Connecticut Business and Industry Association logo Keith M. Phaneuf / CTMirror.org
Companies expect the national economy to grow over the next year, but not Connecticut’s. CBIA
Companies expect the national economy to grow over the next year, but not Connecticut’s. CBIA

Despite improving sales growth last year, eight out of 10 Connecticut companies say the business climate here is declining, according to the latest annual survey from the state’s chief business lobby.

The Connecticut Business and Industry Association also found 77% of businesses believe the state’s new paid Family and Medical Leave program will harm their companies and 53% say the rising minimum wage will do the same. Business confidence in state lawmakers plunged to an all-time low.

The CBIA presented the results to an audience of about 280 people gathered Friday at the Hartford Marriott for the association’s annual forum on the Connecticut economy.

“While Connecticut businesses are finding ways to survive and grow, their concerns for the future are clearly apparent in this survey,” Joseph F. Brennan, president and CEO of the CBIA, said Friday. 

But the survey, conducted by mail and email in June and July by Marcum LLP, an international accounting firm, had a relatively modest response. Marcum approached 5,300 top executives with the survey and 356 responded, giving the results a 5 % margin of error.

Joseph F. Brennan, president of the Connecticut Business and Industry Association.

The survey found 73% of responding Connecticut businesses reported a net profit last year — a post-recession high.

And 43% reported sales growth in 2018, up from 36% in 2017 and the highest number in the last five years.

But while 73% of survey respondents expect the national economy to grow next year, only 11% predict the same for the state’s economy. About 29% of those surveyed said Connecticut’s economy would remain static in 2020, while 61% predicted some degree of contraction.

“So why not here?” asked Michael Brooder, managing partner for Marcum’s Hartford office. “There’s concerns on the tax side” and businesses see a lack of predictability in overall state government finances.

But equally important, Brooder said, are new state policies that have Connecticut businesses worried.

One of those is the new paid family medical leave law passed last spring by the Democrat-controlled legislature and Gov. Ned Lamont. Under that legislation, benefits would become available in January 2022. It would provide up to 12 weeks of replacement wages, payable on a sliding scale ranging up to a maximum of 95% for minimum-wage earners, capped at $900 a week. 

Workers would fund the program with a payroll tax of one-half of one percent. Benefits would be cut if the revenue proves insufficient to meet demand.

Advocates say the program would offer some of the strongest benefits and job protections for workers who take extended time off for personal illness or to care for a child, siblings and other loved ones.

The survey found that businesses are most concerned about rising costs and coping with decisions made by lawmakers. CBIA

Critics counter by saying that although the benefit will be financed by employees, it still will be a blow to small businesses by giving workers an incentive to take up to 12 weeks of leave.

CBIA and other business advocates also chastised Lamont and lawmakers for adopting a plan to raise the state minimum wage from $10.10 per hour to $15 over the next four-and-half years.

“State policymakers must acknowledge these very real concerns and focus on policies that will restore public confidence, promote investment and drive long overdue economic and job growth,” Brennan said.

But Max Reiss, communications director for Lamont, said the paid leave and minimum wage initiatives will help Connecticut remain competitive with other states while providing financial security for families statewide.

“The governor was proud to sign them into law,” Reiss said. “The governor is thrilled to see economic growth on the rise in Connecticut and wants to pursue policies that support that growth. That is why the governor has spent so much time connecting with top executives from major Connecticut companies, looking for their input and guidance. The governor will continue to have those discussions.”

Brennan said small businesses were particularly frustrated with the 2019 state legislative session, adding they felt they were unfairly targeted by new mandates and tax changes.

Though Lamont and the legislature averted a major state budget deficit without increasing income tax rates, they did raise taxes on businesses by scaling back tax credits. 

Jessica Rich, managing partner for The Walker Group and Scott Dolch, executive director of the Connecticut Restaurant Association

They also cancel numerous sales tax exemptions on a range of goods and services, set a one-percentage-point sales tax surcharge on prepared meals, ordered a new levy on vaping, and boosted real estate conveyance taxes on mansions — sold by people leaving Connecticut.

“It wasn’t just one or two little things,” said Scott Dolch, executive director, who said too many lawmakers were less than receptive when approached by business owners with concerns. “They act like they know your job better than you.”

For example, he said, very few lawmakers were aware that restaurant workers here earn, on average, $28 per hour if tips and wages are combined. That’s more than 2.5 times the current minimum wage.

Business confidence in the state legislature fell to all-time low, with 92% of respondents either somewhat or strongly disapproving of lawmakers’ handling of jobs and/or of the economy. That’s up from 81% one year ago.

More than half of those businesses surveyed, about 56%, expect their workforce to remain constant next year, with 23% anticipating adding workers. Last year, 39% expected to add employees.

Jessica Rich, a managing partner with The Walker Group, a Farmington IT firm, said that while “the survey actually scared me a little bit … it’s not all grim.”

While the Connecticut workforce needs more skilled workers, Rich said, her firm has been able to retain and add key staff.

One key, she said, has been to work with existing employees, who often can provide valuable referrals to assist with hiring. “Smart people tend to know smart people,” she said.

The survey found 29% of respondents cited employee training as its top investment. This ranked highest, followed by 16% that cited new technology; 15% that said property and facilities; and 14% that cited recruiting qualified workers.

The Walker Group also has tailored practices to accommodate the “millennial” generation, referring to those individuals born between 1981 and 1996, Rich said.

