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Hospitals Shouldn’t Need State Permission Slips

In 2006, a Norwich neurology practice with a new $1.5 million MRI scanner had a simple request. It asked the state for permission to use the scanner for all of its patients. The state said, “No.”

For four years the practice had to fight state regulators before it finally got permission to use the scanner the way it wanted to in the first place. If the state had granted permission four years earlier, what would have happened? Would any patients have been injured or harmed? No. In fact, the quality of care could have been higher.

The state regulates the use of MRI scanners – and a host of other health care related devices and practices – through the use of “certificates of need.” These certificates are basically permission slips issued by the state, and they are used to limit the supply of healthcare.

In a new Yankee Institute policy brief, “Does Connecticut Have Enough Healthcare?” released March 26, we say it is time to end the use of certificates of need in Connecticut.

Last year, state regulators used the certificate of need to kill a $500 million investment by Tenet Healthcare in Connecticut hospitals.

Certificates of need were dreamed up decades ago as a way to reduce healthcare spending by reducing the amount of healthcare available. While the policy has reduced the amount of healthcare available, it has caused prices to rise.

Connecticut has more services covered by certificate of need than 32 other states, including 14 states that don’t have any permission slip requirements.

To be clear these certificates have nothing to do with the quality of healthcare, instead they limit the quantity of health care. For example, Connecticut has a third fewer hospital beds per capita than the national average. The certificate of need process is at least partly to blame.

It’s time for the state to stop using certificates of need to regulate the supply of healthcare.

Does Connecticut Have Enough Healthcare?

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Instead of a Transportation Wish List, Connecticut Needs Priorities

Connecticut can do better, especially when it comes to our roads and rails. We’re on the wrong track.

The state is in the process of spending $1 billion on a rail line to Springfield, which will eventually serve an estimated 2,200 passengers a day. Meanwhile the 125,000 daily Metro North commuters face delays and other frustrations related to outdated infrastructure and needed repairs.

“We need to prioritize,” said Suzanne Bates, policy director for the Yankee Institute. “The problem is we’ve been chasing projects like the Springfield rail line instead of fixing what we have that’s broken. We should meet those needs first before we spend millions – or billions – more on the wrong projects.”

If transportation is a priority, we need to put our money where our mouth is and reallocate funding from less important areas.

We also need to get better value. Connecticut’s per-mile administrative costs for its roads are seven times higher than the national average.

Through a combination of clear priorities, reallocation and reductions in other taxes, we can find a fair way to fund Connecticut’s necessary transportation investments.

Connecticut already has one of the highest gas taxes in the nation. That money, and the other taxes and fees allocated to the Special Transportation Fund, should be spent only on transportation projects.

We must end the conversation about border tolls. Instead, we should explore congestion pricing in key areas as a way to clear up traffic and reduce the gas tax.

Wrong Track: Reprioritizing Our Transportation Needs

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Yankee Institute President Testifies Against Higher Taxes

Taxes hurt all Connecticut residents and today the Yankee Institute is bringing that message where it is needed most: the General Assembly. Our President Carol Platt Liebau will testify before the finance committee, which oversees tax policy. The public hearing begins at 11 a.m. in room 2E of the Legislative Office Building.

Submitted testimony:

March 9, 2015

The Yankee Institute for Public Policy is a Connecticut think tank that develops and advances policy solutions to promote smart, limited government; fairness for taxpayers; and an open road to opportunity for all the people of our state.

I am here today to testify on Senate Bill 946, which would implement the revenue portion of the governor’s budget. I appear before you with many serious reservations about this bill. In particular, I am concerned that Connecticut’s government continues to find new ways to raise revenue, even as state taxpayers – your constituents – struggle under the weight of Connecticut’s already high taxes.

Indeed, a recent study released by the Department of Revenue Services shows the extent to which these taxes burden all Connecticut’s citizens – poor and rich alike. The study shows that tax increases have a negative impact on job growth, the cost of goods and services, and income growth.

That is true whether higher taxes are levied on individuals or on businesses.

The 2011 tax increases were implemented with the promise that they would fix the state’s budget instability. Instead the tax increases produced greater instability and stagnating revenues. Our population is shrinking, and as people move from Connecticut to states with lower taxes, our state government collects less tax revenue.

