What will it take to move Connecticut into the top twenty in national business climate

rankings by 2017?

Feb. 5 marked the opening of the 2014 Connecticut General Assembly session, which: because it occurs in an even-numbered year: will run only three months, two months shorter than in odd years.

When the legislature adjourns on May 7, election season will be ramping up. All 187 state legislative seats will be on the ballot, along with state constitutional offices (Governor, Lt. Governor, Attorney General, Secretary of the State, Treasurer, and Comptroller), and Connecticut's five U.S. Congressional seats.

Such a scenario: a short legislative session followed by statewide elections: traditionally has not resulted in major action on the part of lawmakers, says Joe Brennan, CBIA's senior vice president of public policy.

"We're not likely to see dramatic change, even though dramatic change is what's needed to improve Connecticut's competitive position nationally and globally," says Brennan. "Although you probably won't see it in 2014, we still have to lay the groundwork and continue making progress. Policymakers must understand that economic competitiveness is not just a CBIA issue or a business issue. It brings a vibrant economy and job creation, which are incredibly important for everyone in the state."

Economic Uncertainty

Brennan's concern is justified by economic data showing that despite slow economic improvement since the end of the Great Recession, Connecticut's recovery lags the nation's as a whole.

According to a 2013 report by the New England Economic Partnership (NEEP), Connecticut had recovered 51.3% of the jobs lost in the recession as of August 31, 2013. Respectable, but the country overall had recovered more than 78%. NEEP predicts that Connecticut's recovery will continue to be slower and less robust than the nation's overall and lag some states in the region.

To be sure, Connecticut and some other New England states face unique challenges, said Boston Fed President and CEO Eric Rosengren, speaking at the 2014 Economic Summit and Outlook on Jan 7 in Hartford. In particular, Rosengren pointed to cutbacks in defense spending and research funding to universities and hospitals due to the sequester, which, he said, "has had an impact in Connecticut."

Despite challenges, some economists, including Nick Perna, economic advisor to Webster Bank, are predicting modest job growth for Connecticut over the next year (15,000-25,000 new jobs) and accelerated growth beginning in 2015.

Also a featured speaker at the summit, Perna cautioned that whether those forecasts come to fruition depends in large part on decisions made at the State Capitol: particularly when it comes to fiscal issues.

Indeed, the prospect of sizable state budget deficits down the road is adding to Connecticut's economic uncertainty. Although, the General Assembly's Office of Fiscal Analysis (OFA) and the governor's Office of Policy and Management recently released consensus revenue estimates that put the projected state budget surplus for FY 2014 at nearly $500 million, the OFA also predicts that the state will end the three following fiscal years with deficits of $1.1 billion, $1.2 billion, and $1.4 billion respectively.

"Connecticut has to redouble its efforts if we're going to change the paradigm of lagging the nation and our region economically," says Brennan. "If we really want to reduce unemployment, create new opportunities for our citizens, and create new tax revenue, we must improve the state's economic competitiveness. And that starts with resolving the state's fiscal issues. We've clearly made progress; now we need to accelerate that progress."

A Path to CT20X17

The actions that will lead to a more competitive Connecticut are contained in CBIA's 2014 Government Affairs Agenda. Recognizing the progress the state has already made in many areas affecting economic competitiveness, the document provides policymakers with a blueprint for expanding its efforts and increasing the pace of change.

"We're focusing on convincing state policymakers at every level to nurture Connecticut's economic strengths and address its shortcomings when it comes to economic competitiveness," says John Rathgeber, CBIA's president and CEO. "Our goal is to see Connecticut move into the top 20 states for business by 2017, as measured by the major national business-climate rankings: CT20X17."

The recommendations in CBIA's 2014 Government Affairs Agenda are built around six core steps designed to achieve CT20X17:

  1. Start: Tackle the biggest challenges: the state budget and long-term liabilities; business costs; regulatory climate; and transportation infrastructure. Keep making progress in education, energy, environmental regulations, and assisting small business.
  2. Build: Capitalize on our strengths: Connecticut is home to diverse, world-class economic base industries, including advanced manufacturing, healthcare, financial services, biotech, and others; a deep and productive talent pool; and a location ideal for reaching the world.
  3. Choose: Adopt positive solutions: Walk away from any that aren't. Weed out any legislative or regulatory proposals that will harm jobs or our economy, and put our collective strength behind ideas that will significantly improve them.
  4. Change: Listen to your constituents: Remember that in surveys of Connecticut residents, the economy tops the list of what concerns people the most. Realize that profit-making employers are providers of good jobs, excellent benefits, and community supports.
  5. Measure: Set higher performance standards for state government: Review progress and increase accountability. Align agencies and departments, programs, and services, and communicate results.
  6. Commit: Make these steps a priority throughout every aspect of state government.

