Gov. Ned Lamont, right, and CT Mirror reporter Mark Pazniokas during an interview focusing on state spending and  taxes. / Photo by Yehyun Kim, CTMirror.org

By Keith M. Phaneuf / CTMirror.org

With final negotiations on the next state budget about to begin, Gov. Ned Lamont doubled down on his positions last week, praising Connecticut’s fiscal guardrail policies and urging lawmakers to set spending priorities while delivering a broad-based income tax cut to the middle class.

Lamont, who was interviewed during a live-streamed CT Mirror forum on Wednes from Real Art Ways in Hartford, also hinted he would reappoint two of the state’s utility regulators and declined to declare himself a lame duck so early in his second term, leaving open the possibility of seeking a third term as governor in 2026.

“I’m Connecticut’s top salesman,” Lamont said during an hour-long conversation with CT Mirror Capitol Bureau Chief Mark Pazniokas. “I love this state. And I want you to love this state. And I want to send that message around the country. 

And, frankly, you know, getting your fiscal house in order is just, you know, one pillar” that supports that goal, the governor added.

After a decade of the 2010s marred by frequent deficits and two major tax hikes, Connecticut has amassed a record-setting $3.3 billion rainy day fund, used another $5.8 billion in black ink to pay down pension debt and could take another big bite out of the problem this summer with the current budget on pace for a $2.9 billion surplus.

If legislators stick to a spending cap and other savings programs that helped amass these surpluses, that will continue to translate into hundreds of millions of dollars in annual savings on the state’s required pension contributions, the Democratic governor noted. 

That, in turn, means those funds are available for other priorities, such as the $500 million state income tax cut Lamont wants the Democratic-controlled General Assembly to adopt this spring.

Lamont: “Guardrails” keeping state on path to prosperity

Budget “guardrails are a means to an end,” said Lamont, who’s expected to start final budget negotiations with legislative leaders this week. 

“We were lurching from fiscal crisis to fiscal crisis for the last 30 years. It was really depressing the hell out of people,” said the Democrat, who handily won a second term last November.

Businesses were leaving, and young people were thinking about other places to go. And the means to the end is that we want to do everything I can to give people a reason they want to stay here.”

But does the spending cap — originally drafted in 1991 and made significantly more restrictive in 2017 — still give government the financial flexibility to respond to pressing needs?

“I think it’s working,” said the governor. “I mean, because we’ve had an expanding economic pie, that means we’ve able to make bigger investments in education than ever before, bigger investments in our universities than ever before, bigger investments in day care and child care than ever before.”

Lamont urged his critics to remember the decade of the 2010s when they say these new investments aren’t enough.

It’s “ ‘not enough.’ I get it,” he said. “I hear that every day at the Capitol. But the change of direction compared to where we were five, 10 years ago … usually it’s all ‘We’re going to have to flat-fund this. So we’re gonna have to cut, cut cut, we’re gonna have to raise this tax a little bit.’ We’re gonna have very different discussion today.”

Fellow Dems, others skeptical about Lamont budget policies

But many of Lamont’s fellow Democrats and other critics of his fiscal positions say it’s the governor, a Greenwich businessman, who doesn’t understand state history.

Surging debt costs consumed larger shares of the budget through the 1990s, the 2000s and the 2010s and leeched vital resources from social services, education, transportation and municipal aid. This, in turn, triggered state and municipal tax hikes that hampered economic development.

And while Lamont says investments in these areas have been on the rise since he took office in 2019, that alone can’t undo decades of fiscal stagnation.

Advocates for public colleges and universities also say the governor has been distorting the numbers. While overall funding has grown in recent years, much of that growth is tied to federal pandemic aid or surplus dollars.

As Lamont tries to wean higher education off these sources now, the funding he’s proposed for the next two-year budget cycle — for the regional state universities, the community colleges and the University of Connecticut and its health center — is down from overall state aid they got across this fiscal year and last.

All of these higher education units have warned these proposed cuts could trigger layoffs.

The governor counters that enrollment has declined in several areas, particularly at community colleges, and higher ed officials need to redesign their programs to become more cost efficient.

Progressives want higher taxes on wealthy

Progressive legislators have pressed Lamont to consider redistributing tax burdens — raising income tax rates on the wealthiest households and delivering more than the roughly $50 per month Lamont wants to give next year to the middle class.

But the governor consistently has opposed such efforts, arguing they would prompt the wealthy to flee Connecticut.

“I’ve said it a million times,” the governor said. “I don’t want more taxes, but I want more taxpayers. That’s how I’m able to afford to make the investments in the programs. They’re going to make a difference in people’s lives.”

But Pazniokas noted that in 1991, when the state income tax was enacted with an initial 4.5 percent rate on all earnings, it amounted to a huge tax break for Connecticut’s richest families. Wealthy households already had been paying a 7 percent tax on capital gains and as much as 13 percent on dividends and interest before that was replaced with a 4.5 percent levy.

According to Internal Revenue Services’ tax migration data, the incomes of those moving out of Connecticut topped those of the households moving into the state for the entire decade of the 1990s.

In other words, the rich didn’t come pouring into Connecticut when the state offered a tax break, so why would they leave it when the state raises rates?

Lamont didn’t address the question directly, but said “I’m doing everything  I can to deal with the income disparity out there,” including not only his income tax cut but investments that make job training and day care available for those in need.

The governor said he also supports a proposal to broaden eligibility for Medicaid coverage through the HUSKY program for undocumented children, raising the limit from age 12 to 15.

He added that he liked how this proposal was built into the new biennial budget crafted by the legislature’s Appropriations Committee. 

But top lawmakers — including leaders of that panel themselves — have said that plan was severely constrained by the spending cap. And hundreds of millions of dollars in spending needs to be moved outside the cap system, or funding for too many good programs will come at the expense of other vital ones, they say.

PURA: “A little conflict not all bad”

In other moments Wednesday, Lamont hinted he would reappoint two former legislators — Michael Caron and John W. Betkowski III — to the state’s Public Utilities Regulatory Authority, where they have bumped heads with PURA Chairwoman Marissa Gillett. Their terms have expired.

The governor praised Gillett for helping the state begin shifting to “performance-based regulation” that takes utilities’ performance — and not just their costs — into account when setting rates.

“I think she’s a good person to take the lead,” Lamont said, before adding that “we’ve got two other commissioners who have been there for a while that have some continuity. It’s not a bad team. A little conflict, sometimes, is not all bad.”

Lamont, who was re-elected by a wide margin last November to a second four-year term as governor, also was coy about whether he’s open to seeking a third term in 2026.

“There’s no plan,” he said. “I’ll tell you, I’ll be blunt. I love the job. I really do.”

But when pressed by Pazniokas whether that meant he was open to running again, the governor said “We’ll see. We got some great people in this state … Time will sort things out.”