A UTC ribbon cutting in 2017: From left, UTC execs David Parekh and J. Michael McQuade, CEO Greg Hayes, Gov. Dannel P. Malloy, Sen. Richard Blumenthal, Rep. John Larson. Kyle Constable / CTMirror.org
A UTC ribbon cutting in 2017: From left, UTC execs David Parekh and J. Michael McQuade, CEO Greg Hayes, Gov. Dannel P. Malloy, Sen. Richard Blumenthal, Rep. John Larson. Kyle Constable / CTMirror.org

The relief was palpable in some quarters when United Technologies Corporation offered no ugly words about Connecticut as the aerospace conglomerate announced plans to pack up its C-suite for a move to the thriving economy of greater Boston, the home of its merger partner, Raytheon Co., and another recent Nutmeg expatriate, GE.

“It’s not like they are moving their corporate headquarters and taking a parting shot at Connecticut. They are not doing that,” said Senate Majority Leader Bob Duff, D-Norwalk. “They are making a business decision.”

So, in other words, the best face to put on UTC’s decision was that it was running towards Massachusetts, by far New England’s leader in jobs recovery since the 2008 recession, and not away from Connecticut, the region’s laggard.

That interpretation, of course, raises its own questions and concerns.

“We have two economies, Massachusetts and Connecticut, that appear to be so homogenous in many ways,” said Donald Klepper-Smith, an economist. “Why is it that the jobs recovery is 340 percent in Massachusetts, while Connecticut is stuck at 81 percent? You could probably write a doctoral thesis on that.”

The comeback of cities and fall of suburbs was one answer posited in a string of articles in Slate, The Atlantic and Governing in 2017. Two had headlines asking questions:  “What on Earth is Wrong with Connecticut?”  and “How Did America’s Richest State Become Such a Fiscal Mess?”

“It’s not like they are moving their corporate headquarters and taking a parting shot at Connecticut. They are not doing that. They are making a business decision.”

Senate Majority Leader Bob Duff, D-Norwalk

Democratic lawmakers and Gov. Ned Lamont’s economic adviser agreed this week with the basic thrust of those pieces: Connecticut was the beneficiary of New York City’s rampant crime and brush with bankruptcy in the 1970s, and it is the loser as employers see cities as magnets for hiring millennials and tech talent. New York is drawing corporations back from the suburbs, and Boston has reasserted itself as a technology hub.

David Lehman, the former Goldman Sachs partner who is Lamont’s economic adviser and the commissioner of the Department of Economic and Community Development, said this means, among other things, that Connecticut has to invest in its cities.

“The environment we need to create in the state is one that can compete with Boston in terms of culture, livability,” Lehman said. “We have significant talent, workforce-wise, but we have to make sure Connecticut is as attractive a place as Boston to live work and play, so employers are going to want to be here and employees are going to want to work here. And that is the goal for us.”

The administration sees improved transit and highway infrastructure as crucial to making the cities more attractive, but it has yet to articulate a broader urban agenda, leaving some mayors to wonder about its commitment.

Lamont addresses the legislature at the close of the regular session Wednesday night. mark pazniokas / ctmirror.org

Hartford has expanded its downtown housing stock with gap-financing from the quasi-public Capital Region Development Authority, which also operates the aging downtown arena, the XL Center. But Lamont wants to limit borrowing, which could hamper further housing development and the modernization of the XL Center. 

Lamont has identified highway tolls as his choice for the best way to finance transportation improvement, an issue he hopes the legislature will address in special session. The first meeting of legislative leaders and the governor about the special session is tentatively scheduled for late next week.

Senate President Pro Tem Martin M. Looney, D-New Haven, said cities clearly are among the keys to economic growth.

“We’re doing all we can, I think in terms of job creation, economic development, investing in education. The problem we have is that if a company really wants to be in a city of 600,000 people, that we can’t match,” Looney said. “We are handicapped by that every day, I think in terms of marketing ourselves. It was probably less of a problem in the era when corporations were looking for the leafy suburban campus. Those, we could offer plenty of.”

Klepper-Smith and Republicans see the state’s economic policies as also playing a role, specifically the passage of a bill raising the $10.10 minimum wage to $15 over the next four-and-a-half years and the creation of a paid family and medical leave program. 

“The new developments of the 2019 session will soon deliver a debilitating blow to the economy of Connecticut as the recently passed legislation is soon signed in to law,” said House Minority Leader Themis Klarides, R-Derby.

She blames them for UTC’s impending move to Boston.

“It should not be seen as mere coincidence that a company, employing 19,000 individuals and that has called Connecticut home for almost 100 years, announced over the weekend the departure of its headquarters, and is moving north to Boston, Mass,” Klarides said.

