Connecticut
Borrowing for transportation on Lamont’s chopping block
An ongoing surge in state borrowing to rebuild Connecticut’s aging transportation infrastructure must be rolled back, Gov. Ned Lamont’s administration projects, because of stagnant fuel and sales tax revenues.
But business leaders and a key legislator insist Connecticut has other options to maintain expanded financing for highway, bridge and rail upgrades, including scaling back one of the governor’s favorite programs: an aggressive effort to pay down pension debt.
And while Lamont downplayed the revenue challenges last week, saying the impact wouldn’t be felt for several more years, his budget staff projected borrowing levels to be reduced starting in the next fiscal year, which begins July 1.
Just 12 months after the Lamont administration reported that Connecticut was ready to increase a key element of its transportation construction budget by 40%, from $1 billion to $1.4 billion, by 2028, a new forecast held that three-quarters of that planned growth is unaffordable under the current system.
That $400 million in new borrowing anticipated for the 2026-27 and 2027-28 fiscal years should be stalled, according to recommendations in the Fiscal Accountability Report issued Nov. 20 by the Office of Policy and Management, Lamont’s chief budget and planning agency.
Reversing plans to invest hundreds of millions in infrastructure work will have a chilling effect on industry hiring plans, said Donald Shubert, president of the Connecticut Construction Industry Association.
“The minute they see any kind of uncertainty, or the minute they get any clue things are slowing down, they pull back,” Shubert told the Connecticut Mirror. “We pull back and that slows the economic activity or the economic benefits — immediately.”
The Connecticut Business and Industry Association’s vice president for public policy, Chris Davis, said that “any business that’s on the fence” about hiring or otherwise expanding, “they need that [state funding] stability to make those types of investments.”
Twelve months ago, in the 2024-25 fiscal year, while Connecticut was borrowing $1 billion for its transportation rebuild, Lamont’s budget staff said that should grow to $1.3 billion in 2025-26, $1.4 billion in 2026-27, and then remain at that level through at least 2029 – a prediction that excited industry and construction trade leaders.
Now the administration wants to stick with $1.3 billion in borrowing for 2025-26, but drop to $1.2 billion in 2026-27, $1.1 billion in 2027-28, and remain there through 2030. And given inflation in the construction industry, $1.1 billion in the late 2020s would reflect little increase, if any, beyond the $1 billion Connecticut borrowed last fiscal year.
Borrowing through bond sales, coupled with matching federal grants, are the two ways Connecticut pays for the overwhelming bulk of its transportation construction projects.
Slowing revenue growth is a solvable problem
So why does Lamont now expect to forego most of that funding growth he envisioned just one year ago?
The administration points to the $2.3 billion Special Transportation Fund, which represents 8% of the overall state budget, and covers the principal and interest payments on infrastructure projects, as well as operating expenses for the Transportation and Motor Vehicles departments.
Twelve months ago, Lamont’s budget office expected annual tax revenues supporting the fund to grow almost 4.5%, or $84 million, by 2028. Now they say those sources — two fuel levies, a portion of sales tax receipts, and a highway mileage fee on most large trucks — will effectively remain flat, growing by less than $6 million over the next three years.
The administration projects this sluggish revenue growth, coupled with rising costs, will push the STF into insolvency by 2029. But this is common outcome when projecting a state program’s finances out four or five years into the future, at which point inflation normally outpaces revenue growth.
Still, learning $84 million in expected extra tax receipts by 2028 largely won’t happen is problematic.
Tens of millions of extra dollars for annual debt service payments would allow for hundreds of millions of dollars in additional yearly borrowing for construction work. That’s because the state pays off various projects across 15 or 20 years.
But compensating for losing roughly $80 million in expected revenue growth also is far from unsolvable.
And some of the first solutions that might come to mind are untenable or unnecessary.
Lamont would not need the electronic highway tolls he sought in 2019 and 2020, nor the $600 million they would generate annually, far more than needed to fill an $80 million gap.
And given that both the governor’s office and all legislators are up for reelection next November, any hike in fuel or sales taxes — which would raise far less than tolls but still enough to cover the gap — also is likely off the table.
But there are still more options.
Will Lamont ease budget controls to grow construction work?
The overall state budget’s General Fund, which covers about 90% of all operating expenses, has been sharing some of its resources with the transportation fund since the late 1990s. The last major change occurred in 2015 when legislators and then-Gov. Dannel P. Malloy assigned about 1/13th of annual sales tax receipts, which currently exceed $5.2 billion — to the STF.
And the General Fund has generated unprecedented surpluses, averaging more than $1.8 billion or 8% to 9% of the fund, since 2017, thanks to aggressive budget caps installed at that time that force big savings.
