Gov. Rell and legislative leadership are meeting again today. They sat down yesterday for the first time in a while as they try to hammer out a new, two-year state budget. The governor has prepared a veto message for the budget and tax package passed by Democratic majorities last week, but as of yet has not officially vetoed the bill.

The state will begin the new fiscal year on July 1 without a budget in place, but the government will continue to operate under the existing laws. Gov. Rell retains her authority to issue executive orders to keep state government in operation.

The parties will try to get consensus on the amount of spending cuts, borrowing and tax increases necessary to close the projected shortfall over the next two years. Gov. Rell has indicated that she will not entertain any tax increases until all efforts to cut the budget are exhausted.

The state Senate passed a new two-year budget today. Among other things, it imposes a 25% surcharge on the corporate income tax for income years 2009, 2010 and 2011; imposes higher tax rates on the personal income tax for upper incomes; increases the preference tax for companies electing combined reporting from $250,000 to $400,000; imposes a 30% surcharge on estates of those who die in 2009, 2010 or 2011; and raises the cigarette tax by 75 cents per pack. Here’s the bill and the fiscal note.

The House of Representatives is scheduled to take up the bill on Friday. Gov. Rell has indicated that she will veto the bill when it reaches her desk. Although the tax package is improved from the version adopted by the Finance Committee several months ago, the overall level of tax increases is still much too high.

The vote was 19-16, with all Republicans present and five Democrats voting no. Here’s the vote.

The House and Senate will be in session on Friday to take up some budget-related legislation, but there is still along way to go before we see a new two-year state budget in place. The measures to be taken up Friday include funding for a summer jobs program and a corporate tax decoupling bill that will prevent a revenue loss in Connecticut.

Democratic leaders have said that they will come into session next week to pass a two-year budget, but without agreement from Gov. Rell it will likely be vetoed. Although there will be changes to the tax increase bill adopted by the Finance Committee during the regular session, the Governor has said she will not even entertain any tax increases until Democrats accept significant spending cuts. The state’s fiscal year ends on June 30 and it appears it will end without a new budget in place.

Many lawmakers are concerned about passing tax increases during a recession and the impact higher taxes will have on jobs in the state. Hopefully the budget, when adopted, will begin the process of reforming state government to make it more sustainable over the long-term. Between an aging population and huge unfunded liabiltities, the current structure of government is not sustainable. Many needed services provided by government will be in greater danger in the not-too-distant future than they are now.

CBIA’s Eric George debated health care reform on NPR today. Here’s a link to the broadcast.

The regular session came to a close last night, and as everyone predicted for the last few months, it ended without passage of a new state budget. Lawmakers will come back to Hartford to adopt a budget as early as the end of the month or as late as who knows when.

We will have a full recap of the session once our staff comes to, but for now let’s just say it was a disappointment. Businesses are failing, thousands are losing their jobs and no real action was taken to help. Fortunately lawmakers avoided some of the most ill-advised ideas like paid sick leave mandates and captive audience legislation, but it did pass two supposed health care reform bills that won’t lower costs or really reform the system. we hope that the governor will veto these bills and the General Assembly will finally get around to improving the system rather than expanding the government bureaucracy.

Hopefully the action on the state budget will be an improvement and we can set a tone of economic renewal in Connecticut.

It’s taken a while to get here, but the 2009 General Assembly session comes to a close at midnight tonight. As just about everyone knows, there is no state budget deal and lawmakers will have to come back in special session to get that job done.

The CBIA staff is monitoring dozens of bills as I write this. We remain hopeful that the paid sick leave bill and the captive audience bill expire tonight. Both have passed one chamber but have not yet been taken up by the other. Time is on our side.

Unfortunately, the legislature did pass two bills purported to bring health care reform to Connecticut. Both fall far short of real reform and will end up being costly for the state. The bills, the “pooling” bill and the SustiNet bill, passed largely along party lines, with Republicans opposing and all but one Democrat supporting. More on these bills later.

The House of Representatives passed the mandatory paid sick leave bill last night. So far we have the sick leave bill through the House, the captive audience bill through the Senate, multiple health care mandates through the Senate, two expensive bills giving the state a much greater role in the health care system through the House, and a $3.3 billion tax increase through the Finance Committee, among others. Eleven thousand jobs lost last month alone, and this is what the legislature is doing. Everyone should ask the question: Who are they listening to?

Time is running short on the 2009 General Assembly session, with a little over a week to go before adjournment of the regular session. Observations of the session to date reveal very little evidence that our economy is under great strain and that the state’s jobless numbers continue to rise. There is also little indication that legislators are aware that their constituents care more about the economy and jobs more than other issues.

What the legislature can do in this last week is avoid making Connecticut less hospitable to job creation. They can start by killing ill-timed bills such as paid sick leave and captive audience. They can also help by beginning the important process of reducing the size of state government and making it more efficient and cost-effective through agency consolidations and other reforms. Perception and confidence are two important concepts in putting both the economy and the legislature in perspective. So far, employers perceive little confidence in legislators understanding how serious our economic problems are, and unfortunately that perception may become reality. Legislators have a week to turn things around.

While residents of Connecticut clearly need greater access to affordable and quality health care, the House of Representatives approved two bills that they claim further health care reform, but in reality, don’t. The health care pooling bill (HB-6582) and the SustiNet bill (HB-6600) each claim to be health care reform. But in fact, they are not.

The pooling bill opens the expensive state employee plan to small employers and other groups and doesn’t insure one new person in the process (considering that these groups can already purchase less expensive insurance in the existing private market). And the SustiNet bill takes the concept to the next level by contemplating eventually offering health plans operated by the state to everyone in Connecticut.

And each of these plans would have the state self-insure all of its public health plans, putting the state’s general fund and its taxpayers on the hook to pay the medical claims made under these plans.

Rather than these state-run health care schemes, Connecticut needs real health care reform that lowers cost, improves quality and thereby increases access. And we absolutely need to coordinate our state health care reform efforts with those of the federal government, which has all but guaranteed massive health care reform soon.

Hopefully, the state senate will recognize the misguided efforts of these bills and opt instead for real reform.

Connecticut has a long, long way to go before we recover from the economic recession. When we held Manufacturing & Technology Day last week at the state Capitol, we heard over and over about companies using every means possible to stay afloat and keep as many of their people employed as possible. Despite the severity of the problem, Democratic leaders are poised to call two bills that will do nothing more than cause more job losses.

The Senate is planning to take up the so-called captive audience bill, designed to limit communications between employers and employees. The bill restricts an employer’s ability to hold required meetings to discuss anything that the legislature deems “political.” This is part of a national movement of organized labor to tie the hands of employers who may want to communicate with their employees about a variety of issues. If legislators care about retaining and creating jobs in Connecticut, they will reject bills like this that have a decided “anti-employer” bias. The public cares about the economy and jobs, not about legislation like this.

The House of Representatives will likely take up the paid sick leave bill, which will increase employers’ costs in a variety of ways. Because companies have cut back so much, the only place left for many is their employees. Higher costs will mean fewer jobs for Connecticut citizens. In addition, legislative mandates often lead to reduced benefits for employees because employers are forced to change more flexible policies to meet the one-size-fits-all mandate imposed on them. At a time like this, spurring economic growth should be the priority, but right now that does not appear to be the case.