Connecticut Gov. Ned Lamont on Wednesday released a $28.7 billion budget blueprint that puts an election-year tax rebate at the center of the debate, while keeping much of the rest of the spending framework aligned with what state leaders have previously agreed to. In his budget address to lawmakers, Lamont said the package is designed to “protect our most vulnerable” and make life “a little less expensive” for working families and the middle class that he described as being “slammed by higher costs.”
The headline item is a proposed rebate that would pay out $200 to individuals earning less than $200,000 a year and $400 to couples earning less than $400,000, with the giveback technically coming from Connecticut sales tax receipts that exceed $5 billion per year. Lamont said the rebate would not force deep cuts elsewhere in the budget; his administration would replenish lost dollars through a temporary adjustment to one of Connecticut’s budget caps, an approach the state has used to manage prior deficits and surpluses. Since lawmakers created budget caps in 2017, the caps have generated surpluses averaging more than $1.8 billion per year, which officials have used for reserves and to reduce Connecticut’s pension debt.
Democrats in the legislature’s majority have argued that the caps have pulled too many dollars from education, health care, municipal aid and other core programs, and Lamont’s proposal reflects a bid to turn some savings back into tax relief. Lamont’s office said he is seeking to tap $500 million returned to taxpayers next year, including the rebate described as the centerpiece. Republicans and progressives both criticized the plan’s balance, though in different ways.
House Speaker Matt Ritter, D-Hartford, said the state should focus on returning money to taxpayers, whether through credits or rebates. “We’re glad that the conversation is about returning money to taxpayers, whether it be a credit or a rebate,” Ritter said. “What the number is, what the dollar values are, that’s a budget negotiation. But I’m glad he took the lead on it.” House Minority Leader Vincent J. Candelora, R-North Branford, said Lamont’s approach was inadequate as an ongoing affordability plan, calling the rebate “hollowing and gimmicky” and arguing that many people face an increasingly unaffordable Connecticut that needs continued relief rather than a one-time payment.
Lamont also used the budget address to argue for changes to how lawmakers direct money to local projects. He called for reform of “earmarks,” the funds for smaller initiatives within lawmakers’ home districts, saying they sometimes lack the vetting that larger initiatives receive. The call was described as connected to an ongoing probe involving more than $15 million in state grants over the past five years channeled to the Blue Hills Civic Association, largely at the direction of Sen. Doug McCrory, D-Hartford.
In addition to the rebate and earmark reforms, Lamont’s plan includes tax and regulatory proposals aimed at specific industries and workers. The administration proposed eliminating state occupational licensing fees for electricians, plumbers, sheet metal workers, HVAC technicians and educators, along with ending renewal fees for those jobs and for health care staff. It estimated the changes would save an estimated 160,000 workers a combined $15.9 million per year. The governor also proposed expanding research and development tax credits to certain limited liability companies and other small businesses that do not pay corporation tax, with the plan capping annual credits available under the program at $25 million and limiting relief any single company could claim at $1 million per year.
Former state Rep. Chris Davis, vice president of public policy for the Connecticut Business and Industry Association, said the research and development proposal “is going to go a long way to help create jobs and economic growth here in the state.” Republicans also contrasted Lamont’s rebate pitch with their own budget priorities, with Sen. Ryan Fazio of Greenwich, who is seeking the Republican gubernatorial nomination, saying the governor was relying on a one-time rebate to court voters and that the budget offered “without any long-term strategy to reduce energy costs, cut taxes or increase economic growth.”
A major health care element of Lamont’s proposal targets the state’s hospital provider tax. Lamont asked lawmakers to eliminate most of a previously ordered hospital tax hike, reducing it from $375 million to $100 million while preserving the earlier plan to boost payments to hospitals by $140 million annually. The provider tax is part of a mechanism Connecticut uses to leverage more Medicaid dollars from Washington, with the state investing its own resources alongside the federal funds back in hospitals.
Jennifer Jackson, CEO of the Connecticut Hospital Association, said hospitals already pay nearly $1 billion each year in taxes while facing nearly $1.5 billion in annual losses tied to Medicaid underpayment. She said adding to the tax burden without “meaningfully addressing this shortfall forces hospitals to make difficult choices,” and warned it “threatens access to care and weakens the state’s health care safety net,” shifting costs to employers and families through higher premiums and out-of-pocket expenses. Jackson’s statement urged state leaders to protect access, affordability and patient care rather than balance budgets “on the backs of patients.”
Outside tax relief and health care, Lamont’s budget maintained increases for K-12 education and continued efforts on other social services. The proposal maintained a $95 million increase for Education Cost Sharing, the state’s chief operating grant for K-12 school districts, and sustained prior special education funding increases as well as a new $10 million grant intended to encourage districts to pursue innovative approaches for 2026-27. Lamont also repeated a proposal from last year to establish universal free breakfast in Connecticut schools, and maintained the administration and lawmakers’ earlier plan to boost Medicaid rates for physicians and other care providers who treat people who are poor.
Lamont’s plan also addressed higher education and transportation. General Fund operating support for public colleges and universities would shrink modestly, with the administration and legislators citing past calls for cutbacks amid reports that the Connecticut State Colleges and Universities system had reserves exceeding $600 million. For transportation, the governor proposed slowing growth in the Special Transportation Fund, boosting it by $114 million next fiscal year to nearly $2.4 billion, but still $12 million less in growth than an earlier 2026-27 draft approved last June. The budget also set aside $3.5 million within the Special Transportation Fund to provide a 50% discount for students on transit buses next fiscal year and offered free rides for veterans.
The Working Families Party criticized Lamont’s budget approach, arguing it did not invest enough in core services. State Director Sarah Ganong said Connecticut families were still reeling from federal cuts and that state leaders now face a “common sense” choice about whether to make “the wealthiest people in Connecticut pay their fair share” to fund public schools, health care and public transit or to let nurses, teachers and other working people keep paying “more of their income in taxes than millionaires” while struggling with rent and groceries.
Lamont’s proposal also included job-related investments, including $1.6 million for a pilot in eastern Connecticut that would split child care expenses equally between workers, employers and the state, along with $1.5 million for adult technical education and workforce development and $730,000 to bolster employment of workers with disabilities. The budget released Wednesday now moves into the legislature, where lawmakers from both parties said their own tax relief and spending priorities will shape the final outcome.