A new report by the Connecticut Business & Industry Association (CBIA), reveals a divided outlook among the state’s business leaders. While state finances have stabilized in recent years, persistent affordability challenges — from high energy costs and regulatory mandates to rising taxes — continue to weigh on competitiveness and growth.
Mixed Outlook, Rising Costs
Nearly half (48%) of surveyed business leaders believe Connecticut’s economy will remain stagnant over the next year, expressing reservations over “the state’s competitiveness, workforce challenges, and cost pressures.” Indeed, 91% say the cost of doing business in Connecticut is increasing; and only 12% believe the state’s business climate is improving.
Although Connecticut’s finances have strengthened since the 2017 adoption of bipartisan “fiscal guardrails,” the state’s economy contracted by 0.9% in the first quarter of 2025 — its first decline in over three years — reflecting broader national headwinds, including tariffs.
“Concern over the cost of doing business has also intensified among employers,” the report states. “Regulatory mandates, tax policies, energy costs, and broader economic pressures are significantly impacting operating costs for businesses across the state.”
Competitiveness Challenges
Business leaders’ concerns are well-founded, as external rankings reinforce employers’ concerns. CNBC’s 2025 “America’s Top States for Business” report placed the Constitution State 28th overall, but near the bottom in key categories: 38th for Economy, 44th for Cost of Doing Business, and 37th for Cost of Living.
Additional studies by WalletHub and the Tax Foundation, tell a similar story, highlighting how high taxes, regulatory complexity, and costly mandates are hindering the state’s opportunities for businesses to excel — and even residents’ ability to have “fun.”
Moreover, energy costs remain a particular pain point. Connecticut has among the highest electricity rates in the nation, due in part to the Public Benefits Charge (PBC) — a state-imposed fee that funds energy programs, including renewable initiatives.
Workforce Strains
Employers also face difficulty attracting and retaining talent. More than three-quarters (76%) of respondents’ report challenges in hiring and retention of talented workers, while 59% say greater access to affordable, high-quality childcare would improve the state’s workforce pipeline.
Despite these challenges, two-thirds of businesses reported profits in 2024, and 71% are not considering relocation. However, among those that are weighing moves, lower-tax states such as North Carolina, South Carolina, Florida, Texas, and Tennessee were most frequently cited as attractive destinations.
Policy Priorities: Guardrails and Growth
CBIA’s survey underscores that employers want a more predictable, affordable, and growth-friendly policy environment. Business leaders identified three top priorities for strengthening the economy:
- Lower income taxes (23%)
- Reduced property taxes (22%)
- Lower energy costs (16%)
The survey also notes that while many respondents appreciate Gov. Ned Lamont’s focus on fiscal discipline and early childhood programs, they fault the General Assembly for failing to sufficiently ease cost burdens or streamline regulations.
Connecticut’s fiscal guardrails — bipartisan spending reforms enacted in 2017 to rein in spending, pay down long-term debt, and rebuild reserves — have played a critical role in stabilizing state finances. They helped reverse decades of pension underfunding, improved credit ratings, and saved the state more than $170 million annually in reduced pension debt payments. As a result, the debt reduction and controlled spending freed up funds for meaningful tax relief — such as the state’s first income tax cut in decades in 2023.
However, this past legislative session, lawmakers bypassed the constitutional spending cap via a “fiscal emergency” declaration for the first time in nearly 20 years, raising concerns about erosion of these safeguards. Progressive activists, meanwhile, are pressing to weaken the guardrails further, a move business leaders warn would increase fiscal risk.
The Path Forward
Fiscal discipline is needed now more than ever. Connecticut risks a cycle of rising costs, stagnant growth, and declining competitiveness. High taxes and energy bills discourage business investment, drive away workers, and ultimately erode the revenue needed to sustain state programs.
The CBIA report demonstrates that the state government has a critical role in Connecticut’s business climate — and lawmakers aren’t doing enough to address affordability concerns. Maintaining the 2017 fiscal guardrails, reducing tax burdens, and addressing energy costs could unlock new opportunities for innovation, expansion, and job creation.
Moreover, Connecticut sits between two high-tax states, New York and Massachusetts, yet could emerge as a regional economic leader if policymakers embrace reforms that improve affordability and competitiveness.
Bottom line: Businesses want state leaders to lower costs, simplify regulations, and preserve fiscal discipline. Without these changes, Connecticut risks losing more employers to states with friendlier climates.
