The Connecticut State Capitol in Hartford.
From left to right, Senate President Pro Tem Martin M. Looney, House Speaker Joe Aresimowicz, House Minority Leader Themis Klarides, and Senate Republican leader Len Fasano talk with reporters during 2017 budget deliberations. Kyle Constable / CTMirror.org file photo

Gov. Ned Lamont’s new state budget is less than a week old, but the pressure already is shifting to the General Assembly to protect the tax cuts it passed last year.

Seniors, teachers, hospitals, corporations and other groups are pressing lawmakers to deliver the tax relief they pledged in 2017 — and campaigned on last fall — even though Lamont says Connecticut no longer can afford it.

“What we are concerned about is how things pile up,”  said Nora Duncan, state director of AARP Connecticut.

Lower- and middle-income seniors face some of the highest property taxes in the nation, pay state income taxes, and now face a proposal from the governor that would place an asset test on elderly medical assistance and raise sales taxes by hundreds of millions of dollars by canceling exemptions.

And AARP’s nearly 600,000 members also took note when Lamont said Connecticut can’t afford nearly $60 million in income tax breaks for retirees. This relief — enhanced exemptions on Social Security income, pensions and annuities — was enacted 16 months ago, but scheduled to take effect in 2019.

Equally important, Duncan said, legislators approved that relief by a wide, bipartisan margin.

AARP members “are looking to us and their legislators, so many of whom promoted their affirmative vote on this issue in their 2018 campaigns for re-election, to stop this repeal,” she said.

Nora Duncan, state director of the Connecticut AARP ctmirror.org

The AARP is not alone.

Retired Connecticut teachers await similar relief. While 25 percent of their pensions are income-tax-exempt, that’s supposed to grow to 50 percent this year. The governor’s budget recommends canceling that as well.

The same goes for a 10 percent surcharge on the corporation tax, which is supposed to expire now — but otherwise will cost businesses almost $100 million over the next two fiscal years combined.

Connecticut’s college students are watching the fate of a new income tax credit designed to help pay off their school debt. That’s worth almost $12 million over the next two fiscal years to graduates with science, engineering and math degrees who stay and work in state after school.

And the biggest tax break hanging in the balance is Connecticut’s provider tax on hospitals. It’s a complicated arrangement of tax payments by hospitals and supplemental funds returned back to the industry — all designed to leverage more federal Medicaid dollars for the state.

The industry was scheduled to see its effective tax burden shrink by nearly $190 million per year, but  Lamont proposed canceling that and replacing it with a $43 million increase.

“There is no predictability in what is happening,” said Bristol Hospital President Kurt Barwis, who said the unstable tax situation wreaks havoc with hospitals’ abilities to provide specialized care, replace critical equipment and make capital improvements. “Every year it’s a different deal and we’re in disaster mode, managing cash and managing projects.”

Nancy Andrews, spokeswoman for the Connecticut Education Association — the state’s largest teachers’ union — said the group understands the tough choices facing Lamont and the legislature.

But teachers also must plan for their retirements, and it’s getting harder to do so in the state, she said.

“Placing this tax burden on educators who dedicated their lives to teaching our children is a disincentive to them staying in Connecticut and participating in our state’s economy,” Andrews said. “Many retirees move out of state and take up residence in Florida and dozens of other states where they do not tax any part of retiree pensions.”

Bristol Hospital President and CEO Kurt Barwis. Arielle Levin Becker / CTMirror.org

Connecticut Business and Industry Association Joseph F. Brennan praised Lamont for freezing income tax rates and for seeking concessions from state employee unions. But Brennan has said repeatedly that the key to encouraging companies to add workers and expand their business is a stable tax environment.

In other words, if you adopt tax relief, deliver it.

The new governor, who proposed a $42.3 billion, two-year budget to the legislature last Wednesday, has asked taxpayers to consider he is attempting something unprecedented.

Lamont is trying to avert a major, projected deficit — $3.5 billion to $3.7 billion over the next two years combined— without raising income taxes.

