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CONNECTICUT AT A CROSSROADS

Which path will the next

General Assembly take?

Overall business costs

Besides taxes, Connecticut businesses also struggle with high costs for workers’ compensation, health benefits, and energy. Overall, Connecticut has the fourth-highest business costs in the country, according to Moody’s Economy.com. (Another source, the Milken Institute, rates Connecticut fifth-highest for business costs.)

Yet during the last General Assembly session, legislators proposed several bills that, if passed, would have increased business costs. These included a measure to mandate paid sick leave.

“We offer employees 20 paid personal hours; the bill last session required 52 hours,” Alinabal’s Bergami notes. If a bill like that were to pass, he says, it would “be a huge hit for us.

“Just about every cost I can think of that the state mandates is higher than in other states,” he says. “We get requests every month from other states asking us to move there. We could save huge amounts of money if we moved.”

He hasn’t done that, he says, because “my business partner and I have very deep roots in Connecticut, and we feel a sense of obligation to our employees. But we’re not going to own this company forever,” he points out.

To keep companies like Alinabal and entice out-of-state businesses to locate here, “the state needs to make workplace costs more competitive,” says Rathgeber. “Legislators need to hold the line on workers’ compensation costs and avoid mandating paid sick time.”

Even with cost-saving reforms in place since the 1990s, Connecticut still has the ninth-highest workers’ comp costs. (Source: Actuarial and Technical Solutions, 2007, comparison of 45 states.)

Health care costs here are also higher than in many other states. CBIA is urging the state to focus on improving the current employer-based system and resist calls for creating a costly, government-run system.

As for energy, everyone in Connecticut has been hit hard by soaring costs.

“Over the past year, our costs have doubled—from $400,000 to $800,000—just on electricity. That’s not counting natural gas,” says Bergami. “We’ve spent close to $300,000 on conservation equipment over the past two years. That means we have spent an additional $700,000 on electricity.”

Some of the problems driving up electricity costs, such as inadequate transmission capacity and outdated plants, are being remedied. In 2005 and 2007, the legislature authorized going ahead with new transmission lines and power plants. “We’re now just waiting for construction,” says Donald Downes, chairman of the Connecticut Department of Public Utility Control.

Legislators also created incentives for consumers to conserve energy, use renewable energy, or generate their own power—as ways of reducing demand and thereby lowering electricity costs for everyone.

Nevertheless, “there are still a number of things the General Assembly can do,” Downes says. One is “fine-tuning rates—for example, time-of-use rates. We already allow some industrial and commercial customers to take advantage of [lower costs for] off-peak times. In CL&P's territory, only large business customers now have meters for time-of-use rates. Time-of-use meters will be introduced to smaller businesses and residential customers over the next two or three years.”

Another thing the legislature should do, Downes says, is “think long and hard about whether to add more charges to electric bills to pay for more conservation and efficiency programs. I’m worried that we’re reaching the point where many customers can no longer afford to pay their bills.” Downes cites significant percentages of utilities customers falling more than 60—and in many cases more than 90—days behind on their bills.

Education for a 21st-century workforce

Connecticut has had one of the highest-caliber, most productive workforces in the country, thanks to a good education system. But times have changed, and that system is no longer turning out enough high school graduates with the requisite skills in math, science, and other areas needed to succeed in college or in 21st-century workplaces.

“We need students who can compete at the level of students in the world arena,” says Lauren Weisberg Kaufman, CBIA vice president and executive director of the CBIA Education Foundation. Today, American students’ scores typically fall below those of their peers in most industrialized nations and even some developing countries. Connecticut companies cannot compete internationally without a world-class workforce.

State Education Commissioner Mark McQuillan, with help from CBIA and other supporters, has been developing a high-school reform plan that calls for higher graduation standards and resources to help students meet them. The plan, as a whole or in part, is expected to be on legislators’ agenda next year.

“The biggest challenge for legislators will be how to pass secondary-school reform in light of the state budget situation,” says Kaufman. Doing nothing is not an option. “Approximately 30 states have already moved ahead with raising the bar for graduation. It’s critical that we move forward with this.”

Other educational issues will also require legislators’ attention. Community colleges need to create more faculty positions in technical fields, especially in manufacturing, says Kaufman. And, she adds, “In urban areas, there’s a very serious adult literacy problem. The state has to target more resources to customized job training and worker-based training to raise adults’ skill levels.”

Transportation

Modernizing Connecticut’s system of roads, rails, mass transit, and airports—and doing it in a way that supports economic development—has gotten a lot of attention from the state in recent years.

“The $3 billion that the legislature and governor have invested [in transportation] is an important first step,” says Transportation Commissioner Joseph Marie. That money is being used to address short-term priorities, such as revamping the Q Bridge in New Haven, adding new rail cars, and upgrading rail operations and branch lines, especially those providing service to and from New York City.

The state’s focus now has shifted to improving the Department of Transportation’s internal operations, particularly those concerning project management.

But the DOT and the General Assembly face significant challenges in the next few years. For one thing, the projects already given a go-ahead are costing more than expected because of “major increases in prices for asphalt and steel,” says Marie. “The resources that are available to do what we have to do are outstripped by the costs.”

Another problem, he says, is that we have an aging infrastructure. The state will need to find the resources to continue maintaining its transportation system.

The challenge, according to Marie, will be identifying “what the major priorities are, what we can do now, and what we can do over time.”

“There are clearly a lot of critical issues on the table for state lawmakers in the 2009 session,” says Rathgeber. “The business community needs to step up and help elect people who will make economic competitiveness their top priority.”

 

Diane Friend Edwards is a freelance writer in Thomaston.

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