Connecticut lawmakers are at a crossroads: use the state’s budget surplus to pay down massive pension debt or divert those funds into costly new government programs that will demand ongoing taxpayer support. Unfortunately, House Democrats are opting for the latter.
A newly proposed bill, H.B. 5003, would transfer up to $200 million from Connecticut’s budget surplus over the next two fiscal years — money intended to help pay down the state’s $37 billion in unfunded pension liabilities — toward expanding early childhood care and education programs.
Instead of reducing pension debt, lawmakers are prioritizing an expensive expansion of government funded childcare aimed at increasing childcare subsidies, boosting wages for early childhood educators, and providing health care subsidies for childcare workers.
Let’s not pretend this is a one-time investment.
Once the childcare program is in place, there will be no turning back. When the state inevitably faces another budget deficit, the same lawmakers pushing H.B. 5003 will demand new tax increases to keep the program afloat.
This is how well-intended but financially unsustainable programs work: use temporary funds to create a new government program, expand the program each year while avoiding real fiscal responsibility, and when the surplus runs out, raise taxes — because by then, cutting the program would be politically impossible.
This shifting of funds comes at a time when Connecticut has been making significant progress in paying down its pension debt.
Over the past several years, the state has allocated $8.6 billion in surplus dollars to its pension systems, making it the fastest state in the nation to reduce its pension obligations. In 2023, Connecticut deposited $1.3 billion into its pension funds, and in 2024, it contributed another $930 million, which helped reduce long-term liabilities and prevented pension costs from spiraling even further out of control.
To make matters worse, a proposal backed by Gov. Ned Lamont would redirect hundreds of millions of dollars in budget surplus funds into a Universal Preschool Endowment, shifting money away from the state’s Budget Reserve Fund, also known as the rainy day fund.
The governor’s bill (H.B. 6867) would transfer up to $300 million of the state’s budget surplus into the endowment in fiscal year 2025. Then beginning in 2026, all surplus funds would go into the endowment unless the Budget Reserve Fund holds less than 18% of net General Fund appropriations, in which case some money would still be set aside for savings but none would go toward extra payments to reduce pension debt.
Under current law, excess revenues — particularly those collected through the state’s volatility cap — are automatically deposited into the reserve fund to guard against future budget shortfalls and to pay down unfunded pensions.
This endowment would serve as a permanent financing mechanism for universal preschool, allowing the Office of Early Childhood to spend millions each year on expanding pre-K programs for three- and four-year-olds.
Unlike normal spending bills, the endowment would allow the state to put away hundreds of millions of dollars in an account that is restricted from being used for other state priorities — including pension debt payments. This means that not only is the state prioritizing universal preschool over debt reduction, but it creates obstacles preventing future lawmakers from redirecting these funds to cover Connecticut’s budget shortfalls.
Connecticut lawmakers have a choice: Pay down pension debt now and reduce future taxpayer burdens or create yet another government program that will only become more expensive over time and ultimately require tax increases to sustain.
These two bills are nothing more than a reckless spending spree disguised as an “investment.” If lawmakers were serious about helping working families, they wouldn’t be mortgaging Connecticut’s financial future to fund more government bureaucracy. Instead of diverting the budget surplus for short-term political gain, they should be doing what Connecticut needs — paying off debt before it crushes future generations.