“Millennials are a force to be reckoned with,” she said. “They don’t want a job. … They want a future. They really want to understand that they are part of something bigger.”

That has meant ensuring all jobs show workers “some potential for advancement” and the ability to continually tackle new challenges and projects. “You have to listen and allow them to be creative.”

Other findings of the survey include:

  • 40% of companies introduced a new project or service in the past 12 months.
  • 36% said they plan to introduce a new project or service in the coming year.
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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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11 Comments

  1. One statistic from the CBIA that was not reported in the article is the most important. It truly awful, in fact it is frightening …. “The survey also found 81 percent of business owners believe Connecticut’s business climate is declining. That’s up 61 percent from last year”. A 20% swing in 12 months!!!!

    Democrat leaders, do you think your “pro-growth” economic policies are still working? Because the people that really matter to the economy, the private sector business leaders, who will risk and invest their own money, hire our children and convince others to come here are loud and clear on this – Connecticut is in REAL trouble and your polices are making it worse at the exact time when we need lower taxes on the middle class, lower cost of living, lower cost of doing business, Democrat policies are doing the exact opposite, maybe it’s time to stop.

    1. That is because the state legislators’ only constituency are state employees, particularly unionized ones. The state is the largest employer in the state and if you add the employee’s families and any remaining retirees, it’s a very significant bloc. Include the urban population that are sadly government dependent and that tells the story of government’s priorities.

      That it is all paid for by the private sector doesn’t matter to them.

      The only way to change it individually is to leave the state. Which many are doing, both corporately and individually McKesson is leaving and taking 150 jobs with them and Forum Plastics will also leave as the mandated minimum wage increases. Another 150 jobs.

  2. Hopefully, the state legislature will read this report and try to make a difference next year. They are doing a terrible job from the business owners point of view. This is important, small business is the backbone of the economy both statewide and nationally.

    This should be taken seriously. From the employees point of view, some kid is probably happy that their wage is going to go up from $10 to $15 per hour, but what about the kid whose wages are going to go from $10 per hour to zero?

    Our lawmakers are very shortsighted, thinking only about the next election. It is time to replace them.

    1. Those $10 an hour jobs are mostly occupied by adults now and adults trying to support families. We are talking about the same businesses that reduced the number of full timers and stopped providing health insurance in the 80’s thus forcing people who would have worked the full time retail, grocery positions into working the part-time positions that used to be for kids. Many occupy more than one of these jobs just to survive. Since then many kids have been too busy taking college classes in high school and volunteering in hopes of getting scholarships and also digging themselves into 6 figure debt because again, businesses won’t hire them without a degree even for jobs that should not require them. Even then, businesses are asking for ridiculous amounts of experience from interns and new hires at very low salaries leaving them unable to afford rent and their college loans.

  3. If the State of Connecticut has to continuously raise taxes and also borrows to fund operating costs, why does it spend huge amounts of money to subsidize the renewable energy business (wind and solar) and then mandate/coerce (through net metering) the consumption of wind and solar energy. We (the State of Connecticut) do not have the money to fund the renewable energy business; if renewable energy is economic let it stand on its own feet.John Gilsenan

    1. John,

      Maybe you should understand the economics of energy first. The state is not subsidizing this sector to the degree you think it is. Its job is create stable policies that the private sector can rely on, and its not doing that. Instead it continues to prop up a 100 year old business model of a big centralized monopoly, which has led to high energy costs. Furthermore, the future tech companies that the state wants to attract DEMAND cleaner energy. The rest of the country is moving fast towards this, and CT is laggard, which makes it unattractive to business. Ct’s biggest issue in my mind is that it is old and stale in its business mix. We have to be bold, and our government is just not willing to do it.They just keep reshuffling the chairs.

  4. If legislators can’t bring people jobs, they can at least provide benefits. Otherwise, what’s the point of making the effort to vote? Well, there’s also opposing the people in Washington who weren’t elected by CT, but that’s not helpful to the individuals who won state offices.
    Once you accept that there will be little or no growth, business concerns become unimportant to both the electorate and those elected. The economy has bumped along for over a decade, and there are still (deep) pockets of wealth in the state. Any new sources of growth aren’t obvious.
    So why not do things for people if nothing makes much difference to the economic situation? (Though I think the minimum wage increase especially will have a surprisingly large effect eventually.)

    1. Legislators do not “provide” benefits–or anything else! They merely (and often wastefully) redistribute monies plundered from taxpayers.

  5. It is not only businesses that have no confidence in our state legislators. There are plenty of non-business-owners, myself included, who have no confidence in our state legislators. Yet they keep getting elected, don’t they? And isn’t that really all they care about — getting re-elected?

  6. Sorry, but response rate to the Marcum survey was so small, the results are useless and I can’t imagine why CBIA bothered to report them (the way they did) at all. . Those who responded to the survey are obviously business owners who feel negatively (it’s called self selection). I believe the more revealing questions at the end of the day is: What did CBIA get for its money? ( What was Marcum’s methodology? What did Marcum do for followup to increase response rate? What steps is Marcum (or CBIA) taking to assure successful data collection next time around? )
    Accordingly, how could CBIA not describe the results of the survey in clearer language. For example, since only 356 businesses responded to our survey, their results cannot be extrapolated to the state’s business community as a whole. We can, however , describe what those 356 have to say…
    The vast majority of businesses may feel negatively, but this survey does nothing to prove that one way or the other.

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