Despite uncertainty on federal government shutdown, Lamont, CT lawmakers push $500M contingency fund

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HARTFORD – State legislators and Gov. Ned Lamont are proceeding with plans to set aside $500 million in state surplus funds to potentially use to fill gaps in federal spending despite progress toward reopening the national government.

The partial federal government shutdown that was a primary reason for establishing a state contingency fund is perhaps nearing its conclusion after a possible bipartisan breakthrough over the weekend in the U.S. Senate. But there are also budget cutbacks that Republicans in Congress and President Donald Trump made earlier this year through legislation dubbed the One Big Beautiful Bill Act.

During a news conference Monday at the state Capitol, Lamont and legislative leaders from both parties reaffirmed plans to approve an “emergency state response fund” to enable Connecticut to offset some of the millions of dollars in federal cuts toward health and human services.

The state House of Representatives is poised to approve the state contingency fund in a special session scheduled for Wednesday and the state Senate is expected to grant final approval Thursday.

In addition, the special session agenda includes legislation on housing growth; the Firefighters Cancer Relief Program; children’s behavioral health services; federal immigration enforcement on state courthouse grounds; hospital acquisitions by the University of Connecticut Health Center, including Waterbury Hospital; and election law changes; and a revision to the Temporary Family Assistance program for the self-employed.

The plan outlined Monday would involve setting aside $500 million of the budget reserve fund for the governor to use to backfill federal spending in several broad categories, including food aid, health care, child care, housing and energy assistance.

The governor’s spending authority would lapse once the General Assembly convenes its regular 2026 session on Feb. 4. The six top caucus leaders – the House speaker, majority leader and minority leader and the Senate president pro tempore, majority leader and minority leader – would have the ability to reject any of the governor’s spending proposals by a majority vote. A tie vote would permit the governor to proceed on a spending recommendation.

“We think $500 million is a number that takes us through to the regular session coming up in February,” Lamont said.

Once the legislature returns in February, the 151-seat House and the 36-seat Senate will resume the legislative branch’s usual authority to spend public funds.

The plan laid out Monday would require the governor sign a declaration of extraordinary circumstances, which would allow the legislature to waive a so-called “bond lock” that has committed the state to follow a series of appropriation, spending, borrowing and saving limits through at least June 2028, collectively known as the fiscal guardrails.

The next step would require three-fifths of the members of each legislative chamber to approve an increase in a statutory cap on the budget reserve fund. That would allow Lamont to spend up $500 million to supplement federal funding, subject to the review of the six top caucus leaders. 

That translates into 91 votes in the House and 22 votes in the Senate, according to House Speaker Matt Ritter, D-Hartford, and Senate President Pro Tempore Martin M. Looney, D-New Haven. The Democrats have a 102-49 majority in the state House and a 25-11 majority in the state Senate.

State law caps the budget reserve fund at no more than 18% of the net general fund in the current fiscal year. Any excess must be used to pay down long-term pension or bonded debt.

The budget reserve fund ended the 2025 fiscal year that concluded June 30 with a balance of $6.3 billion, which is more than 25% over the statutory cap. There is $1.9 billion slated to be used to pay down pension debt. After those transfers, the reserve fund will reach its statutory maximum balance of $4.3 billion.

Essentially, $500 million of that anticipated $1.9 billion would be kept available for appropriations to bridge gaps in federally funded programs. Any remaining funds after the current 2026 year ends next June 30 would become available for use to pay down long-term pension or bonded debt.

The plan outlined Monday would put the covenant to the purchasers of state bonds and the bond market aside under a recognized exception for extraordinary circumstances, state Treasurer Erick Russell said. The treasurer’s office still anticipates transferring $1.5 billion from the budget reserve fund to pay down pension debt by the end of the calendar year, he said.

“It’s in line with the broader guardrails,” Russell said.

House Minority Leader Vincent J. Candelora, R-North Branford, said the spending and time limits addressed major concerns of House Republicans.

“Our caucus didn’t want to have broad, broad latitude, and then we were also concerned to make sure it expires when we go into regular session so the legislature takes back over its role when we’re back in regular session,” he said.

Senate Minority Leader Stephen G. Harding, R-Brookfield, said in a statement that he supports helping vulnerable state residents in a responsible way but said he has yet to see the final bill language.

“Meanwhile, all indications are that the federal government could be reopening as soon as Thursday. We may not need to take this step to give Governor Lamont a huge amount of power to control a half a billion taxpayer dollars,” he said. “We don’t need to be creating gigantic potential ‘slush funds’ in our already unaffordable state. These are the actions that could lead to potentially historic tax hikes.”

Lamont had previously stated his top priority was using state funds to supplement federally funded programs in jeopardy due to the shutdown, including the Supplemental Nutrition Assistance Program, or SNAP; the Special Supplemental Nutrition Program for Women, Infants and Children, or WIC; and the Low-Income Home Energy Assistance Program. The use of state funds to offset federal budget cutbacks from the so-called One Big Beautiful Bill Act could be revisited later, he said.

“The most timely things right now are related to the shutdown,” Lamont said. “That could be solved in 72 hours. It could be solved in 72 days. So, that’s what we need to do on a timely basis focused on that $500 million.”

One possible use of the state contingency funds that Lamont and Democratic leaders mentioned Monday would also be supplementing federal tax subsidies under the Affordable Care Act that Democrats in Congress have demanded Republicans and Trump agree to extend in exchange for Democratic votes for reopening the government. The enhanced tax credits first enacted during the COVID-19 pandemic are due to expire Jan. 1 without congressional action.

Ritter said state residents buying health coverage through the state insurance exchange now receive $350 million in ACA tax credits. A record 151,151 people enrolled in Access Health CT in 2025.

The legislature would have time in its 2026 session to deal with other fallout from the cutbacks contained in the legislation known as the One Big Beautiful Bill Act, Lamont said.

This article originally published at Despite uncertainty on federal government shutdown, Lamont, CT lawmakers push $500M contingency fund.