A recent Yankee Institute study analyzed IRS data to determine just how much wealth is leaving the state. Between the years of 1993 and 2011, the state lost a net total of 200,000 people to other states. And those people took $8.8 billion in income with them.

Some have demanded an increase in income tax rates for the state’s wealthiest residents. That may sound like an easy solution in the short term, but it would have a long-term negative impact on the state’s bottom line. According to the Department of Revenue study, just 357 top-earning households account for 10 percent of the state’s income tax receipts. That works out to $2.7 million for each of those families. If just one of them leaves, the rest of Connecticut’s residents will be responsible for making up that loss.

What’s more, this budget continues the unfortunate trend of depriving our state’s businesses of the predictability they need in order to prosper.

Rather than tinkering with the tax credits offered by the state, we respectfully petition this committee to eliminate many of these credits and instead offer a lower overall rate. This would be a more equitable – and more stable – way to tax businesses.

Notably, the Tax Foundation estimates that this budget bill would increase taxes on businesses by 43 percent. By keeping the tax surcharge, capping business credits, and capping the carrying-forward of net operating losses, this bill would significantly increase the tax burden on our state’s businesses.

In addition, the 35 percent increase in the hospital tax will mean a greater burden on those who seek medical treatment in our state, as they will ultimately bear the higher cost.

These tax increases are of the utmost concern for anyone who cares about Connecticut’s ability to flourish, to attract businesses – which in turn create jobs – and to offer its citizens a healthy and high quality way of life.

Even as Connecticut increases taxes on residents and businesses, other states are passing tax reforms that lower taxes. Notably, our neighbor New York restructured its corporate tax system last year. New York plans to drop its top corporate tax rate from 7.1 percent to 6.5 percent, while our top rate remains at 9 percent. This is no way for Connecticut to remain competitive.

We understand the pressure you are under to pay for the high cost of government in Connecticut. But this year, we ask you to take a stand for the hardworking taxpayers in our state. Please: Say enough is enough.

We must find a way to live within our means. Every policy this committee implements sends a message to all of Connecticut’s people. Let us work together to show our friends, neighbors and fellow citizens – young and old alike – that we want them to stay. Let’s make it clear that in Connecticut, they are free to succeed.

Thank you.

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Crowding Out What Matters

The Connecticut budget is on autopilot – and no one’s at the wheel. State government grows more expensive each year because of expensive promises to state employees and endless borrowing.

A half-billion dollar increase in spending doesn’t even cover the growth in these two areas. “We’re in the alarming position of spending a half billion more but cutting services,” said Carol Platt Liebau, Yankee Institute president.

The Yankee Institute urges the General Assembly to adopt a budget that does not raise taxes and respects the spending cap. State leaders also need to begin reforming our state workforce to make it more flexible and more affordable.

“It’s wrong for politicians to make promises they can’t keep. Connecticut’s government has made too many promises for too long. Soon it will be impossible to keep them. We need to begin the difficult but essential process of changing our approach,” Liebau said. “Our budget is on autopilot. Citizens must demand that their leaders regain control. Connecticut can do better.”

The latest Yankee Institute policy brief, Crowding Out What Matters, suggests a number of ways to balance the budget while increasing the value of each taxpayer dollar spent.

Create jobs. Instead of passing distracting tax cuts, we should focus on helping employers hire. Eliminate the business entity tax and end the corporate surcharge.

Help people in need. Improve the earned income tax credit. Cancel cuts to Medicaid providers.

Improve quality of life by ending traffic nightmares. Use tolls or congestion pricing to pay for transportation projects while reducing other taxes. Cancel the $1+ billion New Haven to Springfield rail line planned for just 3,500 people.

Cut unnecessary spending. Reduce “phantom student” grants by 10 percent. Bill agencies for 5 percent of fringe benefits. Increase cost-sharing for state employee health insurance.

Take the budget off autopilot. Delay all bonding by six months. Create a severance fund to cover the cost of state-employee layoffs. End cost-of-living increases for state retirees who earn more than the median income.

Crowding Out What Matters

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Fix Metro North Before Expanding to Springfield

The Yankee Institute supports HB 5949, which would require the Department of Transportation commissioner to prioritize projects, and to put repair of existing infrastructure ahead of building new projects.

