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sSB511 / File No. 655 1
General Assembly File No. 655
February Session, 2026 Substitute Senate Bill No. 511
Senate, April 16, 2026
The Committee on Finance, Revenue and Bonding reported
through SEN. FONFARA of the 1st Dist., Chairperson of the
Committee on the part of the Senate, that the substitute bill
ought to pass.
AN ACT ESTABLISHING MUNICIPAL GROWTH DIVIDEND
PAYMENTS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective October 1, 2026) (a) As used in this section: 1
(1) "Municipally attributable revenue" or "MAR" means the sum of 2
the portion of revenue, as determined by the Department of Revenue 3
Services, from (A) the tax imposed by chapter 219 of the general statutes 4
that is attributable to sales occurring at a specific physical business 5
location within a municipality, (B) the withholding portion of the tax 6
imposed by chapter 229 of the general statutes that is attributable to 7
wages earned at a physical place of employment located within a 8
municipality, and (C) the tax imposed by chapter 208 of the general 9
statutes that is attributable to business activity occurring within a 10
physical nexus in a municipality; 11
(2) "MAR baseline" means the amount of the municipally attributable 12
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revenue of a municipality for the fiscal year ending June 30, 2026; and 13
(3) "Municipality" means any town, city, consolidated town and city 14
or consolidated town and borough. 15
(b) (1) There is established an account to be known as the "state-wide 16
municipal growth account ", which shall be a separate, nonlapsing 17
account. The account shall contain any moneys required by law to be 18
deposited in the account. Moneys in the account shall be expended by 19
the Secretary of the Office of Policy and Management for the purpose of 20
distributing municipal growth dividends to municipalities in 21
accordance with subsection (d) of this section. 22
(2) For the fiscal year ending June 30, 2030, and annually thereafter, 23
the aggregate amount of the municipal growth dividend for all 24
municipalities as determined under subsection (c) of this section shall 25
be transferred by the Treasurer to the account. Investment earnings 26
credited to the account shall become part of the assets of the account. 27
(c) The Department of Revenue Services shall determine, not later 28
than November 1, 2028, the MAR baseline for each municipality. 29
Commencing with the fiscal year ending June 30, 2030, and annually 30
thereafter, the department shall determine the municipally attributable 31
revenue for each municipality for the applicable fiscal year and provide 32
all determinations made pursuant to this subsection to the Office of 33
Policy and Management. 34
(d) (1) Commencing with the fiscal year ending June 30, 2031, and 35
annually thereafter, the Secretary of the Office of Policy and 36
Management shall distribute municipal growth dividends to 37
municipalities in the amount of one -half of one per cent of the 38
municipality's MAR for the preceding fiscal year, except that: 39
(A) If a municipality's MAR for a fiscal year is below its MAR 40
baseline, such municipality shall receive no municipal growth dividend 41
distribution for such fiscal year; and 42
(B) For any municipal development project that is intended to 43
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support municipal economic growth and for which the state has 44
provided instrumental capital, the municipality shall receive, in lieu of 45
the distribution under this subsection, fifty per cent of the municipal 46
growth dividend attributable to such project and the state shall receive 47
fifty per cent of such growth dividend until the full amount of the state 48
capital expenditure has been recouped. 49
(2) Any distributions received by a municipality pursuant to this 50
section shall be used by the municipality to provide municipal services 51
in accordance with the provisions of subsection (e) of this section or to 52
reduce the municipality's mill rate, or both. 53
(e) Each municipality shall establish a municipal revenue 54
stabilization fund and all distributions received by a municipality 55
pursuant to this section shall be deposited in such fund. For the purpose 56
of providing municipal services, a municipality may use the moneys in 57
such fund as a one -time expenditure or as an ongoing expenditure, 58
provided the legislative body of the municipality certifies that such fund 59
is sufficiently capitalized to sustain such ongoing expenditure for not 60
less than three fiscal years. 61
(f) Not later than November 1, 2030, and annually thereafter, the 62
Secretary of the Office of Policy and Management shall submit, in 63
accordance with the provisions of section 11 -4a of the general statutes, 64
to the joint standing committees of the General Assembly having 65
cognizance of matters relating to finance, revenue and bonding and 66
local governments a report that sets forth for each municipality for the 67
applicable fiscal year the municipally attributable revenue and 68
information regarding any municipal growth dividends distributed to 69
the municipality. 70
Sec. 2. Subsection (b) of section 2-35 of the general statutes is repealed 71
and the following is substituted in lieu thereof (Effective October 1, 2026): 72
(b) (1) The state budget act passed by the legislature for funding the 73
expenses of operations of the state government in the ensuing biennium 74
