Gov. Ned Lamont and his budget director defended their decision Tuesday to build $180 million in extra income tax receipts into the new state budget, with Lamont offering assurances the money will flow as planned into the state’s coffers.
The governor, who pledged to sign the $43.4 billion, two-year state budget into law later this week, insisted the package passed by his fellow Democrats in the legislature is balanced without gimmicks. And his budget director, Office of Policy and Management Secretary Melissa McCaw, said additional income tax receipts built into the budget are modest compared with the revenue growth her office anticipates from this source.
“I promised the people of Connecticut they were going to get a good, honest budget done on time,” Lamont told Capitol reporters Tuesday afternoon following a bill signing ceremony. “And that’s just what we did and I’m going to sign the budget this week.”
More importantly, Lamont added, the additional revenue that his administration pressed to include in the budget will find its way into the state’s coffers over the next two fiscal years. These are “good, conservative assumptions that are going to play out in the future,” he said.
Since 2009, legislatures and governors have based the budgets they’ve adopted on a consensus revenue schedule developed jointly by fiscal analysts for the executive and legislative branches.
But when the Democrat-controlled legislature adopted the latest biennial budget earlier this month, they broke from that trend. The new package adjusted anticipated growth in income tax receipts from paycheck withholdings, boosting it from 4 percent to 5.5 percent in each of the next two fiscal years.
That adjustment, in turn, increased anticipated income tax receipts by $90 million per year or $180 million across the biennial budget cycle.
Minority Republicans cried foul, noting the consensus revenue process was a Democratic initiative enacted a decade ago in response to highly questionable revenue projections in a budget proposal from then-Gov. M. Jodi Rell — a Republican.
But McCaw noted that while the law requires analysts to prepare a consensus report on April 30, the legislature routinely adopts a budget in late May or early June. And this year, McCaw said, income tax data in May showed a growing trend in withholding receipts surging even stronger.
By the time the budget was adopted, McCaw said, her budget staff estimated withholding receipts for 2019 were between 7.2 percent and 7.8 percent higher than those of the previous year. That left the 4 percent growth projected in the consensus forecast extremely low.
“It became very clear that those forecasts became very conservative,” McCaw said.
But Senate Minority Leader Len Fasano, R-North Haven, said the process was designed to ensure growth projections are not reckless. And that means two agencies must weigh in, and forecasts aren’t adjusted based on a few weeks of additional tax data.
“I don’t know what world they are living in,” Fasano said, adding that it’s been nearly a decade since the last recession ended and several economists have warned Connecticut and the nation could topple into the next one in the next year or two.
Fasano also said if Lamont and Democratic legislators intended to disregard the consensus report, they should have done so openly: by proposing language in the budget bill to suspend or modify the system. Instead they quietly adopted a budget that disregards practices followed consistently for the past 10 years.
“They didn’t want you to know there was a hidden number,” he said. “Unfortunately this is what happens when you have one-party rule.”
McCaw added that the consensus revenue projection process should remain, but legislators should consider moving the spring report from April 30 to some point in May.