David Lehman and Gov. Ned Lamont in February. mark Pazniokas / ctimorror.org

Lehman said the state needs to take a “balanced approach” while weighing the concerns of businesses against the needs of workers. He noted that Massachusetts also has passed a $15 minimum wage law and is implementing a system of paid family and medical leave.

Senate Minority Leader Len Fasano, R-North Haven, said he sees the budget as another blow to the business community.

But Lamont happily quoted UTC’s chairman and chief executive, Greg Hayes, on Tuesday as complimenting the recently passed budget, even while Republicans blamed the move on Democratic fiscal and social policies.

“In our conversations,” Lamont said, “Greg commended our work in crafting an honestly balanced budget, delivered on-time, without raising income-tax rates.”

Lamont and Lt. Gov. Susan Bysiewicz are scheduled to meet Wednesday afternoon with Pratt & Whitney workers to talk about the company’s commitment to Connecticut, an event that sounds like a campaign stop. Every time a company moves its headquarters, regardless of the reason, the state has to cope with the public-relations backlash.

The administration wants to reinforce that only 100 of UTC’s 19,000 workers in Connecticut are bound for Boston.

Connecticut has the highest per-capita income in the U.S., one of the most productive workforces in the world, and an admirable quality of life, but those attributes are overshadowed by a chronic inability to get traction on growth and a newer problem — the weekly departure of 428 residents for other states, many of them departing with significant wealth.

The U.S. has seen economic growth of 19 percent in the decade since the recession, while Connecticut has experienced a seven percent decline in its gross domestic product, as measured by the U.S. Bureau of Economic Analysis. (The state has performed better in the last three quarters.)

“The seven percent decline in economic activity is unfathomable to most people when I go out and talk — maybe five percent of the audience knows the number is down seven percent,” Klepper-Smith said.

“Why is it that the jobs recovery is 340 percent in Massachusetts, while Connecticut is stuck at 81 percent? You could probably write a doctoral thesis on that.”

Donald Klepper-Smith

When he ran in 2010 to become the first Democratic governor in 20 years, Dannel P. Malloy was fond of noting that Connecticut and Michigan were the only two states with no net job growth in the previous two decades. And Michigan, with its faltering auto industry, at least had a good excuse.

It was a stunning statistic that somehow failed to make a significant impression on successive classes of state lawmakers.

Klepper-Smith says he still sees no sense of urgency at the State Capitol to find out why the state has produced no economic or net job growth, even though the state of Connecticut’s economy has dominated the last three elections for governor — and all five candidates on the ballot in 2018 came from the worlds of business, not politics.

In a recap of the recently concluded legislative session, Senate Democrats listed three bills as accomplishments under the heading of “economic competition & fairness.” Two of the three were bills were vehemently opposed by many businesses and supported by labor progressives: the $15 minimum wage and paid family and medical leave.

Republicans say that was tone deaf, and the governor is no better.

“When we have a governor that only talks about paid family medical leave, marijuana, tolls and all the other progressive policies, that doesn’t bode well either for business,” said Rep. Vincent Candelora, R-North Branford. “I hope that we have a governor that has now opened up his eyes and stopped talking in sound bites and starts really looking at how these proposals impact the state of Connecticut.”

Rep. Stephen Meskers, D-Greenwich, a former Wall Street executive who unseated a Republican incumbent last year, said the governor and legislature deserve credit for passing a budget that is balanced and will set aside $2 billion in reserves. The administration has negotiated a tentative settlement with hospitals over tax issues that potentially created a $4 billion liability.

“I think overall what we did in the first session was good, but it was half the job that needs to be accomplished,” Meskers said.

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Mark PazniokasCapitol Bureau Chief

Mark is the Capitol Bureau Chief and a co-founder of CT Mirror. He is a frequent contributor to WNPR, a former state politics writer for The Hartford Courant and Journal Inquirer, and contributor for The New York Times.

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11 Comments

  1. The article forgot to mention that UTC was the beneficiary of a $400 million “Mega Deal” from the state in 2014.

    Also the top 5 people make a total of $37 million per year

    https://pro.edgar-online.com/DisplayFilingInfo.aspx?TabIndex=2&FilingID=13303709&companyid=8836&ppu=%252fExpandedSearch.aspx%253fsite%253d0acade95-c20b-4c47-bebb-1dca89f15ab1%2526amp%253bsearchTypeID%253d1%2526amp%253bticker%253dutx%2526amp%253bFormGroupID%253d11%2526amp%253bReceivedDate%253dLAST_12_MONTHS%2526amp%253bfrom%253dquicksearch&type=pdf)

    I think it’s fair to guess that the 100 jobs moving to Boston represent a payroll of $100 million – so there goes $6.35 million in income taxes. Not to mention a further reduction of property value as they sell their homes in CT.

    https://subsidytracker.goodjobsfirst.org/prog.php?statesum=CT

    1. Don’t forget the loss of sales tax on their spending as well. And charitable contributions.

      But, they’re the lowly private sector. Their only purpose is to provide for the public sector.