shall contain a statement of estimated revenue, based upon the most 75
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recent consensus revenue estimate or the revised consensus revenue 76
estimate issued pursuant to section 2-36c, itemized by major source, for 77
each appropriated fund, and supplied by the joint standing committee 78
of the General Assembly having cognizance of matters relating to state 79
finance, revenue and bonding. 80
(2) Commencing in the fiscal year ending June 30, 2018: 81
(A) Such itemization shall include the estimate for each major 82
component of the personal income tax imposed pursuant to chapter 229 83
as follows: Withholding payments and estimated and final payments; 84
and 85
(B) Commencing with the consensus revenue estimate or revised 86
consensus revenue estimate maintained or revised not later than 87
November 10, 2017, each consensus revenue estimate or revised 88
consensus revenue estimate shall include a line item designated as the 89
volatility adjustment that reflects the amount of the estimated transfer 90
pursuant to subsection (a) of section 4-30a. 91
(3) Commencing in the fiscal year ending June 30, 2030, each 92
consensus revenue estimate or revised consensus revenue estimate shall 93
include a line item designated as the municipal growth dividend that 94
reflects the amount of the estimated transfer pursuant to subdivision (2) 95
of subsection (b) of section 1 of this act. 96
[(2)] (4) The statement of estimated revenue applicable to each such 97
fund shall include, for any fiscal year, an estimate of total revenue with 98
respect to such fund, which amount shall be reduced by (A) an estimate 99
of total refunds of taxes to be paid from such revenue in accordance with 100
the authorization in section 12 -39f, and (B) an estimate of total refunds 101
of payments to be paid from such revenue in accordance with the 102
provisions of sections 3-70a and 4-37. 103
[(3)] (5) The total estimated revenue for each fund, as adjusted in 104
accordance with this section, shall not be less than the total net 105
appropriations made from each fund plus, for the fiscal year ending 106
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June 30, 2014, and each fiscal year thereafter, the amount necessary to 107
extinguish any unassigned negative balance in each budgeted fund as 108
addressed in the most recently issued annual report of the Comptroller 109
published in accordance with section 3 -115. On or before July first of 110
each fiscal year, the joint standing committee of the General Assembly 111
having cognizance of matters relating to state finance, revenue and 112
bonding shall, if any revisions in such estimates are required by virtue 113
of legislative amendments to the revenue measures proposed by said 114
committee, changes in conditions or receipt of new information since 115
the original estimate was supplied, meet and revise such estimates and, 116
through its cochairpersons, report to the Comptroller any such 117
revisions. 118
This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2026 New section
Sec. 2 October 1, 2026 2-35(b)
Statement of Legislative Commissioners:
In Section 1(f), ", the adjusted baseline" was deleted for consistency.
FIN Joint Favorable Subst. -LCO
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The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of
the General Assembly, solely for purposes of information, summarization and explanation and do not
represent the intent of the General Assembly or either cha mber thereof for any purpose. In general,
fiscal impacts are based upon a variety of informational sources, including the analyst’s professional
knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final
products do not necessarily reflect an assessment from any specific department.
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 27 $ FY 28 $
Policy & Mgmt., Off. GF - Cost Potential Potential
Resources of the General Fund GF - Revenue Loss None None
Note: GF=General Fund
Municipal Impact:
Municipalities Effect FY 27 $ FY 28 $
All Municipalities Revenue Gain None None
Explanation
The bill has a significant state and municipal revenue impact,
described below, and reflected in the "out years" table at the bottom of
the fiscal note.
The bill expands municipal revenue sharing to include 0.5% of state
revenue from the: 1) withholding portion of the personal income tax; 2)
corporation business tax, and 3) the General Fund's remaining portion
of the sales and use tax.1 For reference, 0.5% of the aggregate amount of
these revenue streams is projected to be $88.2 million in FY 29.
Under the bill, the state revenue would begin to be set aside in FY 30
and distributed to municipalities beginning in FY 31 as municipal
growth dividends.
The municipal growth dividend amounts per municipality would be
1 By law, 0.5 of the 6.35 general sales tax (equal to 7.87% of the total rate) is shared via
the Municipal Revenue Sharing Fund.
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determined according to each municipality's respective growth from a
baseline determined by the Department of Revenue Services.
There is a potential cost to the Office of Policy and Management
beginning in FY 27 to the extent additional resources are necessary to (1)
manage the new Municipal Growth Account, and (2) submit a report
annually beginning November 1, 2030.
The bill results in a revenue gain to municipalities beginning in FY 31
that is dependent on the funds available and if the municipality meets
certain requirements.