Clearly our state has infrastructure needs that must be addressed, and we support this committee’s efforts to find ways to fund those infrastructure needs in a responsible way and in a way that does not increase the overall tax burden on Connecticut residents.

We are particularly concerned with the state’s $365 million project to develop new infrastructure along the New Haven to Springfield rail line.

This project will connect new commuters to the Metro North rail line, which is already overburdened and under-maintained.

According to our Department of Transportation’s own projections, at its maximum the Hartford rail line is expected to carry under 3,500 passengers per day. Under this scenario, the state will have spend millions every year in tax dollars just to maintain the rail line and other infrastructure, with receipts from fares projected to cover only 10 percent of the operating costs.

Meanwhile, the estimated 150,000 daily commuters who use the Metro North rail line are frustrated as they deal with significant delays and poorly maintained infrastructure.

We ask committee members to use existing transportation dollars wisely. We ask you to find better ways to prioritize the spending of transportation dollars, and to carefully consider how much more debt to add to the state’s already-high debt burden.

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Solar Proposal Complicates a Simple Problem

The Yankee Institute is pleased Gov. Malloy and his administration have recognized the failures of Connecticut’s RPS mandates in proposing the Solar Home Renewable Energy Credit. The RPS mandates increase the cost of electricity and create jobs in other states.

“Instead of reducing Connecticut’s electricity costs, second highest in the country, this proposal further complicates energy policy. Now in addition to ZRECs, LRECs and the RSIP we have SHREC,” said Zachary Janowski, Yankee’s director of external affairs. “The real solution is much simpler. Pass H.B. 6026 and put these expensive mandates on hold.”

Last month, the Yankee Institute released a study, Restoring Power, highlighting the General Assembly’s ability to reduce electricity costs with a simple change. We’ve lost control of our electricity bills, but if legislators take action they can put money back in the pockets of homeowners and employers. That’s the best way to create jobs in Connecticut.

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State Would Have $5.2 Billion More Under Spending Cap

Connecticut would have $5.2 billion more in its rainy day fund if lawmakers had kept spending under the state’s constitutional spending cap, according to a new Yankee Institute policy brief.

The Yankee Institute is urging Gov. Malloy and state legislators to honor the cap in the next two-year budget, which will be released in February.

“This budget needs to be the first step toward a sustainable government and fairness for taxpayers. Lawmakers can accomplish these goals by getting state spending under control,” said Carol Platt Liebau, president of the Yankee Institute. “The spending cap is an important – and popular – feature of our government. A good government needs boundaries”

The spending cap was implemented in 1991, the same year the state adopted an income tax. Since 1991, state spending has nearly doubled while Connecticut’s population has only gone up 10 percent.

“Our research shows that if the state had adhered to the spending cap, we could have had a substantial rainy day fund in place before the start of the 2008 recession,” said Suzanne Bates, Yankee Institute’s policy director and author of the study. “Because we didn’t save when we had the chance, we were unprepared when financial disaster hit.”

Instead of slowing the growth of state government expenditures, lawmakers implemented a tax hike in 2011 that slowed the state’s recovery from the recession. Economic growth in Connecticut has lagged the national rate every year since 2008.

Now the state is facing deficits of $1.3 billion and $1.4 billion for fiscal years 2016 and 2017. Lawmakers need to close these gaps by cutting the cost of state government, instead of further burdening Connecticut’s citizens.

The recent mid-year cuts to state government show that last-minute decisions leave us with fewer options. The responsible approach is to make structural changes to prevent future cuts from hurting those most in need.

The spending cap policy brief is the first in a new series of policy briefs that the Yankee Institute will publish in order to address the ways Connecticut can get its economy moving again so every resident has an open road to opportunity.

Sustainable Spending: Respect the Cap by Suzanne Bates

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Bottom 10 yet again

Connecticut in Bottom 10 For Business Tax Climate

Other states, like New York, enacting significant tax reform

EAST HARTFORD – While other states are starting to initiate significant tax reform, Connecticut still has not done anything to make its tax climate more business-friendly, despite its placement at the bottom of several rankings and its slow economic growth.

Today the Tax Foundation released its 2015 State Business Tax Climate Index. Connecticut was ranked 42nd out of the 50 states.

