[{"_1":2,"_100":-5,"_101":-5},"loaderData",{"_3":4,"_26":27},"root",{"_5":6,"_17":10,"_18":19,"_20":21,"_22":10,"_23":-5,"_24":-5,"_25":10},"user",{"_7":8,"_9":10,"_11":10,"_12":-5,"_13":-5,"_14":15,"_16":-5},"roles",[],"isAuthenticated",false,"isPremium","planName","subscriptionStatus","featureFlags",{},"insightsBudget","isDevelopmentHost","userPreferences",{},"recaptchaSiteKey","6LcvOJcUAAAAAHsB-gPGfGktcRlKpH7OTIU_dMTD","isImpersonating","impersonation","affiliateStatus","isFreedomPortal","routes/v2/article/layout",{"_28":29,"_30":31},"notFound",true,"relatedArticles",[32,76,88],{"_33":34,"_35":36,"_37":38,"_39":40,"_41":42,"_43":44,"_45":46,"_47":48,"_49":50,"_51":52,"_53":54,"_55":56,"_57":58,"_59":60,"_61":62,"_63":64,"_65":66,"_67":68,"_69":70,"_71":72,"_73":74,"_75":74},"mediaId",6325248,"mediaKeyId","2334267-7f2bf54314a5b6f87e9e927cb2fc829d","parentId",2334267,"title","OFA: Connecticut fiscal guardrails will make $1.6 billion unavailable to FY26 budget; BRF at statutory cap","audioSeconds",1069,"startMs",1015000,"endMs",2084000,"viewUrl","/Search/View?dp=1&key=2334267-7f2bf54314a5b6f87e9e927cb2fc829d&start=1015&end=2084","thumbnailUrl","https://assets.pipeline.soar.com/2334267-7f2bf54314a5b6f87e9e927cb2fc829d/thumbnail_1015000.jpg","articleUrl","/articles/6325248/Connecticut/OFA-Connecticut-fiscal-guardrails-will-make-16-billion-unavailable-to-FY26-budget-BRF-at-statutory-cap","mediaUrl","https://secure.pipeline.soar.com/6325248-005e009f1d67c39cc7b5f1b1157a0d7e/orig.mp4?Expires=1770437834&Signature=HOMkeym6srwYhUjzt3qLUQAY534kVAYWY-DJ5PhDI-pHea9AalFhZqDd4xLDkhoYHVR057Yj4xIB5F6OhALtGZGb7M~l6wI~D~WXL1gd~SvfAfWjyCQMTbWplGtj1ZokuhieVbXc9CSqcnKuQIpRed~B2VOZd08iuUTsadZrt1NvaonWhVvKXMAPSxcSvHN066FLsf4oIUJaODSiz-eQbkzkgOmq05gPEA5uY6bbBNOme5cGV8zI6eOv2XDNmkBm6MERAqlURfUlCMriSyFoSJxBoLaPeHphDcLi9TshbtoY8RCA2Gp36d8HuCKZHwpF8yaKAgfCcYjHLsDjBOezkg__&Key-Pair-Id=KUT5TJCACFTXG","author","CGA - Finance, Revenue and Bonding Committee","date","2025-02-18T00:00:00Z","article","The Office of Fiscal Analysis told the Finance, Revenue and Bonding Committee that Connecticut’s fiscal guardrails will remove roughly $1.6 billion from amounts available to be appropriated for fiscal 2026, with most of that sum coming from the volatility cap.

The presentation said the combined impact of the revenue cap and the volatility cap for FY26 is $1,600,000,000; the volatility cap portion is about $1,300,000,000 and the revenue cap about $300,000,000. Neil Ayers of the Office of Fiscal Analysis summarized the history and the current mechanics of the guardrails, saying, “the fiscal guardrails were adopted after the long and painful summer and fall of, 2017.”

