The Climate for Business Investment

Susan Coleman, Professor of Finance

Barney School of Business

University of Hartford

Connecticut’s Superlatives: Human Capital

• #3 in the country for the percentage of employees with advanced degrees

• #5 for science and engineering doctorates in the workforce

• #7 in the country for patents issued

• 33% higher concentration of high tech workers than national average

• #4 in the U.S. for productivity

• #5 in global productivity

• Home to 43 public and private colleges and universities

• Source: 2015 Connecticut Economic Review

Connecticut’s Superlatives: Financial Capital

• #5 in the U.S. for private R&D investment per capita

• #3 in the world in U.S. equity assets under management

• #7 in private venture capital deals per capita in the U.S.

• 22 of the Fortune Global 500 firms have subsidiaries in CT

• 15 of the U.S. Fortune 500 companies are headquartered in CT

• Source: 2015 Connecticut Economic Review

Connecticut’s Superlatives: Quality of Life

• #1 as the healthiest state in the U.S.

• #3 in best quality of life of any state

• Source: 2015 Connecticut Economic Review

Challenges to growth: High Taxes/High Costs

• #2 on Kiplinger’s 2015 List of Least Tax Friendly States

• #2 on CNBC’s List of Highest Cost States to Live In (Hawaii was #1)

• Ranked 44th in Property Tax Burden (Rich States, Poor States, 2016))

• Ranked 50th in Estate/Inheritance Tax (Rich States, Poor States, 2016)

• Ranked 49th in Recently Legislated Tax Changes (Rich States, Poor States, 2016)

• Ranked 49th in 2015 for reaching Tax Freedom Day (Tax Foundation, 2016)

Slow Population Growth; Outmigration

• From April 2010 to July 2015, CT’s population grew by only .5% compared to 4.1% for the nation overall.

• Population outflows have begun to exceed population inflows. • #4 in on United Van Lines “Top Outbound States for 2015”

• 63% of CT moves were outbound vs. 38% inbound

• Hartford, New Haven, and Bridgeport are all listed among the “Top 20 Cities Americans are Ditching” in a recent Bloomberg study using U.S. Census data.

Source: Rich States, Poor States 9th ed., 2016

Climate that is hostile to business

• ALEC-Laffer study on state economic competiveness ranked CT:

42nd on Top Marginal Corporate Income Tax Rate

49th in Average Workers’ Compensation Costs

45th in State Minimum Wage

45th in Economic Performance

47th in Economic Outlook (down from 32nd in 2009)

Source: Rich States, Poor States 9th edition (2016)

A high profile corporate departure with more to come?

• The 2015 Legislative Session was noteworthy for its lack of bipartisan input or cooperation.

• That session was also marked by yet another large tax increase and anti-business rhetoric that further alienated members of the business community.

Changing Industry Mix:

• We are losing jobs in finance, insurance, and manufacturing which tend to be more highly paid.

• Conversely, are major areas of job growth include health care, social assistance, accommodation, and food service which tend to pay lower wages and are more likely to be part-time and/or seasonal.

Employment Changes 2/2010-12/2015

Source: CT Department of Labor

Source: Connecticut FY 2017 Midterm Budget Adjustments, Governor Dannel P. Malloy, February 3, 2016

Source: Connecticut FY 2017 Midterm Budget Adjustments, Governor Dannel P. Malloy, February 3, 2016

Lower rates of economic growth and job creation:

• From March 2015-March 2016, nonfarm employment grew by 0.9% in Connecticut vs. 2.0% for the United States.

• Connecticut’s unemployment rate is currently 5.7% vs. 5.0% for the U.S. overall.

• As of March 2016, Connecticut had not yet regained all the jobs lost since December 2007.

Source: Rich States, Poor States, 9th ed., 2016

Source: Rich States, Poor States, 9th ed., 2016

Source: CT Department of Labor

Fiscal Challenges

• Lower than anticipated tax revenues • $500M less this year

• Looming deficits for the next 3 years • $930M 2016-17

• $2B+ for both 2017-18 and 2018-19

• 3rd highest level of unfunded pension liabilities (Pew, 2015)

• 3rd highest in state and local debt per capita (Pew, 2015)

Source: Connecticut FY 2017 Midterm Budget Adjustments, Governor Dannel P. Malloy, February 3, 2016