Connecticut Gov. Ned Lamont (D) may propose legislation that would postpone or repeal scheduled tax reductions to stabilize the state budget in fiscal 2021.
The state faces an approximately $2.3 billion shortfall in fiscal 2021 because of lower tax collections and increased expenses resulting from the COVID-19 pandemic, according to Office of Policy and Management Secretary Melissa McCaw. Speaking during a May 1 news briefing, she said the administration has been discussing the possibility of holding a special session in June with legislative leaders to address the shortfall.
The governor’s mitigation plan — which has not yet been finalized — would require $100 million in revenue changes, which McCaw said would require “essentially holding revenues flat and where there might have been some opportunities to give some additional tax relief, we’ll likely be proposing to hold the line.”
“We will need a special session to have them act on a deficiency bill and the extent to which there are some smaller mitigation measures that we’re in agreement they can act upon, such as some of these small tax policy changes to hold the line at the current tax rates,” McCaw said. “Many of them had been proposed in the governor’s budget; we’ll be putting a package in front of them for consideration.”
McCaw said one example of a revenue change would be maintaining the proposed 10 percent corporate surcharge that applies to businesses with gross income greater than $10 million. The surcharge is scheduled to be reduced to 0 percent in 2021, but the governor's fiscal 2021 budget adjustments include a provision that would permanently preserve the surcharge.
“Those are the types of items that we would like to consider,” McCaw said. “Obviously, the goal is not to do damage to our tax constituents at a time when they’re trying to rebuild and recover.”
Lamont expects the state needs about $415 million in spending reductions to address the deficit, according to McCaw, who said the governor has up to 5 percent rescission authority under state law but any reductions beyond that would require legislative action.
The governor plans to use the state’s budget reserve fund to cover the remainder of the shortfall, McCaw said.