Category: Economy

Connecticut Bonding Woes

The legislative session is up and running, and here’s a new wrinkle unraveling up in Hartford. Connecticut currently has 18 billion in bonding debt. That is about the max Connecticut can bond out. Which means that Connecticut, as CT News Junkie reports, the state credit card is maxed out:

In this letter to the chairs and ranking members of the Finance, Revenue, and Bonding Committee, Rell’s Budget Director Robert Genuario warned lawmakers that the state is approaching its bonding cap. This means it may need to consider scaling capital projects already approved by the state Bond Commission.

Revenue estimates are off $342 million already this year, according to Rell’s budget office and the legislature’s Office of Fiscal Analysis. Wyman is expected to release the latest revenue estimates later this afternoon, but not much is expected to change.

If revenue estimated continue to fall Genuario warned that by the Spring the state could blow through the cap by about $242 million. If that happens Rell and the legislature would be required to come up with a list of projects to scale back or delay a few years.

Since the bonding cap is based on revenues, the state could also raise taxes to boost its revenue projections. Last year Rell and the legislature negotiated about $800 million in tax and fee hikes, which were included in the $18.9 billion state budget for fiscal year 2010-11.

Bob Duff Says State Legislative Priority Should Be Jobs

The legislative session in Hartford begins tomorrow. Naturally, a press releas went out extolling the focus of the Senate this session. It’s about creating small business jobs. State Senator Bob Duff explained that the state of Connecticut needs to be serious about job growth, and particularly among small businesses in order to generate a healthy economy.

Okay, so how do these State Senators plan on doing it? Well here’s their very own news release outlining the issue:

Senate Democrats Start 2010 Session with Plan to Grow Jobs, Cut Taxes for Small Businesses, And Shrink State Government

Surcharge on TARP bank bonuses will help pay for tax cuts & loan fund for small businesses; consolidation of economic development agencies will streamline efforts to grow jobs

Hartford – Senate Democrats held a news conference at a drycleaners in
West Hartford on Monday – two days before the 2010 legislative session begins – to announce a new plan to help small businesses protect and grow jobs.

Connecticut’s unemployment rate is at 8.9% and nearly 95,000 people have lost their job since the recession began in 2008. Many economists predict the total number of jobs lost in Connecticut will reach 100,000.

Citing job growth as one of the top priorities for Senate Democrats this year, Senators detailed their four-point $20 million plan to assist small businesses – which account for 97% of all Connecticut employers and nearly half of private-sector employment.

The Senate Democrats’ jobs plan includes:

Provide tax relief to struggling mom and pop shops by suspending the $250 business entity tax on ‘mom and pops’ for two years.

1. Big banks were bailed out by the federal government, but they have failed to make these bailout funds available to small businesses.  Big banks have significantly restricted loans and lines of credit to small businesses, and in so doing, have severely restricted small businesses’ ability to survive and succeed during the economic downturn and beyond.

A small business revolving loan fund will be administered by a business financing entity with the consolidated business knowledge and the diversity of involvement necessary to serve all types of small businesses in Connecticut. It is critical that this new entity have the flexibility to offer loans to businesses that have been caught in the credit crunch, not because their business has changed, but because the rules of banking have changed.

    2.      Create small business revolving loan fund

    3.      Consolidate state economic development entities
    Consolidate CDA, CI and the direct business financing function of DECD into one single entity, as recommended by the recent bipartisan report from the General Assembly’s Program Review & Investigations (PRI) Committee. This will provide a benefit to small businesses and the state in the following ways:

a.      Cuts costs by streamlining functions.
i.      Operating expenses at CI are high: they have even exceeded loans awarded in some years.
b.      Avoids duplication of efforts – eliminates administrative duplication and helps avoid situations where two agencies are working on the same issue.

      • c. Establishes a one-stop shopping option for small businesses who might not know where to go for help.
        d.      Combines knowledge accumulated from different agencies into one location where this knowledge can be benefit all businesses in Connecticut.

        e.      Creates new entity that will administer new small business revolving loan fund.

  • 4.      Hold formal hearing to review state regulations and their impact on small businesses.

