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June 2005 — Vol. 83, No. 5

COVER STORY

Your last chance ...

... to urge legislators to help, not hurt, our economy

As its June 8 deadline nears, the legislature is debating bills on the state budget and taxes, health insurance, and other business- related issues.

 

By the time you read this, state legislators will be counting down the days until this year’s General Assembly session ends June 8. And that means you have only a week or so left to dissuade them from approving bills that will increase business costs or otherwise make it harder to do business in Connecticut.

Most of the 900 or so anti-business bills proposed since the session began in January have died. But many have been given a green light by various legislative committees over the past few weeks. (So have several positive bills, for that matter — for example, the governor’s transportation plan.) The bills of concern would, among other things, push state spending above the constitutional spending cap, raise taxes, increase health benefits costs, and remove a key workers’ compensation reform.

As of mid-May, these bills had not yet been voted on by the entire General Assembly. That means legislators can still be persuaded to do what’s best for business growth and job creation.

Will they do that? That could very well depend on whether they hear from you and other businesspeople.

“CBIA’s lobbyists have been talking to legislators at the Capitol every day of the session. A number of legislators have told us they haven’t been hearing from many businesspeople, but they have been hearing from people on the other side of the issues,” says Joe Brennan, CBIA vice president for public policy.

“Most legislators don’t have firsthand knowledge about what businesses are up against these days,” he continues. “They often think a particular bill is a good idea, not realizing all of the ramifications for businesses and the economy. That’s why we’re urging our members to contact legislators before the session ends.”

Below are the most crucial business-related issues still on legislators’ agenda at press time in mid-May.

Spending plan above cap

One of the most worrisome issues is the budget approved by the Appropriations Committee. The budget for fiscal years 2006 and 2007 would allow state spending to significantly exceed the constitutional spending cap and would require $1.21 billion in new taxes, according to the legislature’s Office of Fiscal Analysis.

The budget includes $648 million more in spending than the $31.1 billion budget proposed by Gov. Rell in February. The committee’s plan would increase spending 9.4% in fiscal 2006 — the biggest jump in 16 years and well above the 4.06% increase allowed by the constitutional spending cap for that year. In fiscal 2007 budgeted spending would rise 4.6%, again exceeding that year’s spending cap (3.54%).

Connecticut voters approved the constitutional spending cap in 1992 as a way to ensure that the state’s new personal income tax wouldn’t result in excessive state spending. The cap, which is tied to either personal income growth or inflation, can be exceeded only if the governor declares an emergency or extraordinary circumstances and at least a 60% majority in both the House and Senate vote in favor of it.

Gov. Rell declared extraordinary circumstances when she presented her proposed budget. But she wants to exceed the cap only to qualify for federal matching dollars for nursing homes. She has said she will not support going over the cap for any other reason.

The governor and legislative leaders have been meeting since late April to try to reach an agreement on the issue.

CBIA has been opposing the committee’s budget because of the overall level of spending, says Brennan.

Business, personal taxes to rise?

The Finance Committee rejected a number of tax proposals that would have hurt the state’s economy. But the committee’s approved tax package still calls for more than $100 million in new business taxes — including a three-year corporate tax surcharge — and increases in the personal income and inheritance taxes.

Here’s what will happen if that tax package becomes law:

  • A corporate tax surcharge of 10% for tax year 2005, 15% for 2006 and 15% for 2007 will be levied on corporations.
  • The personal income tax rate will rise to 5.75% for single filers earning more than $265,500 and couples earning more than $500,000. Individuals earning more than $1.062 million and joint filers earning $2 million or more will be taxed at 6.5% for the 2005 calendar year. Rates will rise again in 2006, to 6.75% for joint filers earning $2 million.
  • The inheritance tax, which was to be phased out by 2008, will become part of a new inheritance, gift and successors tax. Under this tax, a person may give or bequeath up to $1 million tax free to a relative or a third party. Amounts above $1 million will trigger a tax starting at 1%.

CBIA is urging legislators to continue looking for ways to control spending in order to reduce the need for tax increases. “We’re also trying to make sure none of the bad tax bills that were defeated come back as amendments before the session ends,” says Brennan.

Those bills included a proposal that would eliminate various corporate tax credits and deductions unless they were reauthorized every two years, and a proposal to repeal most sales and use tax exemptions and lower the tax rate from 6% to 2.5%.

“CBIA appreciates the decisions made by Finance Committee members who responded to businesses’ concerns about these bills,” says Brennan.

What you can do: Tell legislators why they need to keep taxes and other business costs as low as possible.

Health benefits costs could worsen for many companies

As things stand now, many businesses would face higher costs not just for taxes but also for health benefits.

“Even though many legislators say they realize health care costs are a serious problem for employers and employees alike, several bills that would make matters worse are still on the table,” says Bonnie Stewart, CBIA counsel.

The bills include:

  • A “pay or play” proposal that imposes a tax on employers with 5,000 or more employees if their health benefits are not as rich as the benefits state employees receive. The tax would fund a state-run pool that would provide health care coverage for full-time employees that is substantially equivalent to the coverage provided to state employees. Most full-time state workers have no deductible for standard office visits, and co-pays of only $10 for routine services such as outpatient visits and $3 to $6 for prescription drugs. Few private-sector employers can afford to offer such generous benefits. The state-run pool would also incur administrative costs for the state, increasing state spending.
  • More mandated coverages for group health plans, despite the fact that Connecticut already has more mandates than most other states. (One bill, though, that CBIA supports requires the Insurance Department to do a cost-benefit analysis of all health care mandates in Connecticut and determine their impact on insurance premiums.)
  • A bill exempting the state-run Municipal Employees Health Insurance Plan (MEHIP) and association group plans from the state’s small-business insurance rating reforms. This would allow covered plans to “cherry pick” small businesses with the best health risks, forcing most small businesses into other, more costly plans.

These bills don’t address the main reason some people lack access to health benefits: soaring medical costs. Instead, by driving up costs, the bills will increase the numbers of uninsured.

What you can do: Let legislators know how rising costs affect your company’s health benefits and ability to create new jobs.

Repeal of workers’ comp reform would cost $9 million in 1st year

A proposal repealing a landmark workers’ compensation reform would cost Connecticut employers $9 million in the first year alone, according to the National Council on Compensation Insurance.

The proposal, if approved, will eliminate the Social Security offset for workers’ compensation benefits. That will mean claimants can collect replacement income from two sources — something state legislators specifically ruled out when they approved the offset as part of the 1993 workers’ compensation reforms.

Most states offset workers’ compensation benefits, usually for Social Security. Eliminating this offset would create a significant disincentive for employees to return to work.

What you can do: Urge legislators to reject any proposals that would increase workers’ compensation costs and hurt Connecticut’s economy.

CBIA supports transportation bill

One bill that CBIA is supporting would implement the major transportation initiative proposed by Gov. Rell earlier this year. The legislature’s Transportation and Appropriations committees have approved the bill, but it still needs to be OK’d by other committees before it can be voted on by the full General Assembly.

The bill, SB-1057, includes funding fornew Metro-North cars, rail-maintenance facilities and commuter buses; projects to reduce traffic congestion on I–95; and improvements to I–84 and I–91.

CBIA believes the bill addresses Connecticut’s most critical transportation challenges in a fiscally responsible manner. It also offers the opportunity to lay the foundation for raising the revenue that will be needed to address all of the state’s transportation needs.

What you can do: Urge legislators to support the transportation bill so the state can begin to improve its infrastructure.

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