Governor Malloy proposed a $43.8 billion state budget for the next two fiscal years that increases current spending by more than 9 percent over the biennium and extends three business taxes that were set to expire.
While the Governor did propose the extension of the corporation tax surcharge, electric generation tax, and insurance premium tax credit limit that were to sunset on June 30, he did not propose repealing the Car Wash Sales Tax exemption.
The budget policy fight now moves to the Legislature, specifically the Finance and Appropriation's Committees that will ultimately settle the tax and spending parts of the two-year budget. During this time, many special interests will be lobbying and advocating for an increased tax base (on items like our carwash services) in order to increase the state revenues coming into State Government to pay for their favored spending programs.
We will be working with key Legislative Leadership and Committee Chairs and Finance members to prevent this issue from becoming law. We'll need your help, so please work with the Connecticut Carwash Association (CCA) leadership and Legislative Committee to help support our small businesses.
Economic Priorities
The Governor did put forward a number of initiatives designed to help the Connecticut economy grow in the 21st century. Among his proposed initiatives are those boosting STEM (science, technology, engineering and math) instruction at the University of Connecticut ("Next Generation Connecticut,") the state's biosciences sector, and early education (a new state office, and an increase in the educational cost sharing formula). Also positive was the Governor's commitment to the state's successful Small Business Express program that has already helped 500 businesses and has a waiting list.
In addition, through bonding, he wants to provide support to towns for schools, roads and bridges, and economic development programs. In other tax changes, the Governor proposes to exempt most vehicles in Connecticut (the first $20,000 in assessed value) from the property tax; reinstate the tax exemption for clothing up to $25; and offer a personal income tax "tax amnesty" program.
Streamlining Government
The Governor also proposed some more state agency consolidations and centralized functions. Prior to the budget address, the Governor announced plans to rebalance long-term healthcare services and assist community-based nonprofit providers in improving the delivery of critical services. The budget also aims to simplify the state contracting process by standardizing financial reporting for private providers, streamlining payment processes, and creating a new, multi-agency centralized contracting unit for several agencies.
Some proposals in the budget would increase the Governor's ability to better manage the budget in deficit situations. They include increasing his rescission authority from 5 percent of the overall budget to 10 percent; and extending it to municipal aid.
Spending Cap, Borrowing
Despite the fact that he made significant reductions in the current services budget, taking out $1.8 billion across several areas (including aid to hospitals, Medicaid coverage, and by ending the Charter Oak Health Plan) the governor's budget proposal still increases current state spending by more than 9 percent over the next two years. What's more, the Governor proposes to modify the state's constitutional spending cap and increase borrowing in order to accommodate his initiatives. This approach, however, fails to avoid addressing the state's burdensome long-term liabilities, especially for healthcare and state employee retiree benefits that must be addressed.
Next Steps
The Governor's message is the first step in a long budget-approval process. Over the next several months the legislature and administration will negotiate the content of the final budget before bringing it to a vote later in the session. We will need to continue to lobby our local legislators, most importantly those on the Finance Committee which has control over taxing measures in the budget
Small Business Express Program
Having already helped nearly 500 small businesses in Connecticut, the state's Small Business Express program is now getting some help of its own from the legislature's Commerce Committee. This program has been one of the Department of Economic and Community Development's (DECD's) top economic development tools. Since it was rolled out in 2011, the Small Business Express program has provided financial assistance in the form of grants and loans to hundreds of Connecticut's small businesses. The assistance may be used for the purchase of equipment, machinery or business expenses, as well as job creation financial incentives.
Not only has the program helped small businesses overcome the financial and economic obstacles thrown at them by the recent recessionary economy, it has enabled them to retain more than 5,000 jobs and create 2,000 new ones. What's more, despite all the businesses helped so far, there's an extensive list of additional businesses hoping to receive much needed financial assistance from this program.
New Mandates to Cost
Connecticut's state health insurance exchange has already adopted an Essential Health Benefit package that defines the group of benefits that insurance companies must offer in their products in the state in 2014. However, while the EHB package includes all of the state's existing health benefit mandates, new mandates proposed during this legislative session would not be included in the EHB package — and therefore would become a direct cost to the state. Under the federal healthcare legislation, federal dollars will be applied to cover Connecticut's existing EHB package for people receiving subsidized coverage through the state exchange. If state lawmakers adopt any new benefit mandates this year, Connecticut will have to subsidize their costs.
Small Business Impact
More important, the cost impact of any new benefit mandates will fall mainly on Connecticut's small businesses like our carwashes and affiliated vendors and businesses. Health benefit mandates are state laws that require fully-insured health plans to cover various healthcare services. Since most small businesses purchase these fully-insured plans (larger businesses tend to self-insure), additional mandates will leave them vulnerable to the extra costs. And because the federally subsidized EHB package cannot be opened up and modified until 2016, at the earliest, small businesses would feel the cost impact for several years.
P.J. Cimini, Esq. is the CCA's lobbyist and a partner in Capitol Strategies Group, LLC, in Hartford. You can reach him at 860/293-2581 or [email protected].
