Like most business people, I have too often looked at our political process with bewilderment and passivity. So last week, I decided to change that and attended a number of events in Hartford intended to illuminate businesses’ position in the Connecticut budget debate. One of the advantages of a small state like Connecticut, is that the government is very accessible. My experience illuminated three questions that business professionals should ask themselves. (For a summary of the Appropriations Committee proposal, click Proposal Summary )
Is anybody really representing your view? The Connecticut Mirror and CBIA have treated the state to an excellent series of panel discussions addressing the key budget issues. Last week I heard Governor Malloy, Joe Brennan (CBIA, President) and Oz Griebel (President, Metro Hartford) address a series of questions on the Connecticut business environment. What struck me the most about the discussion is that all parties seemed to infer that every Connecticut business is a C-Corporation. Most businesses are “Pass-Throughs” (i.e. S-Corporations, LLCs, and Partnerships) and are most impacted by personal taxes. Small business owners should understand that their priorities are highly underrepresented in Hartford. It is worth aligning with an association that actively lobbies your concerns.
What is the real question? Governor Malloy has successful steered the budget debate to a question of whether to raise taxes or cut social services to the most needy. When I hear Republican say that social program cuts are unacceptable and the Governor conceding that the Appropriation Committee’s revenue plan is unpassable, I conclude that these are not choices at all. I heard a representative from Yankee Group say that Connecticut public employees are compensated (wages and benefits) 42% higher than private sector employees in a position with comparable requisite skills. Connecticut’s budget problems are structural and it is striking that neither party is willing to address this issue directly for fear of retaliation. The real question is: “Do we restructure or not?”
What is at the heart of Connecticut’s business unfriendliness? Many in the business community are quick to point at taxes and regulation as the reason for Connecticut’s slow economic recovery. I agree that taxes and regulation are onerous. I observe that when businesses leave Connecticut however, they often don’t go more than 250 to 300 miles and take up shop in another high-cost state. I believe that lack of vision and leadership is a bigger culprit than cost of government. Connecticut’s economic development efforts are disjoint. While the Malloy administration has introduced some excellent programs for small business and startups, we are still willing to spend more money on keeping the jobs we already have than developing new ones. Does it make sense to spend millions of dollars to entice Jackson Labs to move here and then not surround it with a technology-based small business community to attract necessary talent?
What to do? I suggest that in the near future, you telephone (not email) your state representatives to discuss three points: the importance of restructuring state agencies to operate in the current revenue stream, which of the proposed new taxes are most painful for you, and what you feel is most necessary for a full economic recovery.
5 thoughts on “Top Three Questions in the CT Budget Debate”
Very interesting Charles. On your 3rd point (and 2nd also) I was very surprised by a conversation I had with a manufacturer last Fall before the election. I wanted to see whether the cost and regulation burden was real for him. His response was that he really wanted the current administration to continue. He didn’t like the taxes, regulations and employee costs but he got so many handouts from State programs they were perceived to be more valuable that the costs.
Thanks for the comment. Connecticut certainly spends enough money on economic development. There needs to be some accountability on whether it’s having impact.
I have found the tax discussion to be tricky as well. It is hard to isolate one state tax as problematic; it’s the tax code in its entirety that overwhelms. Connecticut would benefit from tax reform and a reduction in the complexity of the tax code.
As mentioned above, it is common knowledge that CT State Employees are highly compensated. They have a very sweet deal, know it and are very defensive of it. They have a Great Pay/Benefits Package. Other states aren’t hearly as generous with their Employee Comp. Packages. Other states often limit what work employees can do for the state after retiring. CT does no such thing, which essentially allows for Double Dipping. They collect they retirement pay, then come back as a Consultant at a Higher rate of Pay, to fill the need the state has due to the number of retirements. I could this much more Double Dipping, but will keep it appropriate. When I’ve asked about confronting the CT Unions about this, I’ve always been told that only the “Governor” can do this. I started asking this question when Rell was Governor. I’ve always just dropped it, maybe now is the time to push the issue. Malloy doesn’t need to worry about “upsetting” state workers & losing their vote, he can’t run again, Thankfully!! Ofcourse, I don’t expect he’ll do anything about it. Hey, he may want to come back as a Consultant.
I think “double-dipping” happens in the private sector, too. The public employee unions have daunting power. The fact that the majority leader of the House is also an union officer, in my opinion, mutes debate in the Legislature. Nobody understands the Governor’s plan going forward. There are no term limits in Connecticut. There is a union contract up for renewal this year. The Governor promises tough negotiations, but we’ll see what happens.
Thank you! Charles