The debate over rewarding Connecticut’s essential workers for serving during the coronavirus outbreak largely is resolved.

The larger question — how to rescue working families from the economic shocks of the pandemic and a 40-year-high in inflation — has just begun to heat up at the Capitol.

A permanent state income tax credit for families with children, other tax relief and expanded investments in social services are at the top of an early to-do list for many legislators who still are wary of a global recession looming as soon as 2023.

“I don’t think our work is done in creating more equity in our state,” said Sen. Julie Kushner, D-Danbury. “These are long-term problems that didn’t happen overnight.”

Along with other members of the Labor Committee that she co-chairs, Kushner was tied to a year-long debate that wrapped this week with $105 million reserved for pandemic bonuses for nurses, child care providers, grocery store workers and others who staffed vital services when COVID-19 first struck Connecticut in 2020.

Labor advocates — who had hoped to see bonuses as large as $2,000 for each of these workers — settled for $1,000 for essential employees who earn less than $50,000 a year.

Those earning above that threshold but below $100,000 were eligible for anywhere from $800 to $200. Those making between $100,000 and $150,000 annually got $100.

Given the political challenges of publicly funding bonuses for private workers, Kushner said she is appreciative of her colleagues and of Gov. Ned Lamont for approving the money in special session this week.

But despite the headlines “Premium Pay” grabbed, it’s just one element of a much larger debate, Kushner added: how to lift all Connecticut families and businesses back to pre-pandemic prosperity or higher.

“Clearly the job is not done,” said Ed Hawthorne, president of the Connecticut AFL-CIO. “Working families are hurting.”

Income tax cuts on the agenda for the 2023 session

One way to alleviate that pain, both Hawthorne and Kushner said, would be to create a permanent state income cut for low- and middle-income families with children.

Rep. Sean Scanlon, D-Guilford, who proposed a permanent, $600-per-child credit, had to settle this spring for a one-time, $250-per-child rebate that sent $82 million to Connecticut families this summer.

Scanlon, who will be sworn in as the new state comptroller in January, is expected to lobby his former colleagues to adopt ongoing relief.

When asked about the credit, Lamont has said he will assess the state’s fiscal health when he proposes his next budget to the legislature in February. The current budget, which runs through June 30, is on pace for a $2.85 billion surplus, equal to nearly 13% of the entire General Fund.

The Guilford lawmaker noted Thursday that when Congress allowed a temporary one-year expansion of the federal child tax credit to expire in January, thousands of Connecticut children were thrown back into poverty, or much closer to it.

According to a recent analysis by the Center on Budget and Policy Priorities, a Washington-based policy think-tank, about 145,000 Connecticut children live in households that now receive less than the full $2,000-per-child credit. (The expansion has pushed many households up to $3,000 per child, or $3,600 for children younger than 6.)

That expansion “literally cut child poverty in this country in half in six months, and just about every study that I’ve seen about what that period was like [shows] an overwhelming net positive to American families,” Scanlon said.

With Washington showing no signs of expanding relief again, and with state finances remaining robust for now, Scanlon predicted a state child tax credit “is something there’s going to be a lot of support for.”

Ten states currently offer ongoing child tax credits, according to the Institute on Taxation and Economic Policy, another Washington-based policy group.

The United Way of Connecticut has tried to raise awareness about the severity of wealth inequality here through the use of its ALICE methodology. An acronym for Asset Limited, Income Constrained, Employed, the ALICE system attempts to calculate the cost of a basic survival budget in Connecticut.

It incorporates key elements like health and child care, transportation, utilities and other housing costs that aren’t major factors in other metrics, such as the Federal Poverty Level — a measure of income set annually by the U.S. Department of Health and Human Services.

While the FPL concludes a family of four is above the poverty level once it earns more than $27,750 per year, the ALICE system says the same family needs slightly more than $90,000 annually to survive in Connecticut.

Too many families who qualify for little or no government assistance need more relief to stay in Connecticut, Bates said.

“The [state] child tax credit is just a very clear example of a powerful tool that goes right to the heart of this issue,” she said, adding the concept likely would draw support from both sides of the aisle.

Republicans in the General Assembly argued for nearly double the $650 million state tax relief package Lamont and his fellow Democrats in the House and Senate majorities approved last spring. That package included ongoing assistance, including an expanded state income tax credit to offset property taxes and a lower cap on motor vehicle taxes. But roughly half of the relief was one-time.

And while the GOP’s biggest proposal — the first state income tax rate cut in almost two decades — was ongoing, many Republicans also have supported a new state income tax credit for families with children.

Senate Minority Leader Kevin Kelly, R-Stratford, has chastised Democrats for being too stingy with the tax relief, pointing to a 40-year high in the national inflation rate this past summer when it topped 9%. The Consumer Price Index still hovers just below 8%.

“We can do better,” Kelly said repeatedly on the Senate floor Monday when legislators voted to extend a gasoline tax holiday through April 30.

Shoring up holes in the social safety net

Community-based nonprofits that provide the bulk of state-sponsored social services have argued for years that Connecticut can do better when it comes to funding its safety net.

The CT Community Nonprofit Alliance two years ago analyzed the impacts of inflation on state payments that had stagnated since 2007. The alliance estimated then that the industry was losing $462 million annually due to this trend.

Since that report, legislators and Lamont have increased funding for contracts with community-based nonprofits by $330 million.

But while there have been significant investments to expand mobile crisis services and early childhood intervention and other new programs, a huge part of that increase is tied to salaries.

“We also have to recognize that nonprofits have costs relative to insurance, food, transportation and capital expenditures,” said Sen. Cathy Osten, D-Sprague, who co-chairs the legislature’s Appropriations Committee.

Osten isn’t the only budget leader in the legislature worried about the state’s social services.

Sen. John Fonfara, D-Hartford, co-chair of the Finance Committee and one of the chief architects of a savings program that’s helped Connecticut pay down billions of dollars in debt in recent years, is willing to scale it back modestly to help more families access child care and early childhood development services.

Nonprofit social service agencies, collectively, are still reeling from the first year of the pandemic, which forced them to curtail certain services and forfeit millions of dollars in revenue.

Gian-Carl Casa, president and CEO of the alliance, said the extra funding the governor and legislators approved since 2021 has been “a lifeline, really for many — and then inflation came and ate it up.”

Connecticut is in the midst of a four-year plan to boost the minimum wage from $10.10 to $15 per hour by June 1, 2023. The wage currently is $14.

That has placed tremendous pressure on all employers to boost compensation.

And Casa said many private nonprofits, which traditionally have offered lower salaries than do state social service agencies, are struggling with vacancy rates of about 20%.

The alliance is working to update its annual state funding gap projection, but Casa said the shortfall certainly remains “in the hundreds of millions of dollars.”

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