Weakened Guardrails, Spending Hikes Create Fiscal, Economic Uncertainty 

Connecticut’s fiscal and economic health faces an uncertain future following the 2025 General Assembly session, the state’s largest business organization said today. 

CBIA president and CEO Chris DiPentima said the two-year, $55.8 billion budget uses fiscal guardrail workarounds and more than $357 million in business tax hikes to increase state spending by $2.6 billion over the next two years. 

“These undoubtedly are challenging times,” he said. “Unfortunately, policymakers did not make the tough decisions this session necessary for ensuring Connecticut’s long-term fiscal health and economic growth. 

“Those guardrail workarounds are the most alarming things in the budget, diverting about $1.2 billion that would have flowed into paying down pension debt and continuing the remarkable progress we’ve made since the fiscal reforms were adopted in 2017. 

“Policymakers are setting Connecticut up for a real problem in 2027 when the next budget is due—they’ll be looking at two choices, cutting programs or raising taxes, the same destructive options that hounded us throughout the last decade. 

“This budget creates real uncertainty—not only for businesses, but for residents. What does it mean for future budget cycles? That’s the big question for Connecticut going forward.” 

‘Unchecked’ Spending 

DiPentima said that by fiscal 2027, state government will spend about $6,873 per capita annually—about twice the national average and 42% above 2009 spending levels.

“The unchecked growth of Connecticut government spending far outpaces the growth of inflation, population, and household income,” he said. 

“It’s unsustainable—and how do you convince residents or businesses to move here, to stay here, when we won’t make the hard decisions on spending or commit to long-term fiscal discipline?

“Just two years ago, the legislature passed the largest income tax cuts in state history, extended the fiscal guardrails, and avoided tax hikes on businesses—what changed?” 

DiPentima noted that budget featured several welcome initiatives, including expanding access to affordable, quality childcare—critical for closing the labor participation gap between men and women. 

“However, there are more effective, viable, and sustainable solutions available to fund necessary initiatives and programs such as childcare,” he said. 

“Lawmakers are sitting on a taxpayer-friendly blueprint for freeing up additional revenue, with a report they commissioned in 2021—and have largely ignored since—identifying between $600 million and $900 million in annual savings.” 

Affordability 

CBIA vice president for public policy Chris Davis said the session made incremental progress addressing the state’s high cost of living and doing business, both key barriers to growing the population and driving economic growth. 

“Legislation providing short-term relief on energy costs was welcome, but we still need long-term policies to lower residential and business costs and improve infrastructure and reliability,” he said. 

“Employers were grateful for the swift legislative action and collaboration to address the threat of triple-digit increases in workers’ compensation costs because of a state Supreme Court ruling earlier this year. 

“And the first-time homebuyers savings account program that lawmakers adopted represents the type of creative thinking needed to address the housing shortage.” 

The session made incremental progress addressing the state’s high cost of living and doing business.

Davis also welcomed the expansion of the research and development tax credit refund to 90% for qualified small bioscience companies, recommended by Gov. Ned Lamont in his original budget proposal. 

Businesses face $357.6 million in tax hikes because of changes to the unitary tax, the extension of the so-called temporary corporate tax surcharge, and alterations to net operating loss carry forwards.  

There was also no relief again for small businesses struggling with soaring health insurance costs and limited options, although lawmakers did pursue legislation—which failed—that increased costs. 

Lamont has said he will veto controversial legislation allowing striking workers to collect unemployment benefits, a measure that likely would increase employers’ federal unemployment taxes. 

Regulatory Reform 

The legislative session was marked by a series of critical regulatory reforms, including adoption of the release-based cleanup regulations that will replace the state’s outdated Transfer Act. 

“That’s a major win for Connecticut’s economy,” said Davis. 

“The new regulations will create an estimated 2,100 new construction jobs, $3.78 billion in GDP growth, and $115 million in additional revenue for the state over the next five years.” 

The legislative session was marked by a series of critical regulatory reforms.

Lawmakers unanimously approved permitting reforms that will improve transparency, predictability, and efficiency while maintaining strong environmental protections. 

State agencies will be required to provide a more comprehensive analysis of the impact and cost of proposed regulations on small businesses. 

The legislature unanimously approved a measure eliminating outdated regulatory requirements for small and medium-sized banks.

Legislation overhauling the state’s apprenticeship hiring ratios for the skilled trades also won unanimous legislative support, addressing a contributing factor to the industry’s workforce shortage. 

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CBIA is Connecticut’s largest business organization, with thousands of member companies, small and large, representing a diverse range of industries from every part of the state. For more information, please contact Scott Beaulieu (860.244.1929).