But that’s not all.

He also wants to restructure Connecticut’s massive pension and bonded debt to end the cycle of deficits projected for many years down the road. And he’s doing it with significant limitations on his ability to lay off state workers, meaning he has little leverage to negotiate with unions.

None of that is likely to happen, Lamont said last week, unless some things change.

“This is the ‘Land of Steady Habits,’ but we can’t continue along the same path and expect that things will fix themselves,” the governor said. “Our state needs to make real, substantive structural changes to facilitate a sustainable financial future.”

Lamont’s budget director, Office of Policy and Management Secretary Melissa McCaw, put things more succinctly.

“Folks there are no easy choices,” she said. “There is pain throughout” the budget.

But what about the legislature?

Lamont administration budget director Melissa McCaw briefs the media on the governor’s proposal last week. Ryan Caron King / Connecticut Public Radio
Lamont administration budget director Melissa McCaw briefs the media on the governor’s proposal last week. Ryan Caron King / Connecticut Public Radio

Democrats widened their margins in the House and Senate in last November’s elections and now hold majorities in both.

But does that really matter, given that both parties voted overwhelmingly for these tax breaks as part of a budget compromise?

At that time, legislators excluded lame-duck-Gov. Dannel P. Malloy’s administration from final negotiations after nearly eight months of attempts to reach a budget agreement had failed.

No one expects lawmakers will exclude Lamont’s administration from budget negotiations this spring after only four or five months in office, however, and Democratic leaders were diplomatic last week after the governor called for suspending the tax relief.

“A majority of these are not just my priorities, but things I touted and ran on” last fall, House Speaker Joe Aresimowicz, D-Berlin, said. “It took a lot of effort to put them in place and I want to preserve them.”

But the speaker also said he has a deep appreciation for the problems Lamont is tackling and the fiscal stability he said he wants to bring to Connecticut.

“He is as advertised,” Aresimowicz said, adding that applies not only to Lamont’s goal, but to his pledge to take an “open-door” consensus approach toward the next state budget. “I believe those tax cuts are going to be on the table.”

Senate President Pro Tem Martin M. Looney, D-New Haven, said “the governor obviously has his own take on this budget, but now it’s in our hands. … Governor Lamont has said he wants a collegial process and he has not drawn any particular lines in  the sand.”

Looney added that there remains “substantial support” in his caucus for the tax relief Lamont wants to rescind.

But Looney’s Republican counterpart, Senate Minority Leader Len Fasano of North Haven, said that while he also appreciates Lamont’s efforts at inclusiveness, the new governor could have given more weight to these bipartisan legislative priorities in his own budget.

“The first thing he did was to dismantle a historic — on many levels — bipartisan budget,” Fasano said, adding that he believes his caucus will  support retaining the tax cuts. “Just because you can change course doesn’t mean you should change course.”

The top Republican in the House, Minority Leader Themis Klarides of Derby, said Lamont has made it clear his budget proposal is only that — a proposal — and that other opinions are welcome.

“Clearly we are at the starting point of doing a budget now,” she said.

But Klarides also said much of the tax relief in the bipartisan budget were longtime Republican initiatives that remain GOP priorities.

“These are things that we fought for for many, many years,” she said. “We’re going to continue to fight for that.”

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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14 Comments

  1. Teacher Unions negotiated to not be under the Social Security system. Then they insisted that teacher pensions be exempt because they don’t receive Social Security. This is all nothing more than paying back the unions for their political support, both inside and out of the classroom. As if that weren’t enough, the politicians in control in Hartford keep trying to absolve themselves of paying the entirety of those pensions by throwing them back at the towns while cutting the ECS grants to most of those towns.

    1. When asked what Unions wanted Samuel Gompers said “More always more”. Word is not many teachers retire in CT. Taxes are too high. And property values are declining. Words is Florida is CT’s teachers retirement dreamland. God bless.

    2. Teacher tax break….. Malloy lost their support after bad-mouthing them and later offered the tax break before his election. He claimed it was b/c they didn’t receive SS, but no mention of police/fire who also don’t pay into SS. Attorney Malloy likes to play dumb, but knew full well.

