Lamont signs state budget, including $1.782 billion in new taxes [Journal Inquirer]

Article as it appeared in the Journal Inquirer 

Gov. Ned Lamont has signed into law his first budget, a $43.35 billion two-year plan that includes substantial tax increases, despite objections from Republicans who argue the budget is out of balance due to savings and revenue that have yet to be realized.

Lamont is touting the budget that includes a total of $1.782 billion in new taxes as a win because it closes a $3.7 billion two-year deficit, increases funding for education, and doesn’t reduce municipal aid, which he said was a priority for local leaders looking for predictability when crafting their own budgets.

The Democratic budget closes the deficit while maintaining the Rainy Day Fund, which is expected to climb well past $2 billion over the next two years.

“On the day I took the oath of office, we were looking at a $3.7 billion deficit, and today I am proud to say that we’ve closed it without an increase to the tax rates and while ensuring that the safety net remains intact for the most vulnerable in our communities,” Lamont said.

While Lamont likes to stress the lack of an increase in income tax rates, the budget relies largely on the elimination of many tax exemptions, including for digital downloads, dry cleaning, parking, and interior design.

There is also a cost for plastic bags, a 1 percent increase to 7.35 percent on prepared meals and beverages, increased taxes on electronic cigarettes, and a reduction of the pass-through entity tax.

Democrats argue the tax increases are an attempt to modernize the state’s tax base and target goods and services seen as discretionary.

The budget does, however, eliminate the $250 business entity tax, which is paid primarily by small business owners.

Overall the budget calls for a 1.7 percent growth in state spending from this fiscal year to the next and a 2.1 percent increase from next fiscal year to fiscal year 2021.

The budget results in a surplus of $158 million and $184 million, respectively, in each of the next two fiscal years, but the nonpartisan Office of Fiscal Analysis projects future deficits of about $972 million, $1.3 billion, and $1.2 billion in fiscal years 2022 through 2024.

While significant savings in the short term are represented in the state’s Teacher Retirement System, the debt will be extended 17 years, which is expected to add long-term debt of $15 billion, according to OFA.

Still, Lamont is pleased with his first budget as governor, stressing the importance of providing predictability by getting it done on time and securing reserves.

“For years, instability in the state’s finances has resulted in slow growth and volatility in our economy — and this budget was adopted with a focus on providing the foundations from which our state can grow,” he said. “When the fiscal year closes, Connecticut will have the largest Rainy Day Fund in history and this budget maintains and grows our reserves, providing reliability and predictability for our taxpayers, businesses, and those looking to invest in our state well into the future.”

Lamont’s optimism is not shared by Republicans, particularly Senate Minority Leader Leonard A. Fasano, R-North Haven, who argued the budget is out of balance because it relies on higher revenue than he expects and savings from unions that have yet to be negotiated.

“It’s no surprise the governor is running to sign this budget as quick as he can before even more problems come to light,” Fasano said. “He’s signing it behind closed doors with no fanfare whatsoever because this is not a budget to be proud of. It doesn’t balance. It’s gimmick-laden. The whole document is a sham.”

Fasano, who along with all other Republican legislators, was not part of budget negotiations this past session, said the budget “sets up Connecticut for failure,” and members of his party will continue to comb through the document that was voted on close to a month ago in an attempt to find flaws.