HARTFORD — Gov. Dannel P. Malloy warned businesses Friday they will face sacrifices to help close the state budget deficit, but added that a new emphasis on smart investments and cooperative government offers light at the end of Connecticut’s dark economic tunnel.

“There is no cavalry — except us,” Malloy told nearly 600 business leaders gathered at the Hartford Marriott for the annual Economic Summit and Outlook sponsored by the Connecticut Business and Industry Association and the Metro Hartford Alliance.

With a $3.7 billion deficit built into the next budget — a gap equal to nearly one-fifth of current spending — state government can’t solve that shortfall with just one solution, Malloy said.

Malloy CBIA

Dannel Malloy: Tough year ahead

Though the new governor did not provide specifics about what he would propose in the budget he will submit to the General Assembly on Feb. 16, he again emphasized it would feature “shared sacrifices” that touch nearly all constituencies.

“I cannot cut our way out of that deficit … and be the state that we as Connecticut residents aspire to be,” he said, adding this would harm social services for the poor and disabled, education from pre-kindergarten through the university level, public safety, and other core services.

Malloy scored a narrow victory this past November over Greenwich Republican Tom Foley, who based his campaign on a pledge to close the largest deficit in state history without tax hikes.

And though Malloy didn’t name Foley during his 20-minute address or 10 added minutes of questions and answers, he made it clear that those holding out hope for a Foley-like, tax-hike-free approach should let it go.

“If anybody tells you they could do that — and they could do that meeting your personal aspirations, your children’s personal aspirations and your grandchildren’s personal aspirations — they simply are not telling you the truth,” Malloy said.

But he was quick to add that it also would be “ruinous” for Connecticut’s hopes of regaining the 90,000 jobs still lost from the last recession to solve the deficit solely with tax hikes.

The governor, a Stamford Democrat, rankled many business leaders during the campaign by pledging to back a key proposal of public- and private-sector labor: mandating paid sick leave for employees.

The CBIA, the state’s chief business lobby, has argued that regardless of the details behind such a mandate, it would send give Connecticut an anti-business image nationwide.

But Malloy said Friday that while he remains open to negotiating the details, he still believes in the principles behind paid sick leave.

“We’re going to have disagreements, but we don’t have to be disagreeable about it,” he said, noting that a continental breakfast was served to the business leaders at Friday’s forum. “I hope no one (who was serving food) came to work today because they feared they would lose their job.”

Malloy used a playful jab at House Speaker Christopher G. Donovan, D-Meriden, to remind business leaders that he is more fiscally conservative than his fellow Democrats in legislative leadership posts.

“I’m a Democrat,” Malloy said. “Donovan, every once in a while, he’s not so sure.”

Though business leaders sat quietly through the the new governor’s comments about paid sick leave, they applauded Malloy on several occasions for saying that, once Connecticut’s deficit is closed, government must invest more to improve a “badly broken transportation system” and public colleges and universities that need to play a larger role in developing the workforce and planning economic strategy.

Malloy also said state government needs to improve its regulatory process and its overall working relationship with business.

“I want to assure you that I understand we need to change the relationship between the companies that are employing so many of our citizens and state government,” Malloy said. “We need to be clear. We need to be plain-spoken.”

Improving that relationship also means having a governor who is enthusiastic and “intricately involved” in promoting economic development, and a legislature that is not allowed to impose new mandates on business year after year. “We need to end the yearly debate — on everything,” he said.

CBIA President John Rathgeber praised Malloy’s frankness about the budget crisis.”The public doesn’t need things sugar-coated,” Rathgeber said, adding that the governor’s goal of providing great stability to Connecticut’s business statutes and regulations should not be taken lightly. “That’s really important. Consistency in economic and fiscal policy is something companies large and small … are looking for.”

But while Malloy and Rathgeber saw the potential for partnership between government and business, state legislative leaders had a tougher time finding bipartisan consensus during a subsequent panel discussion about the budget crisis.

Though Malloy repeatedly calls for “shared sacrifice,” the Democrat-controlled legislature has not followed that credo, House Minority Leader Lawrence F. Cafero, R-Norwalk, said. The legislature enacted more than $950 million in tax increases in 2009 and since then has relied more on borrowing and one-time revenues rather than spending cuts to close budget deficits, he said. “I can’t think of one program that’s been consolidated or eliminated,” he said.

Senate Minority Leader John McKinney, R-Fairfield, added that hundreds of millions of dollars in annual spending could be cut if the state dramatically increased the number of services it hires the private sector to administer. But that would reduce the need for unionized state employees, he said, adding Democratic lawmakers wouldn’t allow this given their strong political ties to organized labor.

But Donovan responded that “this is not a good time to be laying anyone off,” adding that most Republican proposals to cut spending have involved health care and other social services for the poor and disabled. “We’re not going to do that.”

Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, added that this recession has been longer lasting and more painful for many Connecticut residents than economic downturns of 10 and 20 years ago. “This is a different kind of animal,” he said.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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