Sales Tax, Pension Changes Proposed By Lamont

HARTFORD, CT — Gov. Ned Lamont rehashed one of former Gov. Dannel Malloy’s ideas to have towns contribute toward teacher pensions along with a number of his own new structural reform ideas. Some ideas include new taxes on services including home renovations.

Lamont proposes that local boards of education be responsible for at least a quarter of the normal teacher pension cost that is currently paid by the state. Municipalities that have higher than average teacher salaries would pay more equal to how far off they are from the median salary. Distressed municipalities would contribute five percent of their normal cost.

Malloy made similar proposals in the past, but they failed to gain traction in the legislature. In 2017 teachers contributed six percent of their salary toward pensions while the state contributed 30 percent of their salary. Malloy proposed having towns pay about 10 percent of teacher salaries.

The move would hit affluent communities with higher teacher salaries harder. The state contributed about $24 million to Greenwich teacher pension obligations in 2017 for a system with 8,800 students while it contributed around $17 million to cover New Britain teacher pensions for a school system that had 1,200 more students.

Betsy Gara, executive director of the Connecticut Council of Small Towns said the organization is very concerned about Lamont’s proposal and that it could overwhelm small town property taxpayers.

“Requiring towns to pick up millions of dollars in teachers’ pension costs without giving towns any opportunity to manage these costs going forward is simply unfair,” she said. “Towns have had no say in managing the teachers’ pension fund or in negotiating benefits or contribution levels. In addition, binding arbitration laws limit the ability of towns to negotiate teachers’ salaries, which contribute to benefit costs.”

Lamont is also proposing paying off the unfunded teacher pension liability over a 30-year period instead of the current 12 year plan, which could lead to pension costs going up to $3.4 billion by 2032.

“The plan to restructure payments into the Teachers’ Retirement System represents a new road map for Connecticut’s fiscal future and stability, while minimizing the impact on taxpayers,” State Treasurer Shawn T. Wooden said. “It also will allow scarce resources to be directed to the right priorities like economic growth, education, and infrastructure that can move our state forward.

New Taxes

Lamont would largely eliminate exemptions for the sales tax with goods and services being taxed equally. This would make the tax the same for buying a movie DVD vs. downloading one if they are the same price. It would also add taxes to services that contractors, architects and engineers provide for home renovations.

Groceries would still be kept tax exempt. There had been much discussion that groceries might be taxed, but Lamont said he has no plans to tax our groceries. (To sign up for free, local breaking news alerts from more than 100 Connecticut communities, click here.)

Random exemptions like horse boarding, boat storage and campsite rental would largely be eliminated.

State Employee Pensions

On another front Lamont wants to make adjustments to the State Employees Retirement System that would save $131 million in fiscal year 2020.

Currently the state is scheduled to pay 20 percent of unfunded pension obligations for state employees by 2032 with the rest being paid off by 2046. Lamont wants to put it all on one schedule to pay it off by 2046.

He also wants to have cost of living adjustments for future retirees tied to market returns where living adjustments would go up by one percent in bad investment years and up to five percent if investments exceed targets by more than three percent.

He would also remove mileage reimbursements from pension calculations.

These provisions would be subject to negotiations with the state employee union.

Controlling Healthcare Costs

Lamont and Comptroller Kevin Lembo are proposing to negotiate maximum prices it will pay healthcare providers, hospitals and others for services. Lamont gave an example where a knee replacement might cost $50,000 at one hospital and $24,000 at another.

“Connecticut is going to call the shots on healthcare quality and cost,” Lembo said. “The healthcare market should be driven by transparent prices for quality products and successful outcomes for patients, not by arbitrary pricing schemes that seek to squeeze the state and individual consumers out of anything they’re willing to pay for care.”

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