Legislative Session: The Good, Bad, and Missed Opportunities
The 2022 legislative session was framed by Connecticut’s historic $4.8 billion surplus and the choices policymakers made—and did not make—leveraging those dollars and federal pandemic relief funds.
The budget deal struck between the Lamont administration and legislative Democrats contributed an unprecedented $3.5 billion toward the state’s huge unfunded state employee retirement liabilities.
CBIA president and CEO Chris DiPentima applauded that move, saying it “represented an important step toward securing Connecticut’s long-term fiscal health.”
“That was a smart use of budget surplus dollars and a reminder of the crucial role the 2017 bipartisan fiscal reforms played in getting us to this point,” DiPentima said.
“It was disappointing that some lawmakers wanted to dispense with those reforms—Connecticut has a long road ahead to pay down our huge unfunded liabilities and we must maintain fiscal discipline.”
The $24 billion budget package increases state spending 6.5% above the current fiscal year, with new funding for childcare, mental health, workforce development, and social services.
DiPentima welcomed the budget’s $600 million in individual tax relief, calling it “a small step in the right direction for addressing the state’s high cost of living.”
“The labor shortage remains the single biggest threat to our economic recovery and Connecticut’s lack of affordability is a contributing factor,” he said.
“And while any tax relief is welcome, only $300 million of what’s in the budget package is recurring, so there are questions about the long-term impact beyond this year.”
Unemployment Loan Debt
DiPentima called the modest $40 million that policymakers allocated toward the state’s federal unemployment loan debt—just 8% of the $495 million balance—a “major missed opportunity to support small businesses.”
“That’s essentially now a $400 million-plus tax hike on employers,” he said, noting that businesses face tax increases up to 22% over the next four years to pay off the loans.
“It’s terribly shortsighted—a majority of states are using federal COVID relief funds to pay down their unemployment loans and, in many cases, replenish their trust funds.”
The budget allocation for the unemployment debt was $25 million less than a new $65 million unemployment loan the state took out from the federal government just last month.
The budget revisions invest more than $100 million from the General Fund and federal pandemic relief funds to expand childcare infrastructure, boost funding for Care4Kids, and increase infant and toddler slots by 1,300.
DiPentima noted that the lack of affordable childcare is another factor driving the worker shortage, with CBIA part of a collaboration that included nonprofit providers and state agencies that backed new spending.
“We must get people back to work—our labor force decline since February 2020 represents half of the region’s losses and 14% of the country,” he said.
“The investment in childcare, the additional funding for workforce development, and the $50 million allocation to support affordable housing initiatives are real positives in this budget.”
State Employee Raises, Bonuses
The budget agreement also includes $374 million for state employee salary increases and bonuses, part of a four-year, $1.9 billion agreement between the administration and state employee unions.
DiPentima noted broad concerns with the state employee contract agreement that the legislature approved during the session.
“Given the budget deficits looming in fiscal 2024 and beyond and the extraordinary cost to taxpayers, this was not a fiscally sound decision,” he said.
“It also missed the opportunity to adopt long-term initiatives to streamline and modernize state government operations.
“The administration’s CREATES Report identified 200 opportunities to reform state government, with $600 million to $900 million in annual taxpayer savings.
“What happens to that report now? Does it end up on some dusty shelf?”
Small Business ‘Indifference’
The budget expands the manufacturing apprenticeship tax credit to small businesses and repeals taxes on ambulatory surgical centers and movie theaters.
DiPentima said the legislative session was largely “a disappointment for employers, particularly small businesses.”
“Policymakers had a real opportunity to support small businesses and make smart investments to help resolve the labor shortage and drive our economic recovery,” he said.
He cited the legislature’s failure to restore the pass-through entity tax credit to its original level—despite that tax generating an additional $700 million in revenue this year—as “symptomatic of an overall lack of focus.”
“The legislature also passed over a chance to support small businesses by giving them access to the R&D tax credit program, choosing to kick it to a study instead,” he said.
DiPentima said he remained “puzzled” by lawmakers’ seeming indifference to small businesses, “many struggling to recover from two-plus years of hardships and disruptions.”
“There’s unfortunately a growing disconnect between some in the legislature and the realities that small businesses face as they navigate past the last two years and rebuild,” he said.
Eric Gjede, CBIA’s vice president of public policy, said the session will also be marked by passage of a bill drastically restricting employer-employee communications in the workplace.
“Not only does it reflect an adversarial attitude towards employers as they work to rebuild our economy,” he said, “it’s also a flagrant preemption of federal law and if not vetoed by the governor, will be settled by the courts.”
Gjede thanked the Republican and Democratic lawmakers who opposed that bill, adding that employers “appreciated their courage for standing up to special interests determined to destroy our ability to compete.”
He noted that CBIA and other employer groups “spent too much of the session on defense trying to address legislation that fails to address the labor shortage and undermines our recovery.”
“We went into the session with a clear message that Connecticut needed to build on the successes of last year, elevate small businesses, and fuel the recovery with workforce development and affordability solutions,” he said.
“Unfortunately, the distractions of an election year resulted in a real lack of focus—we made marginal progress on labor force challenges while the high costs and administrative challenges of doing business here did not ease.”
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