"Achieving those goals will take a lot of work," says Rathgeber, "but by demonstrating significant annual progress, I truly believe Connecticut can break into the top 20 in national business climate rankings, just as Massachusetts has been able to do."

Reinventing State Government

Indeed, our northern border state ranked 16th in CNBC's Top States for Business 2013 index (compared with Connecticut at 45), outscoring the Nutmeg State in eight of ten categories, including economy (3-39), technology and innovation (7-21), access to capital (1-19), and business friendliness (21-26).

"If you look at the demographics of Massachusetts and Connecticut, they are much the same," says Bob Sobolewski, president and CEO of manufacturer ebm-papst Inc. in Farmington and vice chair of CBIA's board of directors. He points out that the two states are also similar when it comes to tax burden and cost of doing business.

"So why is it that Massachusetts is perceived as a more favorable state for business? What's different is that when you deal with your legislative and executive branch people, they just seem to be more welcoming and more business friendly. There's the perception that if you're in Massachusetts, you're on the winning team."

How do we make Connecticut a winning team? For Jim Torgerson, it requires changing the culture of state government; deploying information technology more strategically to collect and share data and improve government service and efficiency; and addressing the state's biggest cost drivers, which include long-term care, the corrections system, state employee post-employment benefits, the scale at which public services are delivered, and the human services delivery model.

Torgerson is president and CEO of UIL Holdings Corp. in New Haven, chair of CBIA's board, and head of the Connecticut Institute for the 21st Century, a think tank that provides detailed reports with practical recommendations for making state government more cost-efficient and effective. He believes that systemic changes in government operations and culture must take place.

"In some ways, the "business' of government is not unlike private-sector for-profit and nonprofit enterprises," he says. "Capital: for transportation infrastructure, technology deployment, and other needs: must be allocated strategically and invested appropriately. Expenses must be appropriate, tracked, controlled, and proportionate to revenues. The culture must be focused on continuous improvement, innovation, and customer service. Total employee compensation must reflect the market. Accounting and financial reporting must adhere to generally accepted accounting principles."

Essentially, Torgerson argues, we need to remake state government.

"We live in an age of permanent fiscal crisis, and the only solution is to fundamentally reinvent government operations and budgeting. If Connecticut does not do this, we will remain a high-cost state and continue to lose population, business, and jobs to states that get it right."

Streamlining government operations and tackling the state's major cost drivers will help relieve the business community's ongoing concern about future tax increases, which tends to stifle expansion and hiring.

"It's disheartening as a business owner when you consider the state's huge unfunded liabilities that have been mounting up all these years and that our taxes will go to pay those bills," says Kim Sirois Pita, partner at branding and marketing agency The Pita Group in Rocky Hill. "It's really frustrating."

Pita's frustration also stems from what she calls the "chaotic nature of taxes" in Connecticut, particularly when it comes to deciphering the sales and use taxes on the various services her company provides.

"Nothing is uniform, so from a business owner's perspective, it's just a nightmare to navigate. At an administrative level, that costs us money, because we're always trying to figure it out."

State Action

Although we have a long way to go before achieving CT20X17, the Malloy administration has already taken steps to make the state leaner, greener, more user-friendly, and more cost-efficient: a culture change that's beginning to make Connecticut more responsive to business and more responsible to taxpayers. Lean and cost-cutting measures are detailed in a report released last October, Continuous Improvement in Connecticut State Government.

Some of those measures have involved leaning various processes at state agencies, something CBIA's 2014 Government Affairs Agenda recommends be done in every aspect of state government.

Implementing lean techniques is just as critical in government as it is in business, says Rick Wheeler, president of Capewell Components Company LLC in South Windsor and a CBIA Board member.

"One of the key elements of lean," says Wheeler, "is something called value stream mapping," a tool used to diagram and analyze the flow of information and materials in a process or across multiple processes, with the goal of eliminating bottlenecks, redundancies, and other sources of waste. "By value stream mapping and improving flow, all the principles of lean can apply to government as well as manufacturing."

