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Living up to the 'principle of truth in budgeting'

By Lee Howard

Publication: The Day

Published February 17. 2011 4:00AM   Updated February 17. 2011 4:59AM
Business officials OK with share of proposed hikes

Hartford - Business leaders reacting Wednesday to Gov. Dannel P. Malloy's first budget said they liked the overall message it sent even if they could quibble with some parts of the plan to raise $1.5 billion in new revenue.

"I'm glad we finally have a governor who will live up to the principle of truth in budgeting," said Tony Sheridan, president of the Chamber of Commerce of Eastern Connecticut.

"It's a hard budget," he added. "It's going to be hard on a lot of people."

But Malloy's staff indicated that it would not be particularly hard on business, which is footing only 19 percent of the tax increase, compared with 81 percent for individuals.

This doesn't account for the fact, however, that many businesses such as limited liability corporations are taxed as personal income, said Joe Brennan, senior vice president of the Connecticut Business and Industry Association.

He said he suspects the real burden on business owners was understated in Malloy's budget, and he encouraged the governor to find even more savings to reduce tax rates wherever possible.

But Brennan applauded the call for $1 billion in concessions from state employee unions in each of the next two years. And he said that education reforms designed to reward the best teachers and examine the current tenure system hold promise.

CBIA officials will be going over the budget line by line over the next few days, Brennan said.

"There are a lot of good things there," he said. "The overall message was a good message."

Paul Pescatello, president of Connecticut United for Research Excellence, based in New Haven, said he was carefully monitoring the budget's impact on research-and-development tax credits that help pharmaceutical companies such as Pfizer Inc.

"I was worried they would be scaled back, and they were not," he said.

The overall feeling among R&D companies was one of relief, he added.

"Many expected a greater percentage of the tax burden to be imposed on them," he said.

Malloy, in a speech to the General Assembly, described the budget as an attempt to foster a better climate for businesses to create jobs.

"This budget says Connecticut is open for business," he told state legislators at the Capitol.

His most important initiative, the so-called "First Five" program, would give various exemptions, tax credits and financial assistance to as many as five businesses that would promise to add at least 200 full-time jobs within the next two years or would invest $25 million with the intention of employing 200 or more within five years.

"We will hold these First Five to their commitments," Malloy vowed.

Gains and losses

Other elements of the budget meant to encourage business include:

  • Raising the tax-credit cap for businesses that invest in urban and industrial sites from $500 million to $750 million.
  • Raising the tax-credit cap for job creation from $11 million to $20 million.
  • Providing $80 million in additional bonding money that could go toward attracting businesses to the state.

But along with the extra funding come cuts in other areas. Malloy would provide $15 million in each of the next two years to help market Connecticut, but cut $1.9 million in prior funding for tourism districts. Tourism efforts would be under the control of the state Department of Economic and Community Development.

DECD, which will be absorbing the Commission on Culture and Tourism and the Office of Workforce Competitiveness, is one of several state agencies being reorganized. The DECD commissioner will become chairman of the board of Connecticut Innovations and the Connecticut Development Authority under the governor's budget plan.

"Our streamlined economic development system will be growth-focused, entrepreneurial and, most importantly, business-centered," according to a budget summary.

Funding for such economic drivers as the Small Business Incubator Program and the Southeast Connecticut Incubator would be cut, but the Mystic Aquarium would get $620,000, the National Theatre for the Deaf, $151,000, and the Ivoryton Playhouse, $44,000.

Malloy's budget also includes funding for 24 new cars on the Shore Line East rail lines. State Sen. Andrea Stillman, D-Waterford, said the addition of new cars is an indication of a commitment to commuter rail service, although it is unclear whether any new routes will be added.

"It's the beginning of a long discussion," Sheridan said of the budget.

What the business community wants, he said, is a budget that provides clarity, honesty and predictability.

"If it is a fair sharing (of the tax burden), I think the business community will respond and pay its fair share," he said.

l.howard@theday.com

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