Nov 16, 2017
Gov. Malloy signs state budget
Earlier this month, Gov. Dannel Malloy signed a bipartisan budget previously passed by the House of Representatives and the Senate, but used his line-item veto power to reject legislators’ new plan for taxing hospitals. The signature and veto came despite the governor and his administration not being included in budget negotiations with legislative leaders. The Legislature was able to reach a compromise on spending cuts to close the $3.5 billion deficit with broad enough support to override a veto had the governor rejected the proposal.
In an effort to close the $3.5 billion deficit, the Legislature and governor were able to agree on a $41 billion, two-year budget that included more funding for Hartford and spending cuts in other areas. The new budget provides Hartford with $40 million from the state, but requires additional oversight and spending cuts, which lawmakers believe will be enough to stave off bankruptcy. The city entered the fiscal year on July 1, 2017, with a budget deficit approaching $50 million and has already reduced and eliminated services and sought concessions from labor unions representing public employees in an effort to close that deficit.
The legislation also included a $0.25 additional fee to be included in fares from ride-hailing apps, an increase on the tax on cigarettes and tobacco products and cutting the funding for the public affairs television station, CT-N, by half. The University of Connecticut is set to lose more than $140 million in funding, which could result in limiting hiring, eliminating jobs, delaying projects and reducing services that are not essential to the academic mission.
While the budget was signed, it seems far from finalized. The Legislature reconvenes this week to consider compromise language crafted by Gov. Malloy and the Connecticut Hospital Association that will allow the state to receive as much as $1 billion in federal revenue that’s tied to a hospital tax in the budget, as part of a federal-reimbursement formula.
Crumbling foundations
The new state budget also took an extreme approach in an attempt to provide relief to homeowners with crumbling foundations by establishing a not-for-profit captive insurance company to distribute $100 million in state-bond funds over five years to help pay for the costly repairs and replacement of these buildings. The captive insurance company will be regulated and licensed by the state, which will ensure the funds are strictly monitored.
The captive insurance company created by the budget will be a nonprofit entity with the public purpose of providing assistance to owners of buildings with deteriorating foundations due to pyrrhotite, and will ensure that these foundations are repaired or replaced to provide the owner with a structurally sound foundation. The captive will develop eligibility requirements and underwriting guidelines for providing financial assistance to homeowners, as well as develop the Collapsing Foundations Credit Enhancements Program in conjunction with the Department of Housing, Connecticut Housing and Finance Authority and participating lenders. The captive also will have the authority to approve contractors or other vendors for eligibility to perform foundation repairs or replacements on behalf of claimants and disburse approved funds to these vendors.
The captive insurance company will work with the Collapsing Foundations Credit Enhancements Program, which was also created by the budget. The program was created to assist eligible borrowers to obtain the necessary funds for the replacement or repair of their crumbling foundation. The program shall, among other things, make one or more financial products or credit enhancements, including loan guarantees, available that may enable the participating lenders to make qualifying loans with loan-to-value ratios in excess of regulatory standards. The Connecticut Housing Finance Authority is tasked with reaching out to banks and credit unions within the program to develop terms, conditions and standards for the program.