Hartford Business Journal

14 Hartford Business Journal • December 17, 2018 • www.HartfordBusiness.com By Matt Pilon and Gregory Seay mpilon@hartfordbusiness.com, gseay@hartfordbusiness.com U pon seizing the reins as Connecticut governor in 2011, Dannel P. Malloy faced a monumental task. The state was reel- ing from a nearly two-year recession when, under Republican Gov. M. Jodi Rell, it shed 119,100 jobs, many of them well-paying. The unemployment rate stood at 9.2 percent, while an ag- ing population was creating further workforce challenges, particularly in manufacturing. In addition, Malloy was staring down the barrel of a $3.2 billion budget deficit, gifted to him from the failures of prior administrations and legislatures to rein in spending, sock away savings, and contribute enough money to meet massive state employ- ee pension and benefit promises. To help him forge the state's eco- nomic direction forward, the former Stamford mayor turned to a govern- ment and economic-development novice: Catherine Smith. Appointed in April 2011, Smith, now 64, had spent the past three decades in high-level, private-sector jobs, includ- ing as a chief operating officer and then CEO of Windsor insurer ING U.S. Financial Services (now Voya Financial). With Smith helping to steer, the ad- ministration set out on an aggressive jobs strategy. Eight years later, Malloy & Co. have transformed the state's economic-devel- opment agency, adding several marquee programs that have jump-started busi- ness incentives — to the tune of more than $650 million in loans and grants and hundreds of millions more in tax credits — to entice private- sector companies to retain and add jobs in a state des- perate for growth. Despite those efforts, and oth- ers, Connecticut's economy has un- derperformed most other states and is still perceived as a place — at least by some — that is unfriendly to busi- nesses, a lingering reputation in the wake of two large tax hikes in 2011 and 2015. The Democratic governor also leaves behind a budget deficit about the same size as the one he inherited. Indeed, Malloy's relationship with the business community has run hot and cold, and his economic legacy is a complicated one. He endeared himself to some em- ployers by gifting them incentives, while others — including General Electric and Alexion — spurned the state during his tenure by moving their headquarters elsewhere. As of November, Connecticut re- gained just 90 percent of the jobs it shed during the Great Recession, mak- ing it one of the few states that hasn't fully recovered from the downturn. (Malloy often points out, with some frustration, that Connecticut has recovered all private-sector jobs lost during the recession and that govern- ment job cuts are the main drag.) Meanwhile, since 2011, though its unemployment rate has fallen to a much healthier level (4.2 percent), Connecticut's total economic output — or gross state product (GSP) — has grown just two-tenths of 1 percent, while the U.S. economy grew nearly 18 percent. Through the end of 2017, Con- necticut's economy was 9.2 percent smaller than it was in 2007, according to economist Don Klepper-Smith of New Haven-based DataCore Partners. In a recent interview about the ad- ministration's economic-development record, Catherine Smith expressed frus- tration at the pace of growth, though she said there are many factors out of Connecticut's control. She also contends the state would be in a far worse place today if the admin- istration hadn't carried out an aggres- sive economic-development agenda, which some viewed as ineffective. She also points to several recent bright spots in Connecticut's economy, including the creation of 22,000 jobs in the past year, and said she thinks the fruits of their labor will be felt to a greater extent in the years to come. "We put a few new tools in the tool- box and tried to make some strategic investments where we thought we needed to," said Smith, who is unlikely to continue as DECD commissioner under Gov.-elect Ned Lamont. Taking 'the hill' Sitting in her Constitution Plaza office overlooking I-84 in downtown Hartford, Smith recounted how Malloy shared his aspirations with his agency appointees in the early days of the administration. "He said 'economic development belongs to every commissioner in this room,' " Smith said. "He said, 'this is the hill I want to take.' " The administration came out of the gate swinging, quickly convincing the legislature in 2011 to authorize a slate of new corporate incentive programs. "In many ways, we were trying to send a message," Malloy, a believer in Keynesian economics, said in an interview reflecting on his tenure as governor. "We needed a bit of a shock and a statement to the people of Con- necticut and the people outside of Connecticut as well, that we were seri- Complicated Legacy After 8 years, $1B-plus in deals, Malloy's economic record mixed Catherine Smith, Commissioner, DECD During his eight years in office, Gov. Dannel P. Malloy jump-started business incentive programs, but was also plagued by budget deficits and a slow-growing economy. PHOTO | HBJ FILE

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