Playing Offense: DECD’s David Lehman Shares His Economic Playbook
David Lehman left the private sector and a high-powered Wall Street job earlier this year to join the Department of Economic and Community Development as the agency’s commissioner. The 41-year-old volunteered for public service, approaching Governor Ned Lamont and asking for a job in his administration. Lehman recently sat down with CBIA president and CEO Joe Brennan to share his vision for growing the state’s economy, parallels between the private and public sectors, and how he measures success.
Joe Brennan: You had a very successful career in the private sector. What prompted you to join the Lamont administration and take on this role?
David Lehman: I’ve been a resident in the state for 10 years, my wife is from Connecticut, we’ve been raising a family here for the past 10 years. The state is at a crossroads. It is a really critical and important time where we need to change the trajectory. If you want to measure that by migration, job growth, median income growth, it’s really important that the state’s economy shifts to a more positive tone and that we create an environment that’s more conducive to growth.
The more I learned about Governor Lamont and what he wanted to accomplish, I just felt that if I could be helpful, I wanted to be useful to him in his administration. So I reached out and here I am seven months later, but it’s been amazing, and I’m thrilled to be here and it’s a real privilege to work for the governor and the citizens of Connecticut.
JB: Let’s look back on those first seven months. First of all, parallels that you’ve seen or what your private sector experience has led to and what you’ve learned in the job so far.
DL: I have a lens with which I looked at on behalf of shareholders, but now the lens I look at it is for taxpayers. Are the transactions the state is doing, financial transactions, do they make sense for taxpayers? That’s something I’m comfortable with and really measuring what is the economic benefit, what is the return on investment?
I do put myself in taxpayers’ shoes a lot and the litmus test for me, is asking what would a reasonable taxpayer think about this policy, this loan, this grant? Does it make sense, especially in the context of the debt diet that we’re on.
The reality is the state empirically has borrowed a lot of money and we don’t have as much economic growth to show for it. We really need to be rigid in terms of return on investment and making sure the borrowing we’re doing and the lending that we’re doing to companies or to projects around the state is accretive to the economy and makes sense for taxpayers.
We need to think about businesses and individuals that want to be in the state and do business in the state and invest as clients—they are our clients and we need to view them as such and treating them as clients with a sense of accountability. That is part of what we’re trying to do in terms of changing the environment here in the state, and I think it’s important that everyone in government has that same framework.
JB: DECD operated one way for the last administration, a lot around incentives, sometimes big, big incentives, tens of millions of dollars for companies to come here or stay here. What’s your vision?
DL: It is a competitive world. I’m a big believer in free markets, and how the market allocates, but we need to be very mindful of incentives that are given to business, because those are taxpayer dollars.
We’re going to shift to what I refer to as earn-as-you-go or earn-as-you-grow type structure where the burden is put on business to create new jobs in the state, net new jobs in the state, truly growing the state’s economy, and income tax receipts to the general fund. That is a less risky strategy because the burden is on the company to create the jobs.
We’re going to be doing a lot less direct incentives to corporations and I would say the amount is going to be reduced, and importantly, that risk burden will be shifted back to the company because, in my opinion, the state should focus on what it does best, and we’re not an investor, we’re not a bank.
We need to focus on providing services and facilitating business and welcoming business, but we want business to basically drive it, and the dollars the state provides that should not be the driver of most decisions. There certainly will be exceptions, but that’s generally what I’ve experienced.
I’m a big believer that over the next 20-30 years, the state’s investment in its cities is really important. One of the things that has held us back is the fact that we are a state of many small cities, a state of suburbs, and investing in our cities and not just as places to work, but as places to live, as places to raise families, as vibrant communities, is going to be important.
We need to create this environment with the right education, the right infrastructure. We need to deal with the transportation issues, all of these macro issues that the governor is very focused on, and on top of that, we need to provide tax certainty, long-term tax certainty to companies and residents.
That is the recipe as opposed to incentives, and I want to focus our dollars on those areas as it relates to building up these places and environments. I just think that’s going to be smarter for the state over the long run in terms of economic growth.
