The General Assembly passed a $24.2 billion budget package in the final days of the legislative session, based on the state’s historic $4.8 billion surplus and federal disaster relief funding. of pandemic.
Lawmakers have relied heavily on Gov. Ned Lamont’s tax relief package he offered on the opening day of the 2022 session.
The budget revisions, which include $300 million in temporary personal tax relief and an additional $300 million in recurring cuts, are an election-year effort to address voter concerns about looming inflation November elections.
Budget revisions increase state spending by 6.5% from the current fiscal year, with new funding for state employee salary increases and bonuses, childcare, mental health, workforce development and social services.
There are few corporate tax cuts to spur the state’s economic recovery and prime it for long-term sustainable growth.
Tax relief measures
Tax relief measures include:
- Restoring property tax eligibility for those age 65 and older to the current income limits of $109,500 for single filers and $130,500 for joint filers and increasing the credit from $200 to $300 (section 412)
- Accelerating the phased exemption of pensions and annuities from income tax from 2025 to 2022. Single filers with adjusted gross income below $75,000 and joint filers with income below $100,000 $ are eligible. (section 414)
- Lower the motor vehicle property tax cap to 32.46 mills and reimburse local governments $100 million for projected revenue loss (Section 417-418)
- Extend the 50% Tax Credit for Employers Who Pay Up to $5,250 for Connecticut Higher Education Supplemental Loan Authority Employee Student Loans (Section 423)
- Extending the suspension of the 25-cent-per-gallon state gasoline tax through Nov. 30 to help mitigate record prices. (section 435)
- Offer a tax credit of $250 per child, capped at a maximum of three children per household. The credit is reduced by a certain percentage based on the income of the filer (Section 415)
- Enabling FTEs to Take Advantage of the Manufacturing Apprenticeship Tax Credit (Section 429)
- Providing $40 million in federal unemployment debt relief by reducing the state unemployment solvency tax for one year by an amount equal to the first year of a likely four-year increase in federal taxes. (section 213)
Tax credits
Article 158 of the bill also provides for a study to be conducted by the Ministry of Economic and Community Development on the feasibility of allowing companies of intermediate entities to take advantage of the R&D tax credit.
While it would have been preferable had the proposal been fully enacted, this study will help lawmakers better understand what the proposal might cost.
Lawmakers failed to restore the FTE tax credit to its original level, though the tax generates $700 million in additional revenue this year, costing small businesses $53 million per year.
The budget also did not exempt workforce training and personal protective equipment from sales tax and did not allow net operating losses to be carried forward beyond 20 years.
Section 465 of the budget also makes minor changes to what is reported in the tax implications report released by the Department of Tax Services on a biennial basis.
Property taxes
In addition, certain sections included in the bill will introduce new deadlines related to property tax appeals.
Sections 473 (the CFIA successfully lobbied for a corresponding Section 474 to be removed from the enforcer) will make it more difficult and costly for commercial and individual taxpayers to pursue appeals of excessive property assessments.
According to these articles, the burden of obtaining assessments within 120 days (CBIA negotiated in the last hours of the session to change it from a 90-day period) is unilaterally imposed on ratepayers without a corresponding obligation imposed on municipalities. , creating a fundamental injustice.
The valuation under appeal is not the result of a land valuation but the result of a mass valuation process, the quality of which can vary considerably from one municipal revaluation company to the ‘other.
The initial 90-day time frame was insufficient for larger and more complex commercial properties, particularly given the backlog and limited number of appraisers.
Fiscal discipline
In fairness, while the revenue package has left the business community high and dry in terms of relief, it should be commended for maintaining compliance with the spending and revenue caps put in place during the 2017 legislative session.
A number of early proposals sought to divert a percentage of funds that exceed the rainy days fund’s statutory cap to fund various programs, such as childcare, rather than continuing to be used to repay pension liabilities at long-term state.
Ultimately, the Lamont administration urged budget negotiators to maintain fiscal discipline and worked to find alternative sources to fund these programs.
Other items receiving final pass from the Finance, Revenue and Bond Committee include:
- HB 5473: Implements DRS recommendations for tax administration and revisions to tax and related laws. A few concerns were raised about this bill which the CBIA was unable to amend during the session. For example, the bill imposes a $5 million interest cap on refunds, limits claims for refunds on closed audit periods to six months (negotiated last year between AABC and DRS ) and allows the state to “reassess” sales and use tax cases. after having already carried out an audit and issued an assessment. DRS offered to engage with the business community on how to implement these provisions, and if they remain problematic, offered to collaborate in the next session to correct the legislation.
- HB 5475: makes minor and technical changes to tax and related laws.
- SB 464: Allows certain people to file an application for exemption from property taxes, notwithstanding certain statutory deadlines.
- HB5406: Requires the Secretary of the Office of Policy and Management, in consultation with the Commissioner of the DRS, to conduct a study of state fiscal policies.
Expense package
Budget revisions rely heavily on federal funding and reprofile funds to fund a wide range of policies.
The package includes $374 million for state employee pay raises and bonuses, part of a four-year, $1.9 billion deal between the administration and state employee unions. ‘State.
The budget increased programs under the Department of Developmental Services, the Department of Social Services and the Department of Mental Health and Substance Abuse Services, and the Office of Early Childhood through appropriations from the General Fund and Trust Funds. the American Rescue Plan Act.
While this budget provides additional funding for programs like Care4Kids, Birth to Three, private provider support and other programs, CBIA is concerned about the one-time nature of the funding and the creation of a fiscal cliff. over the next few years, which could lead to a reduction in services.
CBIA supports in-budget workforce development funding, including:
- $4.5 million for the Workforce Investment Act
- $1.4 million for the Manufacturing Pipeline Initiative
- $300,000 for the Office of Pandemic Preparedness
- $1 million for minority teacher scholarships
- $1 million for adult education
- $2 million for bilingual education
- $170 million to separate the Connecticut Technical Education and Career System from the State Department of Education
- $70,000 to establish a pilot HVAC training program within the Office of Workforce Strategy (with additional funding from already existing bonding authorizations)
- $1 million for CDL training at community colleges and associated programs (ARPA)
- $100,000 for Education Technology Training at Gateway (ARPA)
- $35 million for health workforce needs in public and private schools (ARPA)
- $150 million matching infrastructure (ARPA)
The budget also establishes the Connecticut Career Accelerator program account under OWS’ CareerConneCT workforce training program.
Additional expenses
Additional expenses to note include:
- $67 million for private providers
- $80 million for child care through the Early Years Office
- $4.3 million for rail operations
- $111.5 for the Early Years Office
- $40 million for need-based Roberta Willis Scholarships
- $170 in Invest Connecticut
- $20 million in one-time stabilization grants to the Department of Developmental Services
- $15 million for the Connecticut Summer at the Museum Program
- $3.5 million to the state Department of Education to increase college opportunities through dual enrollment
- $11 million for Magnet schools to cover one-year tuition
- $22.5 million for outdoor recreation
- $50 million for affordable housing
- $11.1 million for the repayment of the loan from the Ministry of Public Health
- $23 million to equip 5G on wagons
For more information on tax policy, contact the CFIA Eric Gjede (860.480.1784) | @egjede
For more information on state spending, contact AABC’s Ashley Zane (860.244.1169) | @AshleyZane9.
