Connecticut is poised to end the fiscal year with a projected $2.3 billion surplus, the second-largest in state history, according to the latest consensus revenue report released on April 30. Despite this financial windfall, stringent fiscal "guardrails"—including spending caps and the volatility adjustment—restrict the state's ability to allocate these funds toward pressing needs such as state contracts, paraeducator wage increases, and healthcare for child care providers.​

Advocates, including union members across the state, are advocating for Governor Ned Lamont to declare a fiscal emergency. Such a declaration would permit the legislature to responsibly adjust these fiscal constraints, enabling the state to invest in essential public services and support its workforce.​These measures, particularly the volatility adjustment, inadvertently divert stable revenue streams away from essential services. This redirection has led to underfunding in critical sectors, including education and healthcare. ​

Connecticut’s fiscal guardrails—specifically the spending cap and the volatility cap—were originally enacted to instill long-term budget discipline and rebuild the state’s rainy day fund after decades of fiscal mismanagement. While these mechanisms helped stabilize the state’s finances, they are now operating in a way that prevents Connecticut from responding to today’s needs with common sense flexibility.

The spending cap limits how much the legislature can appropriate, even when the state is bringing in more revenue than expected. This means that even with a projected $2.3 billion surplus, lawmakers are legally barred from using a significant portion of that money on current needs.  The volatility cap compounds the issue by forcing the state to deposit any income tax revenue above a certain threshold into the rainy day fund or use it strictly for debt payments—regardless of how urgently that money is needed elsewhere. The current cap level has been set at an irresponsible level, resulting in too much revenue being marked as “volatile” with the cap consistently capturing an average of $1.4B a year. 

These constraints don’t distinguish between one-time spikes in revenue and sustainable, ongoing growth. Worse, they prevent proactive investment in the very services that help communities thrive—public education, health care, housing, and transportation—especially at a time when federal COVID relief dollars are drying up and costs are rising.Not to mention the positive economic impact that broad and fiscally responsible investment has on our economy. 

Declaring a fiscal emergency is one of the legal avenues available to bypass these restrictions. Under state law, a fiscal emergency allows the legislature to adjust the caps and make full use of surplus funds to meet immediate needs. Union members are calling on Governor Lamont to take this step—not to abandon fiscal responsibility, but to exercise it. An emergency declaration would reflect the reality that underfunding public services and underpaying workers in the middle of a surplus is not prudent policy; it’s austerity by another name.

As the legislative session progresses, union members continue to rally for a more flexible fiscal approach that prioritizes the well-being of Connecticut's public servants and the communities they support.