The 2010 General Assembly session ended on Wednesday, May 5. All legislators, and all statewide constitutional officers, are up for re-election this fall.
Despite a significant budget shortfall, the effort to re-impose the sales tax on carwash services was not passed and we were successful in fending off this very negative economic proposal for our industry. It is clear that a complete and total re-examination of the entire tax structure (income, corporate, sales) will be under intense review starting in January of next year. Connecticut will have a new Governor and will be facing another significant budget shortfall. Given the progressive nature of the General Assembly, it is extremely likely that we will experience additional efforts to impose the sales tax on our industry and other businesses.
A number of other issues that will impact the carwash industry were debated during the recent legislative session.
State Budget
The budget was approved by the Legislature before its adjournment. The $19 billion compromise between the Governor and legislative leaders increases spending by 0.9 percent, borrows nearly $1 billion for operating expenses and introduces no new taxes in an election year. The projected budget deficit of $700 million for fiscal year 2011, which started July 1, will be closed through a combination of one-time measures that include about $366 million from an extension of federal stimulus funds, tapping various accounts to boost the general fund, deferring a payment of $100 million into the state pension fund, and borrowing nearly $1 billion to balance the budget. Still, avoided were any structural changes to state government that could help the state start charting a better fiscal course. The budget fixes are mostly short-term, postponing the inevitable significant changes that will have to take place. State government has grown beyond the ability of taxpayers to afford it, and the recession has brought significant changes to Connecticut’s economy and traditional sources of revenues.
And while there were no direct tax increases in the budget, it does reduce but prolong, an additional charge on CL&P customers’ energy bills that was to expire this year. Instead, ratepayers will keep paying a lower charge (UI customers will follow), and the state will borrow against those dollars for the next eight years to patch the state’s budget deficit.
Also on the energy front, the budget diverts $29 million per year from a state energy conservation fund. There are few quick fixes left and multi-billion dollar state budget deficits are just around the corner. It is clear that a major restructuring and downsizing of state government is needed if the state is to finally deal with its fiscal crisis in ways that acknowledge the depth of our fiscal problems, but won’t stop our economic recovery in its tracks.
Clean Water Fund
These revenue bonds of $40 million would be authorized in fiscal year 2011 by Senate Bill 25, which the legislature passed and is awaiting the Governor’s signature.
General Permits
These permits could continue in effect by the DEP Commissioner for one year beyond their expiration date, provided the Commissioner publishes notice within 180 days prior to its expiration date under legislation approved in the House and Senate this week. HB 5209, which would implement the recommendations of the Governor’s Permitting task force, also requires water quality standards to be adopted by the regulatory rather than statutory process, which requires notice and adoption by the legislative Regulation Review Committee. The bill, which CCIA supported, goes to the Governor for her signature.
Paid Sick Leave
One of the most damaging labor proposals, paid sick leave, went far into the legislative session but ultimately died. Senate Bill 63, which would have required businesses with 50 or more employees to let workers accrue up to 40 hours of paid sick time a year, was not debated in the House or Senate and died after it was approved by two committees. It would have made Connecticut the only state in the nation to mandate paid sick leave. It also would have been too high a cost for many carwashes struggling to stay alive. Advocates, however, are already publicly saying they intend to bring the proposal back next year beginning in January, 2011. There was not enough support in the Senate and the Governor was expected to veto the bill if it passed, according to Sen. Edith Prague (D-Columbia), the bill’s main proponent in the legislature.
DEP Regulatory Reform
The product of great bipartisan effort, regulatory reform with a strong focus on the Department of Environmental Protection (DEP) was approved in the very last hours of the session. Contained in HB-5208, the reforms are designed to make it easier for Connecticut companies, including carwash businesses, to do business with the DEP and spark greater economic development.
Among other things, the legislation:
• Establishes time frames for completing the review of permit applications
• Creates a new program for expediting permits for projects of economic significance
• Creates a statewide permit ombudsman and requires the designation of a business ombudsman with the Departments of Environmental Protection, Transportation and Public Health
• Reduces permit application requirements for certain categories of facilities
• Establishes a review of procedures for adopting general permits and recommendations for improvement
• Sets up a new “consulting services program” within the DEP to improve compliance assistance
• Requires statewide standards that form the basis of water permitting to be adopted as regulations rather the current DEP-only process and
• Requires the use of various methods for reducing the impact of proposed regulations on small businesses.
This major regulatory reform legislation addresses an issue that has been consistently identified by companies and economists as a significant barrier in Connecticut’s ability to keep and attract new, high-quality jobs. Bipartisan support for the reforms demonstrates that Connecticut wants to move forward to protect its environmental resources in a way that also places a high value on jobs and economic investment.
Workers Compensation
Lawmakers also considered two harmful workers’ compensation measures, but both failed to gain approval. One proposal, which died at the end of the session, would have raised workers’ compensation costs dramatically. It took away employers’ ability to pre-approve routine medical examinations and treatments in workers’ compensation cases.
Worse, “routine” as defined in SB-61 was “anything recommended by a physician or surgeon” — an invitation to encourage all kinds of potential, costly treatments. Employers would be powerless to make sure that injured employees receive only the necessary and appropriate medical care they need in workers’ comp cases.
Small Business Assistance
Bill (HB-5435) will offer a wide range of help to Connecticut’s small businesses. Among other things, it creates a:
• Small-business assistance revolving loan program
• Angel investor program to encourage burgeoning companies
• Pilot program to help manufacturing companies implement green and lean strategies and a
• Loan-forgiveness program for Connecticut graduates pursuing careers in green technology, life science or health information technology.
Another bill, HB-5500, will help small businesses navigate state economic-development agencies more successfully. It sets up a Small Business Advisory Board to become single contact point for companies seeking financial and technical help from the state. Among other things, the board will coordinate all state small business revolving loan funds and launch a Webpage connecting the dots on small business resources.
Anti-Jobs Proposals Defeated
Facing a severe state fiscal crisis, lawmakers and many special interest groups made the business tax climate a battleground this year. Fortunately, even though legislators spent a great deal of time on them, none of the harmful business-tax bills passed this year. HB-5534, which would have established a commission to review the state’s tax landscape (including most importantly, the sales tax fairness issue), failed when it was not taken up in the Senate. Another tax-review measure, SB-432, also died when it was not taken up in the House. On the other hand, the state budget revision for 2011 has no direct taxes, but an extra charge on electricity customers’ bills that was to expire will be reduced, but not eliminated. And unfortunately, a proposal (SB-433) that would have clarified that the standard of proof in tax cases with no allegation of fraud is a “preponderance of the evidence,” and also failed to gain final approval.
P.J. Cimini, Esq. is the CCA’s lobbyist and a partner in Capital Strategies Group, LLC, in Hartford. You can reach P.J. at 860/293-2581 or via email.
