AN ACT REQUIRING TRANSPARENCY AND ADDITIONAL OVERSIGHT OF THE DISTRIBUTION OF CERTAIN LEGISLATIVELY DIRECTED FUNDS AND APPROPRIATIONS FOR OTHER EXPENSES.

House Bill No. 5039

Public Act No. 26-27

AN ACT REQUIRING TRANSPARENCY AND ADDITIONAL
OVERSIGHT OF THE DISTRIBUTION OF CERTAIN LEGISLATIVELY
DIRECTED FUNDS AND APPROPRIATIONS FOR OTHER
EXPENSES.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:

Section 1. (NEW) (Effective July 1, 2026) (a) For purposes of this section
and section 4 of this act:
(1) "Legislatively directed funds" means an appropriation by public
or special act of the General Assembly that authorizes a specific amount
of money for a contract or other expenditure with a grant, loan or other
economic assistance or incentive to a spec ific entity. "Legislatively
directed funds" does not include any of the following:
(A) An appropriation made in response to a natural disaster or other
emergency situation;
(B) An appropriation where the recipient or subrecipient is a state
agency, political subdivision of the state, the Judicial Department, the
Legislative Department or a constituent unit of the state system of public
higher education;
(C) An appropriation or other statutorily defined grant program
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made through a formula-driven or competitive award process; or
(D) Any funds authorized by the State Bond Commission pursuant
to section 3-20 of the general statutes;
(2) "State agency" means any executive branch department, board,
council, commission, institution or other agency of the executive branch
of state government, but does not include any constituent unit of the
state system of public higher education; and
(3) "Subrecipient" means an entity that is receiving a distribution of
legislatively directed funds from a state agency or other pass -through
entity for purposes of the goals or objectives for which such funds were
authorized, and does not include a subcon tractor, as defined in section
4e-1 of the general statutes.
(b) The Secretary of the Office of Policy and Management shall adopt
policies and procedures to establish requirements for the administration
of legislatively directed funds by state agencies. Such policies and
procedures shall implement the provisions of this section and shall
include, but need not be limited to, the manner in which legislatively
directed funds are distributed to recipients to ensure that such funds are
used for their intended purposes. Any adoption of, or revisions made
to, such policies and procedures on or after July 1, 2026, shall be
submitted by the secretary via electronic mail to a committee consisting
of the president pro tempore of the Senate, the speaker of the House of
Representatives, the majority and minority leaders of both houses of the
General Assembly, the chairpersons and ranking members of the joint
standing committees of the General Assembly having cognizance of
matters relating to appropriations and the budgets of state agencies,
finance, revenue and bonding and governme nt oversight and the
chairperson and vice-chairperson of the Black and Puerto Rican Caucus
of the General Assembly, and shall not be effective until the sixtieth day
after the procedures or proposed revisions to such procedures are
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submitted to the committee, unless such requirement is waived by a
majority vote of the membership of the committee. Such policies and
procedures shall have the goal of establishing uniform procedures
across state agencies concerning legislatively directed funds, and shall
require legislatively directed funds to be distributed in a manner that
will ensure such funds are used for and achieve their intended purpose,
provided:
(1) For any legislatively directed funds equal to or less than one
hundred fifty thousand dollars, such funds shall be distributed as an
initial or advance payment or scheduled disbursement of funds in
accordance with a written agreement executed between t he
administering state agency and the recipient of such funds that includes
the intended use of such funds.
(2) For any legislatively directed funds greater than one hundred fifty
thousand dollars, the administering state agency may provide an initial
or advance payment, with the remaining balance distributed in
subsequent payments or on a reimbursement basis upon submission of
documentation of eligible expenditures by the recipient. In determining
whether to provide an initial or advance payments, the administering
state agency, in consultation with the recipient of such funds and
consideration of the stated pur poses of the appropriation, shall ensure
the payment schedule (A) is responsive to the recipient's needs to
execute such stated purposes, and (B) facilitates project startup or
capital procurement costs. The distribution of such funds shall be made
in acco rdance with a written agreement executed between the
administering state agency and the recipient of such funds that includes
the intended use of such funds.
