With Gov. Ned Lamont set to deliver his annual budget address to the General Assembly on Feb. 5, 2025, Yankee Institute is calling on him to protect the “fiscal guardrails,” bipartisan reforms that have stabilized and improved the state’s finances since 2017.
Although the governor has been supportive of the guardrails, lawmakers have introduced several pieces of legislation that would alter the spending and volatility caps to increase spending on nonprofits, education, and healthcare services.
The fiscal guardrails have reversed decades of pension underfunding, improving Connecticut’s creditworthiness and financial stability. The state has saved more than $170 million since putting the guardrails into place and can save $7 billion over the next 25 years if they are kept intact.
The guardrails have paid down nearly $8 billion in total pension debt, according to State Comptroller Sean Scanlon; they have likewise freed more than $700 million to be budgeted for vital services, including services for which additional funding is currently being demanded.
Weakening the volatility cap component of the guardrails will reduce the funds available to pay down state pension debt, thereby forcing the state to borrow more over time. Increased borrowing will lead to higher interest costs. Additionally, credit rating agencies can view this adjustment as fiscal mismanagement, resulting in lower credit ratings and even higher borrowing costs.
“It’s a mistake to risk the progress we’ve made by destroying the bipartisan guardrails agreement,” said Yankee Institute President Carol Platt Liebau. “Changing the guardrails now for a short-term spending binge would only jeopardize the gains we’ve made and impose additional burdens on generations to come.”
“We ask the governor to hold firm in protecting the fiscal guardrails,” she added. “They’re a path to fiscal stability, lasting prosperity, and a healthier financial future for Connecticut.”
For more information about the fiscal guardrails, read Yankee Institute and Reason Foundation’s joint report, The Case for CT’s Fiscal Guardrails. Find it here.
