The 2010 Connecticut General Assembly ended with little major reforms and a growing realization that the major problems facing the state will have to be dealt with the next Legislature after the election. We encourage all carwash owners and employees to stay involved and active in the political process during this fall. Many of the key decision makers will be determined during this election season.
Below is a brief update on political and governmental activities that have ensued since the last issue of the Northeast Carwasher.
A package of “truly transforming” regulatory reforms will create greater certainty in the business community and provide a much-needed spark for Connecticut companies including the carwash industry. Governor Rell signed the reforms into law earlier this month and called the new changes “reform we can all embrace.” She added that the law “will make Connecticut much more business friendly (while striking) a very important balance by safeguarding our environment.”
The law requires speedier permitting at the Department of Environmental Protection (DEP), more help to businesses with compliance, and better coordination between state agencies—all of which should help move projects more quickly from planning to reality while keeping strong environmental protections.
The law is wasting no time by fast-tracking certain improvements, such as for:
• Establishing new permitting deadlines (the goals are 60 days for application sufficiency and 180 days for technical review)
• Setting up a consulting services program within the DEP
• Creating a business ombudsman within the DECD who will facilitate coordination with all state agencies
• Reviewing how the Connecticut Environmental Protection Act is impacting state businesses. Most of the review deadlines for these improvements are by early fall this year.
The reform movement got a big push early in the session from the Governor who created a Permitting Task Force and gave it 45 days to develop recommendations.
Energy Bill Vetoed
In another pro-business move by the Governor, she vetoed a massive energy proposal (SB-493) the legislature approved at the very end of the 2010 session.
The bill would have expanded state government by creating a new state agency, the Connecticut Energy and Technology Authority. According to the state’s nonpartisan Office of Fiscal Analysis, the costs of this government expansion would have been significant.
SB-493 called for investments in various renewable energy sources beyond ratepayers’ ability to afford them. The lion’s share of these investments was dedicated to solar energy — one of the most expensive types of renewable energy sources, and more costly than other fuels used in Connecticut. With an estimated cost to ratepayers of $1.4 billion over the life of the new solar programs, said the Governor, “It is simply not the right time to make an investment of this magnitude.”
The Governor also noted that the proposal surfaced at the very end of the legislative session and as a result did not go through a formal public hearing process. Businesses and industry representatives were not able to weigh in on the massive bill before lawmakers voted on it.
Budget Update
A slightly stronger economy has given state policymakers a bit more breathing room when it comes to this year’s budget. According to officials, Connecticut ended fiscal year 2010 on June 30 with about $150 million more in tax revenues than anticipated.
It’s not a “surplus,” but those extra revenues will allow the state to borrow less in order to balance the books in the current (2011) fiscal year. Policymakers agreed to borrow nearly $1 billion to cover this year’s spending commitments and avoid cutting any more state spending or increasing taxes. Borrowing at that high a level was a controversial move, given anticipated deficits of more than $3 billion in each of the next two fiscal years.
Though economic recovery continues this year, statewide and nationally, we are not experiencing a self-sustaining jobs turnaround. Still, Connecticut has now had six consecutive months of job growth. The June jobs report showed that after losing 3,500 temporary government census jobs, the state still posted a net gain of 500 jobs — reflecting the strongest month for private-sector jobs in more than two years.
What’s more, many segments of the state’s labor market showed some growth, meaning Connecticut’s jobs recovery is starting to become broad-based.
Health Care Reform Update
With every ambitious new law come high hopes and often false expectations. Witness the newly enacted federal health care reform. The Patient Protection and Affordable Care Act (PPACA) is one of the nation’s most far-reaching and controversial domestic policy changes in decades. Advocates say the PPACA is the panacea that we’ve all been looking for one that will provide health insurance for nearly every American and cost less in the process.
However, that’s not the opinion of experts whose job it is to analyze such laws. The Centers for Medicare and Medicaid Services (CMS) say that while many things are still unclear, two things are relatively certain: PPACA will result in more people being covered by health insurance, and health care costs will increase.
Big Picture
Health care spending will increase by $311 billion from 2010 to 2019 under PPACA, says CMS, mostly due to greater utilization of services, lower Medicaid reimbursement rates paid to providers and lower payments for Medicare services.
According to CMS, about 15 percent of providers will become unprofitable and may find it necessary to stop participating in Medicare. Since Medicare and Medicaid are already underfunded, more payment reductions will force providers to increase what they charge to private payers.
Businesses should beware — since the private sector already picks up much of the current underfunding of Medicare and Medicaid, cost-shifting will likely get worse under PPACA and drive their costs even higher.
Business Impact: Fees and Taxes
New taxes and fees packed into the PPACA will increase costs for many individuals and businesses. Some of these take effect before the new federal health insurance programs begin in 2014.