JB: I’m really glad to hear you say that because, as you point out, you have to have some incentive program because other states are very, very aggressive in marketing to our companies, but we’ve always felt that it’s the overall environment here that’s going to make a difference. Now that you’ve gone through one legislative session, what’s your approach to dealing with legislators to get them to understand the importance of the work that you’re doing?
DL: My approach is one of collaboration. I want to hear the opposing view. I like to get people around the table that have different views, and let’s try to build consensus. Reasonable people can and likely will disagree about certain things.
I think understanding where there is compromise or where there are sensible policies, let’s try to find that balance so we can all move the state forward. I plan on continuing to embrace the legislature and seek out views that are different than my own because I think there does need to be a balance in that vetting process of all these ideas.
JB: One of the things that really frustrates a lot of our members, frustrates me personally, is that Connecticut has so many great assets—world-class companies that are the envy of other states and other nations, a world-class workforce, great quality of life, great location—and we really should be a leader in a lot of economic measures. We are in some, but we’re laggards in many of the critical ones. What’s your perspective on why we’re there and what we all can do to reach our potential?
DL: There are two broad issues here, one of which is medium to longer term tax certainty. A lot of individuals and businesses, they look at the past 10 years or even 15 years, and they see their tax burden increasing, and it is human nature to assume perhaps the next 15 years are going to look like the last 10 or 15 years.
We need to be more aggressive explaining why the future is not going to resemble the recent past as it relates to taxes. That’s the most important thing I think this government can do as it relates to the business front, growing the economy, is providing that tax certainty, because there are folks that didn’t experience it and they don’t believe it.
We are going to need to demonstrate that’s what we’re doing. And I think the budget that the governor signed—I realize it wasn’t perfect for everyone—but I personally think that was a big step in the right direction of letting folks know that we care about fiscal stability and certainty and we need to be really mindful over the long run. We can’t just borrow money now, expect to pay it off later, because I just don’t think that’s worked.
The second, I referenced cities. Cities are generally big economic engines, and that’s where there’s been substantial migration, and this is not just a millennial issue, this is an issue for people that are young to old. I’m not convinced the next 20 years look like the past 20 years in terms of further growth in the cities, but I think we need to invest in our cities.
JB: Let’s go back to DECD for a second. It’s been a policy over the last couple of decades, looking at industry clusters or industry sectors, whether it’s advanced manufacturing, financial services, insurance, digital media, biopharma. Is that something you’re going to continue, and if so, are there particular clusters that you think are most important to focus on for Connecticut?
DL: Yes is the short answer. Given some of the constraints and limitations—whether it’s money, people—we really need to be more targeted on industries that importantly have a competitive advantage for being in the state of Connecticut, whether it’s because their clients are here, their competitors are here, the workforce is here.
Aerospace and defense are clearly a very tangible example where you see the benefits of the supply chain, the workforce locating nearby. You have industry clusters that work together, so it’s a mini-Silicon Valley of sorts focused on aerospace and defense.
I certainly think financial services, whether it’s insurance here in central Connecticut or even investment management and hedge funds in southwestern Connecticut, is very important, in addition to banking and fintech, life sciences, bioscience.
Healthcare is something that comes up quite a bit. Renewables and broader information technology is an area that I think we really need to expand when I think about the kind of shift broadly towards services and a service-based economy going forward. The technology workforce that we have is an area I’d really like to focus on and expand.
JB: Obviously, none of those industry sectors can succeed if people don’t have the workforce they need and, being involved in this every day, it’s one of the most vexing issues, because it’s not just you pass a bill at the legislature, all of a sudden you have solved your workforce problems. It’s probably most acute in manufacturing right now. The numbers are greater there, but I hear it every day, it doesn’t matter the industry. What are your thoughts on what Connecticut can do to jump start efforts around attracting and retaining a workforce?
DL: Workforce is a strength of the state, no matter how you measure it. If you look at the current labor force, our unemployment rate, we have a very, very strong workforce. And I don’t want to call it a high-quality problem, but we want to make sure that employers that have jobs can find people that want to move to the state or can be reskilled to take those jobs.
