SB 8 — AN ACT CONCERNING HIGHER EDUCATION AFFORDABILITY AND GRADUATE RETENTION.

(xx) To the extent properly includable in gross income for federal income tax purposes, (I) for the taxable year commencing January 1, 2015, ten per cent of the income received from the state teachers' retirement system, (II) for the taxable years commencing January 1, 2016, to January 1, 2020, inclusive, twenty-five per cent of the income received from the state teachers' retirement system, and (III) for the taxable year commencing January 1, 2021, and each taxable year thereafter, fifty per cent of the income received from the state teachers' retirement system or, for a taxpayer whose federal adjusted gross incomeLCO does{\\PRDFS1\SCOUSERS\FORZANOF\WS\2023SB-0011 not exceed the applicable threshold under clause (xxi) of this16 subparagraph,R03-SB.docx the} percentageSubstitute pursuantBill to said clause of the income sSB8 / File No.

1398 11income sSB8does Filenot No.exceed the applicable threshold under clause (xxi) of this subparagraph, the percentage pursuant to said clause of the income received from the state teachers' retirement system, whichever deduction is greater;

139 received from the state teachers' retirement system, whichever deduction is greater;

(xxiii) To the extent properly includable in gross income for federal income tax purposes, the amount of any financial assistance received from the Crumbling Foundations Assistance Fund or paid to or on behalf of the owner of a residential building pursuant to sections 8-442 andLCO 8-443;{\\PRDFS1\SCOUSERS\FORZANOF\WS\2023SB-0012 of 16 R03-SB.docx } Substitute Bill No.

(xxiv)8 Toand the8-443; extent properly includable in gross income for federal sSB8 / File No.

139(xxiv) 12To sSB8the Fileextent No.properly includable in gross income for federal income tax purposes, the amount calculated pursuant to subsection (b) of section 12-704g for income received by a general partner of a venture capital fund, as defined in 17 CFR 275.203(l)-1, as amended from time to time;

139 income tax purposes, the amount calculated pursuant to subsection (b) of section 12-704g for income received by a general partner of a venture capital fund, as defined in 17 CFR 275.203(l)-1, as amended from time to time;

(xxvi) To the extent properly includable in gross income for federal income tax purposes, for a person who files a return under the federal income tax as an unmarried individual whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or asamarriedindividualfiling separately whosefederaladjustedgross income for such taxable year is less than seventy-five thousand dollars, or as a head of household whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxableyearislessthanonehundredthousanddollars,(I)forthetaxable year commencing January 1, 2023, twenty-five per cent of any distribution from an individual retirement account other than a Roth individual retirement account, (II) for the taxable year commencing January 1, 2024, fifty per cent of any distribution from an individual retirement account other thanaRothindividualretirement account,(III) for the taxable year commencing January 1, 2025, seventy-five per cent of any distribution from an individual retirement account other than a Roth individual retirement account, and (IV) for the taxable year commencing January 1, 2026, and each taxable year thereafter, any distribution from an individual retirement account other than a Roth individualLCO retirement{\\PRDFS1\SCOUSERS\FORZANOF\WS\2023SB-0013 account;of 16 R03-SB.docx } Substitute Bill No.

[and]8 (xxvii)individual Toretirement theaccount; extent properly includable in gross income for federal sSB8 / File No.

139[and] 13(xxvii) sSB8To Filethe No.extent properly includable in gross income for federal income tax purposes, for the taxable year commencing January 1, 2022, the amount or amounts paid or otherwise credited to any eligible resident of this state under (I) the 2020 Earned Income Tax Credit enhancement program from funding allocated to the state through the Coronavirus Relief Fund established under the Coronavirus Aid, Relief, and Economic Security Act, P.L.

139 income tax purposes, for the taxable year commencing January 1, 2022, the amount or amounts paid or otherwise credited to any eligible resident of this state under (I) the 2020 Earned Income Tax Credit enhancement program from funding allocated to the state through the Coronavirus Relief Fund established under the Coronavirus Aid, Relief, and Economic Security Act, P.L.