Many businesses will see higher taxes as a result of the increases in the Medicare Hospital Insurance tax, including LLCs, LPs, LLPs and others that pay their taxes through the personal income tax rather than the corporate income tax.
Then there are the fees on health insurers and prescription drug manufacturers and importers, additional costs that will likely be passed onto businesses and other consumers. PPACA also imposes a 2.3 percent excise tax on medical device manufacturers and importers.
Employer Penalties
PPACA imposes a “play-or-pay” mandate on employers with 50 or more employees who work 30 hours or more per week. CMS estimates that employer penalties will total $87 billion from 2014 to 2019.
Beginning in 2014, employers with 50 or more full-time employees will be penalized if: They do not offer their employees “affordable” health coverage, and at least one of their employees purchases government-subsidized insurance coverage through one of the new state-based health insurance exchanges that will be created under the new law.
An affordable health plan is defined as one where an employee’s contribution doesn’t exceed 9.8 percent of his or her household income and pays for at least 60 percent of covered health care expenses.
Employers with 50 or more full-time employees who do not offer health insurance and have at least one employee who purchases coverage from an exchange will be assessed an annual penalty of $2,000 per full-time employee minus the first 30 employees.
Employers who do offer insurance but whose plans do not meet the minimum requirements for affordability or coverage will also be penalized, though not as steeply as those who offer no health insurance.
How Effective Are Tax Credits?
Advocates say PPACA’s small-employer tax credits in the law will help lower costs. Effective tax credits are a good way to make health care more affordable, but the law is so restrictive that very few small employers will be able to benefit from its credits. The credit will apply only to companies with no more than 25 employees whose average salary is less than $50,000. The Congressional Budget Office estimates that only about 12 percent of all small companies nationwide will qualify. Since salaries tend to be higher in Connecticut than the rest of the U.S., our experience will likely be less.
Connecticut car washes and other small businesses can determine if they are eligible for the new health care tax credit under the Patient Protection and Affordable Care Act — and estimate the amount of the credit they will receive — through a new guidance from the Internal Revenue Service (IRS).
The credit is designed to help small businesses and tax-exempt organizations that primarily employ low- and moderate-income workers offer health insurance coverage for the first time or maintain coverage they already have. It’s generally available to employers that:
• Have fewer than 25 full-time equivalent (FTE) employees
• Pay wages averaging less than $50,000 per employee per year
• Pay at least half the cost of single coverage for their employees
Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify for the credit even if they employ more than 25 individual workers.
The IRS information (Notice 2010-44), also clarifies that small businesses can:
• Receive state health care tax credits and still qualify for the full federal tax credit
• Receive the credit not only for regular health insurance but also for add-on dental and vision coverage.
The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible tax-exempt organizations. In 2014, the maximum credit increases to 50 percent and 35 percent respectively.
The maximum credit goes to smaller employers—those with 10 or fewer FTEs—that pay annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.
Key Primary Elections
All General Assembly seats and state-wide offices are up for re-election this fall. The summer has brought an aggressive primary campaign for many of those seats to determine who will represent their parties in the fall elections and settle intra-party races for ballot positions in November. In addition to contests for U.S. Senate, Governor and other state constitutional offices, many towns have races for the state legislature or U.S. House.
Here is a list of the major-party primary races for top-tier elected offices. Note: Designations below are for party-endorsed candidates.
Governor
• Democrats: Dan Malloy (party-endorsed) vs. Ned Lamont
• Republicans: Tom Foley (party-endorsed) vs. Lt. Gov. Mike Fedele vs. Oz Griebel
Lt. Governor
• Republicans: Mark Boughton (party-endorsed) vs. Lisa Wilson-Foley
• Democrats: State Comptroller Nancy Wyman (party-endorsed) vs. Mary Glassman
Comptroller
Democrats—State Healthcare Advocate Kevin Lembo (party-endorsed) vs. Mike Jarjura
Secretary of the State
Democrats—House Majority Leader Denise Merrill (party-endorsed) vs. Gerry Garcia
Attorney General
• Republicans: Martha Dean (party-endorsed) vs. Ross Garber
U.S. Senate
• Republicans: Linda McMahon (party-endorsed) vs. Peter Schiff vs. Rob Simmons
First Congressional District
• Republicans: Ann Brickley (party-endorsed) vs. Mark Zydanowicz
Second Congressional District
• Republicans: Daria Novak (party-endorsed) vs. Janet Peckinpaugh vs. Doug Dubitsky
Fourth Congressional District
• Republicans: State Sen. Dan Debicella (party-endorsed) vs. Rick Torres vs. Rob Merkle
Fifth Congressional District
• Republicans: State Sen. Sam Caligiuri (party-endorsed) vs. Justin Bernier vs. Mark Greenberg
In addition, there are a number of primaries also being conducted for State Representative and State Senate Districts.
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 at pj@csget.net.