The Out Years
State Impact:
Agency Affected Fund-Effect FY 29 $ FY 30 $ FY 31 $
Policy & Mgmt., Off. GF - Cost Potential Potential Potential
Resources of the
General Fund
GF - Revenue
Loss
None 88,200,000 90,600,000
Note: GF=General Fund
Municipal Impact:
Municipalities Effect FY 29 $ FY 30 $ FY 31 $
All Municipalities Revenue Gain None None 88,200,000
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OLR Bill Analysis
sSB 511
AN ACT ESTABLISHING MUNICIPAL GROWTH DIVIDEND
PAYMENTS.
SUMMARY
This bill establishes a revenue sharing program that diverts a portion
of state revenue from income, sales and use, and corporation business
taxes into a new statewide municipal growth account and requires the
Office of Policy and Management (OPM) to disburse the funds as
“municipal growth dividends” to eligible municipalities (towns, cities,
consolidated towns and cities, and consolidated towns and boroughs).
Under the bill, these dividends start in FY 31 and are generally tied
to the amount of this tax revenue for a given year that the Department
of Revenue Services (DRS) determines is attributed to each municipality
compared to that amount for FY 26 (the “mun icipally attributable
revenue (MAR) baseline”). For municipalities that have received certain
state capital funds to support a municipal development project, the
dividend is instead (1) tied to the amount of the specified tax revenue
attributable to the project and (2) split with the state.
Starting with FY 30, the bill requires (1) the state treasurer to annually
transfer the total amount of municipal growth dividends for all
municipalities to the statewide municipal growth account and (2)
consensus revenue estimates to include a line item, designated as the
municipal growth dividend , reflecting the estimated amount of this
transfer. (Consensus revenue estimates are the basis for the governor ’s
proposed budget and the revenue statement included in the budget act
the legislature passes.) Under the bill, the statewide municipal growth
account is a separate, nonlapsing account that contains any money
required by law to be deposited into it, including any investment
earnings credited to the account.
Starting by November 1, 2030, the OPM secretary must annually
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report to the Finance, Revenue and Bonding and Planning and
Development committees on (1) each municipality’s MAR for the
applicable fiscal year and (2) any municipal growth dividends
distributed.
EFFECTIVE DATE: October 1, 2026
MUNICIPALLY ATTRIBUTABLE REVENUE
The bill requires DRS to determine, and provide to OPM, the (1) MAR
baseline for each municipality by November 1, 2028, and (2) amount of
each municipality’s MAR for each fiscal year starting with FY 30.
Under the bill, a municipality’s MAR is the sum of the following:
1. sales and use tax revenue attributable to sales made at physical
business locations in the municipality;
2. the withholding portion of the personal income tax attributable
to wages earned at physical places of employment in the
municipality; and
3. corporation business tax attributable to business activity
occurring within a physical nexus in a municipality. (The bill
does not define “physical nexus.”)
MUNICIPAL GROWTH DIVIDENDS
Amounts
Starting with FY 31, the OPM secretary must annually distribute
municipal growth dividends to municipalities that have MAR for the
preceding fiscal year that equals or exceeds their MAR baseline. These
dividends must generally equal 0.5% of each municipali ty’s MAR for
the preceding fiscal year.
The exception is for municipalities with municipal development
projects designed to support municipal economic growth that received
“instrumental capital” from the state. (The bill does not define
municipal development projects or instrumental capital for these
purposes.) In these cases, instead of receiving 0.5% of its MAR for the
preceding fiscal year, the municipality receives a municipal growth
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dividend attributable to the project only. The dividend is split, with half
going to the municipality and half going to the state, until the state
recoups the full amount of its capital expense in the project.
If a municipality’s MAR for a fiscal year is less than its MAR baseline,
it receives no municipal growth dividend distribution for that year.
Required Uses
Under the bill, each municipality must set up a municipal revenue
stabilization fund and deposit their municipal growth dividends in the
fund. They may use the dividends to (1) reduce their mill rates; (2) pay
for municipal services, as allowed under the bill; or (3) do both.
Municipal services funded with the dividends may either be one-time
expenditures or on-going expenditures, but the latter is allowed only if
the municipality’s legislative body certifies that the fund is sufficiently
capitalized to sustain the expenditure for at least three fiscal years.
BACKGROUND
2025 Law on Sourcing Revenue to Municipalities
A 2025 law requires DRS, starting with FY 26, to track and record the
source of state sales and use, personal income, and corporation business
tax revenue to accurately and fairly attribute the revenue from each of
these taxes to municipalities. The commis sioner must determine the
sourcing method for attributing this revenue to each municipality,
based on certain criteria established under the law. Taxpayers paying
these taxes must provide disaggregated information and any other data
the commissioner requests to carry out these requirements.
Annually, starting by October 31, 2026, the commissioner must post
on DRS’s website the amount of revenue from each of these taxes
attributed to each municipality for the applicable fiscal year (PA 25-168,
§ 391, codified at CGS, 2026 Supp., § 12-7e).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 43 Nay 11 (03/30/2026)