(B) room and board, provided the cost of room and board qualifies only to the extent that it is not more than the greater of (i) the allowance for room and board, as determined by the eligible institution of higher education, that was included in the cost of attendance for a particular academic period and living arrangement of the student, or (ii) the actual amountLCO charged{\\PRDFS1\SCOUSERS\FORZANOF\WS\2023SB-00014 ifof the16 studentR03-SB.docx is} residingSubstitute inBill housingNo. owned or operated by the eligible institution of higher education;

8 amount charged if the student is residing in housing owned or operated by the eligible institution of higher education;

sSB8(3) /"Eligible Fileinstitution No.of higher education" means any institution of higher education that is eligible to participate in a student aid program administered by the United States Department of Education;

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139 (3) "Eligible institution of higher education" means any institution of higher education that is eligible to participate in a student aid program administered by the United States Department of Education;

6 January 1, 2024 12-701(a)(20)(B) Sec.LCO {\\PRDFS1\SCOUSERS\FORZANOF\WS\2023SB-00008-15 of 16 R03-SB.docx } Substitute Bill No.

78 JanuarySec. 1, 2024, and New section applicable to taxable years commencing on or after January 1, 2024 sSB8 / File No.

1397 15January sSB81, File2024, No.and New section applicable to taxable years commencing on or after January 1, 2024 HED Joint Favorable Subst.

139-LCO StatementAPP ofJoint LegislativeFavorable Commissioners:LCO R03-SB.docx }OUSERS\FORZANOF\WS\2023SB-00008- 16 of 16

In Section 7(b), "subparagraph (B)(xxiii)" was changed to "subparagraph (B)(xxviii)" for accuracy.

HED Joint Favorable Subst.

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139 16 sSB8 File No.

139 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

See Below Municipal Impact:

See Below Explanation The bill makes various changes related to higher education affordability and graduate retention, and has numerous fiscal impacts, which are identified below.

Section 1 increases the minimum grant awards per semester under the state's debt-free community college program from $250 to $1,000 for a full-time student and from $150 to $600 for a part-time student.

This results in an increased annual cost beginning in FY 24 of approximately $7,401,000 (based on 7,015 minimum grant awards to full-time eligible students and 4,755 to part-time eligible students).

The section also allows returning students (those who are not a first- time enrollee at a community college) to qualify for the debt-free community college program.

This results in an additional annual cost of approximately$4.7 millionbasedonthenumber ofeligiblestudents,the increased minimum grant awards provided by this section, and the estimated maximum award they would qualify for.

Section 2 requires that any American Rescue Plan Act (ARPA) funding under the Roberta B.

Willis Scholarship program, for FY 23, for the community-technical colleges, be reallocated to the Connecticut State University System (CSUS) for use in FY 24.

As of the end of FY 22, the community-technical colleges estimated they would be unable to award approximately $17 million of a $20 million ARPA allocation for sSB8 / File No.

139 17 sSB8 File No.

139 the Roberta B.

Willis Scholarship program.

This funding was unable to be awarded due to various timing and eligibility criteria.

It is unclear how much ARPA funding is allocated to the community-technical colleges for FY 23.

This reallocation results in an increase in financial aid revenue to the CSUS.

Sections 3-5 establish a Student Loan Subsidy Program.

Section 5 authorizes $7 million in General Obligation (GO) bonds each fiscal year starting in FY 24 for the student loan subsidy program established in this act, to be administered by the Connecticut Higher Education Supplemental Loan Authority.

To the extent the new bonds authorized are fully allocated and expended, there would be an increase in annual General Fund debt service costs until such bonds are fully repaid.

At current market rates, total repayment costs over 20 years for $7 million of GO bond authorizations are estimated to be approximately $10.9 million.

The bill creates an annual new GO bond authorization, which would continue to add $7 million of new bond authorizations each year until changed or repealed.

