What’s in Connecticut’s new budget? Raises, fluoride, Medicaid and more

CT Insider – Tuesday, June 3, 2025
By Paul Hughes, Alex Putterman

The state Senate is poised to send a two-year, $55.8 billion budget plan to Gov. Ned Lamont after the state House of Representatives approved the spending and tax package just before midnight Monday.

The budget plan adds approximately $1.2 billion in spending in the first year and $1.4 billion in the second year. That translates to increases of 4.6% over current year levels in year one and 5.3% in year two.

The Democrat-led House voted 99-49 to approve the budget plan after rejecting five proposed Republican amendments. Reps. Jill Barry, D-Glastonbury, and Chris Poulos, D-Southington, joined every Republican in opposing the budget that Democratic majority leaders and Gov. Ned Lamont negotiated. The Democrat-led Senate is expected to grant final legislative approval.

The budget plan appropriates $27.2 billion for the upcoming 2026 fiscal year that starts July 1 and $28.6 billion in the second year. It allocates new funding for child care, special education and Medicaid, while setting aside additional money to prepare for possible federal cuts later this year.

The proposed budget is $900,000 under the state spending cap in the first year and $69.7 million under the cap in the second year.

It anticipates a 2026 balance of $18.9 million and $249.7 million after taking the revenue cap into account. The revenue cap prohibits the legislature from authorizing appropriations that exceed a percentage of estimated revenues included in the state budget. The current limit is 98.75%.

Here are some of the provisions in the budget to know about, from the big-ticket items to the small provisions tucked deep in the bill.

Child care fund

The budget deal includes Lamont’s signature policy proposal of the session: a $300 million child care fund the governor hopes will eventually grow large enough to provide pre-K to all Connecticut children.

Beginning in 2027, the fund is expected to add about 16,000 day care slots statewide, an increase of about 25% on the current total.

Child care expenses have ballooned in recent years in Connecticut and elsewhere, leaving some families unable to find affordable slots for their kids. Proponents say the new fund will go a long way toward reducing those costs.

“I like the fact that we’re making the biggest commitment to early childhood in the history of the state,” Lamont said Monday. “And I’d like to think that over the next five years or so, early childhood education will be at no cost to all families earning up to about $100,000.”

To fund the policy, which has already passed both the Senate and the House of Representatives, Lamont and legislative Democrats have agreed to tweak the volatility cap that restricts how much money lawmakers can spend in a given year, drawing frustration from Republicans.

$250 payment to families with kids

The budget deal includes an annual $250 payment to families with children who receive the state’s earned income tax credit.

This policy comes in place of the child tax credit some lawmakers and advocates had hoped to pass this session but functions similarly: Qualifying families with at least one child will receive a check in the mail or a direct transfer to their bank account, to help them with expenses.

Unlike a child tax credit, this expanded EITC will be targeted to working families, with fairly strict income thresholds. For example, a married couple with three children had to earn less than $66,819 to qualify for the tax credit in 2024.Also unlike the proposed child tax credit, recipients will not receive larger benefits if they have more children.

Still, proponents say the policy will make live easier for low-income workers with children.

“It’s not that you automatically get a $250 credit, but it is saying if you’re already working, if you’re earning the earned-income tax credit, which means you’re a working family, you get a credit on top of that,” Lamont said Monday.

Education cost sharing

The budget bill delays scheduled reductions in Education Cost Sharing grants to municipalities that were considered to have received more funding than they were entitled to receive under the previous formula for distributing education equalization grants. The hold harmless provision means grants to these towns will be maintained at current levels for the two-year budget cycle.

The legislature in 2017 adopted a 10-year plan for transitioning to a new ECS funding formula that favored the lowest-performing school districts. It was a response to a landmark Superior Court ruling directed the state government to rewrite the formula because it violated the state Constitution’s guarantee of a free and adequate public education.

