State lawmakers are devoting a special session to resolving Connecticut’s next two-year budget, including considering Gov. Malloy’s proposals to modify what the legislature adopted earlier this month.

Numbers and figures are being debated but what’s really hanging in the balance is jobs.

The special session gives legislators the opportunity to reopen and rework the budget to better address Connecticut’s needs.

Narrow approval

A sharply divided legislature narrowly approved the budget earlier this month, signaling many lawmakers’ uneasiness with the plan.

The House approved it by a 73-70 vote (with eight absences), mainly along party lines but with 11 Democrats joining Republicans in voting against the bill.  Initially there were enough votes to stop the measure, but one-by-one votes were flipped until there were enough votes to narrowly gain passage.

The Senate also approved the budget by an extremely small margin 19-17, with two Democrats joining Republicans in voting against the proposal.

Since then there has been great public turmoil over the budget with some of Connecticut’s job creators, large and small expressing significant concerns over how it will impact jobs and economic growth in the state.

Wrong approach

The budget lawmakers adopted attempts to close a projected $3 billion budget deficit by increasing spending by $1.28 billion and hiking taxes—much of it on employers and the middle-class—by nearly $1.5 billion over the next two years.

What’s more, the budget reinterprets the state’s constitutional spending cap to allow increases of 4.1% in the first year and 3.1% in the second. It also walks back strategic tax policy, and weakens Connecticut’s climate for job creation and economic growth.

Welcome changes

Gov. Malloy subsequently proposed revising the $40 billion state budget by scaling roughly a third off its $700 million in business tax hikes and requesting legislators give him the ability to make some spending cuts.

Even with the proposed changes, the budget would grow by more than 3% and state taxes would increase--despite projections that Connecticut’s next biennial budget in two years would be out of balance by as much as $1 billion.

While the governor’s changes are welcome steps, systemic challenges remain.

Sustainable reforms

“We have said since the beginning of the budget debate that the lack of spending control and the tax increases proposed in the approved budget would cause serious and long-term harm to our economy and our ability to keep good-paying jobs in Connecticut,” said Joe Brennan, CBIA president and CEO.

Now is the time to adopt reforms that can keep state spending within taxpayers’ affordability, and provide state services to those in need more efficiently and more effectively.  

Proven, practical, and sustainable reforms, such as those the Connecticut Institute for the 21st Century has offered, can help accomplish those goals. The reforms include, but are not limited to areas such as long-term care, regionalism, and corrections.

In fact, the governor’s “Second Chance Society” proposal for corrections reform is one example of that kind of reform—providing better help to people while reducing the tax burden.

Level playing field

Lawmakers must also turn away from new tax increases that will only hurt our competitiveness and slow economic activity in our state.

Many other states—blue and red alike—are eschewing tax increases and adopting positive reforms in their major spending areas. And one of the best ways to create and keep good jobs in Connecticut is to make sure we’re on a level playing field with competitor states.

Tax changes

The tax changes proposed by Gov. Malloy would:

  • Cancel the planned increase in the sales tax on computer and data processing services (from 1% to 2% next year and then to 3% in fiscal year 2017)
  • Postpone for one year the mandatory combined reporting system, until January, 2016 (it was to be made retroactive to Jan. 2015)
  • Modify the reduction of the cap on state tax credits; the budget lowers the cap from 70% to 50%; the governor is proposing a new cap of 55%

In responding to questions the Governor noted he would be open to further discussions regarding the loss carryforward provisions, a tax matter of serious concern for many employers across the state.

CBIA urges lawmakers to reopen the budget during the special session and avoid any actions that will damage Connecticut’s economy and climate for job creators and the people of Connecticut.

For more information, contact CBIA’s Bonnie Stewart at 860.944.8788 | bonnie.stewart@cbia.com | @CBIAbonnie or Louise DiCocco at 203.589.6515 | louise.dicocco@cbia.com.