🔒CT businesses are more confident about the state. Can it continue?

Business confidence has been a major problem in Connecticut.

Negative attitudes about the state’s business climate have been pervasive over the last decade-plus as a series of tax increases, lack of fiscal discipline and labor and other mandates have made it harder to operate in the state.

But those perceptions may be changing, at least slightly. The Connecticut Business & Industry Association recently released its annual survey of businesses, which had many data points about private-sector conditions.

One section that drew my attention was related to perceptions of the state’s business climate. According to the survey of 625 business executives, 16% of respondents said the state’s business climate was improving, up from 7% in 2020.

Meantime, 46% of respondents — down 15 points from last year — said they believe the state’s business climate is declining.

Are these numbers cause for celebration? Well, I wouldn’t publish them on marketing materials trying to sell the state. The fact that nearly 50% of businesses have a pessimistic outlook is cause for concern, but the improvements are positive indicators in a state that’s traditionally had low self-esteem.

The more upbeat outlook also coincides with the state’s recently improved ranking in CNBC’s America’s Top States for Business study, which ranked Connecticut’s business climate 24th in the country, up 11 spots from the previous report in 2019. Technology and innovation, workforce, and the state’s pandemic response drove that improved performance.

The question is, can the state leverage and carry over some of the momentum it has coming out of the pandemic into 2022 and beyond. I think it’s possible but it will require a lot of work to get there.

I recently chatted with CBIA CEO Chris DiPentima about the survey results and his take on the state’s business climate.

“I would say the business community is more positive. They are cautiously optimistic,” he told me, admitting the bar was low to begin with.

So, why does DiPentima think business confidence is up? Multiple factors are at play.

The state’s strong response to the pandemic is a major reason, he said. The Lamont administration’s ability to get infection rates under control, open up the economy quicker than other blue states and get a significant portion of the population vaccinated has been good for the economy.

The pandemic has also led to a population boost in the state, particularly in Fairfield County where New York City residents have found refuge over the past 18 months.

Add to that the fact the state’s financial outlook has improved — Connecticut has a $3-billion-plus rainy day fund, its credit rating recently got a boost and we are starting to pay down some long-term debt — and there is reason to be more bullish about the future.

One of the positives that came out of the pandemic, DiPentima said, is a closer collaboration between the public and private sectors. He points to the business community’s representation on the state reopening and vaccine committees as examples.

Not only did businesses get a voice, he said, they were heard. That kind of collaboration needs to be continued and extended further into policy discussions, particularly around taxes and affordability.

CBIA is currently working on its 2022 legislative agenda that will have around a dozen focus areas, centered around workforce development, affordability and business taxes, DiPentima said.

One way to further boost confidence is to help solve the workforce shortages now plaguing many industries. Both government and businesses need to come up with solutions to tackle short-term shortages and long-term needs.

That could mean helping organize or fund career fairs or a marketing campaign, or increasing job-search requirements for people who are currently not working, among other possible ideas.

“Government’s job isn’t to create jobs but it must make sure there is a workforce to fill them,” DiPentima said.

The legislature this year took a more moderate approach, avoiding major tax increases and some other legislation that would have made it harder to do business in the state.

Twenty-two percent of business leaders surveyed by CBIA said they approved the General Assembly’s performance this year, up from 17% a year earlier.

Holding the line on taxes is good, but lawmakers also need to help lower the cost of government long term, DiPentima said.

Of course, that’s easier said than done, particularly in a blue state where public employee unions maintain major influence over state government.

But DiPentima said he sees a major and rare opportunity to lower the cost of government through investments in technology and automation as a significant number of state employees retire in the years ahead (more than 8,000 state employees are eligible for retirement in 2022, according to government estimates).

A report published earlier this year outlined 200 ways to improve and streamline state government to save up to $900 million.

Gov. Ned Lamont has been a proponent of modernizing and making state government more efficient. But the jury is still out on whether he can move the needle on true, long-term cost savings.

But these are the tough issues policymakers must make progress on in order for business confidence to keep moving in the right direction.