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The Buzz by John Rowland
Governor Malloy and Business
On Inauguration Day, Governor Dannel P. Malloy proclaimed that Connecticut would become a state “open for business.” Most recently, Connecticut has ranked last in job creation compared to the rest of the country and now, more anti-business proposals are being considered.
The Legislature’s Labor Committee has just recently passed the Governor’s proposal for mandated paid sick leave. The vote was 6 to 5 and is now headed to the State Senate where it will also be a close vote. One can debate the merits for and against state mandated paid sick leave on private small businesses, but the key issue is quite simple; why do we want to become the first state and the only state in the United States of America to mandate paid sick leave on private small businesses? How could this help our pro-business image? How does this send the message that our state is “open for business”?
Let’s look at some cold hard facts: we are facing the largest state budget deficit in the country. This year it is $3.6 billion and next year it will be $3.5 billion. The solution? The Governor has proposed over $1.5 billion in new and increased taxes for this year and next, and next, and beyond. To balance the budget he has also proposed sharing the burden with the 60,000 state employees, unfortunately it is with a “dream” of $2 billion in union concessions from the public state employee unions. Needless to say, not one union leader has embraced one nickel of union concessions. No one in state government believes this will ever happen, or even come close. So this begs the question: without union concessions will the Legislature cut spending by two billion dollars, or increase taxes by $2 billion, on top of the proposed tax increase of $1.5 billion? If history is any judge, you can bet on more taxes verses less spending.
Wait till July 4th weekend when the Legislature will be in special session threatening to close state parks and DMV offices all in the name of “protecting the safety net” and unfortunately more business taxes will then be proposed to balance the budget.
So what are other states doing? Take a look at (former liberal) Democrat Governor Andrew Cuomo of New York, who has promised no new taxes, cuts in state spending and layoffs of 9,500 state employees if union concessions are not made. Wow, from Andrew Cuomo, our next door neighbor, a state we compete with for jobs every day. And, how about New Jersey with Governor Chris Christie?
In a recent poll by the Yankee Institute, 58% of Connecticut residents polled said they have considered moving out of state because of taxes. This tells us all one thing, we are facing a defining moment in our state history, a moment that will move our state in the right direction, or the wrong direction.
Many have asked me about the state budget, can it be reduced? Can it at least be frozen at last year’s level? The answer, of course, is yes, and many other states are doing it. By the way, families and businesses are doing it every day.
The state budget proposed is $19.2 billion, a 2.7% increase from last year. It then goes to $20.2 billion next year – that’s more than a 5% increase – and over one billion dollars. So,what makes up this huge budget? The simple breakdown is 30% state employee payroll and benefits, 30% Medicaid, 20% aid to cities and towns and the rest to pay debt and other state costs. Like running a business you have payroll, and the costs of running the day-to-day operations. The options for balancing the budget are quite simple: reduce spending or increase taxes. In business you either reduce expenses or increase your prices. In this economy if you chose to increase prices good luck staying in business and creating new jobs.
The leaders of the state employee unions tell us “Connecticut has a revenue problem, not a spending problem.” This is their constant refrain. Um....but the facts would suggest otherwise. Since 1991, the year the state income was passed, state spending in Connecticut has increased by 250%, that is 250% over 20 years. Has your income increased by that amount during this same period?
During this same period of time our state population has remained flat and the number of state employees has grown dramatically.
During this same period of time public employees’ average pay has grown compared to that of the private sector. According to the Bureau of Labor Statistics the average public employee’s pay with benefits is $39.50 per hour while those in the private sector receive $27.41 per hour. And, what about job growth during this time? In 1990 there were 1,726,915 jobs in Connecticut, today there are 1,727,800. That’s a whopping increase of 885 jobs in 20 years; the biggest downturn of course was in recent years with over 100,000 jobs lost in this recession. By the way, what is the unemployment rate among state employees? It is zero, so perhaps some concessions to keep jobs might be a good idea.Just ask the thousands of residents who have lost their job if they would make concessions to keep theirs?
Looking ahead, what will happen if this budget passes? Well, for example, right now we’ve got the 3rd highest gas taxes in the country, behind Hawaii and California. With the Governor’s budget proposal we get to move up to #1. Does this make sense with gas prices rising dramatically and unrest in the Middle East? New Jersey and surrounding states are looking pretty good, can you imagine how many people traveling will fill up in our border states?
The average homeowner will pay thousands of dollars in higher taxes, and to add insult to injury, the Governor proposes that lower income families paying little or no income tax, receive up to $1,700 in what is called an “earned income tax credit.” In other words, 190,000 Connecticut residents – the vast majority not paying any income tax whatsoever – will receive “tax refunds” – checks up to $1,700 from the state. Isn’t it ironic that they call this a “tax credit” and the vast majority pay no state income taxes at all? This will cost the rest of us $160 million.
In addition, there will be new taxes on automobiles, haircuts, hotels, clothing under $50, non-prescription drugs, car washes, cigarettes, alcohol, etc.,etc. Income taxes will increase for all tax payers, there will be new tax brackets and anyone who owns a home starts off with a tax increase of $500 and goes up from there. Connecticut sales tax will increase as well, and it is only March, wait till July when the legislature is in special session and the budget deficit has increased and the cry will be to” tax the rich and businesses”.
So, what can you do? For starters, call your State Senators and State Representatives. Tell them to cut spending, tell them to vote no on mandated paid sick leave. Tell them that it is businesses, especially small businesses, that create jobs, not government. Government needs to create a pro business environment with less regulations to let the free enterprise system work, so that employers can hire more employees. Employers have a choice: they can opt to pay more taxes and be subjected to costly mandates, or they can employ more people. I think most people believe it’s about creating jobs.
Is Connecticut open for business? You decide.