Transcript Slide 1

The State of the State: A Presentation on CT’s Budget and the
Issues That Defined the 2013 Legislative Session
State Representative John Shaban
State Spending: Time to Change Direction
Source: CT Business & Industry Association
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“The cost of state
government grew
dramatically over
the last 20 years,
outpacing
population growth,
inflation, and
median household
income.
Taxpayers don’t
have the means to
support that rate of
spending, which
drains dollars from
the economy and
discourages job
creation and private
sector investment.”
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The High Cost of Living and
Doing Business in Connecticut
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CT has negative job growth over the past
25 years. (DOL data)
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CT is last in nation in economic growth
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(The Tax Foundation)
CT is second worst in nation in personal
income growth (Bureau of Economic Analysis)
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CT ranks as 6th worst state to do business.
(Survey of 700 CEOs - Chief Executive Magazine)
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CT ranked 45th - economic competitiveness.
(Public Fund Survey)
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(money-rates.com)
CT has the latest tax freedom day in the
Nation: May 13 (The Tax Foundation)
Foundation)
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Cost of Doing Business – 5th Highest in
the country. (Milken Institute, 2007)
Ranked 7th for the state with the highest
number of residents leaving. (Forbes Mag.)
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Ranked 40th in Most Free States (George
State Business Tax Climate – 40th. (The Tax
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CT ranked worst state for retirement.
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Management Magazine)
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Percent Funding of State Retirement System
Liabilities – 3rd worst in the country at 58.3%.
Per Capita State and Local Tax Burden as a
Percent of Income – 3rd highest in the
country. (The Tax Foundation)
CT Legislature has been voted “Least
Business Friendly” in the nation. (Expansion
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(ALEC)
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3rd Highest Gas Tax in the US at 48.6 cents
(American Petroleum Institute) *Prior to 7/13 increase
(Bureau of Economic Analysis)
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Worst state for business property tax burden.
Worst place to practice medicine in the
Northeast (Medscape Medical News)
Mason University)
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State’s Roads Worst in Nation (American
Society of Civil Engineers)
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How Did We Get Here?
Budget July 2011 - June 2013
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Despite facing a $3.5 billion annual deficit, state spending continued to increase
and taxes continued to go up to the highest levels in the history of our state—to the
tune of $1.8 billion in new taxes.
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$222 million was borrowed to cover the operating deficit
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$70 million was swept from the Special Transportation Fund
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Annual spending increased by $1.3 billion between FY 2011 and FY 2013
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No funds were available to begin conversion to GAAP accounting
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The state’s cash pool was down more than $800 million from 2011 levels, “trending
downward” according to the state Treasurer
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Republican proposals to reduce spending were defeated and our warnings ignored
Warnings at the time: future deficits, more borrowing, further rating downgrades,
higher costs of debt, declines to service quality to citizens, and additional tax increases
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December 2012: Bipartisan Deficit Mitigation
The deficit mitigation plan was one example of the good work the legislature
can get done when both parties are sitting at the table.
• We passed the first budget-related bill in a long time that had no tax
increases.
• The plan closed the ENTIRE budget deficit, with legitimate spending cuts.
• Aid to municipalities was left virtually untouched - sparing property owners
unexpected tax increases relating to state aid.
• Republicans attempted to make significant reductions to the Earned
Income Tax Credit; in the negotiating process, we had to settle for a
commitment to reduce rampant fraud in the EITC.
• Going into negotiations, proposals to increase taxes on businesses,
consumers, and energy generators seemed imminent, but our strong
opposition resulted in the rejection of these proposals.
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This Year’s Budget
July 2013 to June 2015
• Removes $6 billion from the constitutionally adopted spending
cap
•Adopted in 1991 by the CT legislature with the support of 80% of
Connecticut voters. The Spending Cap is supposed to represent the
maximum amount the state legislature is allowed to expend in a given
year.
•Democrats shifted money out from under the cap without any support
from Republicans.
• Spends $44 Billion over the next two years, which is an
increase in spending of nearly 10%.
• Borrows $750 million for day-to-day operating expenses
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This Year’s Budget
July 2013 to June 2015
• Delays the payment of almost $400 million in debt, costing
taxpayers tens of millions of dollars in unnecessary
interest charges in the long run.
