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Focus on the economy

 

Controlling state spending

One of the most important steps policymakers can take to reduce the cost of doing business and foster private-sector growth in Connecticut is to bring down the cost of state government.

“Controlling state spending is the only way we can avoid the harmful tax increases that make it harder for businesses to grow and invest here and harder for families to purchase the goods and services they need,” says Rathgeber. “If legislators are unwilling to restrain spending, it will mean higher taxes, and the result is less economic activity and a state economy that continues to falter even as other states grow their way out of the recession.”

Results of CBIA’s Annual Membership Survey suggest a strong desire among Connecticut businesspeople to see government spending brought under control. When asked to identify the most important legislative issue facing Connecticut, 73% of respondents cited taxes and state spending. And when asked in an open-ended question to identify a single change the state could make to encourage business growth and investment in Connecticut, a solid majority (63%) recommended reducing taxes and/or spending.

“A state’s tax environment is a critical factor in its competitiveness,” says Thomas O. Barnes, chairman of Barnes Group Inc., a global precision component manufacturer and logistical services company whose world headquarters is located in Bristol. “Escalating taxes are one of the biggest impediments to improving the position of not only Connecticut manufacturing but U.S. manufacturing as well. To strengthen Connecticut manufacturing and reestablish this state as a leading manufacturing center, our state government must become fiscally responsible, and that begins by reining in spending and reducing taxes.”

Barnes’s call to improve Connecticut’s competitive position takes on even greater urgency as other states respond to the economic downturn by encouraging business development. Given the mobility of business investment nowadays, Connecticut risks losing out to competitor states when it comes to attracting and retaining investment dollars and jobs.

To keep government spending from continually producing state budget deficits and increasing the pressure to raise taxes on families and businesses, policymakers must do all they can to reduce the size and cost of state government and increase the efficiency with which it delivers services and programs. That means making changes from the ground up.

“During last year’s session, attempts were made to address massive budget deficits without making fundamental, systemic changes to the structure of state government,” recalls Brennan. “The new biennial budget was patched together by relying on borrowing, the state’s Rainy Day Fund, and other one-time sources of revenue. And several proposals by the majority Democrats attempted to deal with the deficit by making structural changes to our tax code that would have hit businesses hard and further weakened the economy. The fact that the new budget was out of balance almost the day it was passed shows that it’s time to take a different path.”

Brennan is also quick to point out that the state faces $58 billion in unfunded liabilities—more than three times the state’s current annual budget. Those long-term obligations combined with the current economic situation and the immediate need for deficit mitigation make it imperative for policymakers to begin the difficult task of reforming state government so that it is less expensive, more efficient, and more effective. CBIA recommends they start by
• Examining every aspect of state government to reduce wasteful spending and modify or eliminate underperforming programs
• Making better use of taxpayers’ dollars through alternative programs that provide high-quality services and better results at lower costs
• Implementing more effective state fiscal planning to reduce long-term state and municipal unfunded liabilities and shortfalls in federal aid
• Avoiding any tax increases that would stifle economic recovery and instead promoting predictable, consistent, and fair tax policy that encourages employers to invest more in Connecticut and create more jobs here

In addition, the state can further reduce the cost of doing business in Connecticut and promote economic growth by taking the following steps:
• Strengthen Connecticut’s private-sector health insurance marketplace through commonsense, affordable reforms that reduce health care costs, improve quality, and increase access.
• Help Connecticut consumers better manage their energy costs and increase energy reliability by upgrading infrastructures, diversifying fuel sources, and promoting innovation and competition.
• Recognize that Connecticut employers provide good wages, benefits, and safe workplaces; avoid imposing labor mandates that would increase costs and make it more difficult to create and retain jobs here.
• Build a highly skilled workforce for Connecticut and give our young people their best opportunity for success by adopting the State Department of Education’s high school reform plan to improve students’ performance and close the achievement gap.
• Meet the increasing demands of a global marketplace by maximizing Connecticut’s state and federal transportation resources and making sure those dollars are focused on priority, economy-boosting projects.

“Clearly the legislature faces enormous challenges in the coming months,” says Rathgeber. “But I believe the 2010 session also represents enormous opportunities. Our elected officials have an opportunity to demonstrate that they can make the right decisions to give employers the confidence to invest and create jobs here. If they make the right decisions, if they help to create a business climate that allows our private sector to reach its full potential, economic recovery and a new era of sustained growth for Connecticut are not only possible but highly probable.”

For a complete outline of CBIA’s recommendations to state policymakers for shaping a stronger economy and a more competitive business climate in Connecticut, see CBIA’s 2010 Government Affairs Agenda at www.cbia.com.

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