Governor Lamont Signs FY 2027 State Budget, Delivering a Reliable Path Forward for Schools and Municipalities and Increasing Affordability Initiatives

(HARTFORD, CT) - Governor Ned Lamont today announced that he has signed into law the fiscal year 2027 budget adjustment bill (Public Act 26-68), which his administration developed in collaboration with legislative leaders and was overwhelmingly approved on a bipartisan basis by the members of the Connecticut General Assembly.

Most notably, the budget includes an historic increase in state funding for every school district and municipality statewide with the goal of helping towns and cities deliver essential services, while also working to stabilize and lower property taxes. It also includes a major investment into the state's Early Childhood Education Endowment to continue Governor Lamont's landmark expansion of early childhood education programs, continuing the state on the path forward toward providing universal pre-K for all children.

"This budget delivers more education funding and municipal aid than ever before, and it does it in a responsible way that will keep Connecticut on stable financial ground in the coming years, while also making strategic investments to support affordability initiatives and paying down debt," Governor Lamont said. "It maintains the historic middle-class income tax cuts that we enacted, preserves our newly increased EITC rates that have essentially eliminated income taxes for working families, enables most seniors to keep receiving income tax exemptions on pensions and Social Security, and preserves the cap on motor vehicle property taxes that we adopted. And it does this while continuing to fund our more recently enacted programs to support working families, such as Paid Family and Medical Leave and our Early Childhood Education Endowment, which is on its way to delivering universal pre-K so that every child of every background has access to a good education right from the start."

The governor added, "Before I came into office, Connecticut was experiencing year after year of deficits and instability, and over these last several years our administration has produced balanced budgets that are built to last, bringing the sustainability to our state that we so desperately needed. I am proud that for another year we've passed a balanced budget on time, and we did it in collaboration with the input of so many people in our state, which is why it was overwhelmingly approved by legislators, supported by municipal leaders, backed by education advocates, applauded by community providers, and has been endorsed by so many other groups statewide."

Notable new investments include:

K-12 education: The budget provides an additional $193 million in supplemental education grants for towns and cities, including $162.2 million in direct aid to municipalities, $8.7 million for charter schools, $8.3 million for magnets schools, and $800,000 for vocational agriculture programs-representing an increase for all Connecticut public school students-and approximately $10 million in temporary educational aid. Since Governor Lamont took office in 2019, Education Cost Sharing grants have grown by roughly $444.9 million-an 18% increase in support for K-12 public schools.

The budget includes Governor Lamont's priority investments in children's education, including $12 million for universal free school breakfast to ensure all 500,000 Connecticut students have access to a healthy meal to start the school day; $5 million to expand impactful mental and behavioral health supports in schools; $2 million to fund 75 teacher apprentices per year (providing stipends, mentoring and tuition supports, among other benefits to trainee teachers); and $2 million for a new literacy coaches program.

Municipal aid: The budget provides more than $100 million in one-time financial assistance for towns and cities. This investment will help local communities lower property taxes.

Early childhood education: The budget invests approximately $300 million in the Early Childhood Education Endowment. As championed by Governor Lamont, the endowment is the largest expansion of early childhood education programs in Connecticut history, enabling tens of thousands of additional children to enroll in these opportunities. This funding will support sustained investments in the early care and education system, including increasing the number of state-funded slots and providing critical investment for providers and families.

Higher education: The budget provides $30 million in General Obligation bonding for the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to launch a new alternative to the Grad Plus Subsidized Loan Program, which was eliminated upon passage of President Trump's One Big Beautiful Bill.

Unfunded liabilities: Under this budget, the state is expected to make additional pension payments of more than $1 billion in both FY 2026 and FY 2027. These payments are projected to generate roughly $200 million in annual savings in each of the next 25 years. Over the course of the Lamont administration, the state will have made about $11 billion in additional pension payments, reducing taxpayer costs by approximately $1 billion per year each year over 25 years, resulting in cumulative savings of $25 billion.

Federal Cuts Response Fund: This budget bolsters the recently created Federal Cuts Response Fund by $50 million to ensure Connecticut remains well-positioned to address federal policy and funding challenges.

Child welfare accountability and transparency: The budget provides an additional $3.34 million for the Department of Children and Families to establish several new programs and services, which include grant-funded programs for certain caregivers to help cover child-care costs, postsecondary education assistance, paid social worker internship and mentorship programs, and mandatory employee training programs. In addition, a new Urgent Crisis Center in Stamford will be established, and personal emergency communication devices will be made available for certain employees.

Health and human service providers: This budget provides $892,000 for the Department of Public Health to pilot free flu vaccines to uninsured and under-insured adult residents, which will reduce hospitalizations and healthcare costs.

It redistributes activities formerly performed by the Office of Health Strategy among the state agencies best equipped to handle them, clarifying responsibilities and fostering greater alignment between federal and state efforts-including for healthcare-related IT. The Department of Public Health is taking over and streamlining the Certificate of Need (CON) program to improve care quality, access, and affordability. The Office of Policy and Management is absorbing healthcare cost and affordability work, including health data and rural health tech initiatives.