It is the view of the governor and the administration that we need to have a cohesive statewide plan and really have a workforce assessment to understand where are the skills gaps, how do we fix this on a spot basis, as well as, let’s talk about what we envision three years out, five years out, 10 years out.
And then, on the STEM front, you also need to have a longer-term plan, where we, on a per capita basis, can be punching right up there with Massachusetts or others that have more higher-ed institutions than we do. None of these things are easy, otherwise, they would be fixed. We just need to figure out how to get people here and then reskill people that are in what is a constantly evolving workplace. It’s really important that we’re on the cutting edge.
The private sector needs to drive this as opposed to the government, because the government, we don’t exactly know what ABC manufacturer or tech company needs, and I think it’s wrong for us to presume anything. We need to embrace the private sector here and say, ‘How can we help? What do you need and what can we do to help you get what you need?’ And let them drive and take the steering wheel with us helping them.
JB: Some of the other states that are doing well in economic development have a separate entity outside of government, usually a 501(c)(3), partnering closely with each state’s DECD. Here, the governor said the Connecticut Economic Resource Center was going to be repurposed. He put in really top quality people, with Indra Nooyi and Jim Smith as the chairs of that board. Can you talk a little bit about the relationship that you have with CERC going forward and how effective you think it might be in really driving greater economic growth?
DL: DECD and CERC are going to work very, very closely together. The goal is to look to CERC to be the tip of the spear as it relates to a lot of the business retention and recruitment that we do as a state. DECD is certainly going to remain involved as it relates to government programs, any concierge services in terms of navigating, permitting, anytime there are incentives, for example.
We wanted to have more accountability as it relates to retention and recruitment, the cluster strategy I mentioned before, and really, when we look at the states that have been successful, they often have an entity like CERC that is the primary face to business.
That’s the leadership role we expect them to play as it relates to our retention and our recruitment strategy. And importantly, other states are very aggressive at talking to companies in Connecticut, poaching companies in Connecticut.
We need to play more offense. My main goal is we want to make the pie bigger, as opposed to thinking about this as a zero-sum game versus other states.
At the same time, there are companies that I think would fit well within our ecosystem that we need to be proactively reaching out to, saying, ‘Here’s our cluster, here’s why you’d fit nicely in that cluster. You should consider whether it’s moving to Connecticut, expanding in Connecticut.’ I want to play a lot more offense, as opposed to defense, and I think CERC is going to be the tool with which we do that.
JB: We’re about four months away from the beginning of the next legislative session, the so-called short session beginning in February. Can you tell us anything about what the Lamont administration’s priorities might be for that session?
DL: I alluded to incentives and how we’re thinking about incentives slightly differently. The goal is to have a transparent and targeted incentive structure, and ultimately, that would require legislation.
The benefit of something that’s transparent and targeted is—it will be clear to you and others around the state—what does the state’s incentives tool box look like? What is the state willing to do to facilitate job growth here, or capital investment growth? That’s probably a big focus of mine.
One other area where we’re spending a lot of time, as it relates to regulations in the state and what can we do to take a look at regulations, and whether that’s through legislation or otherwise, that potentially makes it easier to do business in the state of Connecticut to reduce the kind of the undue burden of certain regulations that we have.
JB: How will you measure success?
DL: In terms of the main metrics that I look at on the dashboard, or that I think we should look at in a dashboard, median income growth vis-a-vis our peer set is certainly one of them, population growth, GDP growth, and then job growth.
I think those are probably the main four that I look at as it relates to the state’s economy. And listen, I think we need to be above the median, we’ve been bottom quartile in many of those, and I think the reality is we do have a lot to offer and I think we need to market ourselves appropriately, we need to be very strategic.
The goal with those metrics, is how do we stack up? And ideally, we are top quartile or certainly above the median in those areas, but there’s some work to do there.
Beyond that, qualitatively, this medium to longer term fiscal stability and tax certainty point that the governor is really focused on is critical.
I think that is the most important thing that we need to get right, and beyond the investments in cities and making the broader pie bigger, but to the extent that we have that plan and a credible forecast there, I think that’s going to be really persuasive to facilitate more, whether it’s people building a new factory in the state or people looking to come here with their family to spend the next 10, 20, 30 years.
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