Recent independent national reports on business climate and economic competitiveness have painted Connecticut as being less than an ideal state in which to do business. In its “America’s Top States for Business 2013,” CNBC ranked Connecticut 45th overall and the 43rd costliest place to do business. 

Forbes ranked Connecticut 47th in cost of doing business (Forbes’s “Best States for Business 2013”) and 33rd overall.

These independent studies create a perception of Connecticut’s competitiveness across the nation, if not the world.  The reality of high business costs here keeps Connecticut businesses from being able to compete with those in other states. 

In order to attract more businesses and drive economic growth, legislative proposals that would increase, or add new business costs, must be rejected.        

At each of the Labor Committee’s public hearings this year, CBIA spoke of the national competitiveness surveys and asked the committee members about each of their proposals, “If enacted, will this bill help move Connecticut up in the rankings or make us worse off?” 

Positive Proposals

For some of the proposals, the answer was “Yes, this bill will help move Connecticut up.” The Labor Committee in fact approved a few bills designed to address Connecticut’s high business costs.

HB 5314 would use an estimated $60 million in projected state budget surplus funds to pay down a portion of the interest on the debt Connecticut owes the federal government for money borrowed to shore up our Unemployment Compensation Trust Fund because of the recession. 

Even though the state borrowed the money, businesses must pay back the huge debt. Repaying the principal and interest on the borrowed dollars has meant thousands of dollars in higher unemployment compensation taxes each year, along with special assessments on employers for each of their employees. 

The committee also approved SB 61, which corrects a ruling by the Workers’ Compensation Commission that would have resulted in skyrocketing workers' compensation costs. The bill requires the use of a fee schedule that will fairly compensate the hospitals and prevent workers’ comp medical costs from escalating. 

Harmful Proposals

However, the committee also approved many measures that will make things worse by increasing the cost of doing business in the state. 

One creates a totally unnecessary mandate on employers. SB 249 requires any business (with five or more employees) that does not provide its employees access to a 401(k), IRA or pension plan, to help their employees participate in a new state-run retirement plan. 

This proposal increases costs and places administrative burdens on employers – including facilitating payroll deductions and transferring payments to the plan, as well as hosting open enrollment periods every two years for employees. Employees that opt out must do so in writing every two years.

Plus, the state-run plan would directly compete with the numerous low-cost plans already available in the private sector marketplace. As a result, the state would be competing against a major sector of the state’s economy that employs more than 100,000 Connecticut residents. 

Various states have considered similar proposals, but none have implemented one.  This year alone, Arizona, Indiana, Maine, Washington, West Virginia, Minnesota, and Ohio have rejected them outright. 

A growing coalition of more than 40 Connecticut business associations and chambers of commerce is urging the General Assembly to reject SB 249.           

Expanding FMLA

Another committee proposal would create a greater divide between state and federal family and medical leave laws (FMLA) by expanding Connecticut’s leave to additional family members. Expanding eligibility for the state FMLA will be more costly to businesses and will add administrative burdens.  

The federal FMLA applies to businesses with 50 or more employees, while Connecticut’s FMLA applies to companies with 75 or more employees.  Unlike the federal FMLA, HB 5283 would allow employees in Connecticut to use family leave to care for additional extended family members—including siblings, grandparents and grandchildren.

Many lawmakers believe that because FMLA is typically an unpaid benefit for employees, that it is “free” for employers. But a lot of Connecticut businesses pay for at least two weeks of FMLA, and after that, employers still pay for the costs of non-wage benefits for the absent employee--plus the costs of hiring replacement workers and the drop-off in productivity. 

Allowing employees to use FMLA to care for more extended family members will drive up costs for businesses – and continue to make us less able to compete with businesses in our neighboring states.    

Connecticut needs to stop driving up even higher the cost of doing business in the state if we are going to attract new and grow existing businesses.

For more information, contact CBIA’s Eric Gjede at 860.244.1931 | eric.gjede@cbia.com | @egjede