Blog: Legislation

Jobs & the Economy, Taxes & Government Spending, Education, Legislation

2014 CT Legislative Session: The Good, The Bad, and The Ugly

  • May 14, 2014
  • by CPI Staff
2014 CT Legislative Session: The Good, The Bad, and The Ugly

The 2014 CT legislative session ended last week.  Here are some of the session's most important policy developments, including what was good, what was bad, and and what was just plain ugly (spoiler alert: it's the budget).  

 

The Good

New Early Childhood Education Funding

The legislative session included several expansions to state education funding, most notably new funding for early childhood education.  This is a positive development, though the state must do more to ensure that early childhood education funding is spent effectively.  For more on how government can most effectively fund early childhood education, see this CPI op-ed in Education Week and this CT Mirror op-ed by Hope Child Development Center Executive Director Georgia Goldburn.

Reforms to Judicial Pension Guidelines

The legislature made a small but positive change to the eligibility rules for judicial pensions, reducing the standard pension (two thirds of salary) by ten percent per year for judges who retire before serving ten years on the bench.  The change was inspired by judges confirmed to the bench this year who will receive pensions of around $100,000 per year after working as little as four years.  These judges’ pensions, currently the leading vote-getter for the CPI’s 2014 Golden Fleece Award, will not be impacted by the changed eligibility rules as those changes only apply to judges appointed after July 1. 

The Bad

One Step Closer To State-Run Retirement Program For Private Sector Workers

One of the least advisable proposals of the legislative session was an attempt to establish a state-run retirement plan for private sector workers and require any business without a retirement plan to set up direct-deposit and payroll-contribution systems for the state plan.  While this proposal did not pass in full, the legislature did pass a bill creating a new state board to design a mandatory state-run retirement plan and submit it to the legislature for final approval by April 2016.  See this CPI blog post for more on why this is a bad idea.

Tax Breaks For Select Companies While Overall Business Climate Suffers

Connecticut’s government this session continued its pattern of offering generous tax breaks to select companies, paid for with higher taxes on everyone else. 

Specifically, the legislature passed a bill providing UTC $400 million in tax breaks to support $500 million of facilities investments in the state. The tax breaks are tied to capital investment rather than job creation, so UTC could actually reduce the size of its Connecticut workforce and still receive up to 90 percent of the tax breaks. 

The problem with incentives like these is that they have to be paid for with higher taxes on everyone else, contributing to the poor business climate in Connecticut that leads companies like UTC to consider leaving in the first place.  For instance, $118M of spending in the current budget is paid for by a 20% corporate tax surcharge that the legislature could have repealed.  And the legislature failed to act on a proposal to repeal the state’s business entity tax, which raises only $40M per year in revenue yet is a major deterrent to small business creation in the state, forcing companies to pay a fee even if they are not yet turning a profit.  For CPI's award-winning analysis on when state incentives for business are a good idea – and when they are not – see this CPI policy paper and op-ed.

The Ugly

The Connecticut government began the legislative session debating what to do about a projected $500M surplus.  But when income tax revenue came in at much lower levels than the state had projected (something the CPI warned about in January), the legislature had to resort to more than $180 million in budget gimmicks to keep the budget “balanced” at all.  These gimmicks included:

  • $75M in projected new revenue from "enhanced" tax collection techniques, even though the state's largest 50 business tax delinquents owe only $9M in combined unpaid taxes;
  • Failing to budget for $52M of expenses related to an expected surge in worker retirements that Comptroller Lembo says will be needed (the Malloy administration says the workers won't retire even though they are eligible);
  • $20M in fictional spending reductions from yet to-be-identified efficiencies, rather than actual cuts;  
  • $35M in transfers from one-time money in dedicated use funds to pay for ongoing programs.

These new questionable budget moves come on top of $625 million of borrowing to cover operating expenses and $400 million of unsustainable, one-off revenues included in the budget when it was first passed last year.  Unsurprisingly, the legislature’s Office of Fiscal Analysis projects annual budget deficits of over $1 billion per year going forward.

Jobs & the Economy, Legislation

Benefit Corporations Coming To Connecticut?

  • Feb 19, 2014
  • by Helen Fang & Ben Zimmer
Benefit Corporations Coming To Connecticut?

The Connecticut General Assembly is considering legislation that would create a new corporate form in Connecticut – the “benefit corporation.”  Benefit corporations are for-profit companies that receive no preferential tax treatment from the government.  But unlike traditional companies they are required to pursue a “positive impact on society and the environment,” as assessed against a third-party standard, in addition to the economic interests of shareholders.

Benefit corporations have become increasingly popular with advocates of so-called socially responsible investing, and legislation allowing for benefit corporations has already been passed in twenty states.  There are currently more than 550 benefit corporations across the country, including clothing-maker Patagonia and brownie-producer Greyston, which supplies Ben & Jerry’s.

Anyone investing in a benefit corp. understands that economic returns may be lower than with a traditional corporation, so there is no reason not to allow new companies to incorporate in this way if they wish.  On the other hand, if an existing publicly traded company wishes to reincorporate as a benefit corporation, their present shareholders could be harmed.  Delaware, where 50% U.S. publicly traded companies are incorporated, addresses this risk by allowing publicly traded companies to reincorporate as a benefit corporation only with the approval of 90% of shareholders.  Connecticut’s proposed bill would allow this change with only a 2/3 majority. 

The Connecticut General Assembly should pass legislation allowing for the formation of benefit corporations under CT law, but only after amending the proposal to include protections as rigorous as Delaware’s for shareholders of existing publicly traded companies. 

