Climbing the Economic Summit

An economic summit was convened in Hartford by the Department of Economic and Community Development. The capitol city became base camp for a day for what many hope will put Connecticut’s economy back on top.

A new concept to spur innovation and foster growth was unveiled by Timothy Case, CEO of Startup America Partnership. He announced that Connecticut would become the third state to locate StartUp centers. Serial entrepreneurs would be provided with a support system to help them grow into a new generation of leaders. The bigger question is whether Connecticut will keep them here once they launch their ventures without a pro-business, innovative climate that was once Connecticut’s hallmark.

Businesses repeatedly tell me that Connecticut is no longer fertile ground for growth. Along with new taxes, constantly changing regulations, unemployment fund assessments and mandatory time off mandates, the state stands in the way of progress in many other ways. It is too often slow to respond to business needs and has little understanding of the “time cost” of money. They tell us that some businesses lose funding opportunities simply because the state lacks a sense of urgency and is often too late in approving critical permits or licenses. Governor Malloy told the audience he has been hearing similar messages.

Those of us in the private sector, live this reality everyday. Government policies are constantly changing which creates an environment of uncertainty. Planning has become difficult if not impossible. Business costs skyrocket when new taxes and regulations require budget revisions. This last year has been dreadful for most small business owners. The 2011 state budget produced the largest state income tax hike in state history. Even worse, small business and the taxpayer were not given an opportunity to prepare for it since they are retroactive to January 2011. Bloomberg released an analysis of a recent Tax Foundation report. It found Connecticut number one in the country in taxes levied, followed by New Jersey and New York. This is not new news for those that pay income, social security, gas, energy, car, real-estate, inheritance and so many other state taxes.

Steven Cochrane, a Moody’s economist, believes the new economy will not be driven by consumer spending as people are now more cautious and saving. Growth will come from business investment in equipment, technology and software. Export growth will be driven by emerging countries and the education sector, specifically community colleges, will continue to expand. Baby boomers’ grandchildren will ignite the need for more teachers. This is a demographic pattern I have seen in my business and as leader in state education policy.

Other speakers included:
Mitch Horowitz (Battelle): It is important to 1) have industry clusters 2) identify these clusters and 3) focus on developing these clusters.

Bryan Hancock (McKinsey): There is a ongoing mismatch between jobs and skills that will widen.

Michael Porter (Harvard Business): The elements that drive productivity are 1) Quality of the business environment 2) Cluster development 3) Coordinating an economic policy across the state which recognizes that areas of the state face different challenges.

Connecticut’s lack of economic diversity was highlighted. Growth has been in gaming, defense and finance. Policies recently enacted to protect state labor unions have been decidedly negative to the economy. This has exacerbated the state’s anti- business reputation, putting Connecticut at the top of national rankings that find our state unattractive for businesses to build, grow or move into.

The special jobs session slated for later month may finally bring all parties together and afford us an opportunity to reach consensus in reversing this trend. Job growth ideas that chould be considered are attached to this article and include:

• Targeted tax incentives (defer income tax for 5 yrs – reinvest in equipment)
• Regulatory reform
• Workforce development initiatives.

It will not be easy to regain our footing and begin to climb back up the economic mountain. To stop Connecticut’s downward spiral and move it back in the right direction, we must find common ground. Renewed focus, a sense of urgency, and a great deal of determination will be needed to reach the summit.

Click here to read the Legislative Republicans’ plan: A Menu of Job Creation and
Business Development Ideas