How to Pay for It: Temporary surcharge on TARP supported bonuses

    • After receiving billions of taxpayer dollars from TARP, the nation’s biggest banks are back to handing out enormous bonuses and raises. Goldman Sachs, for example, received a bailout of $10 billion in TARP funds while increasing the bonuses it paid its employees in 2009 to $23.7 billion – a jump of nearly 500% compared to 2008.
      Under the Senate Democrats’ job plan, bonuses of $1M or more paid to employees of TARP recipient entities will be subject to a temporary surcharge.

a.      The surcharge will apply for two years only – Income years 2010 and 2011.

        • b. The surcharge rate will be 2.47% on the entire amount of a bonus that totals $1M or more.  This 2.47% is on top of Connecticut’s existing top income tax rate, meaning that the total state income tax rate on these bonuses is 8.97%.

1.      Recipients of these bonuses will pay an income tax rate on the bonuses that is equivalent to the top NY state income tax rate of 8.97%.

          • 2. This rate is still lower than the top NY City / State combined rate of by 12.6% and lower than the top NJ rate of 10.75%

Examples of bonuses being paid by banks:

Citigroup
TARP: $45 billion
2008 bonus pool: $5.3 billion
2009 bonus pool: $5.3 billion

JP Morgan Chase
TARP: $25 billion
2008 bonus pool: $8.693 billion
2009 bonus pool: $9.3 billion

Morgan Stanley
TARP: $10 billion
2008 bonus pool $4.47 billion
2009: has earmarked $14.4 billion for employee compensation in 2009, a 31 % increase from last year.

Goldman Sachs
TARP: $10 billion
2008: $4.8 billion
2009: $23.7 billion – a jump of nearly 500% compared to 2008.

“Helping businesses and reshaping state government shouldn’t be a partisan position,” said Senate President Williams (D-Brooklyn). “As the 2010 legislative session begins I urge lawmakers on both sides of the aisle, and Gov. Rell, to join us in our efforts to grow jobs.”

“Growing jobs and balancing the budget are the top priorities this legislative session,” said Senate Majority Leader Martin Looney (D-New Haven). “We know the success we have in growing jobs will help our efforts to solve the deficit.”

“Sedgwick Cleaners – which is my dry cleaner – is an example of a small business that keeps a community alive,” said Senator Jonathan Harris (D-West Hartford). “And this bill helps keep small businesses alive. Dana is a Rotarian like me, he sponsors youth sports, and he advertises local events in his storefront window. Besides creating jobs, he is a vital part of the West Hartford community. And we need to protect and grow these types of businesses.”

“Small businesses provide the foundation for every community and provide the backbone for our state’s economy – for the duration of this downturn we must help them retain their vitality in any way we can,” Senator Edith G. Prague (D-Columbia) said. “The plan we’ve introduced today will help them retain and perhaps create new jobs, to the benefit of employees in the short term, and to the benefit of our overall economic health for the longer term.”

“This is precisely what Connecticut businesses need; a loosening of credit,” said Senator Gary LeBeau (D-East Hartford). “If we can do that through this bill and get more money out on the street to help small businesses, this will be a home run.”

“As small businesses go, so goes Connecticut’s economy,” said Senator John Fonfara (D-Hartford). “These initiatives target the businesses that will turn our economy around the quickest.”

“The billions in bonuses and raises are back on Wall Street but not on Main Street,” said Senator Eileen Daily (D-Westbrook). “It is time the bank bailout really starts working for the small businesses that fuel our economy.”

“I’ve heard from the owners of many small businesses in my area, and as a business owner myself I know this initiative would be an important first step to provide much-needed relief for small-scale operations,” said Senator Andrea Stillman (D-Waterford). “A new consolidated economic development agency would focus on providing true, one-stop access to information for small business owners and provide a streamlined licensing process.”

“I hear from small business owners all the time about how difficult it is to get credit these days,” said Senator Thomas Gaffey (D-Meriden). “This plan helps to address that concern. “I hope we can work the governor and other legislators to get this passed quickly.”

“One of the most effective ways to reinvigorate the economies of our communities is to provide job opportunities for residents of those communities,” said Senator Eric Coleman (D-Hartford). “Investment in small businesses in the form of financial assistance, focused technical assistance and tax incentives will facilitate such reinvigoration and result in a much more stable economic foundation not only for these communities but for the state as a whole”

“In New Haven we can no longer simply rely upon the colleges and hospitals to grow jobs and sustain the local economy,” said Senator Harp (D-New Haven). “Small businesses, particularly those that cater to the diversity of our population, are the heart and soul of our community – and for that reason this plan to shore up state support for small business job creation is just exactly what we need.”

