The Middletown Press (Middletown, CT)
CONFIDENCE CRISIS?
Connecticut sees sluggish hiring as 2020 begins
Hindsight is 2020, as the saying goes, but as the calendar flips to the new year and the back half of Connecticut’s biennial budget cycle, employers have only a small window to draw any conclusions from Gov. Ned Lamont’s economic policies.
That matters for hiring and, by extension, momentum for the state economy. And heading into this election year, Connecticut hiring remains flat at a time when the nation is doing fine.
As in most years, the key question for the Connecticut economy is the confidence of business owners and corporate managers to hire and increase compensation — a reflection of their profitability and a projection of their longerterm beliefs that their revenue and costs forecasts will hold true.
Those projections are muddied every four years by presidential elections. This time around, that cycle of uncertainty could become particularly pronounced. President
Donald Trump in 2017 signed into law a massive cut in the corporate tax rate, from 21 percent to 35 percent, in hopes of encouraging corporations to expand their domestic operations and hiring.
Since that signing, the U.S. economy has added 4.6 million jobs for a 3.1 percent increase. Connecticut businesses large and small have yet to demonstrate the same confidence, with employment up just 0.8 percent over the same stretch, netting the state less than 13,000 additional jobs.
In a summer survey, 70 percent of business people who responded to a query by the Connecticut Business & Industry Association indicated their companies were profitable. But only one in five indicated they had plans to add employees in the immediate future, with the majority indicating they were holding steady.
Nettlesome issues
A year ago in advance of his first term in office, Gov. Ned Lamont was filling jobs and advisory posts for his own administration, with a pledge to rekindle confidence among business executives to expand here.
A few of Lamont’s early moves have met skepticism in the business community, particularly the state enacting a law mandating that companies award paid family leave of up to three months for employees that qualify. The leaves start in 2022. But starting in January, 2021, all employees will see 0.5 percent of their wages taken out of their paychecks, up to the Social Security wage base that is set currently at $137,700.
That amounts to $500 a year for households earning $100,000. State employees were exempted from the charge.
A rise in he minimum wage, set to reach $15 in 2023, has been met with mixed reactions in the business community, with many larger companies supporting it and smaller ones affected by the change tending to oppose it as antigrowth.
To fill a $1.7 billion shortfall in the current year’s budget, Lamont and lawmakers raised taxes by about $400 million, largely through an extension of the sales tax.
Both Lamont and business executives agree that job one is for Connecticut to return to an era of predictable, balanced budgets while finding a way to meet its future healthcare and pension obligations to retired state workers — among the most onerous set of obligations due by any state in the nation.
“Most business owners I talk to have seen nothing substantive to effectively assess the impact Lamont is having on business in the state,” said David Lewis, CEO of OperationsInc in Norwalk, which provides consulting and training on human resources policies. “The narrative sounds promising ... but results are what matters, and so far there are few to digest. As such hiring likely will continue on the current pace, with (the first quarter) artificially driving more activity given it is the quarter that turnover is highest.”
The current fiscal year that ends June 30 is balanced, or very close to it, but projected deficits resume for the next two fiscal years. Still, with a socalled debt diet in place and with an emergency fund set to reach $3 billion by June, the state’s finances in better shape than in recent years and Wall Street has recognized that.
New taxes?
Skepticism remains over whether Lamont will be able to do so without increasing taxes further.
After stretching Connecticut’s sales tax base last year by eliminating exemptions for some niche industries, Lamont now wants to enact highway tolls for commercial vehicles — amounting to a tax on businesses in Connecticut, but representing as well a new source of revenue from outofstate trucks as they traverse Con
necticut en route to New York, Massachusetts, Rhode Island or other Northeast states.
The governor said he hopes for a vote on a transportation financing package in January, ahead of the February start of the legislative session, but he is not close to an agreement even within his own Democratic Party.
With New Jersey having opened up a new revenue stream via sports gambling, Lamont suggested Connecticut may follow suit in the upcoming session, meeting this month with the heads of the Foxwoods and Mohegan Sun casinos, and not addressing whether any plan could include an authorization for a new casino in Bridgeport.
“Look, the rest of the country and all our neighboring states — they’re working hard on sports betting, iLottery and some of the other things we need to do to make us competitive,” Lamont said in midDecember. “Sports betting could make a real difference for our cities, because they include venues where people can do that. ... This is another one of those issues that has lingered in this state for many, many years — and I’m trying to solve some problems.”