Why it matters: those caps remove money from the pool of revenue that lawmakers may appropriate in the upcoming biennium. According to OFA’s slides and presentation, deposits above the BRF cap instead have been used to reduce unfunded pension liabilities, producing actuarial savings that have lowered future required contributions.

OFA described how the pieces interact. Bill Lederman and Chris Wetzel, who identified themselves as OFA cap experts, walked the committee through the mechanics: the volatility cap applies to estimated and final personal income tax payments and the pass-through entity tax; revenue above the volatility threshold is transferred first to the BRF (until the BRF hits its cap) and afterwards to pension and liability reduction. The BRF itself is capped at 18% of general fund appropriations in the current fiscal year; OFA projected the BRF balance at $4.2 billion for FY26.

OFA gave a short history and figures. Lederman said the volatility cap threshold is $4.1 billion for FY26 compared with projected E&F and PET collections of $5.4 billion, producing the $1.3 billion volatility transfer. Lederman also noted that OFA is using January consensus revenue estimates as the baseline for those FY26 numbers.

OFA also described the revenue cap mechanics: it limits the amount of revenue that can be appropriated to 98.75% of the revenue estimate (a 1.25% budgeted surplus), and there is a similar, smaller cap on the transportation fund (about $30 million). Chris Wetzel told the committee the spending (appropriation) cap growth factor for the upcoming biennium is 5.11%, based on the five‑year compound annual growth in personal income, which equates to about $1.0 billion of allowable cap growth for FY26.

OFA credited earlier deposits above the BRF cap with reducing the state’s unfunded liabilities and creating savings; the presentation said prior contributions toward the state employee and teachers retirement systems have generated roughly $727,000,000 in realized savings that affect FY26. As Lederman explained, those savings arise because additional deposits reduce actuarially determined employer contribution levels over time.

Legal and procedural context: OFA emphasized the statutory mechanics that accompany the fiscal guardrails. The presentation noted statutory exemptions (for example, federal funds, debt service and certain transfers are uncapped), base adjustments when appropriations move on or off budget, and the existing emergency override (a governor’s emergency declaration plus 3/5 vote of each chamber to exceed the spending cap).

No formal policy change was adopted at the hearing. Committee members asked questions and will continue deliberations; OFA and other presenters said they would provide additional detail on request.

Ending: presenters said the forum’s stated purpose was descriptive rather than prescriptive — to provide lawmakers with the data and the mechanics they will need for upcoming budget decisions.","mediaType","Video","parentTitle","Finance Committee: Fiscal Guardrails Informational Forum 2025-02-18","oneSentenceSummary","The Office of Fiscal Analysis told the Finance, Revenue and Bonding Committee that Connecticut’s fiscal guardrails will remove roughly $1.6 billion from amounts available to be appropriated for fiscal 2026, with most of that sum coming from the volatility cap.","taxTitle","2025 Legislature CT, Connecticut","taxId",77677,"location","Connecticut","headline","","shortSummary",{"_33":77,"_35":36,"_37":38,"_39":78,"_41":79,"_43":80,"_45":81,"_47":82,"_49":83,"_51":84,"_53":85,"_55":56,"_57":58,"_59":86,"_61":62,"_63":64,"_65":87,"_67":68,"_69":70,"_71":72,"_73":74,"_75":74},6325239,"Treasurer: bond covenants (the “bond lock”) link guardrails to investor protections; violating them risks litigation and downgrades",622,2403000,3025000,"/Search/View?dp=1&key=2334267-7f2bf54314a5b6f87e9e927cb2fc829d&start=2403&end=3025","https://assets.pipeline.soar.com/2334267-7f2bf54314a5b6f87e9e927cb2fc829d/thumbnail_2403000.jpg","/articles/6325239/Connecticut/Treasurer-bond-covenants-the-bond-lock-link-guardrails-to-investor-protections-violating-them-risks-litigation-and-downgrades","https://secure.pipeline.soar.com/6325239-2daaf965e67a3e5c1d0eb8f4a41ab715/orig.mp4?Expires=1770437834&Signature=XjAbO-CFywm4opBGNAlU5gbQzh19LQvosZE-JmzDfByFfoSoW6NvH0suqbNWV~1mINZWHxntLk7X5JiHPINcc2Jdfzc4i1~L7jitcPq7D0IL6suF8JrPwliMNr2JtKsB6DLiRcyRQBMFrvOO2RrnVWOyti~K4~kV1ep9kthN55ZWqnb4oY32jzVVcZGwOCBW5puL9KDMs-VoBMPNqqLI8rOgkL6aKf3ynbbPL~QaJIFIq2xlcsIxFcAuDzo-R0Nt7u0q6waDtS1W5OhF9bqM6ztA2XC-rbsU~LH5dNUGgsPDK8ujwsd-Kkcd7acoTVIeGsEiP37GboXRSLJLh7vdjA__&Key-Pair-Id=KUT5TJCACFTXG","The state treasurer briefed the committee on the bond covenants (often called the bond lock), explaining that the covenants are contract terms in the state’s bond documents that refer to the statutory fiscal guardrails and prohibit certain statutory changes for the protection of bondholders.

