Finance Committee Moves Forward Without Adjusted Budget Plan
The legislature’s Finance, Revenue, and Bonding Committee wrapped up its committee work this week, advancing 26 bills to the House and Senate ahead of the April 4 reporting deadline.
The committee did not produce an adjusted revenue plan for the upcoming fiscal year.
The unusual move comes on the heels of an announcement earlier in the week that majority party legislative leaders opted to not make budget adjustments this session.
Any adjustments required adopting revised downward projections for revenue and budget cuts to fall within the state’s spending cap to reflect cost overruns and required spending to cover pension investment shortfalls.
Because the state constitution calls for biennium budgets adopted in even number years to cover the next two fiscal years, the state’s budget is technically already adopted for next fiscal year.
Traditionally, however, state officials adjusted that second year of the budget to reflect shifting spending priorities and any revenue projection adjustments.
Fiscal Guardrails
Instead, as the previously adopted budget is still in surplus using last year’s outdated revenue projections, legislative leaders are looking for ways to spend an additional $300 to $400 million on higher education, social services, and further expanding Medicaid through transfers within the adopted budget.
Any revenue intercepts to transfer funds from the General Fund to off budget accounts, however, would violate the state’s fiscal guardrails and draw stiff opposition from Gov. Ned Lamont and Republican legislative leaders.
CBIA also continues to advocate for the legislature to adhere to the fiscal guardrails.
The passing of committee reporting deadlines sets the stage for closed door negotiations with the governor that will ramp up following the April 18 consensus revenue projections.
Net Operating Loss Extension
The committee did approve a top business community priority, SB 443, that exempts taxpayers from paying interest on underpayments of corporation business, pass-through entity, and personal income taxes if the underpayment was due to an amended return filing required under IRS guidance on the federal employee retention credit.
The bill also extends, from 20 to 30 years, the period when corporations may carry forward a net operating loss deduction for corporation business tax purposes for losses incurred starting in the fiscal 2025 tax year.
This extension of the NOL carryforward period helps employers prioritize human and physical capital investment by smoothing entrepreneurial risk and encouraging innovation across all industry sectors.
Tri-Share Childcare Matching Program
CBIA joined a bipartisan coalition of legislators, childcare providers, and employers to support HB 5002, which the committee approved April 3.
The bill expands the Early Childhood Education Fund to include childcare initiatives while establishing a 17-member advisory commission for the fund.
It also implements the recommendation of the Governor’s Blue Ribbon Commission on Child Care, with the support of CBIA, to establish a Tri-Share Child Care Matching Program serving New London County in which childcare costs are shared equally between participating employers, employees, and the state.
Based on successful programs in other states, the program will help address the critical shortage of affordable childcare accessibility in southeastern Connecticut.
Pension Investment Fund
The committee approved SB 453, which represents another of CBIA’s 2024 Transform Connecticut policy solutions.
The bill requires the Office of Legislative Management to issue a request for proposals for a private advisory firm to preform an annual independent review of the state pension funds investment performance.
At a minimum, the report must include (1) an analysis of the state’s investment performance benchmarked against at least 50 peer state public pension funds across specified measures and periods; (2) a comparison of the state’s investment performance for each asset class against commonly accepted financial benchmark indices used by most other states; and (3) the advisory firm’s recommendations for improving the state’s investment management practices and processes.
Although the bill does not call for any structural changes as to how investment decisions are made, the reporting proposed in the bill will be a positive step towards enhanced accountability and transparency.
Student Loan Repayments
The committee approved SB 13, the governor’s proposal to extend the student loan repayment assistance tax credit to employer-supported repayment of all student loans.
The credit program offers employers who make a direct payment to a student loan servicer on behalf of a qualified employee a 50% tax credit for the amount of the payments.
Under existing statute, only student loans serviced by the Connecticut Higher Education Student Loan Authority are eligible for the credit.
This proposed change will help employers further utilize the credit to help attract and retain employees in Connecticut.
State Tax Credits
After discussing numerous tax credit proposals this session, the committee approved SB 448, whch establishes a working group to study existing tax expenditures in the state for the purpose of simplifying the tax code.
The proposal allows stakeholders to rexamine existing tax credit programs for their effectiveness and efficiency.
Billions of dollars in tax credits are earned by Connecticut companies each year, but many of the credits are not allowed to be applied to their tax liability under statute.
By helping companies leverage these credits in a more timely and efficient manner, policymakers can better stimulate job growth and overall economic expansion.
For more information, contact CBIA’s Chris Davis (860.244.1931).
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