Additional years of authorization past the initial year would increase the potential costs proportionately – for example, years of authorizations would be $70 million of bond authorizations at a total estimated debt service cost of $109 million.

To theextentthenewbondsauthorizedare certifiedby theTreasurer, and are fully allocated and expended, there would be an increase in annual General Fund debt service costs until such bonds are fully repaid.

However, when portions of an authorization are specified to become effective in future years, the full authorization amount is typically known at the time of adoption.

The total potential debt service cost is unknowable, given the lack of finite amount or time frame of the bond authorization.

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139 Sections 6 and 7 establish a state personal income tax deduction for student loan interest paid.

This does not result in any fiscal impact as the deduction is only available if the interest has not been deducted federally and it is presumed that filers would claim the "above-the-line" federal deduction in lieu of the state deduction established under the bill.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to inflation, participation in the debt- free community college program and to the terms of any bonds issued.

1In addition to filers' federal tax benefit being greater than the potential state tax benefit due to higher federal tax rates, the income thresholds that apply at the federal level are more generous than the limits for the deduction established under the bill.

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139 OLR Bill Analysis sSB 8 AN ACT CONCERNING HIGHER EDUCATION AFFORDABILITY AND GRADUATE RETENTION.

SUMMARY This bill helps certain students and taxpayers with higher education costs.

It does so by:

1.

expanding the state’s debt-free community college program eligibility to returning students and increasing the minimum program award amounts (§ 1);

2.

reallocating federal American Rescue Plan Act (ARPA) funds under the Roberta B.

Willis Scholarship program from the regional community-technical colleges to the Connecticut State University System (CSUS) (§ 2);

3.

authorizing $7 million in bonding and requiring the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to use bond proceeds to establish a student loan subsidy program to subsidize interest rates on authority loans to people employed in certain high-demand professions (§§ 3-5);

and 4.

establishing a state income tax deduction for taxpayers for student loans interest during the taxable year (§§ 6-7).

EFFECTIVE DATE:

July 1, 2023, except that the student loan interest tax deductiontakeseffect onJanuary 1,2024,andisapplicable to taxable years beginning on or after January 1, 2024.

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139 § 1 — DEBT-FREE COMMUNITY COLLEGE Eligibility Expansion Under current law, the state’s debt-free community college program allows eligible Connecticut high school graduates who enroll as first- time community-technical college students to receive awards on a semester basis.

The bill removes requirements that (1) a qualifying student must be a first-time enrollee at a regional community-technical college, thus extending programeligibility to returning studentsand(2)awardsmust be applied during a student’s first 48 consecutive months of community college attendance, allowing them to receive the award as long as they meet all other eligibility requirements.

As under existing law, an award is available to a qualifying student for the first 72 credit hours they earn.

Thebillalso makesconformingchangesbyeliminatingprovisionsfor separate eligibility requirements for qualifying students who take a medical or personal leave of absence or are called to active duty in the armed forces while enrolled in a community college.

Award Increase Currently, funds awarded to eligible students under the debt-free community college program (1) cover the unpaid portion of the institutional costs (i.e., tuition and fees minus scholarships;

grants;

and federal, state, and institutional aid awarded to the student excluding loans) or (2) provide a minimum award of $250 for a full-time student or $150 for a part-time student, whichever is greater.

The bill increases the minimum awards, from $250 to $1,000 for afull- time student, and $150 to $600 for a part-time student.

§ 2 — ROBERTA B.

WILLIS SCHOLARSHIP PROGRAM By law, the Roberta B.

Willis Scholarship program provides merit- andneed-basedfinancialassistancetoConnecticutresidentswhoattend an in-state public or private higher education institution.

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139 The bill requires any amount allocated from federal ARPA funding totheregionalcommunity-technicalcollegesundertheRobertaB.Willis Scholarship program for FY 2024 to be reallocated to the CSUS to expend as grants under the scholarship program.

§§ 3-5 — CHESLA STUDENT LOAN SUBSIDY PROGRAM Underthebill,theStateBondCommissionhasthepowertoauthorize up to $7 million in bonds annually.

