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Lawmakers will begin the three-month, 2014 General Assembly session Wednesday with a discussion of job growth, economic development and - at least on the bottom line - a budget surplus.
"The theme is to continue the effort on jobs and economic growth so that the average middle-income, lower-income resident of the state actually feels the recovery that is happening elsewhere in the economy," Speaker of the House Brendan Sharkey, D-Hamden, said last week.
The state collected more revenue than expected, so its elected officials are trying agree on how to use the resulting $505 million more than was budgeted and how to boost employment in a state whose unemployment rate of 7.4 percent remains above the national average.
In an election year, the pressure is on to help provide residents with employment opportunities and businesses with flexibility.
Last month, the governor's Office of Policy and Management and the nonpartisan Office of Fiscal Analysis agreed that the state will enjoy a surplus of more than $500 million on the books this year. Gov. Dannel P. Malloy has proposed using $250 million to bolster the state's rainy day fund, pouring $100 million into the state's pension fund and injecting $155 million into the economy via a modest gas and sales tax refund for taxpayers.
Malloy, who began his term in 2011 with a $3.6 billion deficit, called this an achievement. But some local legislators said the $500 million windfall is not really a surplus because the state borrowed at least $560 million in October to close a deficit that grew larger when Generally Accepted Accounting Principles were applied. This method of accounting matches income earned and expenses incurred in the same period.
"There is no surplus," state Sen. Andrew Maynard, D-Stonington, said.
In addition, the Office of Fiscal Analysis has projected budget deficits of more than $1 billion for 2016, 2017 and 2018.
House Republicans have proposed using $268 million of the unexpected revenue for debt payment and the remainder to provide tax breaks for the public.
They propose saving businesses $60 million by eliminating the special assessments used to pay off interest from a state loan for unemployment benefits; starting the planned $50 clothing and footwear sales tax exemption earlier than June 1, 2015; and restoring the sales tax exemption on non-prescription drugs.
Gubernatorial candidate and Senate Minority Leader John McKinney, R-Fairfield, said Republicans agree with paying down the state's debt and shoring up the rainy day fund. However, after the roughly $1.5 billion tax hike that was passed in 2011, a one-time tax refund doesn't cut it, he said.
The state will continue to have $64 billion in long-term liabilities and projected budget deficits after the election. Unless the economy dramatically improves, Maynard said, there is no point in trying to find ways to spend or give back the money.
Proposed budget revisions
The governor has been rolling out parts of his spending and revenue plans in advance of the formal budget address he will make to the General Assembly Wednesday.
On Friday, he proposed a $450 million tax relief plan that includes a $155 million gas and sales tax refund in the 2015 fiscal year and phasing in 50 percent of teachers' pension benefits from the state income tax, which would give retired teachers $46.8 billion during the 2015 and 2016 fiscal years. Malloy's proposal includes exempting non-prescription drugs from the sales tax to save taxpayers $33.7 million over the same period. A sales tax exemption for clothing under $50 is projected to save taxpayers $160 million over two years.
"As our state economy continues to improve, we need to make sure that everyone shares in our emerging recovery," Malloy said Friday in a press release.
The new tax cuts proposed by the governor - which also include extending a tax credit for "angel investors" who provide capital for business start-ups - would amount to $51.5 million in the 2015 fiscal year and $52.9 million in the 2016 fiscal year.
The governor also is proposing an insurance premiums tax cut that would save municipalities that purchase health insurance plans $17.7 million over two years.
Malloy would add funds for mental health, including $5 million for underserved populations, $2.2 million to support housing and services for 110 individuals with mental illness and $250,000 for an anti-stigma campaign.
For job creation and economic development, the governor would create an Advanced Manufacturing Fund of $25 million to help the state's manufacturers modernize, expand and grow jobs. He has proposed preventing discrimination against the long-term unemployed by prohibiting employers from advertising a job as open only to employed people and from screening applicants based on employment status.
His fellow Democrats, who hold the majority in both the House and Senate, have announced a 2014 jobs and business plan, some of which comes from the bipartisan 2011 jobs bill.
They want to increase funding to the state's Step-Up program, which offers employers who hire the unemployed a wage subsidy or a training grant for the first six months.
Democrats are proposing a new school-to-jobs program with features such as a 12-month certificate program that combines high school diploma preparation with real-world skills training, and an Advanced Manufacturing Certificate Program in which students combine paid work with associate's degree courses.
Democrats also would pre-approve zoning and environmental reviews for business renovations and new construction in order to make the process more efficient for businesses. They want to create a procedure for selecting, cleaning, marketing and selling state properties to private developers. Currently, the state must identify potential buyer interest before beginning to prepare a property for sale.
Senate President Pro Tempore Donald Williams, D-Brooklyn, said Senate leaders want to create a state port authority as part of an economic development plan. Maynard proposed a bill for a port authority last year, and although it passed in the Senate, it never came up for a vote in the House. The port authority would coordinate efforts among the ports in New London, New Haven and Bridgeport.
"Without a port authority, we have seen competition among different ports in Connecticut, when the ports should be competing against ports in other states," Williams said.
Reform and relief
Sharkey, the House speaker, said the Municipal Opportunities Regional Efficiencies Commission has been meeting since the last legislative session, charged with finding ways to restructure the state's taxation system.
He said he will propose that nonprofit organizations, such as hospitals and private colleges, be required pay municipal property taxes. Currently, they are exempt. The institutions could apply for partial reimbursements through the state's Payment in Lieu of Taxes program, Sharkey said.
Municipalities receive PILOT money to compensate them partially for the inability to collect property taxes from nonprofit entities.
"(Nonprofits) should be contributing because … the notion of their nonprofit status is starting to wear thin," Sharkey said. "Hospitals are not entirely, although nonprofit, they are certainly profit centers. Is it appropriate anymore to exempt them?"
Under his proposal, institutions would have the option of reaching a voluntary agreement with a municipality instead of paying property taxes, he said.
House Republican Leader Larry Cafero, R-Norwalk, said he would propose one bill that could have local impact. It would require the state to clean up 1,000 acres of state-owned industrial sites or brownfields. Republicans want to level the playing field for businesses, he said, adding that he had the Preston Riverwalk property, the former Norwich State Hospital, in mind.
Instead of giving Preston $5 million to clean up part of the property and to try to woo investors who are hesitant because they don't know the costs of the entire cleanup, the state could clean up the entire property, he said.
"Let's clean it up and tell the world so people, developers, can know with peace of mind, if they buy it and develop it, they won't have to worry," Cafero said.