Originally estimated by Gov. Dannel P. Malloy’s administration $516 million, the final calculation of the cost of the jobs package by the non-partisan Office of Fiscal Analysis remained somewhat unclear Wednesday evening though it stood close to $1 billion.
Legislators said that one major reason for the difference is that the administration had been referring to the cost of the initiatives over two years, while some call for spending to continue over at least five years. When the cost of borrowing is factored, the package grows more expensive.
Further complicating matters, OFA released both an original and a supplemental fiscal note. And while the latter adjusted bonding for one program, new estimates for total interest charges on all bonding weren’t immediately available.
The overwhelming bulk of the job growth initiatives, totaling $626 million, will be financed with bonding. OFA originally projected the cost of borrowing those funds over 20 years would add another $375 million in interest charges. But legislative analysts initially assumed a larger principal, $701 million, would be borrowed. Reducing the borrowing target to $626 million should lower interest charges proportionally.
In addition to debt and interest expenses of roughly $1 billion, legislative analysts estimate tax policy changes could add as much as $44.7 million to the package’s annual cost starting next fiscal year.
Nearly half of the $626 million in proposed bonding, about $340 million, would be used to double the scope of the governor’s First Five Program, which provides incentives to companies committing to create 200 jobs.
Proposed by the governor and developed with the legislature this past spring, First Five originally gave the administration discretion to award “substantial financing assistance” annually to up to five new companies or existing businesses looking to expand.
Eligible recipients must pledge to create at least 200 new jobs and can take up to five years to meet that goal provided they invest at least $25 million of their own funds in the expansion.
The program allows for a wide array of assistance, which can include tax credits, low-interest loans, technical consulting, or employee education and skill upgrades. Malloy already has awarded aid to four firms through the program.
The additional bonding is expected to provide sufficient funds to allow up to 10 companies to participate through the end of the 2012-13 fiscal year.
A quasi-public arm of the state’s economic development program, Connecticut Innovations Inc., would receive a boost in funding to invest in a wide-array of start up companies with $50 million in new bonding.
Another major bonded initiative involves $100 million for Small Business Express Package, which would provide job creation grants and loans specifically to smaller companies.
Nearly $10 million would be bonded both this fiscal year and next to expand the precision manufacturing program at Asnuntuck Community College in Enfield and to establish or expand manufacturing technology programs at three other community colleges.
Other financing for job growth initiatives include:
- $50 million for bridge improvements through the “Fix It First” program.
- $20 million for the Step Up program, which will encourage businesses to add employees in new areas by subsidizing the cost of those posts for up to six months.
- $20 million for brownfield remediation.
- $10 million for infrastructure and other improvements to enhance commercial zones in municipalities through the Main Streets Initiative.
- $10 million to help nonprofit social service providers and local housing authorities replace aging oil furnaces and boilers with fuel-efficient equipment.
The plan also includes several tax changes, including effectively cutting in half the $250 business entity tax a flat registration fee businesses pay annually. But starting in 2013, that $250 payment would cover two years’ worth of registration. Analysts estimate this would cost state government $40 million in the 2013-14 fiscal year and every other fiscal year thereafter.
The minimum investment required for an investor to qualify for an income tax credit through the state’s Angel Investor program would drop from $100,000 to $25,000. This is expected to cost the state $1.5 million per year.
A new job expansion credit would be added to several tax programs, costing between $15 million and $17 million annually beginning next fiscal year.
Connecticut’s film tax credit program also would be expanded to offer a new category for television production costs. This is expected to cost the state between $10 million and $19 million next fiscal year and between $5 million and $10 million annually thereafter.
Perhaps the largest area of bipartisan consensus since Malloy first announced plans in June for an October session on job growth was a need to improve what is perceived by businesses as Connecticut’s oppressive regulatory environment.
The new legislative package calls for state government to hire a consultant to streamline regulations, particularly with a focus on four large permitting departments: Administrative Services, Energy and Environmental Protection, Transportation, and Economic and Community Development.