About the Author: Helen Fang is a CPI Policy Analyst; Ben Zimmer is CPI's Executive Director

Government Administration, Legislation

Stay Engaged With the 2014 Legislative Session Through CPI

  • Feb 04, 2014
  • by Ben Zimmer
Stay Engaged With the 2014 Legislative Session Through CPI

The 2014 Connecticut legislative session begins tomorrow.  The Connecticut Policy Institute will be providing several ways for you to stay on top of what’s going down in Hartford without having to invest too much of your own time.

Weekly Bill / Hearing Tracker & Analysis

Every day, the CPI will be tracking the proposed bills, scheduled hearings, and other legislative activity with the most direct impact on ordinary Connecticut residents and businesses.  We will post weekly summaries and accompanying analysis on our blog, and also include them in our weekly newsletter.  For more frequent updates than once a week, follow us on Facebookor Twitter.   

2014 Legislative Awards

For the second straight year, the 2014 legislative session will feature the CPI's, "Connecticut's Choice Legislative Awards" -- a lighthearted and interactive way for Connecticut residents to engage with the legislative session and hold political leaders accountable.  Anyone can submit a nomination for an award through this form, and the winners are determined entirely by popular voting on our website. 

Below are the four awards, with the 2013 winners listed.  Last session we received more than 25 nominations and 500 votes across all four awards.  This year we’re hoping to get even more participation, so if you see a policy proposal that makes you cringe or laugh be sure to submit a nomination and encourage your friends to vote. 

Worst Policy Idea

2013 winners:  First place: Gov. Malloy's ongoing "First Five" and "Next Five" programs paying companies to move to or stay in Connecticut.  Second place: An Act Requiring Use of Gender-Neutral "People at Work" Signs by the Department of Transportation.

Golden Fleece Award

2013 winner: $120M of State Spending on Hartford-New Britain Busway (plus $10M annually in operating costs)

Biggest Time Waster Award

2013 winner: Legislative Hearing Debating Who Decides How Long Hookah Lounges Can Be Open

Absurd Quote Award:

2013 winner: Gov. Malloy's claim that Connecticut is "leading the way" on job creation

New Policy Research & Recommendation

Stay tuned for new CPI policy papers in the coming months featuring research, analysis, and recommendations on:

  • Urban policy
  • Unfunded state mandates on municipalities
  • Public pension liabilities and CT's long-term fiscal outlook
  • Education Policy

About the Author: Ben Zimmer is the CPI's Executive Director

Taxes & Government Spending, Education, Legislation

CT Government Weekly Rundown—September 16

  • Sep 16, 2013
  • by Alexandra Forrester
CT Government Weekly Rundown—September 16

House Speaker To Revive Debate on Car Tax, Municipal Tax Reform

Connecticut House Speaker Brendan Sharkey announced Thursday that the upcoming 2014 legislative session will once again address municipal property tax reform.  Last session, municipal leaders shot down Sharkey’s proposal to standardize and phase out local property taxes on cars, arguing municipalities need the tax revenue.  Municipal leaders have indicated they may once again object to a phase-out of the tax.   Sharkey stressed the importance of increasing local government efficiency to make up for the lost revenue, and plans to re-launch the legislature’s Municipal Opportunities and Regional Efficiencies (MORE) Commission to identify savings opportunities.  The Connecticut Council of Municipalities has noted that one driver of Connecticut’s high local property taxes, on cars in otherwise, is the large number of unfunded municipal mandates – i.e. costly things that the state government requires localities to do, without providing them the resources do them.

What it means for you: Connecticut is one of two states in the nation to have a car tax that is not part of a broader tangible personal property tax, and the only one to have the magnitude of the tax vary by locality. Is this a good way for Connecticut to stand out? Tax specialists say no.  But it does seem odd for state government to denounce high local taxes while simultaneously mandating local government spending.   

Audit of Connecticut’s Community Colleges Finds Deficiencies

An auditor’s report for the Connecticut Community colleges released on Wednesday found “significant deficiencies” in the oversight of finances at the colleges.  Issues the report cited included improper controls over school inventory, failing to follow proper notice and bidding procedures for large purchases and contracts, and paying part-time instructors for classes that were cancelled.  The report’s author characterized the missteps as “small on their face, but we're looking at protecting controls that may lead to bigger losses of … resources."  The audit looked at Fiscal Years 2010-2011, when the community college system had its own board of trustees.  That board has since been merged with the board for the state’s regional colleges.  You can read the full audit report here.

What it means for you: The dollar amounts at issue in the identified missteps represent a small portion of colleges’ budgets, but any time taxpayer money is not properly managed it should be a matter of public concern.

About the Author: Alex Forrester is a policy analyst for the CPI

Jobs & the Economy, Regulation, Legislation, Elections

Wrapping Up the Legislative Session

  • May 10, 2012
  • by CT Policy Institute

The General Assembly’s legislative session ended this week with a flurry of activity.  With the Democratic Party in control of both chambers of the legislature and the governor’s office, the democrats pushed through a number of priorities on largely party-line votes.  However, splits within the Democratic Party on certain issues such as minimum wage increases left a few major bills on the table as the session ended.

The measures that passed included:
• Legalizing Medical Marijuana
• Supporting Unionization of Healthcare Workers
• Allowing Same-Day Voter Registration
• New Performance Standards for Utilities

The proposals that did not pass, for now, included:
• Minimum Wage Increase
• New Jobs Bill