Under the transition plan, grants to historically underfunded towns and cities were to gradually increase through the 2028 fiscal year, while grants to other communities were scheduled to decrease annually through the 2030 fiscal year. The bill maintains the existing schedule to fully fund towns and cities that were historically underfunded in the 2026 fiscal year.

The ECS grant is the state’s single largest grant for municipalities. Towns and cities are budgeted to receive more than $2.3 billion this fiscal year.

Special education

The proposed budget also includes extensive additional funding for special education, a longtime priority for education advocates.

Both years of the two-year budget feature $30 million in “special education expansion and development” grants, which school districts could use to bolster services for students with disabilities. Funds will be distributed based on a town’s income levels, as well as its count of special education students.

Advocates have long criticized the state for failing to account for failing to account for special education students as part of its education cost sharing formula. The new grants, which have bipartisan support, would address that issue, while particularly benefiting the state’s neediest districts.

Volatility cap

The budget bill increases the threshold for the so-called volatility cap the requires certain income tax receipts that exceed an annual collections threshold be credited to the budget reserve fund rather than be available for appropriation. This change will free up more funding for spending.

The current law sets the limit $3,150,000,000 and requires that it be annually adjusted for personal income growth. The threshold for the current 2025 fiscal year is $3,929,300,000. The budget bill increases the threshold to $4,079,300,000 for the 2026 fiscal year and $4,728,600,000 for the 2027 fiscal year. It must continue to be adjusted annually for inflation.

By law, the legislature may amend the threshold amount by a vote of three-fifths of the members of each chamber due to changes in state or federal tax law or policy or significant adjustments to economic growth or tax collections.

Medicaid funding

Lawmakers allocated tens of millions in additional funding for Medicaid, providing relief to health care providers who say they increasingly struggle to get by at the state’s current level of support.

A series of studies in recent years have found Connecticut trails most peer states in Medicaid reimbursement rates, heightening calls for additional funding.

In some cases, providers have begun to scale back certain services due to a lack of appropriate reimbursement rates.

Hospital provider tax

The budget bill revises how the hospital provider tax is calculated for inpatient and outpatient services. It represents a total increase of $375 million. The Connecticut Hospital Association protested that tax change will be devastating for hospitals, their workforce, and their patients.

Under current law, the tax rate for inpatient hospital services is 6% of each hospital’s audited net revenue attributable to these services for the 2016 fiscal year. Beginning July 1, 2026, the bill resets the rate at 6% of each hospital’s audited net revenue for the applicable federal fiscal year.

Under current law, the effective tax rate on outpatient hospital services is 10.4858%. This rate is calculated based on $820 million minus the total tax imposed on all hospitals for providing inpatient services, divided by the total 2016 fiscal year audited net revenue for outpatient services. Beginning July 1, 2026. the bill sets the rate at $1.195 billion, minus the total tax imposed on all hospitals for providing inpatient services, divided by the total audited net revenue for the applicable federal fiscal year attributable to outpatient hospital services of all hospitals required to pay the tax.

Corporate taxes

The bill extends the 10% corporation business tax surcharge for three additional years, to the 2026 through 2028 income years. Under current law, the surcharge expires after the 2025 income year. As under existing law for the current surcharge, the surcharge for 2026-2028 applies to companies that have more than $250 in corporation tax liability and either (1) have at least $100 million in annual gross income in those years or (2) are taxable members of a combined group that files a combined unitary return, regardless of the amount of annual gross income. The companies must calculate their surcharges based on their tax liability, excluding any credits.

Under the bill, the surcharge that applies to the capital base tax component of the corporation business tax applies only for the 2026 and 2027 income years because the tax is scheduled to be eliminated starting in 2028.

Federal funding cuts

The budget bill also requires the Office of Policy and Management secretary to advise the legislature’s two budget committees on any reductions to federal funding that Congress approves.

OPM must identify affected state programs and projected reductions, recommend how state resources might be used to replace the lost federal funding, including transfers from the Budget Reserve Fund, and submit a draft supplemental appropriations and revenue bill to carry out its recommendations, and the legislation must give priority to the maintenance of health care, food assistance, education, state employment and arts and cultural activities.