(3) In distributing any legislatively directed funds on a
reimbursement basis under this section, the administering state agency
shall ensure that its reimbursement procedures (A) do not impose any
administrative barriers or documentation requirements that (i) are
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inconsistent with, or more burdensome than, the requirements of this
section, (ii) would prevent nonprofit organizations or community-based
entities from being able to receive such funds or effectively use such
funds, or (iii) would otherwise jeopardize the intended purpose and use
of the funds, (B) provide reimbursement determinations to the recipient
not later than forty-five days after submission of the recipient's claim of
eligible expenses to such state agency, in accordance with the provisions
of subdivision (5) of this subsection, and (C) permit initial or advance
payments to recipients when necessary to ensure the feasibility of the
intended use of such funds and as permitted under this subsection.
(4) Prior to transferring, making a pass -through payment or
otherwise paying any legislatively directed funds to a subrecipient, a
recipient of legislatively directed funds shall obtain the written approval
of the administering state agency and, if the approval of the Secretary of
the Office of Policy and Management is required by the policies and
procedures adopted under this section, the approval of the secretary, of
such transfer, pass -through payment or other payment to the
subrecipient.
(5) The administering state agency shall remit payment on any
properly submitted request for reimbursement or invoice for
legislatively directed funds that is not disputed by such state agency not
later than forty -five days after receipt of such request or invoice. Not
later than fifteen days after receipt of such request or invoice, the
administering state agency shall either (A) approve such request or
invoice, or (B) provide written acknowledgment of receipt of such
request or invoice.
(c) Not later than August first of each year, the Secretary of the Office
of Policy and Management shall hold a pre -award conference for
recipients of legislatively directed funds. Each state agency
administering legislatively directed funds shall designat e at least one
employee to participate in such conference. Any such conference shall
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include, but need not be limited to, (1) detailed instruction on (A)
policies and procedures for administering legislatively directed funds,
including invoicing and reimbursement policies, (B) documentation
requirements, and (C) reporting requirements and deadlines, (2)
identification of one or more designated employees of each
administering state agency whom recipients may contact for fiscal
questions and programmatic questions and the contact information for
such employees, (3) a description of any applicable monitoring, audit or
compliance review processes, and (4) written materials concerning the
information described in subdivisions (1) to (3), inclusive, of this
subsection. Each such conference shall be recorded and a recording of
the conference, along with any written materials distributed to
recipients at the conference, shall be posted on the Internet web site of
the Office of Policy and Management.
(d) Not later than October 1, 2027, and quarterly thereafter, the
Secretary of the Office of Policy and Management shall submit a report,
in accordance with the provisions of section 11-4a of the general statutes,
to the joint standing committees of the Ge neral Assembly having
cognizance of matters relating to appropriations and the budgets of state
agencies, finance, revenue and bonding and government oversight.
Such report shall include an overview of the status of all legislatively
directed funds authorized for the current fiscal year, including a full
accounting of all such funds that have been disbursed since the
immediately preceding report or, in the case of the initial report, since
the commencement of the fiscal year, and a plan for the disbursement of
any remaining legislatively directed funds.
(e) On or before January 1, 2028, and annually thereafter, each
recipient of legislatively directed funds shall submit a report to the state
agency administering such funds, in a form and manner established by
the secretary in the policies and procedures a dopted under subsection
(b) of this section, concerning how the recipient utilized the legislatively
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directed funds during the immediately preceding fiscal year and, if any
funds were awarded to a subrecipient, how the subrecipient utilized the
legislatively directed funds during the immediately preceding fiscal
year.
(f) On or before March 1, 2028, and annually thereafter, each state
agency shall submit a report to the secretary, in a form and manner
established by the secretary in the policies and procedures adopted
under subsection (b) of this section, on any legisla tively directed funds
the state agency administered during the prior fiscal year, including a
summary of any report received under subsection (e) of this section, or
a statement that the state agency did not administer any legislatively
directed funds during such period.
(g) The Secretary of the Office of Policy and Management shall
establish and thereafter maintain on the Internet web site of the Office
of Policy and Management or another publicly accessible Internet web
site maintained by the state a publicly available database of legislatively
directed funds administered by any state agency. On or before June 30,
2028, and at least annually thereafter, the secretary shall publish in such
database all legislatively directed funds administered by a state agency
during the prior fiscal year. Such database shall contain a summary of
the information obtained by the secretary through the annual reports
submitted by recipients of legislatively directed funds and state
agencies that administer such funds pursuant to subsections ( e) and (f)
of this section.