“Helping small businesses succeed and grow jobs needs to be a priority this session,” said Senator Bob Duff (D-Norwalk). “Focusing on aid to our small businesses, especially by working to open the credit market for them, will help them get back on their feet and improve our economy at the same time.”

“We recognize the challenges that many of our business owners are facing, and our focus needs to be on job creations and economic recovery,” said Senator Andrew Maynard (D-Stonington). “This package will help encourage and assist our small businesses. Any effort we can make to help business—particularly small business—is welcome.”

“In this economy, simply creating wealth for wealth’s sake — like those TARP bonuses do — is not good enough,” said Senator Mary Ann Handley (D-Manchester). “We need to help small businesses, who are the real job creators, survive and thrive in this recession. And this bill helps them do that.”

“These initiatives are a great beginning to resolve an outstanding need in our state; there must be a coordinated and relentless pursuit of new jobs in small businesses, even as we work to restore the loss of old jobs in the insurance and aerospace sectors,” Senator Crisco (D-Woodbridge) said. “I would hope some funding from this revolving loan program would be invested in job training so Connecticut can continue to boast a workforce second-to-none.”

Jobs and Jobs, Two speeches Which Was More Important?

What a day. First Steve Jobs announced the iPad, the next thing in a long line of gadget things that Apple has figured out that we need.

We need the iPad, because it takes what was the Kindle, and makes it cooler. In color too. It says — hey world, we figured out you figured out that you don’t really need computers any more, you like the iPhone, but the keys are too close together so here’s the fat fingered version.But wait, you can pair a bluetooth keyboard to it. And it will have more battery life than my Air?

This was the state of the union we needed to hear.

Later, President Obama talked about jobs. No, not our Jobs. But jobs as in how to get the economy working. It’s his number one focus. He urged Democrats that they still needed to “solve problems and not run for the hills.”

But wait, why not run over to the Apple store and get an iPad. Instead of bailing out car companies and banks, why not just buy an iPad for every school age child in America? Apple shares would spike, Wall Street would be happy and there’d be some massive trickle down of wealth that even Republicans would like.

Let’s do a play by play analysis of the speeches then, shall we?

OBAMA:

It’s tempting to look back on these moments and assume that our progress was inevitable -– that America was always destined to succeed. But when the Union was turned back at Bull Run, and the Allies first landed at Omaha Beach, victory was very much in doubt. When the market crashed on Black Tuesday, and civil rights marchers were beaten on Bloody Sunday, the future was anything but certain. These were the times that tested the courage of our convictions, and the strength of our union. And despite all our divisions and disagreements, our hesitations and our fears, America prevailed because we chose to move forward as one nation, as one people.

JOBS:

Apple is a mobile device company. Largest mobile devices company on world by revenue. Bigger than Sony. Samsung. Nokia.

OBAMA:

Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. (Applause.) Two hundred thousand work in construction and clean energy; 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, first responders. (Applause.) And we’re on track to add another one and a half million jobs to this total by the end of the year.

The plan that has made all of this possible, from the tax cuts to the jobs, is the Recovery Act. (Applause.) That’s right -– the Recovery Act, also known as the stimulus bill. (Applause.) Economists on the left and the right say this bill has helped save jobs and avert disaster. But you don’t have to take their word for it. Talk to the small business in Phoenix that will triple its workforce because of the Recovery Act. Talk to the window manufacturer in Philadelphia who said he used to be skeptical about the Recovery Act, until he had to add two more work shifts just because of the business it created. Talk to the single teacher raising two kids who was told by her principal in the last week of school that because of the Recovery Act, she wouldn’t be laid off after all.

JOBS:

2 weeks ago sold 250th million iPod. Apple now has 284 Apple stores, had 50 million people visit last year. Has more than 140,000 applications on APp Store. 3 billion apps have been download in 18 months.

OBAMA:

We should start where most new jobs do –- in small businesses, companies that begin when — (applause) — companies that begin when an entrepreneur — when an entrepreneur takes a chance on a dream, or a worker decides it’s time she became her own boss. Through sheer grit and determination, these companies have weathered the recession and they’re ready to grow. But when you talk to small businessowners in places like Allentown, Pennsylvania, or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they’re mostly lending to bigger companies. Financing remains difficult for small businessowners across the country, even those that are making a profit.

