More than 50 Business, professional organizations back campaign to strengthen state’s economy
On March 5 at Connecticut Business Day in Hartford, CBIA President and CEO John Rathgeber and Greater New Haven Chamber of Commerce President Tony Rescigno announced the launch of CT20×17—a multiyear campaign aimed at moving Connecticut into the top 20 states for business by 2017 as measured by independent national business climate rankings.
The campaign has the backing of more than 50 business and professional organizations, including the Chamber of Commerce of Northwest Connecticut, whose president and CEO, JoAnn Ryan, gave the opening remarks at Connecticut Business Day, underscoring the importance of the CT20×17 campaign to her area of the state.
Accelerating Our Recovery
“Making Connecticut one of the best places in the country for business is critical to accelerating our economic recovery and attracting the kind of private-sector investment necessary to create job opportunities and economic growth,” says Rathgeber. “And it’s why CBIA is proud to support the CT20×17 campaign and its framework of commonsense policy recommendations.”
One of those recommendations—shoring up the state’s fiscal condition—resonated with Rescigno. “We think there’s nothing more important than getting the state’s fiscal house in order, and we want to help,” he says. “We think it’s essential for the future of the state and its residents.”
Reaction to the Campaign
The response to the campaign from business organizations throughout Connecticut has been encouraging, says Rathgeber, who points out that it gives our government leaders a definable, measurable goal.
“The reaction from the business community and groups that represent businesses has been very positive. They like the fact that this is a campaign focused on improving our business climate rankings, that progress toward the goal it sets is measurable over time, and that there are independent sources that are going to determine whether or not we’re making progress.”
Reaction from government officials has also been positive, says Rathgeber, but it’s important to policymakers that business leaders not only stress the challenges the state faces in improving its business climate but also acknowledge the advances that have already been made.
“Over time, I think what they’ll be looking for is that if they make difficult decisions to address issues such as our long-term fiscal liabilities, the business community and others who support CT20×17 acknowledge their efforts and support them in those decisions.”
Connecticut’s Ranking Troubles
Numerous media outlets and think tanks release (usually annually) rankings of states’ overall business climates or more narrow indexes based on specific economic metrics, such as access to capital, tax environment, or business R&D. Although Connecticut ranks highly in several specific areas, many well-publicized indexes put the state’s general business climate among the bottom 10 states.
Perhaps the most well-known of those is CNBC’s Top States for Business, which ranked Connecticut’s business climate 45th. Among CNBC’s criteria are infrastructure and transportation (Connecticut placed 49th), cost of doing business (43rd), and economy (39th), which includes fiscal health as determined by credit ratings and outlook, as well as state revenues as compared to budget projections.
Last November, Connecticut took another big hit when the Wall Street Journal released its Best and Worst Run States in America index. Ranking the Nutmeg State 41st, the Journal cited Connecticut’s $8,531 per capita debt (4th highest) and high unemployment rate, noting that “Connecticut’s economy was the only one in the country to contract in 2012.” Other prominent sources have also ranked Connecticut in the lower tier of states:
- Chief Executive magazine’s Best and Worst States for Business (45)
- Small Business and Entrepreneurship Council’s U.S. Small Business Policy Index (42)
- Beacon Hill Institute’s State Competitiveness Index (36)
- Forbes’ 2013 Best States for Business (33)
Most recently, CareerBuilder released a study putting Connecticut at 36th for net growth in business establishments since the end of the recession in 2009. (Texas was best; Michigan worst.)
Why Are Rankings Important?
“National rankings create a perception externally that has taken Connecticut out of consideration for the kind of business investments essential for job creation and economic growth,” says Rathgeber. “Inside the state, they create a mind-set that there are better places to do business. As I’ve said before, being one of the best places to do business does not necessarily mean being the cheapest place to do business; it means having the quality and ability to be competitive in a global marketplace.”
Recognizing that there is disagreement about the accuracy of some national economic rankings, Rescigno knows that those rankings nonetheless factor heavily into businesses’ decisions about where to locate or expand.
