Though Mayor Toni Harp was initially apprehensive about a state proposal to allow cities to tax nonprofit hospitals like Yale New Haven Hospital, the mayor has become more open to the plan in recent weeks, as state lawmakers debate reimbursing hospitals for money lost in new taxes.
As part of Gov. Dannel Malloy’s proposed budget for the 2018–19 fiscal year, nonprofit hospitals would be taxable if cities chose to tax them. The budget was presented to Connecticut’s Legislature on Feb. 8 and is currently under review by the state’s General Assembly.
In an interview with the News on Feb. 28, Harp said she would most likely not push for new taxes on Yale New Haven Hospital in order to help balance the city’s budget. Director of Communications Laurence Grotheer said the mayor was previously concerned that imposing a property tax on YNHH would hurt the hospital, and that Harp preferred to find another way to raise money. But he told the News on March 20 that the mayor would support taxing YNHH if the hospital were reimbursed the money it lost to local taxes by the state or federal government — an idea that has been floating around Hartford, Grotheer said.
“The mayor has said that she would like to know that hospitals will be kept whole should there be a change in local taxation policy,” he explained.
The mayor will have to decide in coming weeks whether to include new hospital taxes in the city budget. The Board of Alders will then vote on the proposed budget and will have the final say on whether the city approves the new taxes.
The discussions about taxation come amid an especially difficult budget-planning year for city and state officials. State officials are determined to shrink the state’s $1.7 billion deficit, and have considered shifting responsibility for certain payments, most notably public teachers’ pensions, to cities and towns. Officials from Connecticut’s municipalities, many of which say they will not be able to balance their budgets if burdened with additional payments, have rallied against these plans.
Chris McClure, a spokesman for the state’s Office of Policy and Management, said the proposed property tax on nonprofit hospitals would generate a projected $212 million in positive revenue for towns, he said, which would be especially beneficial for towns with prominent hospitals like New Haven.
The state would then reimburse hospitals with supplemental payments partially subsidized through Medicaid, McClure said. He added that these payments would total $250 million and would leave hospitals with a net gain. The end result would be an increase in revenue for towns as well as funding for hospitals — all of which would be offset by the federal government, according to McClure.
However, McClure noted that the proposal contains multiple risks. For example, although towns would still be able to opt out of taxing their hospitals, the state would continue to make supplemental payments to the hospitals. This could leave the state accountable for $250 million without decreasing municipal costs, McClure said.
The federal government could also change how they reimburse Medicaid in the future, which would leave the state without the federal funding necessary to cover the $250 million payment. McClure explained that the supplemental payments exist within the Medicaid State Plan, an agreement that could be changed in the future either by the federal or state government.
“Everyone would be bearing a great deal of risk here,” McClure said.
Adam Joseph, communications director for Democratic Senate President Pro Tempore Martin Looney, D-New Haven, said the senator will support the proposal to allow hospitals to be taxed if there is a guarantee that the tax money ultimately be reimbursed to hospitals.
“Senator Looney wants to make sure that there is a guarantee that the hospitals will not lose that money,” Joseph said.
However, he said the General Assembly will still be negotiating and making changes to the budget in the coming weeks.
The assembly is required to adjourn by June 7, and the state’s Appropriation Committee and Finance Committee will present proposed changes by April 27 and April 28, respectively.
Until then, members of the assembly will continue to weigh in on the budget, Joseph said.
Since Yale New Haven Hospital absorbed Saint Raphael Hospital in 2012, it has been the only hospital in the city of New Haven.