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. (Applause.) I’m also proposing a new small business tax credit

-– one that will go to over one million small businesses who hire new workers or raise wages. (Applause.) While we’re at it, let’s also eliminate all capital gains taxes on small business investment, and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment. (Applause.)

Next, we can put Americans to work today building the infrastructure of tomorrow. (Applause.) From the first railroads to the Interstate Highway System, our nation has always been built to compete. There’s no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products.

JOBS:

Apple® today announced financial results for its fiscal 2010 first quarter ended December 26, 2009. The Company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. These results compare to revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago quarter. Gross margin was 40.9 percent, up from 37.9 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter’s revenue.

Apple sold 3.36 million Macintosh® computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. The Company sold 8.7 million iPhones in the quarter, representing 100 percent unit growth over the year-ago quarter. Apple sold 21 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter.

So let’s see, Obama wants to create jobs by putting Americans to work today building the infrastructure of tomorrow and Steve Jobs has just shown the infrastructure of tomorrow. What a friggin disconnect.

It seems like it was a lifetime ago that during the Clinton administration, Vice President Gore was schmoozing the tech industry and bringing in the tech stuff to get problem solving in Washington on the Internet. The High Performance Computing and Communication Act of 1991 gave us the Internet browser. I think there was a recession then too.

The point in all this is that it was only last year Obama was telling us the equivalent to what do you want to do Agent Scully, sell sugar water for the rest of your life or change the world? Today Obama’s pitching us on how a tax credit for small businesses when they hire someone will somehow change the economy. Today Obama is John Sculley.

If You Build It, They Will Lease

There is nothing more frustrating than seeing economic growth still chugging along in Stamford and New Haven, buildings going up in the same time period that our projects stay in limbo. From the newstimes thanks to a reader

A Norwalk-based developer of Stamford’s Harbor Point project has started 2010 by bucking the commercial real estate downturn and signing new tenants for three of its Stamford office buildings.

Building and Land Technology added Guess? Inc., First American Title Insurance Co. and Ipsogen Inc. to its buildings at Stamford Landing, 600 Summer St. and 700 Canal St., respectively, and is building out space for them at all three locations.

The three leases come after Fairfield County’s new leasing activity for Class A and B office space totalled only 1.8 million square feet in 2009, compared with annual averages of 3.5 million square feet from 2005 to 2007, according to a year-end 2009 report issued by Cushman & Wakefield.

The report revealed that the overall available Class A space in the county rose to 6.4 million square feet in 2009 from 4.8 million square feet in 2008.

Guess, the national fashion retailer, has leased 4,500 square feet of office space on the second floor of One Stamford Landing and will move one division into the new quarters early this year, while First American will relocate from 1150 Summer St. in Stamford to 600 Summer St., where it will occupy 3,712 square feet on the sixth floor.

Ipsogen, a medical diagnostics company specializing in molecular diagnostic products and services for cancer testing, will take an additional 4,200 square feet at 700 Canal St.

“Each tenant came to us with very specific design and performance requirements unique to their industries,” Lori Baker, leasing director for Building and Land Technology, said in a statement, “and in all three cases the broad range of our offerings, together with the responsiveness of our team, made it possible to provide highly individualized solutions on a quick turn-around basis.”

Hilarie Siles, executive managing director of Newmark Knight Frank, introduced Guess to the four-building Stamford Landing complex and its views of the West Branch of Stamford Harborafter a broker event there. The complex is in the city’s enterprise zone.

Guess is locating its international jewelry headquarters in the space and is temporarily at 2 Stamford Landing.

“The Stamford Landing space incorporated all the elements that Guess was searching for, in particular a stimulating and creative work environment,” Siles said.

Located a half mile from the Stamford Transportation Center, each Stamford Landing building has its own power generator, office suites with loft spaces, skylights, vaulted ceilings and shuttle services.

First American is moving to the former headquarters of GE Capital after the building underwent a recent multi-million dollar renovation that included new windows, an updated heating, ventilation, air conditioning and building management system and upgraded elevators, lobbies and restrooms.

A provider of title and settlement services to the real estate industry, First American was focused on finding a location with convenient access to the city’s central business district and major highways, said Charles Hanna, vice president at First American.

Ipsogen, based in Marseilles, France, moved its U.S. headquarters from New Haven to Stamford in 2009.