These bonds may be issued in one or more series and in principal amounts not to exceed this amount.

The bill also requires CHESLA to use the proceeds to fund the student loan subsidy program the bill establishes.

The bonds are subject to standard statutory bond issuance procedures and repayment requirements.

(The bill does not impose an aggregate bond cap or specify the number of years for which CHESLA can issue these bonds.

In practice, both of these limits are necessary for debt certification.) The bill requires CHESLA, subject to available funding, to establish the Student Loan Subsidy Program to subsidize interest rates on authority loans to people employed in certain high-demand professions and who meet established eligibility criteria.

By September 1, 2023, the Chief Workforce Officer must identify and annually update professions that are in high demand by Connecticut employers to qualify people employed in these professions for the program.

Under existing law, “authority loans” are education loans by CHESLA or CHESLA loans from the proceeds of bonds to fund education loans (CGS § 10a-223(3)).

Eligibility Criteria and Administrative Guidelines Under the bill, CHESLA and the Office of Workforce Strategy must jointly establish the eligibility criteria and administrative guidelines for the program.

The criteria and guidelines must include:

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139 1.

applicant eligibility;

2.

interest rate subsidies and principal limits on authority loans subject to the program;

3.

the process for verifying an applicant’s employment;

and 4.

the requirement that an interest rate subsidy through the program terminates for a subsidy recipient who no longer meets the program’s employment requirements during the loan’s term.

Account Expenditure Guidelines Under the bill, CHESLA must maintain a separate, non-lapsing account to hold program funds required by law to be deposited there, including any state appropriation or bond sale proceeds.

The bill requires the authority to use the funds in the account for the program’s purposes and to cover reasonable and necessary expenses for the program’s administration.

§§ 6-7 — TAX DEDUCTION ON STUDENT LOAN INTEREST The bill establishes a state income tax deduction for taxpayers who paid interest on their student loans during the taxable year.

It allows taxpayers to deduct these costs from their Connecticut adjusted gross income (AGI), equal to the amount of student loan interest paid on a qualified loan of up to $2,500 for each taxpayer, to the extent not deductible in determining federal AGI.

STUDENT LOAN DEDUCTIONS The bill allows taxpayers to deduct student loan interest from their AGI as long as they meet the following requirements:

1.

their filing status is any except married filing separately;

2.

they have a modified federal AGI below $75,000 (for single, head of household, or qualifying widow or widower filers) or $150,000 (for joint filers);

3.

they were not claimed as an exemption on anyone else’s return;

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139 4.

they are legally obligated to pay interest on a qualified student loan;

and 5.

they paid interest on a qualified student loan.

Under the bill, the deductions apply to “qualified student loans,” which the bill defines as loans taken out solely to pay for qualified education expenses that:

1.

are for the taxpayer, taxpayer’s spouse, or the taxpayer’s dependent at the time the loan was taken out;

2.

have been paid or incurred within a reasonable period of time before or after the taxpayer took out the loan;

3.

are from a private or governmental lender;

and 4.

are for education provided during an academic period for an eligible student (i.e., a student who is or was enrolled at least part-time in a certificate or degree program at an eligible higher education institution).

The bill defines “qualified education expenses” as the total costs of attending an eligible higher education institution (i.e., any higher education institution that is eligible to participate in a student aid program administered by the U.S.

Department of Education), including graduate school, and includes amounts paid for the following:

1.

tuition and fees;

2.

room and board, provided the cost of room and board qualifies only to the extent that it is not more than the greater of the (a) allowance for room and board, as determined by the eligible higher education institution, that was included in the cost of attending a particular academic period and living arrangement of the student or (b) actual amount charged if the student is residing in housing owned or operated by the institution;

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139 3.

books, supplies, and equipment;

and 4.

other necessary expenses, including transportation.

COMMITTEE ACTION Higher Education and Employment Advancement Committee Joint Favorable Yea 21 Nay 1 (03/07/2023) sSB8 / File No.

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