a one‑time tax rebate for families making less than $400,000.

Though the underlying cap would remains intact in his proposal, CBIA has opposed previous efforts to divert volatile revenue streams as they put future budgets at risk of insolvency—and will lead to future tax increases on the business community. 

The governor’s budget adjustment proposal kicks off the budget season in the legislature.

Now, legislators will hold public hearings on the proposals in the coming weeks and make adjustments before passing their own budget proposals out of committee in late March and early April. 

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 For more information, contact CBIA’s CBIA’s Chris Davis (860.244.1931).