Ipsogen searched greater Stamford for a new location after Marseilles authorized it to expand, but opted to keep its products and services divisions in the Canal Street building when Building and Land Technology was able to configure new space.

“The key for Ipsogen was the ability to put together a package quickly in a space that could be tailored to meet their specific needs,” said Adam Klimek, associate director of Cushman & Wakefield, which represented Ipsogen. “Within three weeks, BLT was able to gain necessary city approvals, negotiate the business terms and get a signed lease.”

The building, one of four structures that make up Stamford Harbour Square in the city’s enterprise zone, is adjacent to the Harbor Point development and the former Yale and Towne factory, which is undergoing a conversion into loft-style apartments, public open space, 15,000 square feet of retail space and a Fairway Market grocery store.

“The location’s unique historic character and extensive amenities, as well as proximity to the railroad station and New York airports, were particularly appealing to us,” said Susan Hertzberg, chief executive officer of Ipsogen.

Aging Population

The Courant is reporting that somehow Connecticut managed to add 15,000 people according to US Census Bureau estimates of state populations. I’m going to assume that means net gain, because it would be interesting to know how many people moved out of Connecticut too. Slow population growth is usually another indicator of an aging population, and a short trip to Google reveals that Connecticut

Norwalk’s media age is 36.6 compared with New York City at 34.2. A median, for those that have forgotten means that half of a group, in this case population, is younger and the other half is older than the median. The national median age is 35. It is safe to say that an older median age indicates a population that is less productive in the workforce. Think retirees. Job growth does not come from retirees.

Here’s a stunning graph that I’m going to use as an example of what Connecticut, and more importantly any town in Fairfield County,  is facing when it comes to trying to spur economic job growth.

Blog_NIH_Grants_AgeThe National Institute of Health (NIH) is largely a research hospital where all the important government funded medical and health research takes place. The graph comes from an article on whether there are too many PhDs. An interesting question for sure, since the ability of our global competetive edge comes from the realm of science, engineering, math and technology. But I digress, if the health care industry and bioscience are supposedly the leading industry categories of job growth, what does it say for employment of newly minted scientists when funding for research is creeping towards the the workers nearing retirement?

In a post by Jason Hoyt:

In the U.S., we are constantly hearing about how the country is falling behind in science. We need more scientists to fill all of those jobs we want to create. And the cure to that is to fund more PhD programs! Yet, when you ask graduate students and postdoctoral scholars what their individual experiences are, a science career is a very tough road with low pay and few career prospects.

The graph shows that despite the increase in number of PhDs and increased R&D budgets, the people who are getting grants to do project research are getting older on average. What does this mean? It means that young people aren’t getting the funding to do work in their research field and so increasingly seek other jobs. Jobs that somehow aren’t in the field they studied and trained in. Hoyt’s artcile even opened with the factoid that the guy who narrowly missed out on a Nobel Prize in Chemistry is working at a car dealer.

If young scientists aren’t landing jobs in science, just who exactly will be creating those 21st century jobs of the future? That is one scary implication.

In looking at Connecticut, the UCONN Connecticut State Data Center predicts that by 2030 there will be a statewide 17% decline in student enrollmnet k-12. Norwalk has laready seen a decline that should continue trending downward, here’s a link to how the state of Connecticut is regionally seeing student enrollment changes.

Legislature to Review Liquor Sales on Sunday

They’re back. The arguments to send Connecticut blue laws back into the history bin is always entertaining. Armed with a new economic report, the legislature is planning to review Sunday liquor sales in Connecticut.

On the one side, the legislature is facing a deficit that can only be softened by somehow figuring out new revenue sources. On the other side, the package store association that argues that opening package stores on Sunday would either a) force package stores out of business or b) dilute sales that would otherwise occur Monday through Saturday.

Then there’s all the other special interests that will come out and pick a side to promote whatever morality is selling at the moment. If the legislature was smart, they’d hold the hearings on a Sunday, offer free samples, and see what happens.

The legislatures have a report that says that the State would pick up an extra 7 to 8 million dollars in tax revenues. The package store association says that number is inflated. Needless to point out that the package store association doesn’t watch football on Sundays. Grocery stores, right before the game, between games and after games, seem to do a pretty good business with people who are adorned with NFL team apparel. Perhaps the package stores real problem is that they don’t sell the munchies along with the beer and feel left out.