“Whether all the numbers are absolutely accurate or not, they get out there,” he says. “I’ve heard directly from site finders, people that identify optimal places to locate businesses. They tell me that the rhetoric and all of the glowing remarks about our quality of life and the other things we tout here in Connecticut are meaningless if the numbers don’t look good. They can’t make the case for companies to move here if the numbers aren’t in a positive place. So rankings are extremely important.”
“If Connecticut begins to move up in the national rankings, it will create a buzz about something happening in the state that is unanticipated—that we are making strides and getting the recognition for steps that have already been taken to improve the quality of our future workforce; cut government red tape; reduce energy costs; and improve our ability to support advanced manufacturing, biosciences, financial services, and digital media.”
Where Connecticut Shines
Some national rankings, although often narrow in scope, reveal Connecticut’s underlying strengths. For example, Connecticut gets high marks for its robust science and technology sector. The Milken Institute’s State Technology and Science Index—which evaluates states’ tech and science capabilities and their success at converting those assets into companies and high-paying jobs—ranks Connecticut ninth in the country.
The Information Technology and Innovation Foundation’s State New Economy Index also puts Connecticut at number nine, based on its capacity to adapt to the new technology- and information-based economy.
Many of the metrics compiled in the 2013 Connecticut Economic Review (an annual publication sponsored by CL&P and Yankee Gas) also put Connecticut in a positive light. The Nutmeg State is number one in the country in business R&D per capita; eighth in patents per 100,000 workers; and sixth in scientists and engineers per 100,000 employees. We’re also seventh in venture capital deals per million residents (15.4) and seventh in contract awards from the U.S. departments of Defense and Homeland Security ($12.6 billion).
A productive, well-educated workforce, traditionally one of Connecticut’s greatest assets, is still a bright spot, although having enough skilled young people to replace an aging workforce has become a concern in recent years. Currently the state ranks third in the country in the percent of its population with master’s, professional, or doctoral degrees (15.3%), and fourth in the percentage of population with a bachelor’s degree or more (36%).
The value of a highly educated workforce can be seen in Connecticut’s economic productivity. The state is fourth in per capita gross state product ($64,258—34% above the national average) and 10th in per capita exports ($4,484—16% above the national average). In addition, each Connecticut manufacturing worker creates $278,654 in added value, 6.7% more than the national average ($261,261).
A new index released by POLITICO Magazine in January, based on 14 economic and other categories, places Connecticut 10th overall. Metrics include wealth per capita (Connecticut is second, behind only the District of Columbia), lowest poverty rate (fifth), life expectancy (fifth), lowest obesity rate (fourth), math scores (10th), reading scores (12th), and employment in science, technology, engineering, and mathematics jobs (11th). Less impressive was the state’s performance in the categories of income inequality (49th), unemployment (39th), and home ownership (24th).
Problems, Solutions, and Progress
Despite the state’s strong showing in certain economic and quality-of-life indexes, several persistent problems have conspired to keep Connecticut’s economic recovery tepid and overall business-climate rankings very low.
“Businesses aren’t rushing to get here,” says Rescigno. “We need to do more; we need to make this a much more business-friendly state.”
The question, of course, is how.
“We need sustained progress in the areas where Connecticut falls short,” says Joe Brennan, CBIA’s senior vice president of public policy.
The CT20×17 campaign, he says, provides a framework of commonsense policies for doing just that. Here are a few examples:
Talent: Fully implement Connecticut education reforms passed in 2012 and continue improving public higher education to create a pipeline of skilled talent.
“There is some incredible talent moving through our school systems,” says Rathgeber, “and making sure we match their academic preparation to future workforce needs is critical. We also have to restructure some of our training programs so that incumbent workers have the ability to adapt to the changing needs of the economy.”
Fiscal policy: Adopt balanced state budgets that support critical public services and stay within taxpayer means, reduce the state’s unfunded liabilities, and create a more competitive tax structure.
