HARTFORD, Conn. (AP) – Connecticut could lose nearly $1 million a year because of decreased inheritance tax revenue if the state allows civil unions of same-sex couples, a new legislative report says.

Municipalities would also pay a price, up to $1.5 million a year for health insurance, pensions and other benefits for town and city workers who enter into civil unions, according to the Legislature’s nonpartisan Office of Fiscal Analysis.

The report provided general cost estimates, but said the true cost of civil unions is difficult to estimate.

A bill that would create civil unions, which would allow same-sex couples to enter into legal partnerships and receive many of the same rights and guarantees as married couples, was approved by the Legislature’s Judiciary Committee last month. The measure would need approval from the Appropriations and Finance committees before it could reach the floors of the full House and Senate.

The primary financial effect on the state budget would be lost revenue from the succession tax. Under state law, wives and husbands inherit property from their spouses tax-free, but unmarried partners are required to pay taxes.

If same-sex couples are permitted to legalize their relationships by entering into civil unions, they would have the same status as heterosexual couples. The office estimates that the lost revenue will total $1 million a year until January 2008, when the tax is scheduled to be eliminated.

The state budget for the current fiscal year is more than $14 billion.

Sen. Andrew McDonald, a Stamford Democrat and co-chair of the Judiciary Committee, said the lost revenue proves the inequities gays and lesbians now face.

“Under current law, [same-sex] partners are at a real economic disadvantage because they are considered to be legal strangers – they’re no more connected than if you left a bequest to your neighbor down the street,” McDonald said. “To me that underscores very real economic discrimination.”

The loss of tax revenue is “the price we will pay to end this legal discrimination,” McDonald said.

Towns and cities that offer health insurance to spouses of married employees would have to provide coverage to partners joined in civil unions, the report said.

Annual costs would vary from town to town “but could eventually reach $150,000 to $200,000 for the larger municipalities,” the report said.

Some of the state’s 169 cities and towns already offer coverage to unmarried partners, gay or heterosexual. The state provides domestic partner healthcare coverage and pension benefits.

Private businesses, which are governed largely by federal employment law, would not be required to offer benefits to partners in a civil union, although many large companies already offer benefits to unmarried partners.