Senate Democrats and Republican Gov. M. Jodi Rell are pitching nearly a dozen job creation programs aimed at getting Connecticut residents back to work.
But the state’s chief business lobby is warning that those efforts won’t do nearly as much to curb Connecticut’s 8.9 percent unemployment rate, unless the budget crisis is fixed first.
“We appreciate the fact that people are trying to be innovative, but we really have a big problem with the budget deficit and constant proposals to change employers’ taxes,” said Bonnie Stewart, a lobbyist for the Connecticut Business & Industry Association. “Our belief is that taking care of the state’s fiscal situation by reducing state spending to make government more efficient and effective, and having a state tax policy that is consistent and predictable, are the best things to do for job growth.”
Stewart said uncertainty in the state and federal legislative environment is one of the key reasons businesses don’t hire. She said the tax proposals that were pitched last session, plus those that may be proposed this year, create an unpredictable business climate, which keeps employers from investing in their companies.
“We believe the best job proposal in the governor’s budget package is the call to break insatiable spending habits and to make state government affordable again,” Stewart said.
Urgent Tone
The state legislature has been in session for less than a week, but already lawmakers have taken a more urgent tone than last year, stressing the immediate need to create jobs and fix the state’s budget crisis.
In her State of the State address, for example, Rell said lawmakers this session “should be focused on just two core issues: creating jobs and balancing our state budget.”
Rell has proposed an $18.91 billion revised budget plan for fiscal 2010-2011 that includes no new taxes and fees. But it relies on hundreds of millions of dollars in stimulus funds and deferring contributions to state employee pension funds to balance the budget.
Andrew Markowski, Connecticut director of the National Federation of Independent Business, said it’s important that lawmakers avoid tax increases, but added that won’t be enough to revive the state’s ailing economy.
Markowski said that lawmakers must reduce wasteful spending and streamline state government to avoid continual budget deficits. It’s something lawmakers have pledged to do in the past, but have failed to follow through on, he said.
On the job creation side, Senate Democrats are proposing a laundry list of ideas, including suspending the $250 business entity tax on ”mom and pop” shops for two years and creating an Angel Investor Tax Credit program to leverage private investments.
Economic Stimulus
Additionally, Democrats want to consolidate separate state economic development entities into a one-stop shop for small business owners who might not know where to go for help, and renew support of industry clusters.
“Helping businesses and reshaping state government shouldn’t be a partisan position,” said Senate President Donald Williams, a Democrat from Brooklyn.
Rell also made her pitch, suggesting that remedies for the state’s jobless and economic woes include simplifying and extending the job creation tax credit to small businesses.
The program would offer a three-year credit of up to $2,500 per job and would be extended to limited liability corporations and “S corporations.”
Additionally, Rell proposes a sales-tax exemption for the sale, use and other consumption of machinery, equipment, tools, materials, supplies and fuels related to the renewable energy and clean fuels industries.
Credit Line
One idea both parties have atop their priority list is easing the credit crunch on small businesses.
Senate Democrats have proposed creating a small business revolving loan fund using $10 million to $20 million from a temporary surcharge on TARP supported bonuses.
Meanwhile, Rell has proposed a $500 million private-public loan pool that would provide credit to small and medium-sized businesses.
The state would use $100 million in bond funds to establish the pool, allocating $75 million for loan guarantees.
That would, in turn, leverage $400 million in private capital from community banks for individual loans ranging from $500,000 to $3 million.
The remaining $25 million in state funds would be used to make direct “microloans” of up to $500,000.
Rell said traditional banks have been reluctant to service those smaller loans during the current credit crisis.
Wary Borrowers
Gerald Noonan, president of the Connecticut Bankers Association said the idea of a revolving loan pool is good and could help expand lending in the state.
But he also said the credit crunch is not entirely the fault of banks’ unwillingness to lend. In fact, most community banks in the state have money to lend, Noonan said, but borrowers are still hesitant to take risks.
“Borrowers who are creditworthy don’t want to borrow,” Noonan said.
In addition, many businesses have seen their credit quality deteriorate over the last few years because of a reduction in sales.
That makes it harder for them to qualify for loans.