That brings up the question of why do we have package stores in the first place? Nothing like traveling to another city and seeing grocery stores selling all the ingredients for a mojito that includes fresh mint, ginger and limes as well as 31 flavors of rum.

It’s not like restaurants in Connecticut aren’t open on Sundays. Somehow Hartford doesn’t have a problem with restaurants serving alcohol on Sundays. Does anyone really think that the Sunday restaurants hours take away from business during the rest of the week? Some restaurants are even closed Mondays, voluntarily. Some close for lunch. Somehow they all manage to stay in business.

The report also points out that border towns perform 35-45% below sales in on border towns. This would indicate that price and convenience, the two pillars of any retail establishment, seem to work against Connecticut broder towns.  Something State Senator John Kissel-R had the best quote on the subject in Chris Keating’s Courant report, ” Massachusetts and New York and Rhode Island laugh at us sometimes because we are so slow to change. I think that argument [for Sunday sales] has strong grounds now.”

The 21st Century Office

Not so long ago, when businesses thought about office space, they were concerned with bricks and mortar issues. Where to locate an office, how many employees could fit in it, and how to make sure they produced the maximum amount of work with little distraction. For whatever reason, the tech industry was the harbinger of the cube farm, those vast open floor space layouts filled with office cubes where the only way to tell where you ranked in the overall corporate hierarchy was your proximity to a window. Let’s take a look at a typical picture.

newfarm2

I once wrote a short story about the cube farm which was simply about the drama that took place over the thermostat. Needless to say I’m not fond of cube farms, but I have certainly stacked tables and chairs in hallways maxing out every bit of available space to house employees during peak business seasons. A strange thing though has resulted from the corporate penning of people. Somewhere along the way, management leaders have figured out that you don’t really need to gather up people who have to work together and that they can be practically anywhere, say India, and communicate cheaply. The cube farm is now endangered.

Economists spell this out in more dire language. Business publications are filled with talks of job loss, high productivity despite that and the dire future of the American economy. That lure of cheap communication is so strong, that the CEOs of Wall Street financial institutions thought it best to hold a meeting with President Obama over conference call instead of meeting face to face. THese would be the same brainiacs that destroyed our economy, borrowed tax payer money to bail themselves out, and now that they’re all repaying the money, thank you very much, they don’t have time for Washington.

If the value of interpersonal communication at the highest levels in corporate America is zero, what does that portend for the value of intrapersonal communication at the lowest levels?

Today with mobile phones, unlimited internet connectivity practically everywhere, isn’t it safe to question just what will be the 21st century office? Some of the answers to that question can already be found in tech savvy cities across America. They built the real infrastructure of the the 21st century, things with words like; OC-96, fiber, data packets, noc. To grab the sales pitch succinctly:

What is your business looking for?
  • Space and Power
  • Application Hosting
  • Content and Data Storage
  • New Applications (SaaS)

For Connecticut to compete in the global economy it needs its political flunkies to start thinking like 21st century leaders instead of bickering 20th century do-nothings. Governor Rell is trying to jam down budget cuts that will affect key job growth sectors. The Democratic legislature is worried about protecting social service jobs. The dialog is all wrong. If there’s no job growth in Connecticut then there will never be enough revenues to keep the state out of bankruptcy. All the dialog out of Hartford can’t just be about budget cuts. There has to be some thinking about revenue increases that aren’t just the expedient tax increases. The pool of people and business who pay taxes have to increase. And yes, that means that you have to incentivize companies to locate here because they are going elsewhere everyday.

Connecticut has done nothing about investing in technology infrastructure. Our electrical grid is still charging the highest rates only second to Hawaii, and delivers unstable service. There is not investment in optical fiber, no mass transit plans to connect urban areas, and nothing to make ti easier for today’s mobile workforce to get to the hot job centers in New York, Philadelphia, and Boston. Connecticut seems to expect that selling the pony express in the could computing world is a good business decision.

Today’s businesses are looking not just for brick and mortar buildings, but also a pool of workers that can be productive anywhere in the world. That means they can hop in a car, train or plane to get to where ever they have to be, stay connected to the corporate headquarters and seamlessly conduct business. Connecticut has got to be connected to the world, yet Connecticut lags so far behind in tech infrastructure third world countries have better connectivity.
Smaller north eastern states get it. Compare the messages between New Hampshire and Connecticut. But the data says even more.

