🔒Bordonaro: Assessing Gov. Lamont’s ‘pro-business’ policy record

There was a rare sighting at the Connecticut Business & Industry Association’s annual economic breakfast in January.

When Gov. Ned Lamont, a Democrat, took the stage to give his annual state-of-the-state report to top business leaders, he was greeted by a standing ovation.

Given Connecticut’s economic performance for a large portion of this century, particularly the lost decade that began with the 2008 Great Recession, the business community hasn’t done a lot of cheering — especially for top political leaders.

But it’s fair to say the state’s economy has performed better in recent years, while Lamont — a former business owner whose philosophy until recently has been to create more taxpayers, not more taxes — has forged close ties with the private sector.

The governor even threw out some red meat to the sold-out CBIA crowd of more than 400 attendees, by announcing his continued support for the state’s fiscal guardrails, which have helped usher in an era of budget stability that has allowed Connecticut to record six straight years of surpluses and pay down long-term debt.

“Our relationship with the banks, and our relationship I hope broadly with the business community, has really changed over the last six years,” Lamont said at the Jan. 15 CBIA event.

Something else seems to have changed in the few short weeks after Lamont spoke to that group of business leaders in Hartford. When unveiling his two-year, $55.2 billion budget plan on Feb. 5, the governor not only proposed easing one of the state’s key fiscal guardrails to allow lawmakers to spend more money, he pitched raising corporate taxes by nearly $348 million over the next two years.

That would constitute the largest tax increase in a decade, according to the CBIA.

The budget left some in the business community scratching their heads. I think it also invites taking a closer look at Lamont’s “pro-business” record.

The governor has enjoyed the support of the business community, in part, because of the state’s budget stability.

But the reality is, Lamont has benefitted greatly from income tax hikes and fiscal guardrails that were put in place before he came into office. The best thing he’s done to maintain budget stability is stick to the guardrails.

And the budget in more recent years has been buoyed by pandemic-era federal aid. Now that those federal dollars are drying up, some budget holes have opened.

The sudden shift to increase corporate taxes and loosen a key fiscal guardrail is short-sighted and opens the door to Connecticut falling back into its old and ill-fated budgetary habits.

Dollars and cents

Overall, Lamont’s budget proposes spending nearly $27 billion in the 2025-26 fiscal year, a 3.8% increase from 2024-25, followed by a 4.6% increase to $28.2 billion in the following fiscal year.

Those increases would outpace the economic growth rate projected for Connecticut during that time period. The Lamont administration based its budget on the assumption that Connecticut’s economy will grow only 1% and 1.1%, respectively, in fiscal years 2026 and 2027.

On the fiscal guardrails front, the governor’s budget revises the state’s volatility cap, which limits the amount the General Assembly can spend from the state’s most volatile revenue sources. The statute sets a cap that is adjusted annually, and any revenues raised above that threshold are transferred to the budget reserve fund.

Lamont has proposed freeing up nearly $300 million annually from the volatility cap to fund a new universal preschool endowment.

Meantime, of the six corporate tax policy changes in Lamont’s budget, two reduce the burden on businesses, while four would increase their taxes. Overall, corporate taxes would increase by $181.5 million in fiscal year 2026, and $166.4 million in fiscal 2027.

Lamont defended the tax hikes, particularly the elimination of a corporate tax liability cap, arguing they will only impact a small group of large companies.

Conversely, many small businesses will benefit from an expansion of the R&D tax credit and the early elimination of the capital base tax, Lamont said.

“Ninety-five percent of our companies are going to get a corporate tax cut,” Lamont told WTIC-AM 1080’s Brian Shactman in a recent interview. “I’m a champion for the small business. That’s where the jobs are created. There was one loophole many years ago that said, you know, the 15 biggest companies, their liability would be capped. We just took out that loophole. So, that’s the only change. But when it comes to an R&D tax credit, (and other) tax credits … the vast majority of our companies are going to be paying less.”

He added: “I talked to the bigger companies. They don’t like it, but they understood it.”

Those big companies, of course, are also major employers in the state who will make future capital-investment decisions based, in part, on Connecticut’s cost competitiveness.

There are some perks for businesses in the budget.

Besides the R&D and capital base tax changes, Lamont has proposed eliminating license fees for a number of trades — including HVAC, plumbers and electricians — and allocating tens of millions of dollars for growth-minded manufacturers, brownfield redevelopment and underutilized commercial property conversions.

His biggest new initiative is creating the universal preschool endowment, which would allow thousands of additional children to enroll in early childhood education services — a noble program that could have long-term benefits for the state’s workforce.

Lamont has invested significant sums in workforce development programs since taking office.

Pro-labor policies

Beyond the budget, however, Lamont has demonstrated pro-labor tendencies.

Under his watch, lawmakers have:

• Adopted a paid family and medical leave program;
• Increased, and then linked the state’s minimum wage to the federal employment cost index, which as of Jan. 1 has raised the rate to $16.35 per hour;
• Passed a “captive audience” law, which prohibits employers from mandating meetings to share views on unionization and other issues; and
• Expanded the state’s paid sick leave law.

Lamont this session has thrown his support behind efforts to regulate the use of warehouse-worker production quotas. He’s also taken sides with a state regulator — Public Utilities Regulatory Authority Chair Marissa Gillett — who is in one of nastiest fights with private industry (Eversource and Avangrid) in recent state memory.

Not to mention, Lamont has supported clean energy initiatives that have continued to make Connecticut’s electricity rates among the nation’s highest.

Added up, Lamont’s track record on pro-growth policies is a mixed bag. But he still has at least two more years in office to shape his legacy.