"Special Examination" by State Comptroller Highlights Anticipated Impact of Federal Cuts, Changed Requirements on Connecticut Residents and Industries
/“A significant number of low-income residents in Connecticut are expected to lose eligibility for government benefits under the law and will feel the cuts acutely,” Others in Connecticut, “will see beneficial tax changes,” according to a comprehensive report and analysis by the office of State Comptroller Sean Scanlan on the far-reaching federal legislation signed into law this month.
The 31-page “Special Examination” outlines what Scanlan believes “will have both positive and negative outcomes for residents in our state.
“In general, small businesses and corporations will benefit from more favorable tax treatment, such as the permanent reinstatement of 100% bonus depreciation for qualified equipment purchases and full and immediate deductions for domestic research and development costs. However, the State’s healthcare sector, clean energy industry, and higher education institutions will face new challenges. Higher interest rates, as a result of growing U.S. fiscal deficits, are expected to increase the cost of borrowing throughout the economy, raising the cost of mortgages and business loans,” the report explains.
The report describes the changes to the social safety net programs and health insurance on the Affordable Care Act (ACA) exchange – changes that will “have big implications for the State budget and Connecticut’s healthcare industry in the years ahead.” It also outlines what is described as “steep benefit cuts that will be felt by many low-income and middle-class residents.”
The report also indicated that “Connecticut’s immigrant community is large by national standards. The 2023 American Community Survey shows about 15.4% of the state’s 3.7 million people are foreign-born. That share is well above the U.S. average of 14.3%. According to Pew Research Center, about 23% of the U.S. foreign-born population in 2022 was unauthorized immigrants, while naturalized citizens accounted for 49%, green card holders accounted for 24%, and temporary lawful immigrants accounted for the remaining 4%. Immigrants make up large proportions of Connecticut’s construction and healthcare industries—jobs needed to address the State’s housing crisis and aging population.
Among the Connecticut impacts highlighted in the report:
Between 100,000 and 200,000 Connecticut residents are expected to lose health insurance coverage from HUSKY over the coming years, mostly because of people otherwise eligible getting kicked off due to red tape.
Connecticut's healthcare system could see major impacts, via fewer patients and more uncompensated care, putting providers who serve large Medicaid populations at risk and potentially leading to cost shifting to commercial health insurance.
The State budget will have to cover higher costs for SNAP (est. $84 million to $173 million per year) or provide fewer benefits to reduce costs.
Residents/businesses interested in getting solar, energy efficiency upgrades and electric vehicles will lose out on big discounts, likely slowing adoption.
Defense contractors are major employers in Connecticut. Some could benefit from shipbuilding focus and spending on Golden Dome missile defense system. Coast Guard Academy in New London could get new funding that boosts local spending.
Increased endowment tax is likely to hit Yale University hard, with potential employment consequences for the New Haven area.
R&D expensing especially benefits Connecticut's biotech, life sciences and advanced manufacturing sectors. Should accelerate or stimulate investment helping the State's economy to grow faster, possibly increasing State revenues as a result.
The law has major implications for Connecticut families sending kids to college after this year, residents pursuing workforce preparation or graduate and professional degrees, as well as the State’s colleges and universities.
The report concludes that “While some Connecticut families and industries will benefit, others will lose key government support. Connecticut’s policymakers and residents will face difficult choices in the years ahead as they respond to the consequences of this sweeping legislation.”
