Hartford Business Journal

6 Hartford Business Journal • February 8, 2016 www.HartfordBusiness.com TOP STORY Biz embraces Malloy budget cuts, structural reforms Gov. Dannel P. Malloy is proposing $569.5 million in cuts from his 2017 fiscal year budget that would shrink spending to $19.87 billion. The big news for business under the proposal, which will be taken up by the legislature over the next several months, would be an elimination of a personal property tax for companies with less than $10,000 worth of personal property. Stemming from a recommendation recently submitted by the State Tax Panel, the measure would impact 46 percent of all businesses in Connecticut, the gov- ernor said. It would cost the state $6 million in tax revenue. Malloy is also again proposing the elimination of minimum alcohol pric- ing, which has been met with strong opposition in the past by state liquor store operators, who fear it would give larger stores a bigger advantage. Malloy called for the legislature to craft an enforceable budget spending cap — a measure voters thought they had completed in 1992, but which was recently ruled unenforceable by Attorney General George Jepsen. "It's time we give [voters] what they asked for," Malloy said. He also spoke about Connecticut's economic challenges. Lower-than- expected tax revenue over the past several years, coupled with a net loss of higher paying jobs and stagnant wage growth since the recent recession, presents a new economic reality for the state, one that must be met with reduced spending, pension reforms and other measures, he argued. The governor's budget plan amounts to a 3 percent cut in spending for fiscal 2017, a year in which the state faces a projected deficit of more than $500 million. Malloy noted in his speech that Massachusetts is facing a $635 million budget deficit, and the gaps are wide in Pennsylvania and Louisiana. The proposed spending reductions would be partly achieved through a 5.5 percent cut to many discretionary state agency accounts, Barnes said. That includes municipal aid, but not education grants. Agency commissioners, under Malloy's plan, would have more flexibility in how to use their funding. Malloy wants to shift to a "block grant" funding model, which some see as less transparent. Malloy said he would encourage agency use of tools such as the state's public data portal to show funding decisions and results in real time. Business applauds Office of Policy Management Secretary Benjamin Barnes also said the gov- ernor is committed to a reduction of the state workforce through attrition and possibly layoffs. He said OPM had not projected the number of workforce cuts. Barnes said Malloy also wants to shift to a "zero-based" budget process, rather than forecasting a 5 percent growth in expenditures each year, under the so-called consensus revenue model. In a written statement, Andrew Markowski, Connecticut state director of the National Federation of Independent Business (NFIB), a small business lobbying group, said Malloy set the right tone with his budget speech and proposals. "Governor Malloy said that the days of spending outside of state revenue are over and we applaud him for accepting this new economic reality," Mar- kowski said. "[His] remarks were a great start and demonstrated a tremen- dous shift in the thinking that has traditionally come out of the Capitol." Markowski said he appreciated Malloy's small business property tax re- lief, but indicated the plan didn't go far enough. Businesses, Markowski said, would also like the business entity tax eliminated. Meantime, leaders of unions in the State Employees Bargaining Agent Coalition (SEBAC), which represents state workers, voiced displeasure with Malloy's budget. "The latest prescription for Connecticut's budget woes is a double-dose of arsenic," said Cindy Stretch, Southern Connecticut State University English professor. "We cut the budget for public services directly, and we threaten to further diminish public services by laying off thousands of state and municipal employees. Does anybody really think we help our struggling middle class by making sure we have fewer teachers, nurses and cops, and by making public higher education even less affordable than it is now?" TRANSPORTATION Republicans want $71B in transportation spending Senate Minority Leader Len Fasano (R-North Haven) is defending a Repub- lican transportation plan unveiled last week against charges by Gov. Dannel P. Malloy that it doesn't spend enough. The plan would spend at least $1 billion annually over the next 30 years, and doesn't include tax increases or tolls, which were recommended to pay for Mal- loy's larger, $100 billion, 30-year transportation overhaul. "Just like the governor's own transportation plan, we also include a federal match that supports needed upgrades," Fasano said. "Our plan would give the state more than enough money to cover the $66 billion worth of needed up- grades identified by the governor's own Transportation