“Connecticut loses too many jobs to other states because of its high-tax environment,” said Carol Platt Liebau, president of the Yankee Institute. “We want our children to stay and work in Connecticut, but if our policies keep driving businesses to other states, there just won’t be enough jobs here.”

“With elections just one week away, it’s important for candidates to explain exactly how they plan to improve the economy and create jobs through better tax policy,” Liebau said. “The example of North Carolina shows this can be done.”

Several states enacted significant reform this year. North Carolina was able to change its ranking from 44th place last year to 16th place this year because of the tax reform it enacted, including adjustments to its personal income tax and corporate income tax rates and structure.

Here Comes New York

Although New York is still ranked 49th, its ranking is expected to improve in the coming year because of tax reform enacted there last year. Gov. Andrew Cuomo received an award this year from the Tax Foundation for the state’s efforts. However, those reforms were not all included in this year’s business tax rankings because they have not all gone into effect. New York’s corporate income tax rate, once fully enacted, will drop to 6.5 percent, among many other significant changes.

“Here comes New York,” Liebau said, “and Connecticut had better watch out. Up until now, our state has benefited from the many New York firms who came here for a slightly friendlier business climate.  With New York’s reforms, this ‘free pass’ may be coming to an end.”

High Taxes Across the Board

Although state officials like to claim that the state has a friendly business tax environment because of its 7.5% corporate income tax rate, which places it about in the middle of other states, our state’s very high property taxes and relatively high taxes across the board account for Connecticut’s rank toward the bottom.

Other factors that affected the state’s placement include:

  • Connecticut has the second highest per capita property taxes in the nation;
  • The state levies sales taxes on many business-to-business transactions;
  • Several other states don’t have at least one of the major taxes (corporate income tax, personal income tax, sales tax), which significantly improves their ranking;
  • We are worst in the nation for our capital stock tax rate, which is a tax on business wealth;
  • We are the only state with a gift tax, which significantly effects small businesses;
  • Our alternative minimum tax for personal income taxes is also detrimental to small businesses, many of which are taxed at the personal income tax rates.

The study also says that business incentive programs do less to help states attract and retain businesses than an overall business-friendly tax environment.

In other words, it is better to have a long-lasting business-friendly tax structure than to have short-term programs like Connecticut’s First Five program.

The study notes that companies are more likely to move from one state to another than from the United States to foreign countries. As a result, Connecticut’s low ranking compared to other states makes it difficult to remain competitive and attract jobs.

The study is here: http://taxfoundation.org/article/2015-state-business-tax-climate-index

The Tax Foundation’s press release is here: http://taxfoundation.org/sites/taxfoundation.org/files/docs/Connecticut-Ranks-42nd-Best-on-Business-Taxes.pdf

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Study: Kids in Connecticut are Born Broke

Kids in Connecticut are born broke – more than $27,000 in debt – because of billions in unfunded pension promises. State estimates suggest citizens owe $25 billion, but this Yankee Institute study found the real number is more than three times higher, $76.8 billion.

The state owes another $22.7 billion to cover retiree healthcare costs. To pay for these promises, Connecticut needs a plan. One solution would require raising taxes by nearly $1,500 per family, which could severely damage the economy.

Instead, the study recommends adopting defined-contribution plans – much like a 401(k) – for new state workers as soon as possible.

Read a summary of the study here.

Born Broke Full Study

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2013 Pension Data Added to CT Sunlight

EAST HARTFORD – The retired state employee with the largest pension benefit in 2013 was former Professor John Veiga, who received $283,273 according to new data compiled by the Yankee Institute for Public Policy for its online transparency database CTSunlight.org.

Veiga has had the largest pension benefit in the state since 2009.

Retiree Last Position Last Agency

2013 Pension Benefit

Veiga, John Professor UConn

$283,273

Blechner, Jack UConn Health Center

$278,342

Henken, Eleanor UConn Health Center

$246,900

Blanchette, Edward Corrections

$232,325

Hartley, Harry Professor UConn

$216,944

Judd, Richard Central Connecticut State University

$213,544

Sigman, Eugene UConn Health Center

$210,483

Dibenedetto, Anthony Professor UConn

$209,702

Raye, John UConn Health Center

$205,612

Cutler, Leslie UConn Health Center

$203,276

The entire list of state employees and calendar year 2013 pension amounts is available at CTSunlight.org.

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