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One Step Forward, Two Back

Greg Bordonaro and Brad Kane

June 13, 2011

Connecticut wants to attract and grow businesses, and tax them like crazy.

The state’s business community seems confused and disappointed by this year’s General Assembly legislative session. On one hand, lawmakers passed several sweeping economic development initiatives to grow jobs and attract companies. On the other hand, record tax increases and a controversial paid sick leave measure are leaving behind serious concerns about the future growth of the state’s private sector.

“I think we’ve gone backwards as far as making Connecticut a better place to do business,” said Joseph Brennan, a lobbyist for the Connecticut Business & Industry Association. “There is still a lack of confidence in Connecticut for businesses to invest and grow here.”

Brennan said the chief concern is the impact $1.5 billion in tax increases will have on small-and-medium sized employers, particularly sole proprietors, limited liability companies and certain S corporations that report their business income through a personal tax return.

Lawmakers also voted to make Connecticut the first state in the country to mandate paid sick leave, requiring service businesses with more than 50 workers to allow employees to begin accruing one hour of sick leave for each 40 hours worked.

Brennan said the measure will raise the cost of doing business for many companies, and, more importantly, sends an anti-business message to employers around the country.

Gov. Dannel P. Malloy last week rebuffed the CBIA’s negative tone and said they were overstating the negative impact paid sick leave will have on employers. “I think the CBIA tends to see any glass as half empty even when it’s mostly filled,” he said. “I think they have a business model that requires they warn people of threats that don’t exist.”

Malloy added that the General Assembly undertook several measures designed to encourage businesses to relocate to Connecticut and also to develop and grow emerging and smaller companies.

The $864 million UConn Health Center plan includes a major renovation of the John Dempsey hospital and adding a patient care tower at the University of Connecticut Health Center.

It also expands the school’s medical and dental programs and bioscience research and training facilities.

“That is exactly the kind of strategic public sector investment that is necessary,” said Fred Carstensen, the director of the Connecticut Center for Economic Analysis.

This bioscience initiative immediately creates construction-related jobs, and will create more jobs in the future as bioscience start-ups and other ventures spin off, Carstensen said.

Other measures such as the New Britain-Hartford Busway will create short-term construction jobs as well, Carstensen said.

But Brennan, of the CBIA, said even though those infrastructure projects will create short term jobs, they are more public works initiatives then a stimulus to the private sector.

In contrast, the creation of a Connecticut Airport Authority will help develop a business-friendly environment over the long-term.

One of the flashier economic development initiatives launched in the session was the “First Five” program proposed by Malloy. The program essentially offers all incentives possible to the first five companies bringing 200 jobs or more to the state.

While 1,000 jobs is a small amount, it sends the message that Connecticut will be aggressive about attracting new businesses and industry, said Ed Stockton, former economic development commissioner under former Gov. Ella Grasso.

“Connecticut has done very little promotion in the past 20 years,” Stockton said. “The (‘First Five’) could be very, very important to capture good significant companies that will provide good, significant employment.”

But saying that Connecticut is open for business is difficult when the businesses already in Connecticut are griping about an unfriendly government.

Andy Markowski, Connecticut director of the National Federation of Independent Business, said he thought the session was one of the most anti-business in recent memory, particularly the impact it will have on small businesses in the state.

Even the buzz created by bills that didn’t make it through the legislature — like the captive audience proposal, which would have restricted employer-employee communication on religious and political issues — creates a chilling effect on businesses.

Other bills that fell on the cutting room floor include a measure that would have required a jobs impact analysis of certain proposed legislation, and a $340 million tax on electricity generation that was scrapped in favor of a similar $58.4 million proposal.

“The perception is that we have an aggressive legislative agenda that is targeted at businesses,” Markowski said. “The concerns of small businesses continue to fall on deaf ears.”

One bill that passed leaving some businesses screaming for joy and others just screaming was the energy policy reform bill. The legislation creates a new state department to develop a long-term energy strategy and encourage clean technology development; but also places burdensome requirements on certain electric companies.

The Connecticut solar industry is particularly happy with the passage of the energy bill, as it provides a much steadier incentive package for renewable energy than previous measures, said Michael Trahan, executive director of Solar Connecticut.

“There is a decent chance solar power will be competitive with the power coming off the electric grid in the near future,” Trahan said.

On the health care front, lawmakers passed a scaled down Sustinet law that didn’t include the state offering a public health insurance option, which was a major concern among some in the business community. Instead the state employee health plan will be opened up to municipal workers and some nonprofits, but not small businesses.

Several new advisory boards were also formed as was the framework for Connecticut’s health insurance exchange.