Finance Panel — all without raising taxes or implementing tolls." According to Fasano, Malloy had criticized the plan for only spending $37 billion on transportation spending. He said the Republican "Prioritize Progress" plan would dedicate $71 billion to transportation over the next 30 years. This includes $39.6 billion in state bond allocations and federal matching funds. GOVERNMENT, POLITICS & LAW Senate Dems propose breaks for veteran-owned businesses Senate Democrats said they plan to introduce legislation to give additional support to veteran-owned small businesses. They intend to introduce a bill that would give those businesses additional bidding preferences under state contracting laws and waive the first year's business entity tax for startup veteran-owned businesses. Currently, according to a statement from Senate Democrats, when the state determines the lowest responsible qualified bidder for a state contract, it is al- lowed to give a 10 percent price preference for "micro-businesses" that have defined gross revenues not exceeding $3 million. The Senate Democrats' proposal would increase the allowable preference for veteran-owned, micro-businesses to 15 percent. To qualify for veteran-owned status, 51 percent of the ownership of a business must be held by an honorably discharged veteran. The proposal would also abolish the first year's $250 busi- ness entity tax for startup veteran-owned businesses. State auditors call for better fiscal training by comptroller Ongoing errors in generally accepted accounting practices (GAAP) reporting are prompting state auditors to call for better financial training for state agen- cies. Liabilities and revenues were being inaccurately reported by millions of dollars, a recent audit found. In its recommendations, the auditors said its review of statewide financial reporting identified internal control weaknesses as defined by auditing stan- dards generally accepted in the United States. The comptroller's office did not contest the findings of the report. Errors included the Department of Correction understating contractual obligations by $84.2 million. EDUCATION CT lags in high school financial literacy The Council for Economic Education's 2016 Survey of the States shows that Connecticut's public school system has made no progress over the last several years in meeting benchmarks for financial literacy education. According to this year's survey, by the Council for Economic Education, Con- necticut continues to meet just a single benchmark – inclusion of personal finance in its K-12 education standards. It misses on four other measures including requir- ing a high school course in personal finance and requiring students to take it, and having standardized testing on the subject. ENERGY & UTILITIES Industry group: CT ranks 31st in grid modernization Connecticut needs to do more to be a leading state in "grid modernization," according to an industry group of utilities, suppliers, service providers and others. The GridWise Alliance said in a recent report that Connecticut ranks 31st in the country when it comes to implementation of smart meters, peak pricing structures, cybersecurity planning and other efforts. GridWise's ranking assessed states' planning requirements, rate structures and data collection, and deployment of new technologies. In those three subcategories, Connecticut ranked 18th, 39th and 30th, respectively. GridWise docked Connecticut points because of a lack of advanced electricity metering and granular data collection. BY THE NUMBERS $569.5M The total cuts Gov. Dannel P. Malloy is proposing to the fiscal 2017 budget to close a projected $500 million deficit. 5.75% The percentage Gov. Malloy is proposing to cut from state agency budgets in fiscal 2017. $40,000 The maximum cap Gov. Malloy wants to place on Connecticut's probate fees, which can go as high as nearly $500,000 for estates worth $100 million. 900 The number of workers Home Depot plans to hire in its 20 Connecticut stores within a 50-mile radius of Hartford, as the home-improvement product retailer again ramps up for the busy spring season. TOP 5 MOST READ on HartfordBusiness.com ■ Malloy proposing $569.5M in cuts; elimination of biz tax ■ Glastonbury man pleads guilty to defrauding energy program ■ Bond commission OKs nearly $577M in spending ■ Casino approval called into question ■ CT looks to add "greenways" STAY CONNECTED For breaking and daily Greater Hartford business news go to www.HartfordBusiness.com. HBJ on Twitter: @HartfordBiz HBJ on Facebook: www.facebook.com/HartfordBiz HBJ on LinkedIn: www.linkedin.com/company/ the-Hartford-Business-Journal Daily e-newsletters: HBJ Today, CT Morning Blend www.HartfordBusiness.com/subscribe Weekly e-newsletters: CT Green Guide Weekly, CT Health Care Weekly www.HartfordBusiness.com/subscribe WEEK IN REVIEW P H O T O | C O N T R I B U T E D Gov. Dannel P. Malloy addresses the General Assembly last week in Hartford.

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