Getting its fiscal house in order might be state government’s best form of economic stimulus, topping any tax credit or grant program, Connecticut’s chief business lobby argued Thursday.

The Connecticut Business & Industry Association unveiled a 2013 legislative agenda based upon three principles: a more sustainable state government, more competitive business costs and a greater emphasis on workforce training and education.

Controlling spending and stabilizing the state’s tax outlook “actually can be the best economic development program in the state,” CBIA Senior Vice President Joseph F. Brennan told Capitol reporters during a briefing Thursday.

Gov. Dannel P. Malloy and the legislature used $1.5 billion in tax hikes, a union concession package and other spending cuts to close a nearly $3.7 billion deficit in the 2011-12 budget.

State finances ran a modest $143 million in the red last fiscal year, and Malloy and the lawmakers closed a $365 million deficit in the current budget during a mid-December special session.

But fiscal analysts for the Legislative and Executive branches have estimated a shortfall of as much as $1.2 billion built into the fiscal year that begins July 1, based on current spending and revenue trends.

Malloy has said he has no intention of raising taxes but won’t rule that out. The governor’s proposal for 2013-14 is due to the legislature Feb. 6. Some of Malloy’s fellow Democrats in the legislative majority already have expressed skepticism that a gap that large can be closed without a tax increase.

But Brennan said it’s this uncertainty that has kept the state’s unemployment rate close to 9 percent.

“We talk to people and they’re just quite not sure of what the future is in Connecticut,” he said.

Brennan added that “we also think we have great opportunities here.”

While looking for ways to cut spending six months from now, state officials also should be looking to streamline agencies and consider major policy changes that could yield larger savings a few years down the road, he said. This could include finding new ways to curb recidivism and reduce Connecticut’s prison budget, as well as enabling more elderly residents to avoid or postpone nursing home care and receive less costly treatment in their homes.

“Spending is going to be a big issue for us and we’re going to be fairly aggressive in sharing those ideas,” CBIA Vice President Bonnie Stewart said, adding that the association would release a major report on state spending Jan. 23.

The CBIA also wants lawmakers to revisit the controversial statute enacted last year that requires most businesses to provide part-time workers with paid sick leave.

Brennan said the association is seeking to modify the measure to ensure all manufacturers are exempt from the requirement, and to give companies some mechanism to address absenteeism that results from misuse of paid leave.

Other proposals to help control business costs include:

CBIA proposals to strengthen the state’s workforce and general business economy include:

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Keith M. PhaneufState Budget Reporter

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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