• Extends tax increases that were supposed to sunset this
year including the:
− 20% corporate surcharge on businesses adopted two years ago
has been extended for another two years costing $74 million over
a year
• Establishes Keno gambling in the state for the first time
– The state is expecting to raise only $3.8 million in revenue from
the game in 2014 and $27 million in 2015
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This Year’s Budget
July 2013 to June 2015
• Raids over $130 million from funds with dedicated
purposes:
− Transportation Fund- $100 million devoted to fixing roads and
bridges after a recent report shows 407 bridges in the state
and 102 in Fairfield County alone are “structurally deficient”
and 73% of roads are in “mediocre condition”.
− Stem Cell Research
− Tobacco Trust Fund
• Dedicates almost $1 million to process driver’s licenses
for illegal immigrants
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INCOME
July 2013-June 2014
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EXPENSES
July 2013-June 2014
Conservation,
Development, & Other
5%
Repayment
of Debt
$2,328.9
11%
Pension & Healthcare State Employees &
Retirees
11%
Transportation
3%
Health & Hospitals
9%
Nursing
Homes
7%
Social Services
Programs
22%
Education
21%
Regulation, Protection,
Corrections & Judicial
11%
Legislative
0%
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How Did The Business Community Fare?
Businesses are concerned about the budget’s spending increase and
one-time revenues that do little to get Connecticut off its cycle of deficits,
debt, and taxes. The budget will not instill the confidence that businesses
need in order to plan ahead and make the job-creating investments
necessary to drive the state’s economy.
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Business “Death Tax” Not only do we require businesses to pay a
tax of $250 to open its doors, but we also require a fee when a
business closes their doors, too.
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Gas Tax Increase On July 1st a portion of the gas tax will increase by
almost 17%. CT already has the 3rd highest tax in the U.S.
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Increase in Minimum Wage The law will change minimum wage to
$8.70 on January 1, 2014 and to $9.00 on January 1, 2015. CT was
already in the top 5 states for highest minimum wage rates.
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Corporate Business Tax A 20% tax imposed on businesses two
years ago was supposed to sunset this year and instead was
extended for another two years.
Republican Budget Proposals: Not Adopted
• Defined-Contribution Plans Proposed requiring newly
hired employees to enroll in retirement plans that more
closely resemble what’s offered in the private sector
(Defined-Contribution Plans) to reduce retirement costs
by 25%.
• Health Savings Accounts Proposed restructuring state
employee healthcare by requiring newly hired employees
to enroll in Health Savings Accounts, reducing health
costs by 25%. Currently, taxpayers foot the bill for 91% of
state employee health plans.
• Gas Tax Proposed repealing the scheduled 16% increase
in the gas tax. (Gross Receipts Tax)
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Republican Budget Proposals: Not Adopted
• Earned Income Tax Credit Proposed lowering it to just 10% -meaning fewer individuals who do not pay any taxes will
receive a tax refund check.
• Anti-Fraud Initiative Proposed a comprehensive anti-fraud
initiative. The proposal included increased staff; cutting edge
technology; enhanced penalties; additional compliance
verification; reporting requirements. These efforts would have
saved taxpayers hundreds of millions of dollars by stopping
welfare fraud in all forms - unemployment, Medicaid, food
stamps, and more.
• Pay Debts Now Rather than push off debt payments to future
budgets, we proposed to start paying off debt now—to the
tune of $400 million.
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Republican Budget Proposals: Not Adopted
• Hospital Funding Proposed to restore over $500 million in
Democrat cuts to hospitals, which will cost hospital workers
their jobs.
• Business Death Tax The State currently charges
companies to shut down – the so-called “business death
tax.” Republicans proposed eliminating these fees, which
range from $20 to $150, depending on the type of
company.
• State Employee Reductions Proposed limiting future hirings
to reduce the number of state employees by 3,000.
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Major Legislation
Notable and/or Controversial Measures Adopted
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Drivers licenses for Illegal Immigrants Requires the DMV to issue a
driver’s license to illegal immigrants who reside in our state in violation of
federal immigration laws.