  2. “It’s not like they are moving their corporate headquarters and taking a parting shot at Connecticut. They are not doing that,” said Senate Majority Leader Bob Duff, D-Norwalk

    Well, should make us all feel so much better! Our consolation prize, in a sense. “Sorry for leaving you Connecticut; it’s not you, it’s me”

    I think politicians should save their breath on this topic. If they don’t have anything constructive to report in the way of strategic thinking for retaining/attracting corporations to Connecticut, then maybe don’t say anything at all. Glib commentary about our state’s economic policy failures are not inspiring.

  3. 1) Connecticut has THREE metro areas with a population above or approaching 1 MILLION: Hartford (1.2 million), Stamford (920,000), New Haven (860,000). So it would seem CT has sufficient population centers to be competitive on that vector.

    2) Klepper-Smith doesn’t offer any explanation as to why CT has had such a miserable decade (2008-2018) when the economy shrank annually, except for tiny growth in 2015; 2018 saw some real growth), especially if we remember that CT’s economy grew 3% in real terms compounded annually 1997-2007. It deserves thoughtful assessment–and surely one critical aspect is CT’s failure to adjust to the growing importance of IT. CT does not have a strong IT infrastructure, lacks data centers (a recent industry study singled out CT as an anomaly in the northeast). The significance of that weakness shows up in sector dynamics–dramatic losses in financial services and insurance, where IT plays an increasingly important role, and in information services, the fastest growing sector nationally and in CT. BUT in CT, that sector is growing more slowly that the national pattern, and it is a smaller sector in CT’s economy than it is nationally. So CT is falling behind even in its fastest growing sector.

    And, sadly, it seems the Legislature continues to ignore the dynamics underlying CT’s economic malaise. I don’t see anything now on the table likely to bend the curve.

  4. The article is profoundly misleading on one issue: population dynamics. Pazniokas is victim of a common misconception–that population loss explains the economic malaise CT has suffered. It is the reverse–it is the absence of economic recovery that has driven the population dynamic. CT suffered a double wound post-2008. First, CT lost about 125,000 jobs and has still not recovered from that loss; state employment is still below where it was in 2008. Second, CT lost a plethora of high-wage jobs and gained lower-wage jobs (which is why we have seen job growth since 2010 even as state GDP shrank). People move to where the jobs are; CT hasn’t seen net job creation in more than a decade. People move to where they get jobs.

  5. You will never be able to convince the tax and spend crowd in Hartford that their actions have consequences to the economic well-being of this state and its residents. Ignorance is bliss for them. They pass feel-good legislation like minimum wage and paid medical leave without thinking through the unintended consequences to commerce, businesses, and income earners. Their budgets contain all the bloat of the state workforce without any consideration to living within the state’s means. A honestly balanced budget to them means more taxation and no cost cutting. They rob the transportation fund and then demand tolls to pay for their theft. And then they wring their hands when 100 year old companies in the state depart for greener pastures. Is it any wonder that over 400 residents are leaving this state every week and bringing their assets/income with them?

  6. No matter how anyone tries to spin this, it’s devastating news for Connecticut. If they were moving their headquarters to Connecticut that would be good news, instead we have them moving to Massachusetts like GE recently did. The bottom line if people and companies are leaving Connecticut and we are unfortunately still headed in the wrong direction.

  7. UTC’s departure has no “new insights” for leaders of a State widely considered by the national business community as the worst managed in the nation with its “tax and spend” policies focused towards uplifting its decade long stagnant economy. Any more than GE’s departure had “new insights” for CT’s leadership. Nor do we expect major new firms to locate and invest in CT.
    Maybe the next Recession will focus CT’s leaders on the consequences of “tax and spend” policies imposed on a failing State economy. At some point CT’s leaders will learn/relearn the basic tenants of college freshman economics. Hopefully in our generation.

  8. CT does have Electric Boat and Pratt. So long as the policy of buying new defense equipment continues, CT’s economy will benefit. And in finance, tax reform brought the state a lot of money. There are still rich people living here.
    By the way, tax reform also helped people who had reported their business income on personal tax forms. The legislature acted to diminish their gains, but the federal government has helped them.
    So long as politicians can advocate successfully for keeping bases and increased production here, and for increases in wealth, the state can muddle through.

  9. The demise of Connecticut’s economy can be summed up in two simple words. INCOME TAX. Prior to its implementation in 1991, Connecticut had a vibrant economy. Democrats couldn’t spend the income produced by it fast enough. Once it was adopted, Connecticut went into an economic tailspin that can never be corrected.

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