Survey says businesses don’t expect to recover before 2011 or 2012

ROCKY HILL — Though many economists say Connecticut is slowly beginning to cover, most businesses here don’t expect to do so until 2011 or 2012, according to the state business lobby’s latest annual survey.

The Connecticut Business and Industry Association’s ninth annual Survey of Connecticut Businesses also found poor sales, fears about state government’s fiscal instability and the potential for major tax hikes have companies focused more on cutting costs than expanding to any great degree.

Solving state government’s fiscal crisis and strengthening the economy are the most critical issues companies want candidates to address, according to survey results presented Friday during a forum of Connecticut business leaders at the Marriott Rocky Hill.

“Although Connecticut companies are slowly beginning to add jobs, job growth will continue to be restrained in the face of looming uncertainties at both the state and national levels,” said Professor Susan Coleman, chairwoman of the finance program at the University of Hartford.

The review found one-third of businesses don’t expect to recover fully until next year, and another 48 percent said they believe it will take until 2012.

More than half of those surveyed, 57 percent, describe the state’s economy as below average, citing numerous problems that have left many firms paralyzed.

Breaking with past years, the single-greatest challenge identified was diminishing revenues and customer bases, a problem cited by 34 percent of the respondents. That was followed by state and local business taxes — normally the top selection — cited by 25 percent. That was followed closely by uncertainty over how the state will address its fiscal woes, listed by 22 percent.

“We really need to decrease the uncertainty that is out there,” CBIA economist Peter Gioia said, adding that businesses have watched state officials work harder to postpone than to resolve the challenges of a $3.4 billion deficit projected for the coming fiscal year. “Businesses want the state to cut spending.”

The survey found 40 percent of businesses consider resolving the state’s budget crisis to be the top issue candidates should address. Not surprisingly another 34 percent cited enhancing the state’s business climate as their foremost concern.

“Together we must challenge the candidates in this fall’s election to explain how they will solve the state’s fiscal problems and attract the business investments that are needed to create jobs here,” CBIA President John R. Rathgeber said.

Businesses remain particularly wary of the state income tax, the single-largest revenue source for state government, Gioia warned, especially given a projected 2012 budget deficit equal to almost 20 percent of current spending.

The survey found 38 percent of businesses consider the personal income tax to be the tax of greatest concern this year, up from 28 percent who cited it first last year. Another 27 percent cited municipal property taxes this year, up from 17 percent who listed it first last year.

Health care remains both a major cost to businesses and a source of worry.

With 43 percent of respondents citing it as their most significant cost, compared to 39 percent who selected payroll, it ranked first overall. And 96 percent of businesses surveyed reported they still offer health care benefits to employees, though roughly half have increased employees share of the costs or reduced benefit levels.

The national health care reform legislation enacted this year did little to bolster the Connecticut business climate, with 63 percent of those surveyed saying they believe it will increase their costs, 21 percent feeling unsure and 13 percent anticipating no impact on the bottom line.

Connecticut companies also continued to complain about finding an adequate workforce here, with 60 percent saying their applicants’ qualifications too often fail to meet position requirements, and another 8 percent saying there simply aren’t enough qualified applicants in the state.

Despite their fears, many businesses are hoping to add workers soon. Just under 50 percent of respondents plan to hire new staff in the coming 12 months, up from 38 percent in 2009. And just 13 percent said they are “very likely” or “somewhat likely” to leave the state in the next two years.

“That’s a huge pat on the back for the state of Connecticut,” said Jay Sattler, a partner with BlumShapiro, the West Hartford accounting firm that conducted the survey. Despite the many challenges facing them, businesses still believe the potential for economic growth here remains strong, he said.

BlumShapiro invited 4,800 businesses to participate and received responses from 682, or 14 percent, a level similar to past years, CBIA officials said.