Voices from the Capitol (XIII): spending cap and modernizing the sales tax

Back • April 4, 2017 • Uncategorized

On today’s newsletter:

This Week: Committee Hearings

Appropriations Committee

Monday, April 3 – Room 2E, 12:00 PM – Agenda

Spending Cap bills

S.B. No. 51S.B. No. 151S.B. No. 153S.B. No. 155S.B. No. 160S.B. No. 390S.B. No. 466H.B. No. 5004H.B. No. 5005H.B. No. 5217H.B. No. 5219H.B. No. 5401H.B. No. 5700,H.B. No. 5702H.B. No. 5777H.B. No. 5779H.B. No. 5844H.B. No. 6511H.B. No. 6734, and S.B. No. 785

There are quite a few bills relating to the constitutional spending cap in today’s hearing, so instead of analyzing each bill separately, allow us to give an overview on why the spending cap is important.

As part of the grand bargain that enacted an income tax in Connecticut, the General Assembly passed Amendment 28. Amendment 28 had three parts:

  1. balanced budget requirement, to ensure that Connecticut did not spend more money than it collected;

  2. rainy day fund, to ensure that we would be able to meet our financial commitments during difficult times; and

  3. a spending cap, to ensure that the existence of a new revenue source would not lead to unfettered growth in state government.

The legislature did not intend for the spending cap to solve all of Connecticut’s fiscal woes; rather, the spending cap was to work together with the balanced budget requirement and rainy day fund to make Connecticut more fiscally responsible.

Amendment 28 asks the legislature to define three terms used in the definition of the spending cap: “increase in personal income,” “increase in inflation,” and “general budget expenditures.” Each of these components is important, as they limit how much the state budget can grow year after year and what is counted as state spending to set the cap. You can read a full discussion on each of the three components in our testimony here.

H.B. 5839, An Act to Include Current Services in State Budget Reporting

This bill would ensure that the state uses “current services estimates” when drafting its budget, a measure that would make the process more transparent and accountable.

“Current services estimates” are a budgeting best practice that helps account for routine changes like inflation and caseload adjustments. Each year, when crafting a budget, state officials use the previous year’s spending as a baseline. Then, policymakers adjust that spending for how much it will cost to provide the same level of services this year, given changed enrollment in the program or cost adjustments. In other words, current services estimates tell us how much Connecticut would have to spend on a given program in order to maintain the program at its current level in the absence of any policy changes.

You can read this op-ed by Nick Defiesta and Ellen Schemitz on the subject to learn more, or download our testimony here.

H.B. 6516, An Act Concerning the Juvenile Justice Policy and Oversight Committee

This bill would provide funding for the community-based diversion system planned by the Juvenile Justice Policy and Oversight Committee (JJPOC) diversion workgroup. This diversion system would prevent children from becoming incarcerated, both improving their long-term welfare and saving money down the road on prisons and corrections. Read our testimony here.

H.B. 6517, An Act Establishing a Child Welfare Oversight Committee

This bill creates a child welfare oversight committee to evaluate and make recommendations to improve the safety and well-being of children and families involved with the Department of Children and Families (DCF). A child welfare oversight council would help to sustain the progress made in recent years and to coordinate work in the state that supports children and families engaged in the child welfare system. Read our testimony here.

H.B. 5218, An Act Concerning Portions of the State Budget Concerning the

Education Cost Sharing Formula and Other Aid to Municipalities

H.B. 5467, An Act Concerning Portions of the State Budget Appropriating

Funds for the Education Cost Sharing Formula and Other Aid to Municipalities

H.B. 5701, An Act Concerning the Timing of the Adoption of the Education

Cost-Sharing Grant and Municipal Aid Funding by the General Assembly

These three bills seek to provide towns and school districts with adequate notice and timely decisions about the allocations of the Education Cost Sharing (ECS) and other state education funds. Currently state funding figures become available only after towns have completed their budgets, forcing complex revisions; the proposals would ease this burden. You can read our testimony here.

News: The Feds Report on the Department of Children and Families

Every few years, the U.S. Department of Health and Human Services publishes a review on the state of child welfare agencies across the country. In their latest review, they conclude that safe and stable placement for at-risk youth in the Connecticut’s Department of Children and Families (DCF) system is still “hindered by systemic issues.” Abused or neglected youths often end up in living situations without sufficient supports.

You can read the full report here. The CT Mirror has a good piece about the report here.

Spotlight: Broadening the Sales Tax

Failure to keep our laws up-to-date with the 21st century economy has weakened the 

sales tax as a stable source of revenue. Broadening the sales tax base to include services (in addition to goods) would strengthen the state's revenue system so that we can continue to invest in education, healthcare, transportation, and other critical services.

Over the past 40 years, the share of household spending on services has increased from one third to close to half of household budgets. Yet, services – such as interior design, tennis lessons, haircuts, car washes, pet grooming, bowling alleys, and taxi and limousine rides – remain largely untaxed. As a result, taxable sales as a share of total household income in Connecticut have declined from 32.6% in 2002 to 26.4% in 2015.

Broadening the sales tax base to include services, while at the same time lowering the tax rate from 6.35% to 5.5%, could generate $730 million in new revenue annually. Legislators are considering broadening the sales tax as one of the possible options to raise new revenue.

Check out our revenue options brief, an infographic, and our short video for more information.

Legislative Arcana: File Numbers, Calendars, “Go” List, Markings

As we enter the home stretch of the legislative session, it is useful to go over four terms that will come up often as bills are sent to the House or Senate floor: “file number”, “business on the calendar,” the “go list”, and “markings.”

File number: That’s the number that a bill gets once reported out of committee, printed, and sent to the floor. This means that the bill is ready to be considered by both houses. A bill might end up having more than one file number – if it is amended either in the House or the Senate it will get a new file number.

Business on the Calendar: A list of all the bills that are waiting for a vote in either the House or the Senate. Bills get a calendar number when placed there; the lower the number, the longer the bill has been sitting there. A bill needs to sit on the calendar for three days before being ready for action. Once it has sat for three days, it gets two little stars by its name.

Go List: The list of bills that the House intends to take up that particular day. Bills on the Go List might not get to a vote if debate on other bills on the list takes too much floor time.

Markings: The equivalent to the “Go List” in the Senate. The list is not posted in writing, but read aloud in the chamber.

What We Are Reading:

Reminders:

Still time to take action – we sent an alert urging you to call your legislators and tell them that we need a balanced budget approach that includes new revenue. Call now if you haven’t done so.