Most of those unspent dollars, about $10 billion in total since 2020, have been used to reduce the massive pension debt Connecticut amassed across seven decades prior to 2011. And that’s in addition to the more than $3 billion in mandatory pension contributions Connecticut makes annually.
Lamont, a fiscal moderate, has been reluctant to scale back that savings effort, though, given Connecticut still owes more than $33 billion in this area. His critics, including many of his fellow Democrats in the General Assembly, say this effort is too aggressive and is draining funds from education, health care, municipal aid and other core programs.
They also note the governor has proposed saving less, himself, on a few occasions.
He signed big state tax cuts, which take hundreds of millions annually away from surpluses, in 2022 and 2023, just before and after he successfully ran for a second four-year term. He also proposed and won legislative approval last year for a new endowment to bolster affordable child care. That last initiative took $300 million from last year’s General Fund surplus and is expected to collect tens or hundreds of millions from future surpluses indefinitely.
Sen. Christine Cohen, D-Guilford, co-chairwoman of the legislature’s Transportation Committee, said Connecticut should not abandon what amounts to a huge planned investment in new construction jobs and in the state’s economy.
“If we really do something like that, we’re not looking at the big picture,” she said, adding that by rebuilding the state’s aging highways, bridges and rail lines, “we create a vibrant economic picture for our state.”
Cohen also praised Connecticut’s savings habits in recent years and said the state should continue to whittle down its pension debt.
But “I also recognize times change,” she added, “and sometimes minor adjustments are needed.”
Shubert’s association has asserted for years that Connecticut should be borrowing more than $1.5 billion annually to rebuild a transportation network that is one of the nation’s oldest.
According to the American Road & Transportation Builders Association, Connecticut ranks 35th in the nation, 1st being the worst, in terms of the share of its highway bridges considered “structurally deficient.” But when it comes to the percentage of bridge area that falls into this category, Connecticut ranks in the worst 15 states, according to the association.
Being “structurally deficient” doesn’t mean the bridge is functionally obsolete but at least one key component, such as a deck or culverts, is rated in “poor” or worse condition. And though not necessarily unsafe, the bridge requires significant repair or monitoring.
Lamont’s budget spokesman, Chris Collibee, declined to say what changes the governor might recommend when he proposes his next budget to the General Assembly on Feb. 4 but added “We expect considerable discussion around this [transportation] question in the coming months.”
Lamont has pressed lawmakers in recent years to consider cutbacks to public transit programs, including higher rail and bus fares to reduce the need for state subsidies. This also could help offset sluggish revenue growth and make more borrowing for transportation construction possible.
But Cohen was skeptical the Democratic-controlled General Assembly would look to tighten belts further in this area.
“I certainly hope not,” she said. “I want to see more people on public transportation and that means putting investments there.”
Governor downplays transportation funding challenges
The governor downplayed the transportation funding challenges when discussing them with reporters last week.
Federal transportation funding has been on the rise since 2021, when President Joe Biden and Congress enacted an aggressive $1.2 trillion transportation infrastructure program, Lamont said, adding that “2030 is a long way away. A lot can change.”
But President Donald Trump already rolled back some of that infrastructure funding in July when he signed an omnibus federal spending and tax measure.
Trump also has told states he intends to link future federal transportation funding, “to the maximum extent permitted by law,” to local compliance with federal policies on vaccines and immigration enforcement — issues on which many Connecticut officials and the president disagree.
State Department of Transportation Commissioner Garrett Eucalitto said the transportation fund revenues and changes at the federal level do present challenges to Connecticut’s construction program.
But the department also has adjusted its capital program to ease demand for more state investments “without compromising the long-term health of our transportation system. [The department] will also continue seeking competitive federal grant opportunities.”
The DOT has more than 650 active infrastructure projects, Eucalitto said, adding “We will continue to invest strategically in aging infrastructure … directing funds where they deliver the greatest benefit to Connecticut residents, communities and businesses.”
Keith R. Brothers, president of the Connecticut Building Trades Council, said that since Lamont took office in 2019, a robust 90% of his organization’s members in transportation construction-related trades have been employed.
“I have all the confidence in the world,” Brothers added, “that Gov. Lamont is going to keep us working.”
BURLINGTON, Conn. (WTNH) — A woman is dead after police said she was involved in a head-on collision with a tractor-trailer on Friday in Burlington.
According to Connecticut State Police, a Toyota RAV4 and Peterbuilt 386 tractor-trailer collided head-on on Route 4 near Punch Brook Road at around 4:49 p.m. on Friday.
The driver of the Toyota, identified as 64-year-old Mary Christine Ferland of Burlington, was pronounced dead at the scene. The driver of the tractor-trailer was not injured, according to state police. No one else was in either vehicle at the time of the crash.
The crash is still under investigation by state police, anyone with information is asked to call Trooper Brew at 860-626-7900.
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