Facing affordability crisis and potential economic downturn, CT leaders disagree on next steps

Hartford Courant – Sunday, April 5, 2026
By Christopher Keating

With the state’s fiscal policy table re-set by key committee votes, Gov. Ned Lamont and top legislative leaders will be negotiating during the next four weeks to finalize the $28.8 billion annual state budget and decide how much tax relief that voters will receive in an election year.

Both Democrats and Republicans have been pushing for tax cuts for months as Lamont and all 187 seats in the legislature are up for election this fall.

While lawmakers still have various disagreements, they agreed last week on Lamont’s plans for tax cuts for some small businesses and the elimination of occupational licensing fees for various professions. That would save nearly $16 million in the next fiscal year for plumbers, electricians, teachers, speech and language pathologists, and others.

Beyond those agreements, lawmakers cannot agree on the size of tax cuts or exactly how they would be structured. But some lawmakers are concerned about looming fiscal storm clouds as the ongoing war in Iran causes volatility on Wall Street as gasoline and diesel prices continue to increase.

After seven consecutive years of operating surpluses, some lawmakers were surprised last week to learn that the projected state budget deficit could be $180 million for the current fiscal year. That deficit would be paid from a huge fund of $1.8 billion that has been accumulating during the current fiscal year chiefly from capital gains taxes on Wall Street that are paid largely by millionaires and billionaires from Fairfield County. That money is set aside, under the state’s fiscal guardrails, and cannot immediately be spent by lawmakers as part of the budget.

Rep. Tammy Nuccio of Tolland, who serves as the ranking House Republican on the budget-writing committee, said the looming deficit in the current year should be seen by legislators as a major warning sign.

“It’s more than a red flag. It’s a mushroom cloud,” Nuccio told The Courant. “The stock market is turning down. Our revenues are decreasing. Everything is down. It’s like the Titanic — the dude who fell asleep looking at the iceberg. It’s dead ahead, honey. Start to try to turn the ship now. Instead, we’re saying, ‘Full bore. Get to New York in time!’ It’s not wise, in my opinion.”

Simply hoping that the Iran War will end soon, the stock market will suddenly rebound, and revenues will come pouring in is wishful thinking, she said.

“Ignorance is bliss,” Nuccio said.

While officials are anxiously hoping that the tax revenues will keep coming in, Lamont and lawmakers have not agreed on how to cut taxes. In key committee debates, lawmakers never even voted on Lamont’s proposal for a one-time rebate of $200 per person. That plan could be resurrected in the final budget negotiations, but the refusal to vote at the committee level shows that the Democratic-controlled legislature has largely rejected Lamont’s offering.

Numerous proposals are still floating at the Capitol by both Democrats and Republicans alike. Each side says the other is not being realistic by offering too many tax cuts or not providing a coherent plan on how to pay for them.

Senate Republicans last week re-offered their plan to cut the state income tax by up to $1,600 per couple per year and $800 for single filers. Joint filers earning $100,000 per year would see a 40% reduction in their income tax, while couples earning up to $200,000 per year would receive a 16% reduction under the plan. In addition, the proposal calls for eliminating the local car tax for couples earning less than $200,000 per year.

Senate Republican leader Stephen Harding of Brookfield said the fiscal plan that was passed by the Democratic-controlled appropriations committee is a “ridiculous budget.”

But the two top Senate leaders, President pro tempore Martin Looney of New Haven and majority leader Bob Duff of Norwalk, blasted the Republicans for not offering complete, detailed plans for both taxing and spending.

“The Senate MAGA caucus unveiled nothing but an empty political promise that has not been reviewed by nonpartisan fiscal staff, and it has not been subjected to a public hearing,” the Democratic senators said. “The last time they proposed a real budget was 2018. Since then, they have abandoned responsible participation in governing and resorted to back-of-the-napkin promises. The people of Connecticut have noticed and stopped taking the MAGA Senate caucus seriously. The Democrats will continue the real work of building a vetted budget that delivers actual tax relief rather than political talking points.”

Lamont’s chief budget spokesman, Chris Collibee, also dismissed the Republican plan.

“What the Senate Republicans have presented is not a budget proposal, it is election-year messaging without substance,” Collibee said. “A complete budget includes specific adjustments to revenues and expenditures. The administration looks forward to reviewing such a budget.”

On a point of agreement, lawmakers voted at the committee level for Lamont’s tax cuts for small businesses by allowing pass-through entities to receive tax credits for research and development that are now only available for larger corporations under state law. The proposal represents a victory for the Connecticut Business and Industry Association, which has been pushing the idea for years and earmarked it this year as a top priority. The small businesses must have less than $70 million in sales, and they would need to apply to the state economic development commissioner to receive the credit.

