State legislators are counting on the last shreds of Connecticut’s $2.8 billion COVID pandemic relief grant to help them untangle a complex budget mess.
Hoping to bolster education and human service programs — but hemmed in by legal budget constraints — lawmakers love these flexible federal dollars that can be spent outside of the “fiscal guardrails” system.
The problem is that legislators — who must resolve the budget before the regular session ends on May 8 — don’t know how much in American Rescue Plan Act funding remains available, nor are they sure when Gov. Ned Lamont’s administration is going to tell them.
And with this being a state election year, the May deadline is a firm one. Lawmakers want to spend the summer campaigning, not debating finances in special session.
But Lamont’s task also isn’t easy.
Since 2022, legislators have ordered hundreds of ARPA allocations, many of which come with complex federal rules governing reporting and usage. In some instances, original allocations couldn’t be carried out. The administration says some private entities declined to accept federal money given the strings attached. Other ventures were required to match their own funds to ARPA dollars in order to receive them, and found they could not.
Still, lawmakers insist not one dollar from Washington will be wasted, and that there are plenty of programs in need that are ready to accept and use federal funds.
But it’s been five weeks since legislators asked the Lamont administration how much is available — and they still don’t have a complete answer. And some lawmakers are skeptical the administration is being as transparent as possible.
‘An impossible task’
“The sad part is we’ve been given an impossible task,” said Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee, told The Connecticut Mirror this week. But “when you have a lack of information, you’re being held back from trying to achieve that equitably.”
That “impossible task” begins with the preliminary $26 billion budget legislators adopted last June for the fiscal year that begins this July.
Under Connecticut’s biennial budgeting process, lawmakers in odd-numbered years — such as 2023 — adopt a spending plan for two consecutive fiscal years. Then, in the even-numbered year — like this one — they typically adjust that second year’s budget a few months before it takes effect.
Leaders of the Democrat-controlled House and Senate have been saying for months their members want to add $300 million to $400 million to the bottom line for 2024-25. Popular targets for that extra funding include: public colleges and universities; private, nonprofit social service agencies; Medicaid programs; child care; and K-12 schools.
And at first glance there’s sufficient funds to cover that. The preliminary, $26 billion budget has a built-in cushion of almost $300 million, and the state expects to save another $450 million in tax receipts tied to investment earnings and business tax filings.
But one fiscal guardrail, the “volatility adjustment” identifies that $450 million as too unstable and requires legislators to save it.
A second guardrail, the spending cap that keeps appropriations in line with household income and inflation, says the preliminary budget already exceeds this limit by about $30 million, according to the administration.
Legislators and Lamont have maneuvered around the spending cap somewhat in recent years by taking surplus from one budget year and spending it in the next.
And because those “carry-forward” dollars — as legislators call them — technically were appropriated in a prior fiscal year, they won’t count against future cap calculations when they are spent.
But what happens when there isn’t enough surplus to carry forward?
This year the Lamont administration projects an operating surplus of just $168 million. And because sales tax receipts have been weak, that number could shrink between now and June 30, when the fiscal year ends. There’s another $479 million that’s being saved this year through the “volatility adjustment,” but it’s already earmarked to help pay down Connecticut’s huge pension debt, which topped $37 billion entering this year, according to the administration.
The big fiscal unknown
That’s where the ARPA dollars become key.
They can be used on all of legislators’ priorities and are exempt from spending cap rules. And while legislators already have assigned all those funds, some are still available.
On Feb. 7, the first day of the 2024 session, the Lamont administration reported it had identified $55.7 million that never got out the door and could be “redirected.”
And when Office of Policy and Management Secretary Jeffrey Beckham, Lamont’s budget director, met with the Appropriations Committee the next day, lawmakers wanted to know if there might be more.
“We think it could be a larger number,” Beckham replied, adding the administration still was surveying departments and this could take a while. “I just don’t know what that is yet.”
Legislators already whittled down the eventual ARPA total on Feb. 14 when they directed $17 million to support winter heating assistance. Still, most legislative leaders say they still expect the final total available to help support the next state budget will be well above the $55.7 million the administration targeted on Feb. 7.
Sen. Cathy Osten, D-Sprague, the other co-chair of Appropriations, has been insistent since Congress enacted the ARPA measure in March 2021 that the General Assembly would decide the fate of all pandemic relief.
“The legislature will maintain the control over the ARPA. I just wanted to say that out loud,” she told Beckham on Feb. 8.
And Osten said this week that she’s not surprised that no revised estimate has been delivered to lawmakers since then.
“I haven’t gotten any updated information at all,” she said this week, quickly adding “nor did I expect any.”
Lamont, who is significantly more conservative than many of his fellow Democrats when it comes to state financing, has been bumping heads with them over ARPA since before it arrived.
Administration officials have expressed frustration repeatedly that legislators have assigned temporary ARPA dollars to cover recurring expenses in core programs, and that key constituencies — such as higher education units — aren’t better prepared to live without pandemic relief as the program winds down.
