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For Immediate Release Nov. 24, 2003
BUSINESS CONFIDENCE CONTINUES TO DECLINE Taxes and Health-Care Costs Among the Biggest Issues
Business executives across the state are less confident in state government’s ability to make decisions that will help improve Connecticut’s business climate and strengthen the economy, according to the annual survey of Connecticut Business & Industry Association (CBIA) member companies.
Citing taxes, the high cost of doing business in the state, the uncertain economy and stiff global competition, nearly three-quarters (71 percent) of the executives responding to the survey said they lacked confidence that lawmakers would make decisions that would improve Connecticut’s economy. That’s up sharply from 57 percent last year.
When asked about the most important problem facing Connecticut businesses, 27 percent of respondents cited taxes, 24 percent said the cost of doing business in Connecticut, and 12 percent said health care costs.
“The challenges of a slow economy, tax hikes, cost increases in heath-care benefits and workers’ compensation costs are making it extremely difficult for Connecticut businesses to remain competitive,” said Kenneth O. Decko, CBIA president and CEO. “As the national economy begins to improve, Connecticut needs to take action to restore business confidence and encourage job-creating investments in our state that will strengthen our economic base and help create jobs.”
Taxes CBIA says recent tax increases have hurt business competitiveness and discouraged expansion and job creation, particularly in the manufacturing sector, which is also facing a number of global challenges including unfair trade practices and the loss of U.S. jobs. According to the survey, the top concerns affecting Connecticut business growth, especially for manufacturers, are the corporate income tax (24 percent), and property taxes on business machinery and equipment (23 percent), and on buildings and real estate (23 percent).
Business executives said tax increases have discouraged them from hiring additional workers. Seventy-three percent of respondents said further tax increases would force them to give smaller wage increases or reduce employee benefits, 65 percent said increased taxes would make their businesses less competitive, and 51 percent said further tax hikes would discourage the hiring of more employees.
State budget issues have been a major concern for Connecticut businesses over the past few years, and the majority of respondents (83 percent) said the state needs to do a better job controlling spending in order to avoid future tax increases. Respondents also said the state must do more to encourage business expansion efforts by reducing workplace costs (48 percent), business taxes (24 percent) and improving the state’s transportation infrastructure (11 percent).
More than half of the business executives said rising health-care costs are among their greatest cost concern, and these costs have the biggest impact on job growth. The majority of employers surveyed (86 percent) said that rising health-care costs are an important factor in any decision about their company’s plans to hire additional workers. Eighty-two percent of respondents said that rising health-care costs affect any decision about their company’s expansion or relocation plans.
Nearly all employers surveyed (93 percent) have experienced a double-digit rise in health benefit costs over the past year, and they don’t see things improving next year. In fact, 92 percent of respondents expect health-care benefit costs to increase next year.
Despite the double-digit increases in health-care benefit costs now and in the future, Connecticut companies are still struggling to find ways to continue to provide health benefits for their employees. While employers continue to pay the majority of employee health-care benefit costs, 56 percent of respondents said their employees are now paying a greater share of the costs. In order to pay for the increased costs, 28 percent of those taking the survey said they experienced a loss in profits, 3 percent said they reduced their workforce, and less than 1 percent said they eliminated employee health-care coverage.
When asked to speculate on what they would do next year as costs continue to increase, 65 percent said they would have to increase their employees’ share of health-care costs, 29 percent said they would take a cut in profits, 2 percent said they would reduce their workforce, and 2 percent said they would eliminate health-care coverage completely.
“Escalating health care costs are having a detrimental effect on Connecticut employers and employees, with no end in sight,” said Pete Gioia, CBIA’s economist. “State government must work to help slow the rise of health benefit costs and allow for new benefit design plans that address these costs.”
Rising workers’ compensation costs continue to be a major problem for Connecticut companies, with 40 percent of respondents citing workers’ compensation costs as the most important factor when making decisions regarding hiring additional workers. The majority of respondents (84 percent) are opposed to any legislation that would lead to higher workers’ compensation costs.
“Connecticut will never be a low-cost state for businesses, but it can’t be the most expensive either,” said Gioia. “We need reforms that will help bring business costs in line with other states’ and that will restore business confidence in Connecticut.”
Business assets But it’s not all bad news for Connecticut businesses, as executives cite a number of assets to doing business in the state. Thirty-nine percent of respondents said their business location -- between New York City and Boston -- is the top asset to doing business in Connecticut, but they believe additional investments in the state’s transportation infrastructure are needed to improve connectivity to regional, national and global markets.
Twenty-eight percent of respondents said the second greatest asset in having a business in Connecticut is the availability of skilled workers in the state. Manufacturers responding to the survey said Connecticut’s experienced labor pool is their No. 1 asset. “ A highly skilled workforce is essential if Connecticut’s businesses are to compete in today’s global marketplace,” said Gioia. “Education and training are the keys to maintaining a world-class workforce. Connecticut must continue to prepare young people for meaningful careers by providing them with the skills they need and to help those already in the workforce upgrade their skills.”
The CBIA membership survey reaches out to member businesses to get their views about key issues important to Connecticut companies. “The economic policies of the 1990s served Connecticut well,” said Decko. “We need to work together to effect changes that will return us to those policies, which helped restore confidence, encouraged job-creating investments and got our economy moving, creating opportunities for our citizens.”
Methodology The surveys were distributed in early September to CBIA member companies and have a margin of error of +/- 3.6 percent.
CBIA is Connecticut’s largest business organization, with 10,000 members.
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To arrange an interview with Pete Gioia, CBIA’s economist, or for a copy of the survey, please call Nancy Andrews, media relations manager, at 860-244-1957, or via e-mail at andrewsn@cbia.com.
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© Copyright 2003 Connecticut Business & Industry Association, cbia.com. All rights reserved. |
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