A new annual report from Truth in Accounting found Connecticut has $67 billion in bonded debt and unfunded retirement costs, making it the third most indebted state per taxpayer in the nation. The total debt, which amounts to $50,700 per taxpayer in the state, is based on Connecticut’s 2019 financial ...
Stanley Black & Decker CEO urges Connecticut lawmakers to avoid tax increases
In what is becoming an all-too-familiar occurrence, the CEO of a major Connecticut company issued a politely-worded piece asking state lawmakers to “take the steps necessary to support the long-term economic sustainability of the state.”
Stanley Black & Decker CEO Jim Loree penned an op-ed to the Hartford Courant Friday asking lawmakers to get Connecticut’s finances under control without once again raising taxes.
Loree wrote that his company – founded in Connecticut 175 years ago and based in New Britain – wants to remain in the state but that Connecticut’s good schools and location between New York and Boston are no longer enough of a reason for companies to remain in the state.
“Our state’s historical economic appeal has diminished over time as repetitive tax increases have taken their toll.”
Loree’s statement echoes those made by General Electric, Travelers and Aetna in 2015, when Governor Dannel Malloy raised taxes for the second time in four years, including hundreds of millions of increased business taxes.
General Electric issued a statement which read; “raising taxes again on Connecticut’s residents, businesses and services makes businesses, including our own, and citizens seriously consider whether it makes any sense to continue to be located in this state.”
Aetna issued a similar strongly-worded statement: “Connecticut is in danger of damaging its economic future by failing to address its budget obligation in a responsible way. Such an action will result in Aetna looking to reconsider the viability of continuing major operations in the state.”
After the tax increase, GE began to search for a new location. In January 2016, six months after the tax increases passed, GE announced it would be relocating its headquarters from Fairfield to Boston. Earlier this year, Aetna announced it is moving its headquarters although the company has yet to announce a location.
Smaller companies, such as Borgeson Universal Steering Components, also moved out of state citing the tax increases as part of their motivation for relocating to South Carolina.
Rep. William Petit, R-Plainville, who represents part of New Britain said that lawmakers must work “hand-in-hand” with the state’s largest employers. “We should have frequent and open discussions on what changes are needed on issues such as tax policy, regulatory reform, educational preparedness for employment, and infrastructure,” Petit said in an email.
“The CEOs and employees at these companies provide a huge reservoir of knowledge and expertise we should utilize.”
Despite the tax increases in 2011 and 2015, Connecticut’s income tax receipts have continually fallen below projections and this year was no exception.
According to the Connecticut Department of Revenue Services, income tax receipts were $500 million below expectations which inflated the projected two-year deficit from $3.6 billion to $5.1 billion.
Fixed costs, such as unfunded liabilities for state employee and teacher pension systems, retiree healthcare and debt service, are projected to keep rising in the coming years, leaving the legislature in a tough position.
Thus far, Malloy has rejected calls from some lawmakers and union leaders to raise income and business taxes again. But some of the governor’s budget recommendations – such as cuts to municipal aid and shifting one-third of teacher pensions onto municipalities – would cause increases in property taxes.
Absent any long-term reforms, those costs will continue to grow. Reforms to the state pension system could potentially save billions.
But lawmakers have eschewed attempts to make lasting reforms to those fixed costs. Numerous bills were submitted to set state employee retirement benefits in statute rather than through collective bargaining, but were not taken up during the 2017 legislative session.
The increased costs combined with dwindling tax revenue threatens to crowd out state services and could potentially lead to state employee layoffs.
Malloy has negotiated a $1.5 billion concession package with union leaders but the deal would grant layoff protections and extend the existing contract until 2027, making substantive reforms to curb some of those fixed costs nearly impossible for the next ten years.
This is the third budget cycle that faces a serious deficit and some lawmakers worry that it will not be the last, setting up the possibility for future tax increases.
Loree writes in his op-ed that Stanley Black & Decker favors reforms to eliminate “inappropriate practices related to public employee pensions.” Loree wrote that he preferred the budget plan by Senate co-President, Len Fasano, R-Wallingford, to the governor’s plan.
The Republican’s budget calls for $2.2 billion in concessions and no contract extension.
Sen. Joe Markley, R-Southington, welcomed Loree’s comments. “It’s time that business people are vocal about what needs to be done,” Markley said. “We’ve really got to change direction.”
Markley believes that too many business owners have been reluctant to “rock the boat” when it came to Connecticut politics and policy decisions. “But I think they realize the boat is floundering.”
Loree expressed optimism about the future for Connecticut if the state can get its fiscal house in order.
“Our vision is to be a great industrial company — one that is human-centered, innovative, committed to delivering outstanding growth and profitability, while acting with the utmost social responsibility. And I hope that we will be able to fulfill that vision while continuing to be headquartered in Connecticut.”
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