While some want to reset Connecticut’s budget controls to replace expiring federal aid with state dollars, Lamont doesn’t want to ease the pace with which the state has been paying down debt it has amassed for decades — a problem it isn’t projected to fully resolve until the early 2050s.
But advocates for core programs counter they simply appealed to state officials for help covering ongoing expenses. Legislators responded by using temporary money, knowing that when federal aid was gone, state funds would be needed to plug the gap.
The Connecticut State College and University system is facing a $62.9 million gap next fiscal year as aid from ARPA and other temporary sources shrinks. The funds, according to Chancellor Terrence Cheng, are needed for wages, classrooms and student support services. Legislatures periodically assigning temporary funds for these core services is nothing new, “a practice that goes back decades and pre-dates the creation of our current state college and university system,” he said.
And the hundreds of private, nonprofit agencies that deliver the bulk of state-sponsored services to people with disabilities say they’re losing $480 million annually because state payments haven’t covered rising wage, utility, and insurance costs for more than a decade.
“They have recurring costs, and the recurring costs are increasing,” said Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance.
So have some ARPA dollars gone unspent because they couldn’t be, or did the administration drag its heels because it didn’t like how they were being used? Osten asked. And are lawmakers unaware of available funds five weeks after asking because the administration doesn’t know, or because it doesn’t want them to know?
“I’m not being cynical,” she added. “I’m just being realistic.”
“There’s been no unwillingness to move the money,” Beckham told legislators in early February. “We want to move the money. I don’t want to give it back. I want to spend it.”
Chris Collibee, Lamont’s budget spokesman, repeated this week there is no resistance whatsoever on the administration’s part. “This is not true,” he said. “The administration is happy to speak with any legislator who believes this to be the case.”
Collibee added that the administration expects to provide legislators with a revised estimate before the session ends on May 8, but didn’t project a more precise timeframe.
Still, Osten and Walker aren’t the only ones concerned about the lack of answers five weeks into the session.
The Appropriations Committee has 22 more days, until April 5, to recommend any adjustments to the 2024-25 budget. And after that, top legislative leaders have roughly one month to negotiate a final day with the administration.
House Speaker Matt Ritter, D-Hartford, said back-checking $2.8 billion in ARPA allocations is no easy task, but he added there also “is probably a little bit of gamesmanship” behind the lack of information. “We need the number sooner rather than later.”
Senate President Pro Tem Martin M. Looney, D-New Haven, noted that legislators also have to tackle a host of other bills besides the budget next month. And even once federal ARPA totals are refined, legislators also won’t have a complete assessment of available state tax revenues until April 30, about two weeks after the income tax filing deadline.
“All of that information is going to come down to us in a crunch,” he said.
And it’s not just Lamont’s fellow Democrats who are tired of waiting for answers about pandemic relief.
Republican leaders in the House and Senate fear this information will be kept secret from all, revealed only to top Democratic leaders — during closed-door negotiations — during the final days of the session in early May. Any questions about ARPA — why certain projects never were funded, or if more funds might become available after the session ends on May 8 — won’t be answered.
House Minority Leader Vincent J. Candelora, R-North Branford, said the administration’s silence on this huge question speaks volumes. “I think it’s partly by design. And I think it’s going to push the budget negotiations out of transparency,” he said.
“Frankly, I’m growing more and more anxious by the day, because we’re not even getting estimations,” said Senate Minority Leader Stephen Harding. “The longer this goes on where we have little to no answers, the more likely that [closed-door] scenario plays out.”
Leftover funds
But enacting laws and ordering ARPA allocations is one thing and running government daily — the Lamont administration’s responsibility — is another.
And administration officials and legislators alike agree that ARPA is complicated.
According to U.S. Treasury rules to guide states through use of pandemic relief dollars, state agencies must expend all ARPA funds by Dec. 31 of this year. Agencies outside of state government that receive these funds, though, have until Dec. 31, 2026, to use the money.
And while legislators might prefer to know the fate of Connecticut’s entire $2.8 billion share of ARPA funds before they adjourn on May 8, administration officials say that simply isn’t realistic given the roughly 440 ARPA allocations they already must track.
Problems with funding might arise after the session ends. An ARPA-funded project might wrap this summer or fall and prove less costly than anticipated, leaving funds left over.
“It is inevitable that some of the hundreds of ARPA allocations may have amounts that will remain unspent or unobligated as the year progresses,” Collibee added.
To deal with this, the governor has asked legislators to empower his Office of Policy and Management to assign any funds still not spent by Oct. 1 into programs to combat homelessness, promote affordable housing, and to help businesses cover unemployment benefits.
Connecticut’s unemployment trust — like those in many other states — has been relying on federal loans to keep up with the demands for jobless benefits since the pandemic first struck in March 2020. According to the state Department of Labor, the state trust currently owes about $161 million. Any ARPA funds assigned here would reduce the amount Connecticut businesses otherwise would have to cover through special tax assessments.
Legislative leaders haven’t said yet whether they will grant the governor this authority.
But Walker said what’s most important is that the legislature — not the administration — ensures ARPA benefits those most affected by the pandemic.
“I hate to say this, but OPM was not elected,” Walker added. “That’s not how we govern here."
