Connecticut”™s $43.4 billion, two-year budget may have been completed by the Legislature”™s June 5 deadline, but a number of other issues remain unresolved, and it is unclear as to how many of them will remain in limbo until the General Assembly officially convenes again on Feb. 5, 2020.
Gov. Ned Lamont has called for a number of special sessions this calendar year, with expectations that legislators will return to weigh such issues as electronic tolls on the state”™s highways, the settlement of a 2015 lawsuit filed by the Connecticut Hospital Association over the state”™s controversial hospital tax and possibly the issue of state-sanctioned gambling.
The budget, which passed the House by a 86-65 margin, with five Democrats joining all Republicans in opposition, and by the Senate by a 20-16 vote, with a pair of Democrats joining all Republicans in voting against it, is still being debated by lawmakers on both sides of the aisle.
Lamont and Lt. Gov. Susan Bysiewicz maintain that the budget makes significant progress in stabilizing the state”™s fixed costs, does not increase income or sales tax rates on anyone, invests more money into education and workforce development, and does not cut municipal aid to towns and cities.
“The governor”™s budget increases income taxes on small business owners,” Republican Senate Minority Leader Len Fasano said. “It increases the tax rate on digital downloads, ridesharing services and alcohol. It expands the sales tax, adding a new tax to things like prepared foods sold in grocery stores and fast food restaurants, soda, safety apparel, parking and more. It puts a new tax on plastic bags. It creates new car registration fees. It increases business filing fees. It counts on $50 million in ”˜fee increases”™ that have yet to even be identified.”
Among the tax changes, digital downloads, dry cleaning, parking and interior design, previously exempt from taxation, will be taxed at the standard 6.35 percent rate. The state Office of Financial Analysis said such a move will raise $27.5 million in the first year of the budget and $37.1 million in the second year.
The sales tax on prepared meals and beverages, which would apply to restaurants, caterers, prepared meals at grocery stores and beverages that are dispensed at bars and soda fountains, are set to rise 1 percentage point to 7.35 percent.
A 10 percent fee on single-use plastic bags provided at the point of sale will be applied until June 30, 2021, when such bags will be banned.
“The reality is the governor”™s budget relies on $1.8 billion in new revenue,” Fasano continued. “The Democrat budget is also out of balance, as it counts on over $450 million in labor savings yet to be agreed upon in concept, let alone achieved.”
The $450 million is in reference to Lamont seeking permission from the State Employees Bargaining Agent Coalition (SEBAC) to refinance contributions into the pension fund for state retirees, which would be the second such refinancing in three years.
“We take issue with Sen. Fasano”™s claim that it is imprudent or improper for the budget to assume pension funding savings,” said SEBAC Chief Investigator Daniel E. Livingston. “While we have made clear that we are not open to a penny of further concessions beyond the $24 billion in savings we are already providing through the SEBAC 2017 agreement, we have indicated our willingness to consider ”˜win-win”™ changes, including the pension funding proposal included in the budget. We don”™t consider it unreasonable for the budget to assume the parties will agree to this change.”
The Connecticut Business and Industry Association also criticized the state government”™s activities during the legislative session. CEO Joe Brennan cited two measures that he said “hit the state”™s smallest companies particularly hard.” They are the paid family leave medical bill and the minimum wage increase.
With the former, employers must offer paid leave to their workers of up to 12 weeks at 90 percent of their compensation, with the program to be paid via a 0.5 percent tax on wages of employees, subject to later revisions to meet the program”™s funding needs, as of 2022. The state”™s minimum hourly wage of $10.10 will gradually be increased in stages until it reaches $15 by mid-2023.
“The paid family and medical leave bill was crafted in a way that makes it the most expansive in the country,” Brennan noted. “Among other things, it applies to businesses with as few as one employee, something no other state mandates.”
Lamont appears determined to push for electronic tolls, with no more than 50 tolling gantries on Interstates 84, 91, 95 and parts of Route 15 (The Merritt Parkway), as well as the creation of a Connecticut Transportation Commission that would set toll rates for various vehicles during peak and off-peak times. The governor and fellow Democrats maintain that would raise some $800 million in annual revenue.
Republicans oppose tolls, favoring their Prioritize Progress plan, which bypasses tolls in favor of $684.6 million to $863 million of annual bonding over the next nine years for transportation projects, along with the continuation of Special Tax Obligation bonds for the regular Department of Transportation capital program and a hard cap of $2 billion on annual general obligation bonds.
Resolution of the hospital tax lawsuit seems imminent. A tentative agreement was announced last month for the lawsuit, filed by the Connecticut Hospital Association, which argued among other things that the tax was unconstitutional. Financial terms of the agreement have not been announced. Indications are that hospitals would still pay about $500 million a year over the next two years, significantly less than they have since the tax went into effect in 2011. Lamont and the CHA said they expected a formal agreement to be announced soon.
On the gambling front, the governor has said that the state is trying to find a way to allow sports betting and internet gambling throughout the state without risking its 25 percent share of slot machine revenues from Connecticut”™s two tribal casinos.
The failure of an eleventh-hour bid by the Mashantucket Pequot and Mohegan tribes and the city of Bridgeport to open a casino in that city further underscores the complicated factors in expanding gambling in Connecticut. A resolution this year may be difficult.
A plan to legalize recreational marijuana for adults, which once appeared to have the support necessary for passage for much of the session, came to no avail. Supporters have indicated that a constitutional amendment legalizing the product may show up on next year”™s ballot.
