Washington – Connecticut pays more in taxes than it gets back in federal dollars, but when it comes to federal contracting dollars, the state receives more money than most and this could be a banner year.
Because it is a high-income state, Connecticut residents pay more federal taxes, on average, than those in most other states — $9,998.60 per taxpayer in 2017. The state also has a comparatively low reliance on federal aid.
According to a study by the Tax Foundation, Connecticut is ranked third, relying on federal assistance for only about 24.6 percent of its general revenue. Only North Dakota, which relied on the federal government for 16.8 percent of its general revenue and Virginia (22.8 percent) were less reliant than Connecticut. Most of the less reliant states had, like Connecticut, higher tax revenues and smaller low-income populations.
But when it comes to federal contracting dollars, Connecticut is nearly always near the top of the list. According to the federal database USAspending.gov, in 2014, companies and non-profits received $13.7 billion in federal contracting dollars, ranking the state 7th in the nation as far as the money it received in federal contracts.
Last year, Connecticut dropped to 10th on the list, receiving slightly more than $12 billion in federal contract awards. With a big boost in the 2018 Pentagon budget, the state is on track to do better this federal fiscal year, which ends on Sept. 30.
“We’ll probably have a record year on defense,” said Peter Gioia, economic adviser to the Connecticut Business & Industry Association.
At the beginning of September, Connecticut companies and non-profits had received more than $11.8 billion in federal awards. Electric Boat is in final negotiations for the next block of Virginia-class submarines, which could, with other pending Pentagon contracts, give the state a big boost this year.
The Block V contract would allow for the construction of 10 Virginia-class subs, with the possibility of adding an additional two, at an estimated purchase price of about $3.2 billion per boat.
While the money would be spread out over five years, money allocated in the first year of the contract would be substantially more than in the other years to acquire lead materials. Electric Boat is also benefiting from increased spending this year on the new Columbia-class submarine program.
Rep. Joe Courtney, D-2nd District, said federal spending on manufacturing in Connecticut has a “multiplier bounce” that creates jobs in other sectors.
“For every dollar spent on manufacturing…there is a ripple effect in other parts of the economy,” Courtney said.
Because Electric Boat is the largest government contractor in the state — followed by defense giants United Technologies and Sikorsky, a subsidiary of Lockheed Martin — Courtney’s eastern Connecticut congressional district received nearly half, or about $5.4 billion, of the federal contracting dollars that were spent in the state last year.
Rep. Rosa DeLauro’s 3rd congressional district followed with about $3.7 billion, and Rep. John Larson’s 1st District, home of engine-maker Pratt & Whitney, with about $2.5 billion.
“When it comes to income taxes, Connecticut is a donor state,” Gioia said. “But it gets more than its fair share in government contracts.
Spreading the wealth
While Connecticut’s defense contractors and subcontractors receive most of the state’s federal contracting dollars, other federal agencies have also entered into lucrative contracts with companies and non-profits in the state.
Stamford-based PlowShare Group, an advertising company that focuses on public service campaigns, has a multi-million dollar contract to create a multi-media anti-smoking ad campaign for the Centers for Disease Control and Prevention (CDC).
The Yale New Haven Health Services Corp. received a five-year, $83.5 million CDC contract to develop better patient outcomes and hospital efficiency programs, while Stamford-based Gartner Corp., a research and consulting company, has a contract worth up to $33 million to provide “technology analysis and consulting support” for the National Institutes of Health.
Yale University and its affiliates have 42 contracts worth more than $132 million. The University of Connecticut is a government contractor, too, with more than $3 million in government contracts this year, including a contract worth $273,446 to provide “podiatry services” to the Department of Veterans Affairs.
In total, Connecticut companies and non-profits are working on nearly 45,000 contracts, both large and small, with the federal government this year.
While federal contracting is a boon to the state’s economy, it is also vulnerable to budget fights in Congress.
The stage has been set again this year for brinksmanship in that budget fight.
Congress must pass bills funding the federal government by the end of this month to avoid a government shutdown, which has been threatened by President Donald Trump if he does not receive enough money for his proposed border wall between the United States and Mexico.
Meanwhile, budget deficits and national debt continue to rise, with the prospect of permanent trillion- dollar annual deficits by 2020, which will soon put pressure on Congress to cut spending.
Courtney said it’s likely there will be “significant downward pressure,” on future federal budgets, even though there is a bipartisan agreement to increase spending in the 2018 and 2019 federal budgets “and defense is not immune to that pressure.”
“The idea of an open checkbook is a false expectation,” Courtney said.
Contract spending by state, based on place of work performed for Fiscal Year 2017.