State legislators have a big say in Where Connecticut ends up
With a month to go in the 2015 legislative session, state lawmakers have a lot of decisions to make—some that will have a significant bearing on whether Connecticut becomes a top 20 state for business by 2017 or continues to languish near the bottom among other economically underperforming states.
Connecticut’s 2014 economic performance was ranked 49th in the country by CNBC’s America’s Top States for Business. Placing Connecticut at 46th overall, the CNBC index also gave the state poor marks for cost of doing business (47th) and infrastructure (42nd).
Although our job growth numbers are improving, our jobs recovery has been slow compared with the nation as a whole. After posting 25,100 new jobs in 2014 for a growth rate of 1.5%, Connecticut is still trailing the national economy, which grew jobs at a rate of 2.3% last year.
So what can lawmakers do in the next few weeks to move Connecticut up?
The legislative progress reports on the facing page provide a brief guide to some of the most economically impactful bills now before the legislature, indicating which ones would move Connecticut up (and should get a yes vote) or hold the state down in national economic competitiveness rankings (and should get a no vote).
Budget: Why Lawmakers Need to Get It Right
The state budget submitted to the legislature by Gov. Malloy attempts to close the deficit with spending cuts in a variety of areas and tax increases that fall mainly on the business community.
The tax measures include reducing the value of investment incentives for research and development (R&D) and other key economic activity, which would effectively raise taxes only on companies investing in Connecticut.
The proposed budget also reduces the net operating loss carry-forward (an important tool and prerequisite to attracting and retaining businesses in Connecticut) and extends indefinitely the temporary 20% corporate surcharge, which keeps our corporate tax rate at 9%—the sixth-highest in the country.
Connecticut is already ranked by financial website WalletHub as having the fifth-worst state and local tax burden in the nation (the worst when adjusted for cost of living).
The most critical task legislators now face is creating and building consensus around an alternative budget that:
- Erases projected deficits of $1.3 billion in FY 2016 and $1.4 billion in FY 2017
- Comes in under the state’s constitutional spending cap
- Avoids tax increases or structural changes to the tax code that would further slow economic recovery and job creation
Confidence Is Key
“Although increasing taxes on business is intended to solve fiscal problems, it will ultimately make them worse,” says Joe Brennan, CBIA’s president and CEO. “By devaluing the state’s own economic development tools and creating a less favorable business tax environment, these tax increases shake the confidence of businesses and entrepreneurs that Connecticut is a good place to invest and create jobs.
“Without that confidence, Connecticut’s economic growth will continue to be weak, compromising tax revenues and virtually guaranteeing budget imbalances year after year. Policymakers must give businesses a reason to be confident that the state understands the connection between private-sector investment and fiscal stability.”
At press time, the legislature’s Finance Committee had not yet finalized a tax package as a legislative alternative to the governor’s proposals.
“CBIA has made it clear that our members want the legislature to reject tax increases and a host of labor mandates and other anticompetitive bills that will add to the high costs and miles of government red tape Connecticut businesses now face,” says Brennan.
And, he argues, legislators must undertake systemic reforms to state spending, including by expanding the use of nonprofits to deliver state programs and services, accelerating the rebalancing of long-term healthcare toward home-based care, and reforming the corrections system to reduce Connecticut’s prison population.
“Our state has a lot to offer,” says Brennan, “and legislators now have an opportunity to make it even better, but it will require doing things differently. In the short term, that means approving bills that will help Connecticut rise and rejecting those that will hold us down.” ■
CBIA has the tools and resources you need to engage your state legislators:
1. Get started by identifying your state senator and representative.
2. Contact CBIA’s Nicole Cline (860.244.1929; nicole.cline@cbia.com) for advice on connecting with your legislators.
3. Follow and interact with lawmakers on Twitter.
4. Sign up to receive CBIA’s digital Government Affairs Report.