There’s a lot on the minds of Connecticut manufacturers these days.
Heavy layoffs. Possible tax increases. North Carolina.
A number of the state’s small and mid-sized manufacturing companies are sounding the alarm that proposals to eliminate key sales tax exemptions on equipment and a 30 percent surcharge on corporate profits will prompt them to shutter their doors in Connecticut and look elsewhere. And the one state that everyone seems to agree on is North Carolina.
Just last week, Windsor-based Stanadyne, a 133-year-old company, announced the closure of its Connecticut manufacturing facility within two years and will instead expand manufacturing operations in North Carolina by 110 jobs. The company plans to cut 250 manufacturing jobs in Connecticut during that time.
Stanadyne, which builds engine components and fuel systems and first opened its North Carolina facility in the 1970s, chose to abandon Connecticut manufacturing operations because of soaring costs, said chief financial officer Steve Langin.
“The cost of doing business in Connecticut is very high,” Langin said. “And when we were looking at the overcapacity in our U.S. operation, Connecticut is our largest and most expensive operation.”
Cost Of Connecticut
As Connecticut looks to close a projected two-year, $8.7 billion budget deficit, manufacturers have in the past few months railed against proposals to increase taxes on their businesses. They say any additional burden would accelerate layoffs and severely limit investments in their businesses.
The Democrats say their budget is more realistic than the one put out by Gov. M. Jodi Rell in February. State Sen. Eilieen Daily, co-chair of the Finance, Revenue and Bonding Committee, said businesses are unfairly sounding off against the Democrats’ budget.
“I think people are being stirred up for no reason,” Daily said. “I haven’t heard anything concrete from any manufacturer how this is going to hurt them.”
Being Business Friendly
But why North Carolina?
Department of Labor economist John Tirinzonie said he has long heard about North Carolina’s appeal.
“That comes up quite a bit,” Tirinzonie said, “and I’ve been here for many years.”
It’s hard to tell how many Connecticut jobs have already been lost to North Carolina. Economic development agencies in either state do not keep track of that data, and Tirinzonie said the Labor Department generally monitors media reports to stay informed on who goes where.
Tirinzonie said Connecticut lost a lot of manufacturing jobs to North Carolina during the early 1990s recession when the state shed 158,000 jobs in total, nearly a quarter of which came from the manufacturing sector. But that manufacturing work tended to be low skill, such as textiles — jobs that have since moved from North Carolina to China and India.
“One of the things Connecticut is trying to do is be more competitive to use assets we have, such as a skilled work force, to really encourage companies to stay,” Tirinzonie said.
The low labor and energy costs and anti-union laws have always made the South an attractive place for manufacturing companies in the northeast. North Carolina’s labor costs are the sixth-lowest in the country, according to Business Facilities, a national site selection magazine. Another site selection publication has named North Carolina the best state in which to do business seven of the past eight years.
The state offers to manufacturers some of the same sales tax exemptions that the Connecticut legislature is now proposing to eliminate, specifically on industrial machinery and equipment.
North Carolina has been making a push in past years to attract high-tech manufacturing — particularly aerospace — to replace the low-skills manufacturing jobs that passed through the state. The state’s One North Carolina Fund, responsible for recruiting out-of-state companies, has made $4.5 billion in investments and created 30,000 jobs since 2001. Another job development grant program has made $4 billion in investments and created 28,000 jobs since 2003.
A six-year $570 million investment from the One North Carolina Fund last year brought in 1,000 jobs from Spirit AeroSystems, the world’s largest independent supplier of commercial airplane assemblies and components.
Yet, North Carolina has been working to shed the long-nagging criticism of the South’s shortage of a skilled work force. That perception of North Carolina is quickly turning around after the growth of prominent universities and state investments in the community college system, said University of North Carolina economist Jason Jolley. In fact, the North Carolina metropolitan areas of Raleigh and Charlotte are now among the top 20 most-educated work forces, according to a Business Facilities ranking.
“I don’t think the knock is accurate,” Jolley said. “If you compare some of our metro areas to metro areas in other parts, you probably won’t see as big of a difference.”
Not Recession Proof
Yet, North Carolina’s economy — especially the manufacturing sector — has been hit particularly hard during this recession, with state unemployment climbing from 9.7 percent in January to 10.7 percent in February. While the state has shed nearly 200,000 jobs in the past year, about 67,500 manufacturing jobs have been lost since December 2007.
The heavy losses can be attributed to the massive population growth the state experienced in the past 10 to 15 years, particularly because of jobs in high-tech sectors including precision manufacturing, Jolley said.
“In some ways, most economists thought the state — having undergone an economic transition to high-tech industries — had the notion we were somewhat recession resistant. That’s not the case,” said Jolley, who estimated the state in past years had to add 60,000 jobs annually to keep up with the population growth.
Still, Jolley said the state government’s economic development arm will act aggressively to attract jobs, particularly in higherpaying sectors.
“It would be a good time to move here,” Jolley said. “There’s a huge skilled work force that is now unemployed.”
At least one more Windsor-based manufacturer, which opened a North Carolina facility last year, is contemplating a Tar Heel State expansion.
“The tax proposals will significantly increase our costs of doing business in Connecticut and likely cause us to strongly consider relocating additional manufacturing jobs to that region,” Turbotec Products chief financial officer Robert Lieberman told legislators in February.
