Connecticut Se­nate passes hos­pi­tal tax fix in state bud­get


The Se­nate voted unan­i­mously Tues­day to fix a se­ries of tech­ni­cal is­sues in the new state bud­get, in­clud­ing a flaw with the new hos­pi­tal provider tax in­crease.

But while there was bi­par­ti­san agree­ment on this vote, Demo­cratic and Repub­li­can Se­nate lead­ers held dif­fer­ent opin­ions on when the leg­is­la­ture should act to fix a $178 mil­lion rev­enue short­fall in the cur­rent fis­cal year — a prob­lem first iden­ti­fied Mon­day by Gov. Dan­nel P. Mal­loy’s ad­min­is­tra­tion and by non­par­ti­san an­a­lysts.

“I think it’s good that the (Mal­loy ad­min­is­tra­tion) and the hos­pi­tals were able to come to terms” on the hos­pi­tal tax, Se­nate Repub­li­can leader Len Fasano of North Haven said, adding he is con­fi­dent this leg­is­la­tion — which the House is sched­uled to con­sider to­day — would solve the dis­agree­ment be­tween those two groups.

“We are grate­ful that leg­isla­tive lead­er­ship came to rec­og­nize the need to fix the lan­guage for im­ple­ment­ing the hos­pi­tal sup­ple­men­tal pay­ments and provider tax,” Mal­loy spokes­woman Kelly Don­nelly said. “The adopted lan­guage was fun­da­men­tally flawed and vi­o­lated fed­eral law, and the ac­tion by the Se­nate to­day makes the law work­able.”

Don­nelly added that the new hos­pi­tal tax­ing arrangement still is conditional upon ap­proval by the U.S. Cen­ters for Medi­care and Med­i­caid Ser­vices.

“We want to thank the state Se­nate for pass­ing leg­is­la­tion that will ben­e­fit Connecticut com­mu­ni­ties, hos­pi­tals, and the pa­tients they serve,” Connecticut Hos­pi­tal As­so­ci­a­tion CEO Jen­nifer Jack­son said. “We look for­ward to pas­sage in the House and work­ing with the ad­min­is­tra­tion to im­ple­ment the mea­sure.”

The hos­pi­tal tax is a com­plex le­gal and fis­cal ma­neu­ver de­signed to in­crease fed­eral Med­i­caid re­im­burse­ments to Connecticut. Ev­ery state but Alaska im­poses some form of a health provider tax.

Connecticut col­lects taxes from hos­pi­tals and nurs­ing homes and then re­dis­tributes a por­tion of those re­ceipts back to those in­dus­tries.

The re­turn of these funds then trig­gers a fed­eral Med­i­caid re­im­burse­ment.

Af­ter a nine-month bat­tle over a new state bud­get — that ex­tended four months into the new fis­cal year — leg­is­la­tors reached a bi­par­ti­san deal in late Oc­to­ber that in­cluded a hos­pi­tal tax hike. But be­cause of in­creased state pay­ments back to the hos­pi­tals as well as ad­di­tional fed­eral re­im­burse­ments, law­mak­ers said both the state and the in­dus­try would gain un­der the deal.

Mal­loy signed the bud­get on Oct. 31, but used his line-item veto to stop im­ple­men­ta­tion of the hos­pi­tal provider tax, say­ing the lan­guage was flawed and would not pass muster with fed­eral of­fi­cials — and might cost Connecticut hun­dreds of mil­lions of dol­lars in fed­eral funds.

The bill that passed 34-0 in the Se­nate on Tues­day also made tech­ni­cal ad­just­ments to a rental re­bate pro­gram mu­nic­i­pal­i­ties pro­vide for low-in­come se­niors, an in­come tax de­duc­tion re­lated to So­cial Se­cu­rity, a bond­ing is­sue iden­ti­fied by the trea­surer’s of­fice, and the pub­lic fi­nanc­ing sys­tem for state elec­tions.

The ad­min­is­tra­tion said the orig­i­nal bud­get tech­ni­cally left it with no le­gal way to dis­trib­ute the $13 mil­lion in fund­ing for the rental re­bate pro­gram to cities and towns.

But Se­nate lead­ers had mixed opin­ions Tues­day about how to deal with a new prob­lem tied to the bi­par­ti­san bud­get.

The gov­er­nor’s bud­get of­fice and the leg­is­la­ture’s non­par­ti­san Of­fice of Fis­cal Anal­y­sis re­ported jointly Mon­day that erod­ing rev­enues have opened deficits top­ping $175 mil­lion this fis­cal year and near­ing $150 mil­lion in 2018-19.

Fasano said he wants to an­a­lyze the re­port in greater de­tail, not­ing that close to half of the prob­lem for this fis­cal year in­volves fed­eral Med­i­caid pay­ments. “I want to look at that as to why it’s such a larger num­ber,” he said.

Re­gard­less, though, Fasano added that his pref­er­ence is for the leg­is­la­ture to deal with this be­fore the reg­u­lar 2018 Gen­eral Assem­bly session be­gins on Feb. 7.

“It’s go­ing to be tough to do,” he said, adding that he’s hope­ful that bi­par­ti­san talks that ended the most re­cent bud­get im­passe could be re­peated. “I think what we showed is when we look to­gether we usu­ally can ac­com­plish a goal.”

But Se­nate Pres­i­dent Pro Tem Martin M. Looney of New Haven, the top Demo­crat in the cham­ber, said he prefers to take a wait-and-see ap­proach.

“We have a bi­par­ti­san bud­get that does re­flect the con­sen­sus of the Gen­eral Assem­bly,” Looney said. “But ob­vi­ously, as we have in other years, we will be mon­i­tor­ing the sit­u­a­tion closely.”

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