In the face of declining tax revenues and weak job reports, state lawmakers have to decide whether or not to continue to fund Governor Malloy’s controversial First Five Plus program, which is scheduled to end this year. To fund the program, the state borrows money, which it then hands out to major corporations through grants, low interest loans and tax subsidies in order to create jobs.
Commissioner Catherine Smith of the Department of Economic and Community Development testified before the Commerce Committee on March 15 that the program should continue for another three years.
At issue is how many jobs the program has actually brought to the state. When measuring the “success” of the program, administrators count both retained jobs – or jobs that already existed in the state – as well as new jobs. Many feel the retained jobs would have stayed in Connecticut whether the state paid to keep them here or not.
Smith told the board that over the last three years the program has provided $256 million to thirteen different companies. Smith stated that the companies have “committed to retain more than 13,500 jobs and to create between 2,600 and 5,264 jobs.” Corporations such as Cigna, ESPN and NBC were beneficiaries of First Five Plus. Connecticut issued bonds to pay for the program on the promise that the companies would relocate to Connecticut, create or retain jobs.
The Commerce Committee voted 16 – 4 to pass HB: 5573 – An Act Concerning An Extension of the First Five Plus Program. The bill will now be scheduled for a vote in both the House and Senate.
Representative Fred Camillo, ranking member on the committee, said, “My support that has been there the last few years is not open-ended. Its not the first five anymore, its the first twenty.”
“I would rather see us stop with this at this point – or after this year – and cut taxes across the board and see how that works,” Camillo said. “It can’t be a blank check all the time.”
Representative Noujaim, a Republican serving on the committee said that he doesn’t believe the First Five program is the best path toward growing Connecticut business. “I truly believe that the bread and butter of our economy is the small businesses. The First Five is well-intended and I respect the governor for wanting to bring businesses to Connecticut but the First Five have not been as lucrative as the businesses that are here in Connecticut, the small businesses that have been helped by many other programs that the governor has implemented.”
Noujaim pointed out that small businesses are the real drivers of economic growth. “The small business initiatives are those people who live in your community, contribute to charitable organizations.” he said. “They have roots in their community. The First Five program, those people have priorities elsewhere, quite honestly.”
“Let me put it this way; we have no money. I don’t know if its going to go through or not but we have no money. How are we going to be able to afford this?”
The organization, Good Jobs First, labelled the practice “Costly and Blunt” in their 2011 study of Connecticut’s economic development subsidies. “More than four out of five jobs promised to DECD in exchange for its subsidies are to retain existing jobs, and only one out of five are for newly created jobs.”
According to Jim Watson, spokesman for the DECD, “A retained job is an existing job in the state that, while not necessarily at risk, is maintained as a condition of state investment.”
Camillo questioned the counting of retained jobs and believes the state should try a new approach. “How do we know the job was not going to be retained anyway? Its hard to get at these numbers and at some point we have to say, are we better off cutting our rates to the lowest in the region including New York and New Jersey and see what happens? Has any other state done that?”
Committee member, Rob Sampson, also advocated for a change to policy; “I do not believe it is the role of state (or federal) government to engineer or manage or our economy. Instead, we should be setting up a simple and stable environment for businesses and citizens to thrive within.”
According to Commissioner Smith’s testimony the state has given $256 million to companies through the First Five Program which has created “between 2,600 and 5,264 jobs.” Leaving aside retained jobs, these figures indicate that Connecticut has spent between $48,000 and $98,000 per new employee.
The First Five Plus extension passed out of committee with a 16-4 vote. Despite their reservations, both Rep. Noujaim and Rep. Camillo voted for the bill. “It is just a concept. We are looking into future possibilities and it is worth exploring,” Noujaim said. “We need to see some hard facts and hard numbers to keep justifying it. We got to start drawing the line somewhere.”