Aetna assured Connecticut lawmakers that it will leave most of its employee workforce in Hartford and would only move its top executives to its new location in New York City. But even the loss of the top five executives at the insurance giant will cost Connecticut millions in lost tax revenue.
The five top executives, including CEO Mark Bertolini, earned a combined $49.2 million in 2016, according to the investment research firm Morningstar.
That translates to approximately $3.4 million in income tax revenue.
To put that figure in perspective, the budget for the governor’s office in 2017 was only $2.5 million. Gov. Dannel Malloy tried to meet with Bertolini in the months before Aetna’s announcement but was unsuccessful.
Although most of Aetna’s 5,800 employee workforce will stay in Hartford, the company is officially transferring its headquarters to New York City and taking its executives there. It is unknown exactly how many executives will be leaving Connecticut but a statement issued by Aetna says it will be bringing 250 jobs to New York City.
The move of top executives out of state is likely to further rock Connecticut’s fiscal boat, which relies heavily on income tax revenue from the state’s top earners.
This year’s much lower-than-expected income tax revenue was largely due to the state’s top 100 richest tax filers bringing in less money than other years. The loss skyrocketed Connecticut’s projected deficit from $1.5 billion to $5.1 billion.
Morningstar’s records show that Aetna’s top five executives made slightly more in 2016 than the previous year, but were down from their high of $60 million in 2013.
Despite leaving most of its employees in Hartford, Aetna said its “long-term commitment will be based on the state’s economic health,” and lawmakers’ ability to put the state on “sound financial footing.”
But the company’s hopes may not come to fruition this year as the state started the fiscal year without a budget and few leaders in the Capitol, including Malloy, believe a budget will be passed any time soon.
The $5.1 billion deficit threatens tax increases and service cuts. Democratic leaders in the House of Representatives have proposed an increase to the sales tax.
However, even if a budget is passed it will most likely not include substantive changes to fixed costs such as pensions and retiree healthcare, which are projected to continue to grow and create further deficits in the future.
A number of other business leaders have expressed worry that the future increase in costs will lead to increased taxes in the future, including Stanley Black & Decker CEO Jim Loree and Mark D. Nielson, executive vice president of Frontier Communications Corporation.
In an op-ed for the Hartford Courant, Marietta S. Lee, vice president of The Lee Company in Westbrook, wrote that “Connecticut’s corporate tax structure will not attract or retain businesses,” and that the state’s economic problems are linked to its fiscal problems.
Aetna CEO Bertolini repeatedly warned that it was considering a move and, along with General Electric and Travelers, criticized the 2015 tax increase.
“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,” the company said in 2015.