Sobolewski agrees.

"From a manufacturing or business standpoint, if you're going to be competitive globally, it's paramount that you lean up your operations, because that's what everyone else is doing," he says. "What the state has to look at is that we have to be competitive, not with private industry, but competitive in general."

Sobolewski has found that implementing lean is not only good for his company's bottom line, it's good for his employees too, something he says could apply to state workers as well.

"When you lean processes, you find that people are happier, because they know they're not wasting time. And it's not like you're putting more work on people; you're improving their job satisfaction. People don't like to be sitting there waiting around for somebody to give them the next thing to do."

Regulations Review

In other state action, the governor issued an executive order last October directing state agencies to conduct an independent review of state regulations more than four years old in order to identify any that are outdated, unnecessarily burdensome, insufficient, or ineffective.

"We are very pleased the governor is undertaking a thorough review of the state's regulatory climate, complementing initiatives developed in the Oct. 2011 special legislative session on jobs," says Rathgeber. "We've already seen a commitment from DEEP, the Department of Revenue Services, and other agencies to be more customer-service focused and timely in their decision-making. Regulatory burdens have a big impact on our business climate, so if CT20X17 is to become reality, it's critical that real progress in regulatory reform be made across all state agencies."

The state has also begun to rebalance its long-term care system: one of the government's biggest cost drivers: from one that relies heavily on nursing home care to one that provides more options for home- and community-based services (HCBS) through programs such as Money Follows the Person. The goal is to have 75% of patients in HCBS and only 25% in institutional care. Several barriers, however, have kept progress slow.

"One barrier has to do with culture," says Donna Galluzzo, president and CEO of HMS Healthcare Management Solutions Inc. in Wallingford and vice chair of CBIA's board of directors. "We are a culture, especially in Connecticut, that is primed for facility-based long-term care, and our laws and regulations have, in many ways, been written to support that."

Galluzzo also believes that overly stringent regulations governing the certification of home-care clinical care supervisors is a significant barrier to rebalancing long-term care in Connecticut.

"As a result, there is a shortage of qualified candidates for these positions, which makes it very, very difficult to develop homecare agencies and run them here in Connecticut. In Massachusetts, regulations are not as stringent, yet we're not hearing that quality suffers."

Maintaining Our Competitive Advantages

It's important that the state not only improve in areas that hurt its competitiveness but also stay strong in areas that are already competitive advantages: in particular, our well-educated, highly skilled workforce.

"The available intellectual labor force is very good in Connecticut," says Wheeler.

To keep it that way, CBIA is urging state policymakers to do all they can to implement the comprehensive education reforms adopted in 2012.

"One of the things we have to do is continue our initiatives to support the kids in K-12," says Sobolewski, who has made a substantial commitment to encouraging students to pursue careers in STEM: science, technology, engineering, and math: fields. He believes that there are growing opportunities for high-paying jobs in skilled trades that don't require advanced degrees.

"I think some of the things the state is doing to enhance communication between UConn and the business community is fantastic. And I spend a lot of my personal time trying to get kids interested in science and technology. When we talk about science and technology today, people often assume that you have to go to college and even get a postgraduate degree. But you don't need a master's degree to be a machinist or work in a very well-paying skilled job for, say, a local utility.

"The jobs are changing, and many are paying good money, but we have to train the kids to do them, and that's one of the difficulties we face. So, again, we have to emphasize higher education, but we have to also prepare young people at an earlier age for the good jobs they can do without coming out of college saddled with debts bigger than the mortgages they're going to have."

Jeffrey Geiger, president of General Dynamics Electric Boat in Groton, also believes that developing workers who have the skills for high-tech manufacturing is critical to the state's future, particularly in light of an aging workforce.

"Electric Boat has a tremendous pool of talented employees, many with decades of experience," says Geiger. "As these workers begin to retire, and as we execute the Navy's plan to build two Virginia-class submarines a year and develop other submarine concepts, we're going to need a strong pipeline of skilled job candidates. We're very encouraged by the state's willingness to align training at vocational-technical schools and colleges to support our future workforce needs."

Learn More Visit CBIA government affairs to learn more about CBIA's CT20X17 campaign, read CBIA's 2014 Government Affairs Agenda, and learn about ways to influence the legislative process during the 2014 session.

Bill DeRosa is editor of CBIA News. Contact him at bill.derosa@cbia.com.