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State Hospital Tax & Recession

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“I viewed the hospital tax as more of a gimmick than a systemic change,” says Vincent J. Candelora, R-North Branford. Candelora and many of his fellow Republican lawmakers favor significant reductions in state employee benefits. “I think that’s always been the elephant in the room,” Candelora said. “Democrats and the unions are there at all costs to protect each other. We have to start making tougher decisions.”

[Excerpts from full article]

For good or ill, state officials relied on aggressive increases in hospital taxes to keep Connecticut’s finances in balance during an extremely sluggish recovery from the last recession. Between 2013 and this year, hospitals pumped more than $1 billion into the state’s coffers. If another recession arrives in the new year or soon thereafter, Connecticut won’t have the hospitals to bail them out.

Lawmakers and Gov. Dannel P. Malloy created the hospital levy in 2011 as a tax in name only. The industry paid $350 million to the state, which responded by redistributing all of those funds, plus another $50 million, back to hospitals. Connecticut didn’t lose out because these supplemental payments helped the state to leverage hundreds of millions of dollars annually in federal Medicaid reimbursements.

But as Connecticut’s recovery from the last recession plodded along far slower than officials anticipated, Malloy and lawmakers gradually increased the tax, scaled back the supplemental payments.  Hospitals, who paid a total of nearly $2 billion more than they received between 2013 and 2019 collectively, sued four years ago on grounds that this system abused the process allowed under Medicaid.

Under this [recent] settlement [of the suit], the state pledges to keep hospital taxes flat through 2026 — even though history suggests Connecticut and the nation are overdue for another economic downturn.

“Most people accepted this settlement was the right thing to do because of the fear of the possible outcome — that a court could say you have to refund all of this money,” said Sen. John Fonfara, D-Hartford, co-chair of the tax-writing Finance, Revenue and Bonding Committee. “But the discipline part, cleaning up our finances, I don’t know if people are realizing we’re going to have to bite the bullet,” he added.

“If we can’t get any more revenue somewhere else, then we have to cut,” State Rep Toni Walker (D-New Haven) said, “and this is going to become a war.”

“I viewed the hospital tax as more of a gimmick than a systemic change,” said Deputy House Minority Leader Vincent J. Candelora, R-North Branford, a veteran of the finance committee and another advocate of the lawsuit settlement.

The “systemic change” Candelora and many of his fellow Republican lawmakers favor involve significant reductions in state employee benefits.

“I think that’s always been the elephant in the room,” Candelora said. “Democrats and the unions are there at all costs to protect each other. We have to start making tougher decisions.”

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Read full article in The CT Mirror

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