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Malloy Rejects Hospital Tax But Signs Most of New CT Budget Into Law

By Keith M. Phaneuf

www.ctmirror.org

Gov. Dannel P. Malloy today used his line-item veto to reject a new taxing arrangement on hospitals, but signed into law the bulk of a new, two-year state budget negotiated without direct input from his administration.

The governor signed a $41.3 billion, biennial plan that closes major projected deficits while boosting taxes close to $500 million per year, cutting municipal aid, higher education and social services, and sweeping tens of millions of dollars annually from energy conservation programs.

“After 123 days without a budget, it is time to sign this bipartisan bill into law and continue the steady and significant progress our state has made over the past several years,” Malloy said. 

“Connecticut’s families and businesses deserve to have a budget in place, one that provides a stable environment to live and work.  While there are certainly many provisions of this budget I find problematic, there’s also a clear recognition of many of the fiscal priorities and concerns I’ve consistently articulated since January.  I appreciate the work of the General Assembly in passing a budget to my desk that I can sign.”

“While there are certainly many provisions of this budget I find problematic, there’s also a clear recognition of many of the fiscal priorities and concerns I’ve consistently articulated since January.  I appreciate the work of the General Assembly in passing a budget to my desk that I can sign.”

The hospital tax is a complex legal and fiscal maneuver designed to increase federal Medicaid reimbursements to the state and to ease burdens on the industry.

Technically the state’s tax on hospitals would rise from $556 million to $900 million per year. Connecticut would redistribute those funds and return them to the industry — plus about $229 million more — qualifying the state for a big boost in federal aid.

The net effect on the state budget would be a $137 million annual gain.

This taxing change still needs to be approved by the U.S. Centers for Medicare and Medicaid Services, commonly referred to as CMS, which oversees the Medicaid program.

The administration says the budget bill appears to guarantee a windfall paid by the state, regardless of whether the federal government signs off on the Medicaid change.

“I am not opposed to a new, mutually beneficial relationship with hospitals that realizes additional federal dollars for the state of Connecticut,” Malloy wrote in a letter to legislative leaders. “In fact, my administration has repeatedly offered workable language to that end — language developed by nonpartisan, classified attorneys in the executive branch with considerable expertise in this specific area.”

Legislative leaders have said they didn’t receive the administration’s proposed language in time to incorporate it into the budget, which was adopted last Tuesday. Malloy’s budget chief, Office of Policy and Management Secretary Ben Barnes, disputes this assertion.

Legislative leaders nonetheless have said they are prepared to adopt corrective language regarding the hospital tax in the near future.

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