‘Safe harbor’ fund

The budget bill creates the “safe harbor account” to accept funds from private sources such as gifts, grants or donations to award grants to nonprofit organizations that provide funding for reproductive or gender-affirming health care services and other related costs such as travel, lodging, or meals. It prohibits the use of taxpayer funds for these purposes.

The legislation establishes a five-member board of trustees chaired by the state treasurer that will oversee the account’s funds. The treasurer is also responsible for appointing the four other members. The bill requires the treasurer to follow certain standards when investing the account’s funds.
Artificial intelligence

The budget bill includes a requirement that businesses using artificial intelligence inform consumers any time they are interacting with AI, as opposed to a real person.

The provision is one small (and relatively uncontroversial) component of a much larger artificial intelligence bill that has stalled in the legislature amid Lamont’s vow to veto it.
Pay raises for judges and constitutional officials

Starting July 1, 2025, the budget bill increases salaries for judges, family support magistrates, family support referees, and judge trial referees by 3.5%. The pay for statewide constitutional officers is pegged to judicial salaries. The governor’s salary equal to the salary for the chief justice of the state Supreme Court chief justice and the salaries for the lieutenant governor, secretary of the state, state treasurer, state comptroller, and state attorney general’s equal to those for Superior Court judges. For these six officials, the 3.5% salary increase does not take effect until the start of the next term for that office, which is January 2027.

Bond premiums

The budget bill requires the state treasurer to continue directing bond premiums to the general fund. A bond premium is the extra, upfront payment investors make in exchange for a higher interest rate on state bonds. State law requires the treasurer use bond premiums on general obligation and special tax obligation bonds to pay for previously authorized capital projects. The budget bill delays this requirement for two years until July 1, 2027.

DPH advisory committee

The budget bill authorizes the Department of Public Health commissioner to create a committee to advise on matters relating to federal Centers for Disease Control and Prevention and Food and Drug Administration recommendations. The proposed Federal Recommendation Advisory Committee must base its recommendations using evidence-based data from peer-reviewed sources.

Committee members may include the deans of public health schools at an independent and a public institution of higher education, a primary care physician with at least 10 years of clinical experience and who is a medical school professor, an infectious disease specialist with at least 10 years of clinical experience and who is a professor, and a pediatrician with at least 10 years of clinical experience and expertise in children’s health and vaccinations and who is professor.

The committee may also include anyone else the commissioner determines would be beneficial.

Food code revisions

The budget bill gives the DPH commissioner discretion to adopt revisions that federal Food and Drug Administration makes to its food code adopted after Dec. 31, 2024. Existing law requires the DPH commissioner to adopt the FDA food code as the state’s food code for regulating food establishments. The bill requires the commissioner to adopt into the state code any FDA code revision issued by Dec. 31, 2024, but gives the commissioner discretion later supplements to the federal code.
Water fluoridation

The budget bill codifies the amount of fluoride that water companies must add to the water supply, rather than tying the amount to federal Department of Health and Human Services recommendations as current law does. This essentially will maintain the current required level.

Specifically, it requires water companies to add enough fluoride to maintain an average monthly fluoride content of 0.7 milligrams per liter, within a range of 0.15 milligrams per liter greater or lower than this amount. As under current law, the bill applies to water systems that serve at least 20,000 people.

The current HHS recommendation is 0.7 milligrams per liter, but HHS recently directed the Centers for Disease Control and Prevention to reexamine the issue.
Precious metals working group

The budget bill creates a Connecticut Precious Metals Working Group to monitor the precious metals markets and related legislation in other states and requires the group to annually report its findings and recommendations to the General Assembly. The working group will track economic conditions, inflation expectations, precious metals prices and activities, including the market activities of leading commodities exchanges and bullion market associations, and other states’ proposed and enacted precious metals legislation.

Beginning in 2026, the working group must annually submit a report to the Banking; Commerce, and Finance, Revenue and Bonding committees summarizing its findings and make recommendations to improve the precious metals market in Connecticut.

