You requested an estimate of the fiscal impact of the provisions contained in HB 5001 (concerning same-sex marriage); and HB 5002 (concerning same‑sex civil unions) of the 2002 regular session.

Summary

Both bills result in an increase in income tax revenue estimated to be $700,000 annually.  However, this could be offset by a revenue decrease in succession tax of $1 million annually until FY 06, when that tax is scheduled to be eliminated.

The bills would also result in a cost to the state of approximately $70,000 in the first fiscal year of implementation related to expanding programs within the Judicial Department’s family violence docket ($47,000) and one‑time costs to print new marriage / civil union license forms and death certificates ($23,000). 

In addition, the fiscal impact related to changes in the following would be minimal or none: (1) court fines and fees; (2) civil court operations; (3) victim compensation and services; (4) home studies for adopted children; (5) probate court judge benefits; (6) state employee benefits; and (7) procedures and benefits administered by various other state agencies and municipalities.    

Note: the bills have substantially the same fiscal impact because they both provide that parties to a same-sex marriage or civil union shall have all the same benefits, protections and responsibilities as are granted to spouses in a marriage.

Explanation/Detail

Tax Provisions

The estimates provided herein are largely based on Vermont’s experience adjusted for differences in Connecticut’s tax structure and the estimated number of same‑sex marriages or civil unions that would occur in Connecticut in the first year.  The estimates also assume that the intent of HB 5001 and HB 5002 is to treat civil unions/same sex partnerships similar to married couples for tax purposes.

Income Tax 

Couples that enter into same‑sex marriages or civil unions would be treated as joint taxpayers instead of single filers for purposes of calculating their annual personal income tax liability. This provision is anticipated to result in an annual General Fund revenue gain of approximately $700,000/yr.  The estimate is based on each person having an income of $43,000/yr, which is the mean income for a single person living in Connecticut according to 2000 census data.

Succession Tax

The transfers to a partner would be exempt from the succession tax because it would be considered a Class AA transfer (transfer to a surviving spouse) instead of Class C transfer (non immediate family and others). Currently, transfers to Class AA inheritors are exempt while transfers to Class C inheritors are taxed up to 20%.  

Because the succession tax is so volatile and depends on the wealth of the decedent, estimates of lost General Fund revenue are difficult to estimate.  However, depending on individual circumstances, the revenue loss could exceed $1 million annually.  It should be noted that the succession tax is being phased out and the tax on Class C transfers is scheduled to be eliminated in January 2006.  Therefore, there would be no revenue loss after FY 06.

Gift Taxes

Under current law, property transfers between married couples are not subject to the Gift Tax.  Establishing joint ownership of a home is the most common property transfer between married couples. Therefore, if same‑sex marriages or civil unions were recognized, property transfers between partners would be exempt from the Gift Tax.

According to staff at the Department of Revenue Services, under current law there have been very few transfers between same sex partners that have resulted in a tax liability. Therefore, the recognition of same‑sex marriages or civil unions is anticipated to result in a negligible revenue loss from the Gift Tax.   

Other Taxes

The impact of same‑sex marriages or civil unions to other taxes (controlling interest transfer tax, sales tax, property tax exemptions) is expected to have a negligible impact on state and local revenues.

Court Fines and Fees

The bills provide for penalties related to certain administrative prohibitions against entering into same‑sex marriages or civil unions.  Any resulting revenue gain to the state would be less than $1,000.  For comparison purposes, there were no violations in FY 02 of CGS Sections: 46b-22 (Unauthorized Performance of Marriage), 46b-24 (Performing Unlicensed Marriage), and 46b-34 (Failure to Complete / File Marriage Certificate). 

The entry fee to commence a dissolution proceeding is $185.  Future revenue from civil filings to dissolve same‑sex marriages or civil unions is anticipated to be less than $50,000 annually.

Civil Court

The future number of dissolution proceedings involving same‑sex marriages or civil unions is not expected to substantially alter the Judicial Department’s caseload such that additional staffing, equipment, or facilities would be required.  Consequently, there is no cost associated with adjudication and related services such as mediation and support enforcement.

Family Violence Docket

It is anticipated that, under either bill, the Judicial Department would expand its pre‑trial diversion and alternative sanction programs within its family violence dockets.  In particular, the agency would increase the number of classes in pre‑trial diversion (Family Violence Education Program or FVEP) in order to: (1) mitigate the impact on the waiting period associated with the potential increase in female participants; and (2) provide for separate classes for male same gender clients because they generally have a more difficult time being accepted by other program clients.  It also would expand the alternative sanction (Explore) program to provide services for female offenders[1] and to provide specific classes for male offenders in same gender relationships.  The annual cost of the expansion to the FVEP and Explore programs (net client fees) is estimated to be $47,000.