“We really need to address our fiscal policy challenges,” says Rathgeber. “That means ending the cycle of budget deficits that we’ve experienced, reducing our long-term liabilities, and dramatically leaning the cost of government so that we can direct funds to policy areas that will benefit the community, such as education, creating healthier cities, and improving our infrastructure.”
Recently, some progress has been reported by the governor’s budget office in reducing the state’s unfunded liabilities for state employee pensions and post-retirement benefits—lowering the total by 15.2% to $64.6 billion over the last three years. In addition, the current year’s state budget has been running a sizeable surplus. Sustaining such progress, however, will require commitment, particularly since budget deficits of more than $1 billion have been forecast for each of the three fiscal years following FY 2015.
Transportation: Identify and accelerate priority investments in roads, bridges, transit systems, airports, and seaports—and protect the state’s Special Transportation Fund.
The governor’s proposal to transfer $380 million from the General Fund to the Special Transportation Fund (STF) would help move priority projects forward at the Department of Transportation, but future funding commitments will be needed to make up for years of raiding the STF to help close gaps in the General Fund.
“We have an aging infrastructure in an older part of the country subject to severe weather conditions,” notes Rathgeber. “We have to take steps to ensure that we can move people around the state and get our products and services to regional, national, and global markets.”
Business costs: Reduce the cost of doing business in Connecticut, including lowering energy costs and dropping unnecessary employer mandates.
The good news is that the passage of a bill based on the governor’s Comprehensive Energy Strategy last year provides opportunities to control Connecticut’s energy costs—perennially among the highest in the nation. State-imposed labor mandates also add unnecessarily to business costs.
“While we can’t be the cheapest place to do business, we can’t be an outlier and be the most expensive, difficult place to do business,” says Rathgeber. “We have to look at the costs and mandates that are imposed on the business community and see what we can do to help companies be more competitive globally and respond quickly to changing economic events and opportunities.”
Red tape: Continue expanding efficiency practices to all areas of government, follow through on regulatory reforms, and make state agencies more user-friendly.
The regulatory burden is a key factor in many national business climate rankings and has been a drawback for Connecticut. Fortunately, that’s beginning to change. Several initiatives to lighten the regulatory load have already taken shape, including Gov. Malloy’s recent executive order directing state agencies to review regulations to eliminate those that are outdated or unnecessarily burdensome.
Several agencies have already made measurable progress in cutting costs, speeding up processes, and delivering better customer service. The Department of Energy and Environmental Protection (DEEP), for example, has made a concerted effort to advance a more business-friendly operational strategy.
“We try to think very hard about the competitiveness of Connecticut businesses every day,” said former DEEP Commissioner Dan Esty at CBIA’s Annual Meeting last October. “That’s meant things like 60 different lean teams taking apart all 26 of [DEEP’s] permanent programs… and rebuilding them for speed, efficiency, and reduced regulatory burden.”
One key outcome, said Esty, is that DEEP has reduced the time it takes to issue permits by 75%. “We now have 90-plus percent of our permits out the door in 60 days or less. This makes a dramatic difference in terms of creating a platform for job growth and prosperity in Connecticut.” Robert Klee, Esty’s replacement as DEEP commissioner, plans to continue these efforts.
DEEP’s accomplishments represent a good start toward making Connecticut a top-20 state for business by 2017, but to reach that goal, many state government entities will need to be on board. Rescigno is optimistic.
“I think that for the first time, there are people up at the Capitol actually listening,” he says. “Putting together a substantial plan [such as CT20x17] could be very, very helpful. I think it could set a positive tone and get a lot more people on the same page.”
Rathgeber is also encouraged.
“The CT20×17 campaign is an opportunity to have a real conversation about what it takes and why it’s important for Connecticut—not just for the business community but for all residents—to be one of the best states for business. It will also provide an opportunity to acknowledge those government leaders with the political courage to help the state reach that goal.”
Bill DeRosa is editor of CBIA News. Contact him at firstname.lastname@example.org.