Our state’s economic development and fiscal policies could benefit from a revolutionary approach.
The facts are well known and not under dispute: State employment peaked at 1,700,000 20 years ago and in 2012 we are down to 1,625,000 positions. From the start of the great recession in 2008, we have lost 125,000 jobs and the recovery has resulted in the recapture of about 30,000 such jobs. The 2011 Beacon Hill Institute State Competitiveness Report found CT lagging in 33rd place: In 2001 the same report ranked us eighth. And a United Van Lines study recently ranked CT as the seventh worse state in the country in terms of people moving out.
And yet the economic and fiscal policies of our state have not changed over the years: succeeding governors and legislatures have relied on incentives, be they tax, grants or loans, to entice companies to move or expand in our state. At the same time, they relied on increased borrowing to pay for operating expenses while at the same failing to rein in ever increasing salaries, pension and health care expenses of state employees.
The use and abuse of state and town economic incentives is at an all-time high. I cringe when I read that Rocky Hill is giving away millions in tax credits so that a firm can move from Newington to Rocky Hill. And I cringe when I read that DECD is funding the move of a company from Glastonbury to Hartford, or the move of a hedge fund (they need money?) from Westport to Stamford. Remember Pfizer? Remember UBS? Short-term memory must be a prerequisite of running for office.
The recently released budget by Governor Malloy is a big disappointment: increases in overall spending of almost 10 percent over two years; extension of a number of taxes on businesses which were supposed to be temporary; increased borrowing to finance operating expenses while cutting revenues to municipalities, hospitals and the poor. And the budget proposal does not include the cost of any of the steps to be proposed as a result of the Newtown tragedy.
The move to eliminate the car tax is particularly galling: the governor gets credit for eliminating a tax while the municipalities will have to increase property taxes to make up the shortfall. Where are the cost savings, hundreds of millions as I recall, emanating from the union-management committees touted during the negotiations with the state employees? What happened to the shared sacrifice concept?
We need a radically different approach.
Let us concentrate on generating savings from inefficient state operations by applying Lean Manufacturing concepts to the state’s functions. Let’s re-organize the many departments and make structural cuts ( i.e. cuts that will generate permanent savings) to the state’s vast operations.
Let’s stop funding the UConn Health Center. It’s long past time for this failed experiment to either make it on its own or to fail.
Let us, come 2015 , resolve to negotiate a contract with state employees, including those in higher education, that will transfer more of the financial burden of health care, pensions and salaries costs to state employees.
Let us stop the failed economic policy of playing favorites (first 5 or first 15) and of picking winners (funding bio science). Let us use those savings to create an economic environment which is favorable to as many industries as possible and enable the private sector to pick the winners and losers.
Continuing to follow the failed policies of the past 20 years only makes matters worse. The longer we wait to make the tough decisions the more painful future cuts will be.
Paul Pirrotta is president of Paul Pirrotta International in Glastonbury. Reach him through paulpirrottainternational.com.