(h) Not later than January 1, 2029, and annually thereafter, the
Secretary of the Office of Policy and Management shall submit a report,
in accordance with the provisions of section 11-4a of the general statutes,
to the joint standing committees of the General Assembly having
cognizance of matters relating to appropriations and the budgets of state
agencies, finance, revenue and bonding and government oversight.
Such report shall include a summary of the information obtained by the
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secretary through the annual reports submitted by recipients of
legislatively directed funds and state agencies that administer such
funds pursuant to subsections (e) and (f) of this section.
(i) If the Governor reduces an allotment requisition or allotment in
force concerning legislatively directed funds pursuant to section 4-85 of
the general statutes, the Secretary of the Office of Policy and
Management shall provide written notice of such r eduction not later
than seven days thereafter to the president pro tempore of the Senate,
the speaker of the House of Representatives and the majority and
minority leaders of both houses of the General Assembly and shall
include in such notice an explanation of why such funds were reduced.
Sec. 2. (Effective July 1, 2026) Not later than June 30, 2028, the Secretary
of the Office of Policy and Management shall submit a preliminary
report, in accordance with the provisions of section 11-4a of the general
statutes, to the joint standing committees of the General Assembly
having cognizance of matters relating to appropriations, the budgets of
state agencies, finance, revenue and bonding and government
oversight. Such preliminary report shall include a summary of the
information obtained by the secretary through the reports submitted by
recipients of legislatively directed funds, as defined in section 1 of this
act, and state agencies that administer such funds pursuant to
subsections (e) and (f) of section 1 of this act.
Sec. 3. Subsection (d) of section 4 -186 of the 2026 supplement to the
general statutes is repealed and the following is substituted in lieu
thereof (Effective July 1, 2026):
(d) The provisions of this chapter shall not apply to: (1) [To
procedures] Procedures followed or actions taken concerning the lower
Connecticut River conservation zone described in chapter 477a and the
upper Connecticut River conservation zone described in chapter 477c,
(2) [to] the administrative determinations authorized by section 32 -9r
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concerning manufacturing facilities in distressed municipalities, (3) [to]
the rules made pursuant to section 9 -436 for use of paper ballots , [and]
(4) [to] guidelines established under section 22a-227 for development of
a municipal solid waste management plan , and (5) policies and
procedures established under section 1 of this act concerning the
administration of legislatively directed funds.
Sec. 4. (NEW) ( Effective July 1, 2026 ) (a) No state agency shall enter
into a written agreement to provide funds, including, but not limited to,
funds in the form of a grant, loan or other economic assistance or
incentive, to a specific entity at the direction of the General Assembly,
unless the General Assembly enacts a public or special act that
appropriates funds for such purposes and, either such public or special
act or the Connecticut State Budget Agency Sheets issued by the Office
of Fiscal Analysis by August first of each year:
(1) Identifies the entity with reasonable particularity, including by
specifying the entity's legal name, the actual name the entity is doing
business under or the entity's principal office address;
(2) Describes the intended purposes for which the specific entity will
use the funds; and
(3) If the funds are intended to be awarded to a subrecipient, provides
the same information required by subdivisions (1) and (2) of this
subsection with respect to such subrecipient.
(b) The requirements of subdivisions (1) to (3), inclusive, of
subsection (a) of this section shall not apply to appropriations or funds
that are excluded from the definition of "legislatively directed funds" in
subparagraphs (A) to (D), inclusive, of subdivision (1) of subsection (a)
of section 1 of this act.
Sec. 5. (NEW) ( Effective July 1, 2026) (a) For purposes of this section,
(1) "state agency" means any executive branch department, board,
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council, commission, institution or other agency of the executive branch
of state government, but does not include any constituent unit of the
state system of public higher education; (2) "department head" has the
same meaning as provided in section 4-5 of the general statutes; and (3)
"recipient" does not include a state agency, political subdivision of the
state, the Judicial Department, the Legislative Department or a
constituent unit of the state system of public higher education.