  2. The tax exemption for state worker pensions should be eliminated – unless withdrawals from 401Ks and IRAs get hte same treatment.

  3. An excellent article. Don’t be surprised by an increase in taxpayers leaving the state. There’s no reason to stay, especially if one is about to retire. Take the hit in your house value and leave.

    1. Vacationing in Florida we’re just astonished at the numbers of CT “retirees” seeking new quarters. Florida’s retirement communities are seeing an utterly unprecedented housing boom. CT is a small state but the number of CT license plates in Florida is awesome. Leaving no doubt the CT Exodus is real.

    2. I agree. Firm Democrat control means that there will be no end to the tax and spend spree we’re on in Connecticut. Personally, I’d rather take a loss on the house on the way out of the state than be be complicit in the state bankruptcy schemes being hatched in Hartford. Its really sad to see but it will only get worse. Much worse.

  4. By now even the most devoted CT Democrats must realize that Gov. Lamont is following the old script. Only this time its sales tax hikes, not income tax hikes. Gov. Lamont was likely never interested in becoming CT’s savior who would tackle the decades long economic, budget and pension problems that set back CT. So is business as usual in Hartford. The only safe bet in the new CT budgt is that CT’s public Unions salaries/benefits/pensions will remain untouched.

    And as long CT public Unions are protected we can be fairly sure our municipal Unions in our 169 towns and cities will demand no less. With public Unions comprising CT’s largest “industry” CT’s Exodus will continue as America moves forward in the greatest sustained post War economic expansion ever witnessed. Ensuring a sustained Exodus from CT. Not only retired folks but their children seeking careers elsewhere.

    That’s the awesome trajedy unfolding. CT taxpayers paying billions to educate their children and seeing a mass migration of “human capital” leaving CT. That outflow all but guarantees CT’s cities will remain depressed for decades as our best educated youngsters leave CT. While adjoining Massachusetts and New York reach unparalleled heights of prosperity.

    The great “economic reality” across the developing and developed world is that “its all about its cities”. But CT’s leaders have truly forgotten its long depressed cities. That’s just mean spirited.

  5. An excellent discussion of the absurdity of promising such tax relief when everyone knew full well we would face massive deficits going forward. But let’s remember the bigger picture: CT’s economy has been shrinking for a decade; it is now about the size it was in 2005. A shrinking economy makes the situation worse and worse: that needs to be addressed–and it large measure it is being ignored. The poster child is probably the hospital tax–CT alone among states has grossly mismanaged it, costing the state jobs, household income, and tax revenue. What is being proposed will make the situation worse, not better.

  6. An excellent discussion of the absurdity of promising such tax relief when everyone knew full well we would face massive deficits going forward. But let’s remember the bigger picture: CT’s economy has been shrinking for a decade; it is now about the size it was in 2005. A shrinking economy makes the situation worse and worse: that needs to be addressed–and it large measure it is being ignored. The poster child is probably the hospital tax–CT alone among states has grossly mismanaged it, costing the state jobs, household income, and tax revenue. What is being proposed will make the situation worse, not better.

  7. With a decade long stagnant economy/employment level the over riding requirement to make progress is to avoid further tax hikes and spending increases. Overall tax burden pre-empty tax incidence. As college economics students learn.

    So far there’s no evidence either the Governor nor the Legisalture will hold either spending or the total tax burden unchanged. So we know our future – higher spending and taxes. Malloy III.

  8. The only folks not being proposed to pay more taxes are the top 1 percent. The working class and middle class is being asked to close the $3 billion dollar deficit. So why is Lamont in the Democratic party?

  9. Threatening to leave Connecticut because of the state’s fiscal mess does not bring us a whit closer to any budgetary solution. So, respectfully, if you feel the financial and/or moral need to leave, then just go. Then those of us who remain can at least give our newly elected governor a chance to pose solutions to the state’s fiscal difficulties.

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