Give the Gift of Plumbing, An Economic Christmas Story

With Black Friday safely out of the way (sales up only 0.5% from last year), the usual economic story about December is the savior of the retail activity because of Christmas and Hanukkah. But is it really? That’s the question posed by the Courant’s Dan Haar, who makes the case that when it comes to measuring economic activity, holiday retail sales aren’t a big thing.

Sounds crazy. But consider this: Strictly by the numbers, the painting industry is just about as important to the U.S. economy as Christmas.

Christmas gift buying, in fact, is not a huge driver of prosperity in America. Plumbing, electrical work, dentistry and many other ways we spend our money are bigger.

How can this be? After all, consumer spending accounts for two-thirds of the economy, and Christmas — with Hanukkah and Kwanzaa along for the ride — is the culminating linchpin of the retail year. Certainly that’s the case for many merchants, who count on the season for 40 percent or more of their profits.

For the economy as a whole, the numbers tell a very different story.

Spending in stores this year will total $437 billion in November and December, a widely reported forecast based on a survey by the National Retail Federation. That total includes most of the stuff we buy, including food and drinks but not restaurant meals, and not vehicles or gasoline.

What about gift-buying? The retail federation predicts the average adult will spend $507 this year. That comes out to $117 billion for the nation. But the difference between total retail sales in November-December, compared with other months, suggests the “holiday excess” is closer to $60 billion.

The sidebar to the article is where things get really interesting.

By comparison, Americans spend:

$30 billion: Roofing work

$40 billion: Painting contractors and paint

$70 billion: Plumbing

$95 billion: Dentist

And when we look at the whole gift giving thing, all those made in china items kinda of make you want to say bah humbug. Heading over to Walmart to buy a GPS doesn’t do anything for the local economy except support the $12.68/hr sales job. For a full time worker. On average. According to Walmart, they employ a total of 9,559 (they don’t separate full time from part time) and they say:

  • In FYE 2009, Walmart spent $3,247,957,724.00 for merchandise and services with 435 suppliers in the state of Connecticut.  As a result of Walmart’s relationship with these suppliers, Walmart supports 32,711 supplier jobs in the state of Connecticut.
  • Supplier figures provided by Dun & Bradstreet.

According to the local 777 web site, there are over 3200 members. I think there are more plumbers than that. The State of Connecticut regulates plumbers and therefor there’s a list of licensed plumbers somewhere. The state web site however delivers some lame message about that not being available. So much for supporting the local businesses State of Connecticut. So let’s run some math anyway. I got the hourly wage average for plumbers based on the average yearly salary of $80k.

9559 x 12.68/hr = $121,208.12/hr

3200 x 38.46/hr  = $123,072/hr

So, going by this back of the envelope, or in my case google calculator, it would appear that plumbers, at least those identified as local 777 members earn more per hour than all the employment generated by Walmart. And at a wage of $12.68 an hour, you know that the income generated is not flowing back into the local or Connecticut economy except in the form of taxes and housing costs. Which is why local health care clinics and hospitals are basically Walmart health centers funded by everyone else, but that’s another post for another day.

It’s not like those sales tax revenues would go away if Walmart weren’t here. They would just be collected by other retailers.  In either case goods that are made in China. Which is really the problem. All that stuff being sold by retailers gets so much press yet it’s disproportionate to the impact on the economy.  So buying stuff that is made in China just sends your dollars to China, without contributing to the local economy let alone the Connecticut economy.

So if you really wanted to buy local, and have your dollars stay local consider the gift of a new toilet instead of a gift made in China placing our economy in the toilet. And if plumbing isn’t your thing, consider all the local service economies–who employ more people –who spend more dollars in taxes, dining, food, other services, and most importantly support your local community.

Rell Cuts Executive Branch Spending; Plans Budget Briefing For Legislators

Gov. M. Jodi Rell on Thursday announced she’s ordered more than $34 million in budget cuts under her power to reduce expenditures at executive branch agencies, boards and commissions.

In a news release, Rell said her action is intended to reduce a projected state budget deficit of nearly $400 million.

The release quotes Rell saying the legislature’s adopted budget “has been built on unrealistic savings assumptions (and) I am determined to end this fiscal year in balance, and that requires that action be taken as soon as possible.”

The release says her cuts — called recissions — represent the first of a series of reductions Rell will be making over the next several weeks. It says she will be preparing a deficit mitigation plan that she’ll be presenting to the legislature before Dec. 1.