For individuals, Lamont has not adopted President Donald Trump’s ideas of “no tax on tips” and “no tax on overtime,” meaning that those items will still be taxable under the Connecticut state income tax.

While the final version of the $28.8 billion budget will be shaped in the upcoming negotiations, some groups were happy and some were outraged by the committee decisions so far.

The association that oversees independent living facilities for people with disabilities decried a continued lack of funding.

“It is disappointing and frustrating to see the appropriations committee, once again, has proposed no funding increase for the state’s five Independent Living Centers, especially as we face ongoing and significant cost increases,” said Jaclyn Pinney, the association chairwoman. “Our funding has been stagnant for years, and our service areas are shrinking. Now federal funding cuts that will take effect later this year, and the extreme uncertainty around ongoing funding, will only make the situation worse.”

As the association is still seeking $1 million, Pinney said, “The lack of fiscal support is an affront to the work we do – hiring people with disabilities to help people with disabilities to live independently in the community.”

At the same time, the nonprofits that provide multiple services under state contracts are still looking for additional funding.

Gian-Carl Casa, a former state budget official who now serves as president of the CT Community Nonprofit Alliance, said the news is mixed as funding for many nonprofits has not kept pace with inflation for years.

“Connecticut’s nonprofits thank the appropriations committee for recommending an FY27 spending plan that includes the $130 million in increases approved last year and an additional $30 million for Medicaid rate increases,” he said. “The funds are much needed and help address decades of underfunding. … But underfunding has taken a significant toll on the state’s safety net. Nonprofit annual buying power remains 30% behind where it was 20 years ago, exacerbated by the so-called guardrails that limit how much money the state can spend on programs, no matter how much revenue we collect.”

Sen. Cathy Osten, a Sprague Democrat who crafted much of the $28.8 billion budget recommendations with co-chairwoman Toni Walker of New Haven, told The Courant that they wrote “a really decent budget that was very serious, very responsible.”

As a former correction officer for 21 years at seven different prisons, Osten is keenly aware of the problems of mental and physical health inside the prisons. As a result, she called for 20 new employees to help improve conditions.

“Personally, I insisted that we put in more positions in mental health and medical,” Osten said in an interview. “We can’t continue to wait.”

After the state closed down major psychiatric facilities like Fairfield Hills in Newtown and Norwich State Hospital, the prisons “became the quasi-psychiatric institution for the state” because “there isn’t any place else,” Osten said.

With the deaths of nine prisoners in the first three months of 2026, state legislators are calling for sweeping changes to improve health care in the prisons.

Besides the funding, both Democrats and Republicans are backing a separate, wide-ranging bill to improve training for correction officers, create medical positions in the correction ombudsman’s office, repay student loans for nurses who are working in the prisons, ensure that medications are administered properly, order an audit on the nutrition of prison food, and create a medical and health oversight board, among others.

The measure, known as House Bill 5567, was passed 30-6 by the judiciary committee, which has jurisdiction over the prisons. The bill now requires approval by the state House of Representatives and Senate in the coming weeks.

State statistics show that the share of inmates with mental health and medical issues have both been increasing, along with the population over the age of 50. The aging population reached 2,735 inmates in late June 2025, compared to 1,981 prisoners in January 2023.

A key report in 2023 by the state’s sentencing commission reported that 41% of prisoners overall have a history of mental health problems. The numbers were higher among women, with more than 85% of the inmates at the all-female York Correctional Institution having mental health disorders rated at mild to severe. Among men, 28% had active mental health disorders.

The report also found that 89% of prisoners had “a history of or current substance abuse problem.” Overall, 95% had either a history of mental health and substance abuse problems or active mental health and substance abuse problems that required treatment.

The final budget negotiations are not expected to be completed until early May because negotiators traditionally wait until after the April 15 tax deadline to get a clearer picture of the state’s financial health. The consensus revenue estimates are expected to be finished by April 30.

Lamont’s chief spokesman, Rob Blanchard, expressed optimism, despite the disagreements.

“While the proposal from the appropriations committee takes a different approach, it is reflective what people have been saying in public hearings and conversations across the state — and those voices are important,” Blanchard said. “The legislature’s proposal builds on the governor’s proposals for addressing the cost of living, supporting our schools, and investing in our health care system. In the coming weeks, we will work with lawmakers to find a path that’s responsible and delivers real relief where it’s needed most – just as we have done for the past seven years.”

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