July 05, 2008

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FISCAL FRAILTY

Bills Axed

Insurance premium tax cut, regional compact plans die


By Sean O’Leary

Hartford Business Journal Staff Writer

05/12/08

Facing a nearly $70-million budget deficit, state lawmakers axed several key pro- business bills while approving the expansion of state health care insurance to small businesses, nonprofits and municipalities.

Gov. M. Jodi Rell

Gone is the proposed reduction in the insurance premium tax and the multi-state insurance compact to make the state’s insurance sector more secure.

The premium tax bill, championed by the business community and passed in the state Senate, would have reduced the state’s 1.75 percent annual tax to 0.5 percent by 2010. Similar bills have been adopted by other states vying to lure Connecticut insurers to their states.

The bill flew through the state Senate’s insurance and real estate committee with no opposition. But it died in the House.

The bill would have been a boon to insurance companies, but it would have cost the state escalating sums in lost revenue: from $39.7 million this year to more than $170 million in FY 2011 and thereafter.

The bill to allow Connecticut to join 30 other states in a state insurance regulation compact passed the Senate during the session’s final week, but it did not receive a vote from the House. Supporters said the bill was a step toward heading off moves to begin regulating insurance at the federal level.

 

Red Flags

Not all bills died. Passed and waiting for Gov. M. Jodi Rell’s signature is a bill calling for the expansion of the Connecticut Healthcare Partnership to include municipalities, nonprofits and small businesses.

As of press time, Rell had not decided whether to sign the bill. According to a spokesman for the governor, she would give the bill careful consideration.

“Gov. Rell recognizes that a lot of people might benefit from the proposal, but the governor’s budget director has raised red flags about the potential consequences of the initiative on the state budget,” said spokesman Adam Liegeot.

Rell warned lawmakers prior to the conclusion of the session that she would veto any legislation that raised state spending.

“We did oppose that and we’re still questioning why they are doing it,” said Bonnie Stewart, vice president of government affairs for the Connecticut Business & Industry Association. “The state already has unfunded liabilities for state employees, and now we’re going to open that up to an unknown risk.”

The state House of Representatives approved the bill by a vote of 102-43 in April, while the Senate approved it last week.

CBIA will push Gov. M. Jodi Rell to veto the bill, Stewart said.

 

Big Win By Democrats

In their end-of-session report, House Democrats cited the insurance expansion bill as one of its biggest wins during the legislative session.

Democrats believe the bill would translate into savings for municipalities, up to $8 million annually for larger cities, though Stewart and the CBIA dispute that.

In other business, the legislature axed a proposal by state Comptroller Nancy Wyman, who called for Connecticut to be the first state in the nation to open its state-run pension program to small businesses. Small business groups came out against the proposal in March, saying that it was unnecessary and that it used taxpayer-funded program to compete with private pension plans..

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