Rell, it says, has asked her Council of Economic Advisors to brief lawmakers and legislative leaders on Connecticut’s near- and long-term economic outlook at a briefing to be held Nov. 12 at 2:30 p.m. in room 2E in the Legislative Office Building.

The list of Rell’s rescissions can be found at: http://www.ct.gov/governorrell/lib/governorrell/fy10_nov_5th_rescissions_report_final_nc.pdf .

Moody’s Drops Outlook on Connecticut Bonds, Governor Urges State Reps To Respond

[This story has been updated from its original posting to add remarks from state Sen. Bob Duff.]

The bond rating agency Moody’s Investors Service announced on Monday it has lowered its outlook for Connecticut’s general obligation bonds from stable to negative. At the same time, the agency said it held its rating for the state’s outstanding GO bonds — amounting to approximately $12 billion — at Aa3.

The agency released a report describing the factors it used to come up with its negative rating, which included the state’s need to issue deficit bonds to resolve this year’s budget shortfall, and the non-recurring solutions and deficit financing used to close revenue gaps in the state’s 2010 – 2011 biennial budget.

“Connecticut used one-time solutions to close slightly over half of the (biennial budget’s) shortfall,” the report says, and “these solutions create future structural budget gaps and leave the state with significantly reduced flexibility to address additional fiscal pressures that may arise due to a delayed and/or weaker than expected recovery from the worst economic recession since the depression.”

The state’s bond rating determines the amount of interest lenders are willing to pay to purchase its bonds. Moody’s defines Aa3 as ranking in the lower end of the rating for issuers who “demonstrate a very strong creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues.”

Moody’s Aa rating falls within the top third of bonds it judges to be investment grade.

In their report, Moody’s analysts Nicole Johnson and Kimberly Lyons note the state’s general fund balance sheet will weaken as its Budget Reserve Fund (commonly known as the “rainy day fund”) is depleted due to the already sizeable unreserved, undesignated [debt] fund balance the state has carried since the early 1990s, “largely reflecting an accrued liability that has never been repaid.”

At the end of fiscal year 2008, the state’s unreserved, undesignated general fund balance was a negative $1.1 billion, the report says, while by the end of 2010, the Budget Reserve Fund is expected to be depleted.

In response to the report, Gov. M. Jodi Rell sent a letter to the leaders of the General Assembly saying, “Being forced to pay higher interest rates on our bonds would have serious and lasting financial effects in both the near- and long-term.”

Rell said the rating downgrade requires a swift and cooperative response from all branches of state government that must include “a willingness on all sides to make even deeper reductions in state spending than we have to date.”

Rell noted that a decisive factor in the lowered outlook from Moody’s is the excessive use of one-time fixes in the state’s next two-year budget, “especially borrowing and securitization of an as-yet unidentified future revenue stream.”

The two analysts said Connecticut compares unfavorably to other states on measures such as debt ratios “that are among the highest in the nation,” pension funding levels that were among the lowest in the country in 2008 “before the market turmoil is factored,” and other post employment benefit liabilities “that are larger than the size of the state’s annual operating budget.”

They said while Connecticut’s revenue trends should improve as it emerges from the recession, “as the wealthiest state in the nation, Connecticut is more dependent than most states on high-income earners.” Thus, the uncertain recovery of the nation’s financial markets, they said, has an “exaggerated impact” on the state’s personal income tax receipts, which account for almost half of the general fund’s resources.”

The report says Connecticut’s income tax revenue grew by an average annual rate of 12 percent over the 2004 through 2008 fiscal years, but dropped 15 percent in fiscal year 2009. Based on 2007 income year data, the report says, Connecticut’s millionaire residents (those earning at least $1 million) made up less than one percent of the state’s income tax filers, but accounted for 35 percent of the its income collection.

The report identifies Connecticut as being a frequent borrower, and says the state’s debt per capita and debt-to-personal income will likely remain among the highest in the country.

Commenting on Moody’s decision, Tuesday evening state Sen. Bob Duff, D-25th Dist., said, ”This letter from Moody’s should be a wake-up call to everyone in the executive and legislative branches, municipal leaders and special interests from around the state. We are going to have to continue to tighten our belt and restrain spending. It is a time for true leadership and all hands on deck.”

The entire Moody’s report is available on-line at: www.ct.gov/governorrell/lib/governorrell/moodys_report.doc.