UConn report: Loosening state bonding backlog could add 28,000 jobs in CT

State government could create up to 28,000 new construction and related jobs over the next two years — if it can reverse a growing, $6.2 billion backlog on its capital project list, according to a new report released Wednesday.

The quarterly report by the University of Connecticut’s economic think-tank also projected the state’s recovery would accelerate between now and mid-2015, particularly if the stockpile of potential projects is reduced.

Gov. Dannel P. Malloy’s administration “has built up a multi-billion-dollar stockpile of approved-but-unissued bonds,” the Connecticut Center for Economic Analysis wrote.

The center was referring to a controversial fiscal ratio that has gotten increasing attention from lawmakers since they first mandated reports on the subject in the fall of 2010.

State Treasurer Denise L. Nappier reported last week that $6.17 billion in approved financing has yet to be actually borrowed — presumably because state government isn’t ready to spend the money yet. That is more than double the $3.06 billion backlog that existed when Malloy took office in January 2011.

There always is some overlap in the borrowing process for state projects.

Many times the State Bond Commission — a 10-member panel chaired by the governor that gives final approval on proposed borrowing — must act months or even years before money will be spent, either to qualify for federal aid, or to satisfy a contractor’s requirements.

In addition, the treasurer typically waits to borrow funds until interest rates are most favorable to the state.

But some legislators expressed concern two years ago when the buildup surpassed $3 billion that this was the result of more than the usual market forces. And it has risen steadily through Malloy’s two years and nine months in office.

Labor unions have argued that state agencies overseeing construction projects, particularly the Department of Transportation, are badly understaffed and unable to launch projects quickly.

Despite four state fuel tax hikes between 2005 and 2008, and a fifth this past July, the number of DOT employees is down 8.8 percent since the tax hikes began.

And the debt service accounts in the state budget — which repay financed projects — have tightened.

Debt service spending in the general fund, the chief operating fund in the state budget, rose 1 percent last year and drops 12 percent this year — below 2011 levels.

In the Special Transportation Fund, the debt service account is just 5.4 percent higher than it was two years ago.

“Accelerated recovery is possible for the state,” the center wrote in the new report. But “to achieve its full potential, the state would need to use some of that stockpile of approved-but-unissued bonding to fund strategic state investments.”

The center, led by economist Fred V. Carstensen, noted that while Connecticut’s recovery from the last recession largely has been “sluggish,” the pace has picked up recently.

  • Employment is up about 13,000 jobs from a year ago.
  • The construction, transport, trade and utility sectors of the labor force have been growing.
  • And the Dow Jones Industrial Average is up more than 11.5 percent from one year ago — important for the state’s financial services sector.

Though a more traditional model shows the state’s economy continuing to grow modestly, at about 1.5 percent per year, the center estimates that growth as high as 5.4 percent by 2015 is possible — if rising interest rates don’t creep up too much.

And what if the $6.2 billion bonding backlog could be cut in half over the same two years?

“The impact is dramatic,” the report states, adding 16,000 to 28,000 jobs, and potentially doubling Connecticut’s economic output.

Not all bonding creates jobs, such as that approved to purchase equipment or preserve farmland.

Still, the center reviewed all bonding approved during the first six months of 2013. More than 80 percent was planned for construction. And more than half of the backlogged bonding involves transportation projects, most of which trigger matching federal dollars.

 

An extra $3.1 billion state investment not only would pull in $4 billion more in federal funding, but also would spur more private business activity, the center projected. The result could equal an $8 billion shot in the arm to Connecticut’s economy.

Benjamin Barnes, Malloy’s budget director, said the administration has been trying to expand its capital outlays, but still must grapple with several limitations.

Malloy, who inherited a nearly 20 percent shortfall in his first operating budget, has struggled to keep day-to-day finances in the black, and Barnes said concerns about staffing to launch capital projects are not new.

“We are staffing- and resource-challenged throughout state government,” he said. “It’s a struggle to push money dramatically faster out the door … but we certainly have been trying to push for more.”

Complex rules must be followed to launch projects backed in part with federal dollars, but Barnes said state government imposes major procedural obstacles as well.

Connecticut adopted a wide array of “clean contracting” rules after the bid-rigging scandal that landed former Gov. John G. Rowland in a federal prison in 2005.

Barnes said that while the integrity of these procedures is important, they should be reviewed and streamlined if Connecticut is to accelerate its construction projects.

Simply forming a contractor selection panel “adds weeks to the process just to get everyone in a room.”

Malloy told the state construction and building trades council at its annual convention last week that ramping up more construction projects is a top priority.

But House Minority Leader Lawrence F. Cafero, R-Norwalk, said the situation is frustrating, especially given how the Malloy administration modified bond commission agendas to include estimates of how many jobs each item “will create or retain.”

“We have heard this governor boast ad nauseum about the jobs he has created,” Cafero said. “This (report) shows it is a cruel hoax on the Connecticut public.”

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