Sales tax exemption for antique coins

The budget bill expands the sales tax exemption for sales of rare or antique coins, gold or silver bullion, and gold or silver legal tender. Current law applies to sales valued at $1,000 or more. The bill applies the exemption to all sales, and extends it to sales of palladium bullion and platinum. It also limits the gold and silver bullion exemption to those with a purity level of at least 90%.
Municipal finance advisory commission referrals

The budget will narrowly revises the statutory triggers for referring a town or city to the Municipal Finance Advisory Commission. The bill expands the reasons why the OPM secretary must refer a municipality to MFAC. A referral must be made if a town or city has been a distressed municipality for at least 15 consecutive years and has a population between 15,000 and 20,000. The Office of Legislative Research reported that it appears that currently only Ansonia qualifies. The bill also requires MFAC to designate a municipality meeting both criteria as a Tier I municipality for the 2026 and 2027 fiscal years.

Maternity care report card

Starting July 1, 2026, the budget bill requires the DPH commissioner to establish an annual maternity care report card for birth centers and hospitals that provide obstetric care, create an advisory committee to establish the report card’s contents, and adjust the report card based on patient acuity levels. The DPH commissioner must also post the report card on the department’s website annually, starting by January 1, 2027, and revise the report card criteria at least once every three years in consultation with the advisory committee and any other experts of the commissioner’s choice.

Payment for certain pretrial programs

The budget bill requires a person’s insurance, either private insurance, Medicaid, or Medicare, rather than the Department of Mental Health and Addiction Services to cover the costs of substance use treatment under the pretrial Drug Intervention and Community Service Program or pretrial Impaired Driving Intervention Program if the court finds the person is indigent and unable to pay. This applies as long as these costs are a covered benefit under the person’s insurance. The bill continues to require DMHAS to pay other program-related treatment costs for these people, including out-of-pocket expenses, not covered by insurance.

Lactation consultant licensure

The budget bill authorizes the creation of a licensing program for lactation consultants. To receive a license, an applicant must have a certification in good standing from the International Board of Lactation Consultant Examiners or any successor to the IBLCE.

The bill generally prohibits unlicensed people from practicing lactation consulting for compensation using the title of lactation consultant, or holding themselves out to the public as licensed lactation consultants. But it does not restrict unlicensed people meeting specified criteria from practicing lactation consulting or providing related services, provided they do not refer to themselves as lactation consultants.

Real estate wholesalers

The budget bill generally requires real estate wholesalers to be registered with Department of Consumer Protection. It also requires real estate wholesale contracts to include a seller’s right to cancel within three business days without penalty and generally prohibits these contracts from providing a closing date that is more than 90 days after the contract is executed. Under the bill, real estate wholesalers must make certain disclosures and provide a DCP-developed wholesaler disclosure report to a prospective seller. Violations of this provision are to be consider violations of the Connecticut Unfair Trade Practices Act.

Repeal of digital animation tax credit

The budget bill eliminates the digital animation tax credit that is available for eligible companies with in-state studio facilities and 200 or more in-state employees that incur eligible production expenses and costs in Connecticut. No credits have been issued under this program since 2016. Tax credits are 10% for expenses between $100,000 and $500,000, 15% for expenses between $500,001 and $1 million, 30% for expenses exceeding $1 million. The credits may be applied against the corporation business and insurance premiums taxes. Total annual credits are capped at $15 million.

Police training center

The budget bill requires the Department of Emergency Services and Public Protection, in consultation with Police Officer Standards and Training Council, to establish a police training center at Central Connecticut State University to train and educate police officers in crime scene processing, the collection and analysis of forensic evidence, and criminal investigations.

The bill also requires DESPP, in consultation with POST, to establish a social work and law enforcement project at Southern Connecticut State University. The project is intended to advance the ethical and effective integration of social work services into law enforcement units by preparing social workers, social work students, and law enforcement professionals to collaborate in the field of police social work.

Access this article at its original source.