The treasurer said the covenant is “a legally binding agreement that restricts actions of the issuer,” and that the intent is to protect bondholders and the issuer’s ability to make scheduled debt‑service payments. The covenants commonly include continuing disclosure and reporting requirements and promises not to alter the statutory frameworks that underpin the state’s fiscal controls without triggering the covenants’ mechanics.

Timing and scope: the treasurer outlined a timeline: the covenants were enacted in the 2017 statute, included in bonds sold from May 15, 2018 through July 1, 2020, expired on July 1, 2023, and were renewed by the legislature in January 2023; the current statutory schedule would let them expire July 1, 2033 unless the General Assembly adopts a resolution between January 1 and July 1, 2028 to change or amend the guardrails earlier.

Risks of violation: the treasurer identified three categories of consequences if the state violated covenants: litigation risk (bondholders could sue), reputational harm with the investment community, and potential rating‑agency actions that could increase the state’s cost of borrowing. The treasurer said the covenants have been a factor in the state’s communications with investors and rating agencies and in recent rating improvements.

Practical note: the treasurer explained that some statutory changes are explicitly contemplated in the guardrail statutes (for example, threshold adjustments to the volatility cap under specific circumstances) and that some mechanisms to alter controls would not automatically violate the covenant because the statute provides procedures for specified changes.