Victim Compensation and Services

Any potential compensation payments made under either bill from the Criminal Injuries Compensation Fund (CICF) to dependents of deceased victims would be less than $10,000.  (The median payment for support claims for dependents of deceased victims is $7,000.)  The CICF is funded from restitution payments and federal grants.  Victim services, including counseling for victims of domestic violence and surviving family members of homicide victims, are currently available to same‑sex partners through private providers[2] under contract with the Judicial Department.  Consequently, there would be no fiscal impact related to victim services as a result of either bill.

Home Studies for Adopted Children

Should language similar to that proposed in House Bills 5001 or 5002 be enacted, the Department of Children and Families may be asked by the Probate Court to perform additional home studies.  This would occur in cases involving the potential adoption of a child by a stepparent through civil union.  It is not expected that the increase in the volume of court requests would be significant in nature, however, and therefore the agency will be able to accommodate any additional workload within its normally budgeted resources. 

Licensing and Certificates

The Department of Public Health (DPH) will incur a one-time cost of approximately $4,100 to reprint 40,000 marriage/civil union license forms (at $0.10 each) for distribution to town registrars, as well as an additional $100 in printing costs for civil union application forms.

The state will experience a revenue gain and cost in response to the collection of a license surcharge fee from persons entering into civil unions.  A $20 surcharge would be paid for each license (Section 7-73(b) CGS).  Of this, $1 would be retained by the local registrar of vital statistics, while $19 would be credited to the State’s General Fund and distributed to the Department of Social Services for shelter services for victims of household abuse and to the Department of Public Health for rape crisis services.  The number of persons seeking civil union licenses cannot be predicted in advance.  However, for comparison purposes, $19,000 in revenues would be generated should 1,000 couples seek licenses.

An additional minimal revenue gain of $10 each would be generated in the course of the State Registrar issuing certified copies of civil unions.  (However, it should be noted that vital records held at the Connecticut Department of Public Health are currently being microfilmed which precludes the State Registrar of Vital Statistics from issuing certified copies at this time.)

The Department of Public Health would also have to modify its death certificate form to accommodate a new civil union category.  This would result in one-time costs to the state of approximately $18,900.  This sum reflects DPH costs of approximately $16,100 to reprint 70,000 death certificates.  It also includes costs incurred by the Office of the Chief Medical Examiner of approximately $2,800 in the course of reimbursing DPH for both the revised certificates and associated correction forms.

Probate Court Judge Benefits

There would be a minimal cost to the Probate Administration Fund related to health insurance benefits for both active and retired Judges.  The fund pays 100% of the Judge's premium and pays 50% of "spouse and family."  There would be a minimal, if any, fiscal impact on other probate statutes.

State Employees

Neither bill is anticipated to significantly impact the collectively bargained benefits provided to state employees.  Same sex domestic partner benefits were extended to state employees in March 2000 through an Interest Arbitration Award between the State of Connecticut and the State Employees Bargaining Agent Coalition (SEBAC). Administrative orders issued by the DAS Commissioner and OPM Secretary have already extended the provisions of the arbitration award to non-represented employees.

To date, 336 state employees have had affidavits of domestic partnership accepted for health care benefits and/or pension coverage.  The Office of the State Comptroller estimates the FY 03 cost of providing health care benefits to same sex domestic partners to be $825,000.  The state’s total cost for the state’s employee and retiree health care benefit plan will be approximately $700 million (all funds) in FY 03.

Various Other Impacts

Various other state agencies would experience a minimal fiscal impact related to changes in administrative procedures necessitated by the bills, or the extension of benefits to individuals entering into same‑sex marriages or civil unions permitted by the bills.

Local registrars will experience a minimal revenue gain in response to the retention of $11 out of each $30 license fee ($10 base fee, $1 surcharge) paid by couples entering civil unions.  A further minimal revenue gain of $5 each would be generated in the course of issuing certified copies of civil unions.

It is anticipated that municipalities would experience a minimal revenue loss from fees for recreational facilities as same-sex partners might pay a family rate rather than two individual fees. 

Background

Passage of either bill would result in approximately 1,300 same-sex contracts (civil unions or marriages) in the first year following the effective date.[3]  The annual number is expected to decrease over time, with a corresponding increase in dissolutions.