The General Assembly, voting along party lines, passed $331.5 million in budget revisions Tuesday that aim to close a mid-year budget deficit. The bill also changes the taxes applied to hospitals and other businesses.
The bill makes expenditure modifications of $195.8 million and revenue adjustments of $135.7 million to the FY 16 General Fund Budget totaling $331.5 million. In addition to the changes in the bill, other expenditure adjustments anticipated to be achieved administratively total $18.5 million, which together total $350 million.
Gov. Dannel P. Malloy said in a statement, “While we couldn’t achieve a bipartisan vote, we had a bipartisan process to lead us to the vote. The legislation passed … iis not perfect, but it helps make progress for the State of Connecticut this fiscal year and beyond.”
The new budget delays the scheduled diversion of sales tax revenue from the General Fund to the Special Transportation Fund, resulting in an estimated revenue gain of $35.2 million to the General Fund in FY 16 and corresponding revenue loss to the transportation fund.
It also make various changes to certain provisions of unitary reporting under the corporation business tax, including implementing a $2.5 million cap on the tax increase any filer experiences as a result of unitary reporting. This results in a revenue loss of approximately $7.5 million in this fiscal year and $11.9 million annually thereafter.
The bill delays the scheduled diversion of sales tax revenue from the General Fund to the Municipal Revenue Sharing Account (MRSA), resulting in an estimated revenue gain of $70.4 million to the General Fund this fiscal year and corresponding revenue loss to MRSA. This delay reduces the projected MRSA balance in the upcoming fiscal year beginning July 1, 2016.
Other sources of revenue tapped include $2 million from the tobacco settlement fund and $2 million from a program for seatbelts on school buses. It also taps $15.1 million from higher education reserve funds.
Other bill provisions include:
- It excludes from the income tax income a non-resident employee derives in Connecticut from providing personal services for up to 15 days
- Establishes a local option property tax relief program for qualifying commercial and industrial property owners in municipalities with state-approved enterprise zones.
- Broadens an exemption from the petroleum products gross earnings tax for propane gas by applying it to propane used primarily, instead of exclusively, for heating purposes. The 8.1 percent petroleum products gross earnings tax applies to the first sale of certain petroleum products in Connecticut.
- For income years beginning on or after Jan. 1, 2016, the bill allows pass-through entities to sell, assign, or transfer the tax credits for employing apprentices who are receiving training in the manufacturing trades under a qualified program to other taxpayers for use against their utility companies or petroleum products gross earnings tax liability.
- The bill raises the cap on the amount of certain tax credits corporations may claim each year. Starting in the 2016 income year, the bill raises the cap over four years to 70 percent of the tax liability, but only with respect to the credits for research and development and investments in urban and industrial sites development projects.
- Hospitals pay taxes each quarter based on their net patient revenue and may use urban and industrial site reinvestment tax credits to reduce their tax liability by up to 50.01 percent. Starting in 2016, the bill raises this cap by 5 percent per year until it reaches 70 percent in 2019. Urban and industrial sites credits equal 100 percent of the amount taxpayers invest in a state approved development project, up to $100 million. Taxpayers claim these credits over 10 years according to a statutory schedule.
- The bill also makes ambulatory surgical centers eligible for urban and industrial site tax credits, subject to the same annual cap as hospitals. The centers were hit with a 6 percent tax on gross receipts in the budget bill.
In light of a recent ruling that the state’s constitutional spending cap is faulty, the bill also creates a 24-member spending cap commission to create, for purposes of the state’s constitutional general budget expenditures requirement, proposed definitions of: “increase in personal income,” “increase in inflation,” and “general budget expenditures.”