Ending: the treasurer concluded by offering to answer questions; committee members pressed about interactions with rating agencies and potential effects on borrowing costs and pension funding.","Connecticut State Treasurer told the committee that statutory bond covenants — the so‑called bond lock — tie compliance with the spending, revenue and volatility caps to bond contracts; the covenants were initially included in bonds sold 2018–2020, renewed by the legislature in 2023 and now expire in 2033 absent action",{"_33":89,"_35":36,"_37":38,"_39":90,"_41":91,"_43":92,"_45":93,"_47":94,"_49":95,"_51":96,"_53":97,"_55":56,"_57":58,"_59":98,"_61":62,"_63":64,"_65":99,"_67":68,"_69":70,"_71":72,"_73":74,"_75":74},6325243,"Pew: Connecticut’s volatility-cap formula pushed more revenue into BRF and pensions; rolling-average option would more closely track revenue",731,4024000,4755000,"/Search/View?dp=1&key=2334267-7f2bf54314a5b6f87e9e927cb2fc829d&start=4024&end=4755","https://assets.pipeline.soar.com/2334267-7f2bf54314a5b6f87e9e927cb2fc829d/thumbnail_4024000.jpg","/articles/6325243/Connecticut/Pew-Connecticuts-volatility-cap-formula-pushed-more-revenue-into-BRF-and-pensions-rolling-average-option-would-more-closely-track-revenue","https://secure.pipeline.soar.com/6325243-52c6c5a8c3a07577857b2aa7b02e38ca/orig.mp4?Expires=1770437834&Signature=AlZKGiU5b~ygNx1MaPO5hle3-YpZqqEd09TeUWmwBAOzhZSqYh3VV~Tu9GfYOaqtlWwzBFJMLY4AaoYA97p9eIwwCY1I9Wx2C2-8LYNF1olGi9bSrsJh8xFOKcIPN6nw1d8a-gCpm7ux3mcf2rPQyUkDigGaMxkceDOOvbv20dlnmNBbvt4qbmE46aVN2Gbdk~LYQmhPvY-woQ~8vL56u~vgWB0Vi06Dh4Rb9egTWh-hwnvk99SVmP8zcsgPG0NeH8ytx6P8WxtMe6aPW9g65pdgUpDS-rYRkiGhg~eBYNABuVi9NyGSrLIO4A7MLoLZg5iOZBnX3Tv6GpQIsJwyIA__&Key-Pair-Id=KUT5TJCACFTXG","Pew Charitable Trusts analysts told the Finance, Revenue and Bonding Committee that Connecticut’s volatility cap formula — using a 2017 starting level grown by the five‑year compound annual growth rate in personal income — has historically left the statutory threshold below actual estimated-and-final payments (E&F) and pass‑through entity (PET) tax collections, producing large transfers to the BRF and then to pensions.

Mark Robin of Pew said the volatility deposits through 2024 totaled about $10 billion (about 29% of the combined E&F and PET revenue stream over the period) and amounted to roughly 7% of annual general fund appropriations. “The current formula has resulted in the volatility cap being consistently below where actual revenue has tended to be,” Robin said, adding that the formula “has helped you fill your budget reserve fund relatively quickly and make large pension transfers.”

Pew outlined four broad approaches lawmakers could consider if they want the threshold to track more closely with revenue: 1) change the 2018 starting value (the baseline), for example by using an average of prior years rather than 2017 alone; 2) change the annual adjustment factor (for example use a one‑year personal income growth rate instead of a five‑year average); 3) combine a higher starting point with a different growth factor; or 4) replace the current mechanics with a rolling average of inflation‑adjusted revenue (a moving window of revenue that resets annually).

Pew’s analysis found that under any of the illustrative alternatives the BRF would have been filled by the end of fiscal 2022 at the latest; most proposed changes would chiefly affect the size of subsequent pension transfers, not BRF deposits, assuming no large withdrawals from the BRF. The presenters cautioned that each approach involves trade‑offs: a threshold set closer to typical revenue lets lawmakers spend more in the current budget but increases the chance that revenue will fall below the threshold in a downturn, exposing the budget to volatility.

Pew also recommended regular stress testing to set savings targets. Analyst Josh Goodman said stress tests estimate the size of budget shortfalls in recession scenarios and help determine whether the state’s reserves are sufficient; he noted Connecticut’s BRF balance has risen rapidly since guardrail adoption and that the state’s tax system is relatively volatile because of capital‑gains exposure.

Ending: Pew recommended additional forward‑looking analysis — including historical volatility studies and stress tests that model recessions and rebasing effects — to guide any statutory change to the volatility cap.","Pew Charitable Trusts told lawmakers the volatility cap formula (2017 baseline + five‑year personal income growth) has kept the statutory threshold below actual volatile revenue, producing large BRF deposits and pension transfers; Pew offered alternatives including a rolling-average threshold","actionData","errors"]

Article not found

OFA: Connecticut fiscal guardrails will make $1.6 billion unavailable to FY26 budget; BRF at statutory cap

Treasurer: bond covenants (the “bond lock”) link guardrails to investor protections; violating them risks litigation and downgrades

Pew: Connecticut’s volatility-cap formula pushed more revenue into BRF and pensions; rolling-average option would more closely track revenue