In the Department of Mental Health and Addiction Services, $3.54 million will ensure the availability of community resources that allow for timely discharge from state hospitals and $775,000 will expand suicide prevention and postvention services through Regional Behavioral Health Action Organizations.

Additional support for veterans includes a $1 million investment for the Department of Veterans Affairs to provide free bus passes, along with nearly $500,000 to support veteran housing and services at the skilled nursing and other residential facilities in Rocky Hill.

Private providers: This budget maintains $156 million to support significant rate increases for human services providers. In addition, the legislature created a new Nonprofit Provider Advisory Board under the Office of Policy and Management to strengthen the partnership between the state and its nonprofit providers, serving as a forum to identify emerging issues and opportunities and to work collectively on solutions that streamline reporting, standardize processes, and promote administrative efficiencies and improved outcomes.

Hospitals: The budget reflects a new five-year agreement with the hospitals that will provide not only stability but predictability for the industry. In addition to increased supplemental payments, the budget provides increased funding for hospital-affiliated physician groups, as well as increased support for those hospitals that serve a greater share of the state's Medicaid members.

Housing: The budget provides an increase in operating support of $500,000 for the Department of Housing to operationalize the various housing efforts set in motion through the passage of Public Act 25-49.

Transportation: This budget continues historic investments in public transportation. A total of $3.5 million is invested to provide U.S. military veterans with passes at no cost, enabling veterans to use Connecticut's network of public bus services, including CTtransit, CTfastrak, and various transit districts throughout the state. Additionally, the funding supports providing K-12 students with a 50% discount on CTtransit buses. These efforts build on annual support of $716.6 million in support for public bus and rail.

Public safety: The budget includes $9.86 million for the Department of Emergency Services and Public Protection to address costs of modernizing equipment and technology used by the Connecticut State Police. This investment will help replace outdated, first-generation police technology and equipment with advanced tools that modernize operations, enhance efficiency, and improve safety for both officers and the public.

Inmate medical: The legislature built on the proposals made by the administration to help transform the provision of health care to people in and returning to the community from prison in a number of meaningful and actionable ways. The budget provides $1 million to make permanent its first-in-the-nation interagency, holistic, cross-sectional efforts linking the state's Medicaid administrative services organization, the Department of Correction, Office of Policy Management, and Department of Social Services, including the flow of all such patients in the population health management of publicly-funded medicine. Funding of $9.15 million across state government will support implementation of section 5121 of the federal Consolidated Appropriations Act of 2023, which mandates certain health coverage for youth in the care and custody of the state's carceral settings. Additionally, the budget creates a pilot at York Correctional that will engage community providers more actively in the care and transition of incarcerated women.

Revenue adjustments include:

Lowers the cost of health insurance: The budget creates a new tax credit for small businesses to encourage employers to offer Individual Coverage Health Reimbursement Arrangements (ICHRA) through Access Health CT's BusinessPlus platform. This new incentive will expand healthcare coverage options while allowing small employers to better attract and retain workers.

Expands Sales Tax-Free Week: The budget expands eligible items during Sales Tax-Free Week, increases the sales price which is exempt from the cap during the period from $100 to $300 dollars.

Eliminates Taxes on School Supplies: The budget eliminates taxes on school supplies, putting $6 million dollars back into families' pockets.

Caregiver Tax Credit: The budget provides a Caregiver Tax Credit for individuals who pay out-of-pocket costs to support the activities of daily living of adult family members. This change will support families and allow individuals to continue to live independently if they desire.

Supports knowledge-based industries: The budget makes changes that will encourage research and development in the state, increasing the dynamism in Connecticut's economy. The budget allows pass-through entities to participate in the research and development tax credit program and earn a credit equal to 6% of qualifying expenditures upon approval from the Department of Economic and Community Development. This change will allow fast-growing, early-stage companies to invest in the future economy right here in Connecticut. In addition, the budget allows immediate, full expensing of research and experimentation costs beginning in income year 2026, encouraging innovation and economic growth.

Cannabis tax modifications: This budget converts the current tax on cannabis from a THC tax to a 10.75% excise tax, simplifying the current tax structure for cannabis.

PeoplesBank Arena Tax Credits for UConn Athletics: This budget provides tax credits that will ensure UConn's basketball and hockey teams play games in Hartford for the next 20 years.

Volatility cap: This budget continues the trend of prudent fiscal management while utilizing extraordinary revenue to make investments in key areas. Due to the state's continued fiscal stewardship, volatile revenues subject to the volatility cap have exceeded $2 billion in FY 2026. At the same time, the state faces higher than expected Medicaid costs, and municipal and school budgets are negatively impacted by inflation, rising healthcare costs, and federal cutbacks. Governor Lamont issued a declaration permitting the investment of $813.7 million of these volatile revenues to promote affordability and growth in the state while still making a sizable contribution to the pension system. The authorized investments include $183 million for schools, $100 million for municipalities, $50 million to be added to the Federal Response Fund, and $80 million to address Medicaid deficiencies.