Zachary Suri, Contributing Photographer

HARTFORD — In Connecticut politics, few moments hold more importance than the biannual release of the governor’s budget proposal. On Wednesday, Governor Ned Lamont submitted his budget proposal and outlined his priorities in a speech to the General Assembly.

“For many years, governors would stand at this dias for a budget address, often confronted with a recession,” Lamont began his speech. “Today, we’re much better prepared to manage the unexpected, within reason. Our proposed budget is our best effort to stay true to our Connecticut values while continuing to focus on affordability and opportunity for all.”

Since the adoption of constitutional spending limits in 2017, the state has gone from the brink of financial disaster to a model of fiscal responsibility, largely thanks to established “fiscal guardrails.” On Wednesday, Lamont, long a defender of the guardrails, proposed slight adjustments to allow around $300 million in additional spending in each of the next two years.

His budget included additional funds for special education and early childhood care, measures to lower health care costs and transportation projects, as well as significant changes to the state’s tax code. The proposed budget also comes with little increase in housing funds and cuts to some state services. 

Education 

Education spending was one of the most closely anticipated items in Lamont’s proposal and the first one he discussed in his address.

Lamont proposed an adjustment to the state’s volatility cap — one of the most restrictive of the fiscal guardrails — which would raise the amount the state can spend before devoting the rest to savings and paying down debts and liabilities. The volatility cap is currently based on the state’s relatively low revenue years before the guardrails were enacted in 2017.

The governor’s proposal would change how the cap is calculated, taking into account the years of economic growth that followed 2017. This would give the state more room to spend on education without violating the guardrails. Because of agreements with bond holders, however, the state legislature must approve this change by a three-fifths vote of both houses.

“I believe that we have earned the opportunity to rethink our volatility cap,” Lamont said.

In particular, the governor would like to see some of the surplus revenue now used to pay down pension liabilities — around $300 million each year — placed instead in a new “universal preschool endowment,” a trust fund for early childhood education. These funds would serve as a “down payment” on a universal public child care system in the state, Lamont said, with only 10 percent of funds spent each year.

After repeated calls for increases in special education funding from Connecticut school districts like the New Haven Public Schools, Lamont proposed an additional $40 million for the excess cost grant program, which partially reimburses districts for the special education services they are required to provide by federal law.

The governor also proposed the creation of $10 million in “high-quality special education incentives” grants to encourage in-district special education programs. NHPS alone currently spends around $28 million a year on out-of-district special education for New Haven students.

Additional funding would also support free school breakfasts and programs to combat chronic absenteeism. $5 million would go to tutoring programs for thousands of students.

In order to balance the budget for fiscal year 2026, none of these funds will become available until fiscal year 2027. Educators and administrators, however, say these funds are needed urgently.

“The crisis is now,” Leslie Blatteau, president of the New Haven Federation of Teachers, told the News. “We need a much more urgent, much more robust investment from the governor.”

Around $50 million in additional special education funding in the fiscal year 2027 is not nearly enough, Mayor Justin Elicker told the News on Monday, when news of the governor’s proposal first trickled in.

“It is less than I had hoped,” Elicker said. “We need to see the state take a really strong, meaningful step forward. And while I’m appreciative that there is some additional funding in the governor’s budget, it is far from enough.”

Both Elicker and Blatteau cited a recent report from the state’s 119k Commission on “disconnected youth,” which called for $500 million in additional education funding. Both have called for the state to increase the “foundation amount” — the per-student allocation to school districts — in the state’s Education Cost Sharing program and include special education costs.

While Lamont’s budget does include an additional $86 million for ECS in 2026 and $78 million in 2027, these increases are already set by state law. The governor did not propose any changes to the ECS “foundation amount,” nor did the total investment in education in the budget come close to the $500 million Blatteau and Elicker pointed to.

