By P.J. Cimini 

  On Wednesday, February 3, the 2016 General Assembly convened for the 2 year of the biennium.

The main focus of the Connecticut Carwash Association (CCA) this session will be on repealing the recently enacted sales tax on carwash services.

As you all know by now, in the waning moments of the 2015 session, the Connecticut General Assembly imposed a new sales tax on car wash services. Without any notice or public hearing, and following a frantic effort to raise additional revenue from as many sources as possible, the tax was added at the last minute in an all-night session on the last day of the session.

The carwash tax first came to light late in the Legislative session in the middle of the night. Unlike four years ago, when Democratic Governor Dannel P. Malloy proposed it, there was no public hearing where the owners could make their case. Connecticut previously taxed carwashes from 1989 to 1993.

The Special session was held on Tuesday, June 30, and the effective date of the new law was July 1 – effectively providing only 12 hours’ notice to the industry and consumers!

Since then the CCA board, and many of its members, have stepped forward to meet with key Legislators and staff to work to have a bill introduced.

Thanks to the leadership of State Rep. Jason Rojas (9th District) and State Rep. Roland Lemar (96th District) proposed Bill No. 5197 (LCO No. 385) has been introduced and referred to Committee on FINANCE, REVENUE AND BONDING. The bill calls for a full repeal of the sales tax on carwash services.

Over the next few weeks will be reaching out to many of you and asking for your help to 1.) Speak directly to your State Legislators and ask for their support of the bill; 2.) Join with us at the Public Hearing in support of the repeal bill; 3.) Get involved in our advocacy efforts via social media and on-line communications.

Given the state of the current Connecticut budget, we’ll need all your help to build support and try and get this measure repealed. A number of other important issues will be debated this year that the Association will be monitoring and working on in your behalf.

Governor’s Proposed Budget

Governor Malloy wants to dramatically change how the state budgets, to “reset our expectations of what we can afford, how we provide services, and how we save for our priorities.”  Reshaping the state budgeting process was the centerpiece of the Governor’s recent State of the State Address at the opening of the 2016 session of the General Assembly.

No longer can the state “wrongly assume government can do everything it does now, regardless of ever-growing costs,” said Gov. Malloy. “It just isn’t sustainable.”

Just as businesses and families have adapted to the changing realities of a tough economy by spending only what they can afford, said the Governor, so now must state government. “The Governor’s responding to what he’s hearing from residents and large and small businesses. State lawmakers will be in session from now until midnight, Wednesday, May 4, to consider a myriad of issues but most important, the Governor’s $19.87 billion budget revision.

Connecticut faces a budget deficit of at least $7 million for this fiscal year and approximately $550 million in the next, plus billion-dollar deficits in funding for state employee retirement benefits. Gov. Malloy’s proposal would cut 5.75 percent from all agency discretionary budgets and overall reduce state spending by $570 million in the next fiscal year, a budget cut of 2.8 percent from what had been approved. But the Governor went far beyond the revised budget numbers to call for a major overhaul of how the state works and budgets.

He outlined five principles to change the way the state budgets/reforms that reflect sentiments expressed by the state’s business community including:

  • Limiting spending to available resources by abandoning the “current services” system of budgeting which automatically funds every activity or line item previously funded, with inflation increases, every year. “Autopilot” spending increases, said the Governor, “must end, and … must end this year.”
  • Reforming the funding of long-term state employee pensions and other retirement costs
  • Defining state government’s “core services” to prioritize state spending. “Core services cannot comprise every single line item,” said the Governor.
  • Holding state agencies accountable for results, by focusing on outcomes and cost-effectiveness
  • Holding bipartisan budget talks, and “getting it done early. We welcome anyone to that table,” he added.

Town Hall Meetings

Gov. Malloy and Lt. Gov. Nancy Wyman will hold a Town Hall Forum in Middletown, and other areas of the state, to talk about the state budget, his proposals for adapting state government to a changing economy, and other issues concerning Connecticut’s future. Residents who would like an opportunity to ask the Governor a question should arrive about 30 minutes prior to the start of the event to submit their name on a sign-up sheet. The forum is open to the public and you should look for a notice in your local area of these important events.

Health Care Costs

The Legislature’s Insurance Committee held its first meeting of the 2016 session, and on its agenda, once again, were a slew of proposals that will increase healthcare costs by adding new health benefit mandates. Health benefit mandates are procedures and services the state requires health plans to include. The more procedures and services the state requires, the higher your premiums. And for those who receive a subsidy from the state’s healthcare exchange, the state must pick up the costs of new health benefit mandates.

Smaller employers help pay for their employees’ health benefits, which are very expensive. Smaller employers can’t afford even more mandates, and neither can the state. We’ll be urging lawmakers to focus on avenues that will lead to healthcare cost savings. Rejecting any new mandates would be a good first step.

Unemployment Compensation

Lawmakers from across Connecticut are hearing the same question from employers in their districts: Why have our federal unemployment tax bills skyrocketed over the last few years, and what will you do about it? Employers in Connecticut have been paying the highest federal unemployment taxes in the nation — $189 per employee this year, versus $42 in most other states — for a while.

And while that peak tax will end this year, businesses can’t afford to see it come back. The good news is that lawmakers can do something about it this year. And given that the economy continues to struggle, they shouldn’t hesitate. Legislators can follow the lead of their peers in other states and adopt basic reforms of the unemployment compensation system that helped those states return their systems to solvency much faster after the recession than did Connecticut’s.

The problem is Connecticut’s historic generosity in benefits paid to claimants — generosity that led to the state having to borrow nearly $1 billion from the federal government to cover benefits payouts during the depth of the recession.

Connecticut employers, who are responsible for footing the bill, have been paying that loan back ever since. With the exception of Rhode Island, all neighboring states charge less in state unemployment taxes than Connecticut.

Other states have adjusted their benefits by:

  • Raising the minimum earnings to qualify for unemployment benefits to $2,000. Claimants in Connecticut need only earn $600 in a year to qualify for benefits, the third lowest earnings requirement in the U.S. For perspective, 32 states/territories require between $2,000 and $5,000 in earnings.
  • Requiring claimants to post their resumes online to receive benefits after six consecutive weeks of unemployment. Rhode Island recently instituted this reform which studies show gets the unemployed back to work faster.
  • Basing benefits on an employee’s annual salary rather than two highest quarters, to avoid inequitably rewarding seasonal workers. Sixteen states base employees’ benefits on a full year’s salary.
  • Freezing the maximum weekly benefit rate for three years. The maximum benefit rate is allowed to increase by $18 every year. Freezing this for three years could save as much as $10 million per year.

These simple reforms will help keep Connecticut’s Unemployment Compensation Trust Fund solvent. Throwing more tax dollars at the problem won’t help. The best course to sustainability is long-term, measured reforms that will get us back on par with our neighboring state

 

 

 

 

P.J. Cimini, Esq. is the CCA’s Lobbyist and a partner in Capitol Strategies Group, LLC, in Hartford. You can reach him at

860/983-2581 or pj@csgct.com