In a year when state lawmakers and the governor agree on hundreds of millions of dollars in tax cuts, one might assume the state’s largest business lobby would be fully supportive of the legislative session’s outcome.
That wasn’t the case in 2022.
In fact, Connecticut Business & Industry Association CEO Chris DiPentima hasn’t been shy about calling the recently-completed legislative session “a disappointment for employers.”
His main gripes include a lack of tax cuts for businesses at a time when the state has a budget surplus approaching $4 billion.
The $24.2 billion budget approved by lawmakers and signed into law by Gov. Ned Lamont earlier this month includes $600 million in individual tax relief, which DiPentima called “a small step in the right direction for addressing the state’s high cost of living.”
But he said he was disappointed that only $40 million was allocated toward the state’s federal unemployment insurance fund debt — just 8% of the $495 million balance. The state was forced to borrow about $953 million from the federal government to continue paying out jobless benefits during the pandemic-induced economic downturn that started in March 2020.
Nearly half of that money has been repaid, but the remaining balance is “essentially a $400 million-plus tax hike on employers,” which will be paid back over the next four years, DiPentima said.
CBIA was also vocal in opposition to the captive audience bill, which passed both legislative chambers and bans mandatory company meetings that discuss employee labor issues. Critics have said such meetings are used to shut down employee organizing efforts, but the CBIA called the bill “widely regarded as an unconstitutional attempt to restrict workplace communications and an infringement on employer free speech rights.”
The CBIA recently joined leaders from more than 50 businesses and trade groups asking Lamont to veto the bill. That didn’t happen — the governor signed the bill into law May 17.
CBIA and others may challenge it in court, DiPentima warned.
The captive audience legislation was one of 25 employer mandates CBIA opposed this year. The rest didn’t make it through the legislature, which DiPentima said was a victory.
There were other wins, he said. There were significant investments in workforce development that could help address the state’s labor shortage, which he said is Connecticut’s main economic challenge.
CBIA also applauded the $3.5 billion supplemental payment lawmakers agreed to make against the state’s massive pension debt, which will lead to long-term cost savings.
DiPentima chatted with HBJ about his thoughts on the recently-concluded legislative session.
Here’s what else he had to say:
Q. Why was CBIA so frustrated with how the 2022 legislative session played out?
A. I think we played way too much defense, otherwise it would have been somewhat of a disastrous session. That’s disappointing.
There were some highlights and lowlights, so it was a bit of a mixed bag. But the fact we had to play that much defense at a time when we’ve got a historic budget surplus and an opportunity to really spur Connecticut’s economy, it’s disappointing there couldn’t be more collaboration on a strong economic investment.
Q. What were the biggest missed opportunities?
A. Making the state more affordable for businesses. I thought we did an OK job for making it more affordable for residents, which is one of our priorities so we can maintain or grow the population.
We won’t grow the population unless Connecticut is affordable and people want to come to the state. The $600 million in tax relief was good, but about half of it goes away after a year.
The biggest disappointment is there was very little tax relief on the business side.
Q. On the unemployment insurance trust fund, were you looking for lawmakers to wipe out the entire $495 million debt?
A. We were never lobbying for the full amount. In our minds, we were looking for a payment somewhere between $100 million and $155 million. That would have really helped with the current fiscal year and next fiscal year.
I don’t think people would have noticed a big difference between a $3.5 billion payment to the pension liability vs. a $3.4 billion or $3.45 billion payment. I think some of the pension fund payment should have been diverted to pay down more of the unemployment trust fund debt.
Q. Was the unemployment insurance fund payment the primary item CBIA was lobbying for in terms of business tax cuts?
A. In addition to that we were also lobbying for the research and development tax credit going to pass-through entities. That didn’t happen, but it would have sent a good strong message and created quite a bit of economic return on investment, especially from the manufacturing and biopharma industries.
The legislature did agree to do a study on the implications of an R&D tax credit for pass-through entities.
We also lobbied for restoring the pass-through entity tax credit back to the 92% threshold, but it didn’t get through.
The budget did expand the manufacturing apprenticeship tax credit to small businesses and repealed taxes on ambulatory surgical centers and movie theaters, which were good things.
Q. Do you think the $600 million in tax cuts will have a meaningful economic impact?
A. It’s a good question. It would have been nice if it was more structural. Individuals like businesses want some type of predictability and stability and the fact that half of the tax cut is here today and gone tomorrow, that’s not going to give people a warm and fuzzy feeling.
I think it will provide some economic return. The property tax is a major issue in Connecticut. We are one of the few states that has it and we have a significant reliance on it. The property tax, we’ve heard it from individuals and businesses, is a bit of a barrier to entry to Connecticut, so I think the move to increase the property tax credit and lower the cap on motor vehicle property taxes will have a positive economic impact.
Q. You have said the state’s lack of affordability is contributing to the workforce shortage. How can Connecticut better address that issue and make the state more affordable?
