Not Much Progress Made This Session On The Economy
CROMWELL — The Connecticut Business and Industry Association’s vice president of government affairs told a group of business executives Friday that the business community had one win, one loss, and blocked a lot of “bad” bills during the 2014 legislative session.
Bonnie Stewart, CBIA’s vice president of government affairs, said they were successful getting the legislature to approve an apprenticeship tax credit for manufacturing companies. There are only about 150 individuals in apprenticeship programs outside of the ones run by the utilities or other trades. The measure was approved as part of the language implementing the budget.
While she only cited that one victory during her prepared remarks, Stewart said afterward that another victory was the workers’ compensation legislation, which changes how the default rates for workers’ compensation-related services are set.
But she admits that neither of those victories increases the state’s economic competitiveness. CBIA and its partners have created a campaign to move the state up in the national rankings. The goal is to reach 20th by 2017. Connecticut ranked 45th in the 2013 CNBC rankings.
The big loss this legislative session, according to Stewart, was the increase in the minimum wage.
“The increase in the minimum wage was a problem,” she said. “Most of Connecticut does not pay the minimum wage, but we did hear from a lot of our members that their wages for other employees are tied to the minimum wage.”
Stewart, who has been with CBIA for 26 years, said she had never experienced a volume of calls like the ones produced by the news that Democratic Gov. Dannel P. Malloy and the legislature wanted to raise the minimum wage to $10.10 an hour by 2017. Malloy signed the increase into law in late March, making Connecticut the first state to heed President Barack Obama’s call for the increase.
“It was a definite priority for the governor. It was something he wanted,” Stewart said.
Meanwhile, “we’ve got a huge problem when it comes to the state budget,” she said. “We’ve seen our revenues fall and there’s a huge deficit projected for two years out.”
She said all the gubernatorial candidates are saying they won’t raise taxes if they get elected, but “that means they have to get their spending under control.”
Traditionally, cutting spending is something “the legislature, to put it nicely, has a great deal of trouble with,” Stewart said.
Connecticut’s budget may be “balanced” but it doesn’t account for all the liabilities and debts the state has incurred over the years, Camille Murphy, the president of the Connecticut Society of Certified Public Accountants, said Friday.
“Folks, we’re in trouble,” Murphy said. “We’re in trouble with a capital T.”
Nationwide, states will need to report all pension and “other post employment benefits” on their financial statements starting in 2014. Connecticut has some of the highest unfunded pension and “other post employment benefit” liabilities in the nation.
In 2012, Connecticut’s State Employees’ Retirement System had $9.7 billion inassets, which is enough to cover 42.3 percent of its $23 billion in liabilities. The Teachers’ Retirement Fund had $13.7 billion in assets, which is enough to cover 55.24 percent of its $24.9 billion in liabilities.
At the moment, “we make promises today for people who work for the government and we don’t put those balances on the balance sheet,” Murphy said. “That all changes this year.”
Based on last year’s annual financial statement, Murphy calculated that if state government was shut down on June 30, but continued accepting revenue for 60 days there would be a $1.1 billion deficit.
“It doesn’t even make sense,” Murphy said.
When all the liabilities are accounted for under the “full accrual” method of accounting, there is a $15 billion working capital deficit on the balance sheet. Next, she wondered what it would look like if all the debt and all the promises the state made were on the balance sheet.
“If we did that we would have a $59 billion operating fund deficit,” Murphy said. “Do you think this is sustainable?”
She said everyone hopes things are going to get better and the economy is going to turn around, “but hope is not a strategy.”