In New Haven alone, Blatteau told the News, NHPS needs an additional $8 million just to fully staff special education programs. With around $50 million made available statewide for special education programs in fiscal year 2027, it seems unlikely that NHPS will receive that amount anytime soon.

“What we’re seeing are certainly improvements, but not the structural change that we really need in the state of Connecticut right now,” Blatteau said.

Health 

Lamont spent much of his speech detailing efforts to address rising health care costs in the state.

“We have the best health care in the world, if you can afford it,” he said. “Connecticut should be a leader, so let’s take the lead. Our budget includes some initiatives to provide quality, access and affordability.”

Governor Lamont’s proposal raised a policy issue long controversial in the state: Connecticut’s tax on hospitals. The governor’s budget would adjust the baseline for taxes on hospital revenues — currently set based on 2016 numbers — to be based on 2024 revenue.

The Office of Policy and Management predicted this would bring the state an additional $140 million in revenue.

The Connecticut Hospital Association immediately condemned the plan on X, calling the proposal “devastating to hospitals, their workforce, and their patients.”

Warning legislators that his proposals “may drive the lobbyists crazy,” Lamont urged them to cap hospital costs in the state and cap generic drug price increases at the rate of inflation to make hospital care and pharmaceuticals more affordable for Connecticut residents.

Lamont also announced an initiative to import lower-cost drugs from Canada, a program under threat by the Trump administration’s proposed tariffs on Canadian imports.

The governor did not shy away from addressing concerns over the new presidential administration’s cost-saving measures. The new Department of Government Efficiency, he said, has promised to cut Medicaid costs, but is likely simply to shift costs to the state.

“If all they do is cost you, DOGE is just a dodge which could cost our state hundreds of millions of dollars,” Lamont said. 

The proposed budget also calls for $70 million for Medicaid rate increases to encourage Connecticut doctors to treat low-income patients.

Lamont proposed ending licensing fees for nurses, teachers and other educators and health professionals, a proposal that met with widespread applause from legislators.

Rob Baril, president of SEIU 1199 New England, which represents public sector healthcare workers in Connecticut, welcomed the elimination of licensing fees, but echoed Blatteau’s call for structural changes. Baril had hoped to see wage increases for public health employees included. Members of his union filled the capitol’s public gallery for the governor’s address.

“What was notable was what I did not hear,” Baril told the News. “I did not hear that there was going to be funding increases that would allow for workers to have livable wages.”

Cuts and taxes 

At a time when Connecticut is rated the worst state in the country for renters, the budget proposal itself includes little additional funding for the Department of Housing. 

The governor did discuss a program to create 500 units of “supportive housing” across Connecticut for homeless residents, but the program will be funded with money won by the state in its suit against Purdue Pharma over the proliferation of opioid abuse.

One of the governor’s signature items in the proposed budget is an expansion of the state’s property tax credit which allows residents who own their homes to deduct property taxes from their state income tax. 

The proposed changes would benefit around 800,000 taxpayers, increasing the maximum tax credit from $300 to $350. This would cost the state around $85 million each year. New Haven’s renters —  around 70 percent of the city’s residents — would not be eligible. 

The governor also proposed small changes to the state’s corporate tax which would result in more than $133 million in additional revenue in fiscal year 2026 and $83 million in 2027. 

The budget included additional incentives for in-state manufacturing and in-state hiring. The governor set forth a $1.8 million proposal to increase the percentage of research and development tax credits that bioscience firms can reimburse with the state from 65 percent to 90 percent.

Particularly notable for New Haven residents was a proposed increase in CT Rail and Metro North fares, as well as CT bus fares. These price increases were coupled with tens of millions of dollars in additional investments in rail and buses in the state.

The governor’s proposed spending increases, achieved through small changes to the fiscal guardrails, will also require cuts in certain departments. For example, the Governor’s proposal would eliminate free text and email service for inmates in the Department of Corrections and lower the income threshold for a state-provided attorney in the state’s courts.

Ned Lamont was first elected governor in 2018.