Governor Unveils Biennial State Budget: Proposals Would Hurt Hospitals, Healthcare

On Wednesday, February 5, Governor Ned Lamont released and presented his fiscal year (FY) 2026/2027 biennial state budget proposal to the Connecticut General Assembly and delivered his biennial budget address.  The $55.2 billion, two-year budget would spend $27 billion in FY 2026 (beginning July 1, 2025) and $28.2 billion in FY 2027.  The proposal increases spending 3.8% over current levels in the first fiscal year and 4.6% during the second year of the biennium.

The proposal includes budgetary maneuvers to avoid some of the restraints tied to the state’s “fiscal guardrails” and spending caps.  It moves hundreds of millions of dollars outside of the state budget and modifies the state “volatility cap” to reclassify hundreds of millions of dollars as stable, annual revenue that is available to be spent.  Gov. Lamont pitched these modifications in order to fund an expansion of the state’s early childhood programming.  

The governor’s budget also would increase the state’s property tax credit to $350, up from $300, per tax filer.  The budget proposes increases in state funding for school districts with high special education costs and maintains scheduled increases to education funding.  The proposed budget also contains changes to the corporation tax that would generate more than $160 million in each of the next two fiscal years.  Nonprofit agencies have raised concerns about the budget containing an effective $19 million cut as a result of the state not increasing funding to offset the end to federal pandemic relief funds.

The biennial proposal also contains numerous policies that would be harmful to hospitals and healthcare.  The proposed budget would drastically reduce hospital payments and increase the burden of the state’s hospital tax — the combined effect would financially devastate hospitals and jeopardize care.  The budget contains proposals to:

• Rebase the hospital tax to 2024 net patient revenue after the expiration of the hospital settlement next year (in the first year of the budget, the tax and payments would remain unchanged in accordance with the hospital settlement)
• Implement out-of-network price caps at a percentage of Medicare
• Introduce reference pricing/discounts to commercial rates for hospital care for state employees

“These proposals will add significant financial burdens on local hospitals at a time when they are already struggling, making it more difficult for hospitals to meet their mission of caring for communities, improving quality, growing and supporting the healthcare workforce, and investing in innovation to advance care,” Connecticut Hospital Association (CHA) CEO Jennifer Jackson said in a statement.  “We ask Governor Lamont to reconsider these proposals and work with us to build a budget that protects patients, supports care delivery and the healthcare workforce, and plans for Connecticut’s future.”

The governor’s budget generates more than $150 million in federal funding by further taxing and reducing payments to hospitals, while doing nothing to solve Medicaid’s chronic underpayment and also further weakening hospitals’ financial stability.  This comes at a time when Connecticut hospitals continue to face extraordinary financial pressures that exceed the nation and the region as our healthcare providers across the state work to recover from the lasting effects of the global pandemic and years of historic inflation.

Hospitals already pay more than $800 million in taxes to the state each year and are absorbing $1.4 billion in Medicaid losses and $1.3 billion in Medicare losses.  The governor’s proposals would add millions in additional taxes while reducing millions more in payments to hospitals all while operating expenses are increasing rapidly (a billion dollars in one year between 2022 and 2023).

Click here to learn more about why the governor’s proposals will hurt hospitals.

Click here to read CHA’s full statement on the proposed biennial budget.