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Campaign Finance Changes Rolls back the reforms enacted in response
to the Rowland scandals.
− Doubles the amount that a donor can give to state party committees
from $5,000 to $10,000 and doubles the amount that a person can give
to a town committee from $1,000 to $2,000.
− Removes limits on what committees can spend in support or opposition
to candidates.
− Allows organization expenditures to be used for negative campaign
communications.
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Mattress Recycling This new law requires mattress manufactures
establish methods for the disposal and recycling of used mattresses.
Consumers are charged a tax at the time of purchase that will fund the
recycling program.
Major Legislation
Notable and/or Controversial Measures Adopted
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UCONN Bonding Next Generation Connecticut is a $1.5 billion investment in
classrooms, dorms and lab equipment, as well as a move of UCONN’s West
Hartford branch into downtown Hartford and the creation of dorms at UCONN
Stamford. It will cost taxpayers $2.3 billion total due to interest payments.
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GMO Labeling This new law requires the labeling of foods containing
genetically modified organisms. There are trigger clauses built in: four other
Northeastern states need to pass similar labeling laws, and one of those
states needs to border Connecticut. The combined population of these states
needs to be at least 20 million.
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Early Voting The legislature removed the final hurdle leading the way to a
Nov. 2014 ballot question asking voters if they support some form of early
voting.
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FOI A new law was adopted that will block the release of photos, videos, or
digital video images "depicting the victim of a homicide, to the extent that
such record could reasonably be expected to constitute an unwarranted
invasion of the personal privacy" of the victim or surviving family members.
This is in response to the Sandy Hook shootings.
Major Legislation
Controversial Measures Blocked
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Elimination of the Independent Party Republicans fought against a
Democrat proposal to remove the word "independent'' from any
political party in Connecticut. This provision would have required that
those voters registered as Independent would have to register under
a new party.
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Decrease of the Drug-Free Zone Republicans objected to a
measure that would have reduced the size of a drug-free zone
around a school or daycare facility. Democrats would have reduced
the boundary from 1,500 feet to just 300 feet.
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Energy User Auction Proposed to force energy users to move from
the standard offer to a retail supplier of electricity.
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Conflicts of Interest with Municipal Employees Blocked by the
Democrats was a proposal to prohibit municipal employees from
serving on any governmental body charged with preparing the
municipal budget
Bipartisan Legislative Agreements
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Hurricane Sandy Response Legislation was adopted to make the
process of rebuilding after a major costal storm easier for shoreline
homeowners. The new law grants more flexibility to property owners to
protect properties in advance of a hurricane or tropical storm.
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DUI Arrests for Driving with Minors in the Vehicle This bill will make it a
felony to drive while intoxicated with passengers under the age of 16. A
first offense would carry a five-year sentence. It would increase to 10
years for a second offense and 15 years for subsequent offenses.
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Continuation of Education Reform The legislature committed $355M
additional money to improving education in our state. Four new charter
schools will be funded, more students to attend magnet schools and funds
will be available for the new statewide teacher evaluation system.
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Small Business Express Expands the existing program to include
companies with up to 100 employees, and provides additional funding to
meet the demand from small businesses.
Bipartisan Legislative Agreements
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Frivolous Lawsuits Allows the judicial system to deny fee waivers for
people who frequently file frivolous lawsuits.
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Renewable Energy Tax Exemption Phases in a requirement to offer
property tax exemptions for businesses that use renewable energy
sources to provide power for their business.
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Early Release Program Reforms the early release program to ensure
that no violent offender gets out of prison before serving at least 85% of
their sentence.
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Gun Trafficking Provides $1 million for the Gun Trafficking Task Force
and increase penalties for illegal trafficking of guns.
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Sex Trafficking Imposes increased penalties for sex trafficking and
requires additional reporting.
Additional questions?
Please Contact Us
State Representative
John Shaban
Legislative Office Building
Room 4200
Hartford, CT 06106
800-842-1423
[email protected]
www.RepShaban.com
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State Senator
John McKinney
Legislative Office Building
Room 3400
Hartford, CT 06106
800-842-1421
[email protected]
www.SenatorMcKinney.com