(b) No funds appropriated to any state agency for Other Expenses
shall be used for grants or pass-through payments unless (1) the General
Assembly enacts a public or special act that appropriates funds for
Other Expenses for such purpose, or (2) such use is pursuant to a written
agreement in effect on July 1, 2026, to fulfill a transitional noncompliant
Other Expenses obligation, as described in subsection (c) of this section,
in accordance with the terms of such agreement.
(c) (1) Not later than January 1, 2027, each state agency shall conduct
a review of any expenditure or obligation of funds from Other Expenses
that provide financial assistance, a grant or other payment to a recipient
that would violate the prohibition in subsection (b) of this section. Any
such expenditure shall be designated as a transitional noncompliant
Other Expenses obligation.
(2) Not later than January 1, 2027, the Secretary of the Office of Policy
and Management, in consultation with the director of the Office of Fiscal
Analysis, shall (A) develop a plan to reclassify or reallocate each
transitional noncompliant Other Expenses obligation into an
appropriate appropriation, grant program or budget classification, and
(B) submit such plan, in accordance with the provisions of section 11-4a
of the general statutes, to the joint standing committees of the General
Assembly having cognizance of matters relating to appropriations and
the budgets of state agencies, finance, rev enue and bonding and
government oversight.
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(3) On and after July 1, 2027, no state agency shall enter into any new
agreement or obligation that would qualify as a transitional
noncompliant Other Expenses obligation or continue any such
obligation unless such obligation has been reclassified or expr essly
reauthorized by a public or special act of the General Assembly.
(4) Nothing in this subsection shall be construed to permit the
expansion, renewal or increase in funding of any transitional
noncompliant Other Expenses obligation beyond the amount and
duration authorized as of July 1, 2026.
(d) On and after July 1, 2026, each state agency that makes an
expenditure from Other Expenses to a recipient that is a municipality or
a nonprofit shall submit to the Secretary of the Office of Policy and
Management a statement that includes (1) the purpo se of such
expenditure, (2) the statutory or program guidelines authorizing such
expenditure, and (3) whether such expenditure constitutes financial
assistance or a grant award. Any budget document or report on the
status of the budget submitted by the Gov ernor pursuant to section 4 -
71 of the general statutes shall identify any such expenditure and
include the information specified in subdivisions (1) to (3), inclusive, of
this subsection, and if any such budget document or report recommends
that such an ex penditure be made annually, such expenditure shall be
included as an individual appropriation and not an expenditure from
Other Expenses.
(e) Not later than thirty days after the Auditors of Public Accounts
report the results of any state agency audit in accordance with the
provisions of section 2 -90 of the general statutes, the Secretary of the
Office of Policy and Management shall report, in accordance with the
provisions of section 11 -4a of the general statutes, to the joint standing
committees of the General Assembly having cognizance of matters
relating to finance, revenue and bonding, appropriations and the
budgets of state agencies and government oversight a detailed list of
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each expenditure made by such agency over the amount of ten thousand
dollars from Other Expenses, including (1) the name of the recipient, (2)
the amount of the expenditure, (3) the purpose of the expenditure, and
(4) the date approval was received from th e secretary, in accordance
with subsection (d) of this section, if applicable.
(f) The Auditors of Public Accounts shall annually review each state
agency's Other Expenses expenditures and submit a report, in
accordance with the provisions of section 11 -4a of the general statutes,
to the secretary and the joint standing committees of the General
Assembly having cognizance of matters relating to finance, revenue and
bonding, appropriations and the budgets of state agencies and
government oversight identifying any such expenditures that are
inconsistent with the provisions of this secti on, including, but not
limited to, any expenditure that constitutes a grant award.
(g) After any expenditure is identified by the Auditors of Public
Accounts as inconsistent with the provisions of this section in
accordance with subsection (f) of this section, the Secretary of the Office
of Policy and Management shall issue a letter to the department head of
the state agency that made such expenditure stating corrective action
that the state agency shall take to prevent reoccurrence of an
expenditure being made from Other Expenses that is inconsistent with
the provisions of this section. Such expenditure shall be subject to
recoupment or lapse and may result in a reduction in subsequent Other
Expenses appropriations.