A. We can make some structural reforms. It’s tough to get too aggressive on the income tax because we do rely on it for such a big piece of revenue, but even chipping away at it, knocking it down by a percentage point could have an impact.
We can do something on the gift tax, that’s a barrier for entry in terms of businesses thinking about succession planning, or maybe people who are at the end of their careers thinking about where they want to live when they retire. If you have an inheritance, the gift tax can be a barrier to entry.
We have to make the state more affordable to all classes of wealth in Connecticut. We don’t need to be the lowest-cost state in the country, but we at least need to be more middle of the road when it comes to the income estate and property taxes.
Q. Where does CBIA stand on efforts to build more affordable housing in the state?
A. This is an issue we are going to be increasingly involved in. We had conversations with some of the coalitions this year and last year.
The challenge is a one-size-fits-all reform. It doesn’t necessarily work because our towns are so unique and somewhat siloed. But we need to make housing more affordable. We need more worker housing.
We need affordable housing for more lower-income folks who can come into the state and work and be productive. We also need more transit-oriented housing around bus and train stations because, especially for the younger generations, they don’t necessarily want to come to this state, buy a car and pay property taxes on it, when they can use other state’s public transportation systems to get to work.
So, we are going to be more aggressive on worker and transit housing priorities come next budget session.
Q. So, what is one solution to affordable housing?
A. There has been a lot of discussion around transit-oriented housing. The problem with some of the proposals is they allow the state to impose eminent domain around the surrounding business communities.
The last thing we want is someone telling a gas station right next to the bus station, ‘hey you have to get up and leave because we are going to put housing right there.’ We want it in a way that is fair, that is not going to disrupt the current business ecosystem that is in place.
We are interested in focusing more on driving our cities and towns to have incentives for transit-oriented housing.
Q. During the session the legislature agreed to set aside $3.5 billion to pay down the state’s long-term pension liabilities. Was this a good move?
A. I think the pension payment was the biggest win of the session. The pension liabilities are still huge, but it’s a good number to pay down. However, I do think we could have used a little bit of that money for business tax relief.
Q. Why did the captive audience bill get so much attention?
A. It was the top priority of organized labor, we heard that coming into the session. It got a lot of attention from the CBIA because we’ve been fighting it for a decade.
We know that it is clearly unconstitutional and it’s concerning that lawmakers, many of whom are lawyers, would pass a bill that is literally unconstitutional.
It has a lot of national attention too. The U.S. Chamber of Commerce, National Association of Manufacturers and Business Roundtable have all reached out to us saying they are watching this because it sets a national precedent.
Other states have tried this and it got overturned in court. (Oregon is currently the only U.S. state with captive audience legislation in place and it has faced legal challenges. Wisconsin previously passed a captive audience law, but later rescinded it.)
That’s not the kind of attention we want our state attracting as we try to recover the economy.
Q. Will the CBIA be a party to a lawsuit over the captive audience bill?
A. We have done a lot of due diligence around potential litigation. It looks like we have standing ourselves to bring litigation.
We have a lot of national support with some law firms reaching out to us about this. It is something we will seriously consider.
Q. Did the legislature in your mind make any headway in helping tackle the labor shortage?
A. There were some good policies that passed, including increased funding for training and workforce development. We were focused on legislation that aimed to help ex-offenders get jobs out of prison.
There was some good legislation passed there, including a program that will get [incarcerated individuals] training and a commercial driver’s license while they are still in prison so they have the ability to get a job when they get out.
There was also additional funding for child care to help single parents and dual-income households get back into the workforce. Pass-through entities are also now eligible for the manufacturing apprenticeship tax credit.
Q. Coming out of the session, how would you characterize CBIA’s relationship with the legislature?
A. We had to push hard this legislative session. We are always going to have open debates with those who don’t necessarily see our position, and at the end of that we are going to agree to disagree, shake hands and work with them the next time around.
So, while we are disappointed and some folks were maybe too focused on the election and not necessarily on the current workforce crisis we have in the state, we are going to go back and work with them during the summer and next session.
We still have a good relationship with the governor’s office.
Q. Where do you think the economy is headed for the rest of 2022?
A. This is the concern. The economy is everything we advocate for in the legislative session.
I’m hopeful that I’m wrong and the economy will do better than it has been doing, but when you look at GDP growth, we were 36th in the country in 2021, not even middle of the pack.
Personal income growth continues to lag. We know about the workforce crisis, we have 109,000 job openings. Our workforce has shrunk by 73,000 people, which represents 41% of the U.S. workforce shrinkage. That is staggering to think about when Connecticut represents just 1% of the population.
GDP did grow 12th best in the fourth quarter of 2021, so maybe that is a springboard that will help propel us this year, but I’m concerned that we have some real headwinds, including inflation and supply chain issues.
I’m hopeful the economy grows, but I have my doubts.
