CT Budget Passes: Here Are The Coming Changes

HARTFORD, CT — The State Senate passed the $43.3 billion state budget bill Tuesday evening and the bill will now head to Gov. Ned Lamont’s desk signature, which is expected. The Senate voted 20 to 16 to pass with Greenwich Democrat Alex Bergstein and Waterbury Sen. Joan Hartley joining all Republicans in a no vote.

The vote tally was 86-65 in the House with five Democratic legislators joining Republicans in voting no on Monday. The budget includes no tax rate hikes, but does include taxes on things that were previously exempt.

The Senate vote comes about 26 hours before the regular legislative session is set to end. That may sound close to the buzzer, but in recent years the budget vote has gone well past the regular deadline. The matter of instituting tolls in Connecticut is expected to be taken up later this year in a special session. The date of that debate is yet to be determined. It also would appear that a vote on recreational marijuana legalization is dead for now.

“This budget is fair, balanced, promotes economic growth and support for working families, and was delivered on time, enabling our towns and cities to know what they can expect in their budgets over the coming biennium and plan accordingly,” Lamont said.

The General Fund budget would increase by 1.7 percent in fiscal year 2020 over the current fiscal year and by 3.4 percent in fiscal year 2021, according to the state Office of Fiscal Analysis.

The budget process had one of its biggest questions answered recently after Gov. Ned Lamont came to a tentative agreement with the Connecticut Hospital Association over the hospital tax. CHA is expected to ratify the agreement this summer and then the General Assembly would have to ratify the agreement as well during a special session.

Lamont resisted a push by progressive Democratic legislators to add an additional two percent capital gains tax for the state’s highest earners.

Among some highlights:

• Keeps municipal aid flat funded for the next two years.
• Keeps Education Cost Sharing Formula and adds $112 million over two years.
• Teacher pension fiscal cliff smoothed out over more years.
• Includes debt-free community college plan that is funded by I-lottery proceeds.
• Adds money to Rainy Day Fund, which will be over $2 billion.
• Saves $185 million over two years through state employee and retiree healthcare changes.
• Includes $29 million over two years for wage increases for nursing home workers.
• Husky A adult eligibility expanded to 160 percent of the federal poverty level.

Tax/Fee Changes

• Imposes 10-cent fee on single-use bags and bans them after two years.
• Eliminates $250 business entity tax.
• “Mansion Tax” adds 2.25 percent tax on home sales over $2.5 million if residents move out-of-state.
• Pass through entity tax credit reduced from 93.01 percent to 87.5 percent. Expected to bring in $50 million more per year for state.
• One percent tax on prepared meals at restaurants, catering and grocery stores.
• Digital goods taxed at regular sales tax rate.
• Dry cleaning, parking and interior design services taxed at sales tax rate.
• Trade-in vehicle fee increases from $35 to $100.
• 10 percent tax on e-cigarette products and 40-cents per milliliter tax on “open” e-cigarettes. Brings taxes closer to regular tobacco tax levels.
• A 10 percent excise tax increase on alcoholic beverage purchases, but a reduction on craft brewery taxes.

State Treasurer Shawn Wooden said the restructuring of the teacher's pension found is sustainable for the state's long term stability.

“This moment was a long time coming," he said. "I applaud the General Assembly for tackling this challenge head-on. The restructuring will benefit taxpayers and teachers, and will allow scarce budget resources to be used for funding critical services as well as investments in our future.”

House Republican leader Themis Klarides said the budget bill boils down to tax and spending increases, including increases on businesses and rich residents moving out of the state.

“We are putting a tax on people of means who have homes of a certain amount who are selling their homes very likely because the policies of this state are pushing them out,” she said about the “mansion tax.”

She also criticized the new sales tax on interior design services, which are primarily businesses owned by women.

“We are affecting a women-dominated business and making them pay more,” she said.

Senate Republican Leader Len Fasano said Republican leaders were never asked to come together with other leaders from across the aisle to hammer out common ground on the budget. He accused Democrats of drawing a hard line before the session began on doing paid family leave, the minimum wage increase and other matters their way only.

He also predicted that the legislature would definitely be back to deal with a number of issues including a union deal that wouldn’t materialize, figuring out the hospital tax situation and budget shortfall down the road.