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State Agenda, Part 4: A Better Business Climate

Hartford Courant

January 06, 2010

There's no excuse for Connecticut being at the bottom of any business list. It's lovely, smart and prosperous. It's in the top ranks in college graduates per capita, incomes and state spending on schools. It has world-class universities, Tony-winning theaters, sublime museums, bucolic beauty.

Yet in the past 20 years, according to the University of Connecticut's Center for Economic Analysis, this state has seen "perhaps the poorest job creation among all 50 states." CEOs surveyed by ChiefExecutive.net rated the cost of doing business here third worst of all states.

The dire state of the state's finances, its budget probably billions of dollars in the hole over the next few years, will surely mean new and higher fees and the sacrifice of some of the corporate tax credits that bring jobs here. The business community, like everyone else, has to do its part to get Connecticut through this crisis.

But there are ways the state can help businesses, or at least ease their load, without emptying the treasury. Here are a few:

Transportation. How often does the business community call for raising taxes? Not. Yet the MetroHartford Alliance advocates gas tax hikes and highway tolls to pay for high-speed rail and other transportation improvements. Two-hour rail service from Hartford to New York would open the door to a huge economy and free up I-95. Otherwise, gridlock will put Connecticut in an "economic cul de sac," as consultant Michael Gallis ominously predicted a decade ago.

Also, Bradley Airport needs to take flight. It should be run not by the state but by an independent authority with the flexibility to, well, make decisions.

Mandates. The Council for Affordable Health Insurance ranked Connecticut 10th in the nation in the number of insurance mandates, such as fertility treatments — and that was before the legislature added more last fall, including wigs for chemo patients and coverage of children until they are 26.

The nonpartisan Office of Fiscal Analysis said the cost of the mandates passed last year "could be significant" for the state's own employee health plan. But the costs fall mostly on smaller employers, since large ones often self-insure, exempting them by federal law.

What particularly infuriated businesses in 2009, a year that saw a record high in business closings, was a bill mandating paid sick leave for companies with 50 or more employees. Fortunately, the legislation didn't pass. Ironically, one bill proposed that the state do for small businesses what the state doesn't do for the largest employer in Connecticut — itself — and that is to administer 401(k) plans. The bill failed. But how about 401(k)s for state workers, instead of adding to a pension debt the state can't afford?

Measurements. You can't manage what you don't measure, goes the business adage. So why does Connecticut's state government continue to resist the accounting system used by most other states, businesses and municipalities, Generally Accepted Accounting Principles, or GAAP?

The system it now uses allows for fudging: Deposits (taxes) are counted before the money arrives, but expenses aren't recorded for months. This is a scandalous gimmick that has been hiding state financial problems for years. Oh, maybe that's the point?

Another irony: The state legislature requires municipalities to use GAAP.

Speaking of honesty in numbers, the state and its towns and cities need better data on their programs and how they compare in cost and results. What's the per-capita cost of each town's fire districts? Could the state's information technology be outsourced more cheaply? More data make for better decision-making and a focus on results rather than just hopes.

Marketing. And finally, the next governor has to be the chief economic development officer, wooing out-of-state executives, rallying business support for ventures such as flights from Hartford to Paris, understanding that cutting taxes isn't the only way to make corporations happy.

The next governor has to work with the legislature to nurture small businesses, the engine of job creation, and to create a culture of "economic gardening" rather than "economic hunting," or of luring firms that leave once tax credits run out. (Think Pfizer in New London.)

Several political leaders have adopted the lessons of Littleton, Colo., which added 20,000 jobs in two decades without spending a cent on business recruitment by offering small companies market research tools, among other resources. Wisconsin's governor in 2004 set up the PeerSpectives Network, a CEO peer-to-peer problem-solving resource. Oakland, Calif., is helping small companies increase their Web effectiveness through search engine optimization. Rhode Island recently got top banks to agree to dedicate $165 million for loans to small businesses.

The expertise is here, in companies such as United Technologies and academic centers such as the University of Connecticut. What's needed is a leader to get them to share.