Survey: State makes it tough for business

Chief Executive Magazine's annual ranking of the Best & Worst States to Do Business placed Connecticut at No. 44 this year, up one notch from the previous survey but still far from a leading business association's goal of a Top 20 finish in the next three years.

"Connecticut used to be very business friendly and (used to) have a competitive advantage over New York, but it has squandered that lead," according to one chief executive's comment highlighted in the report released this month.

Greenwich-based Chief Executive Magazine pointed to a boost in state minimum-wage compensation as a factor weighing heavily on Connecticut's business ranking. Other factors cited in the report were the state's negative economic growth between 2011 and 2012, a relatively high unemployment rate and a state-and-local tax burden that is significantly higher than the national average.

But Catherine Smith, commissioner of the state Department of Economic and Community Development, said in a phone interview that she takes issue with many of these business-climate surveys.

"These surveys are frustrating for us because it's difficult to understand what they're measuring and how they're counting," Smith said. "In some instances, we think they're counting not exactly the right things."

Some of the surveys, she said, give Connecticut a mediocre score for its workforce despite the state's ranking as one of the top five in terms of production per worker and percentage of knowledge-based employees. The state also often winds up with low scores for the local and state tax burden, though she said the accounting firm Ernst & Young listed Connecticut as No. 2 in the nation in terms of taxes paid relative to income.

Smith said she is supportive of a campaign launched earlier this year by the Connecticut Business & Industry Association, the state's largest business group, to raise Connecticut's ranking to somewhere near the Top 20 within the next three years. The so-called 20x17 campaign is geared toward steering the state away from unfriendly business policies while also challenging some of the data being used in the rankings.

"With what Connecticut has to offer, it could be looked at as one of the top places to do business," Joseph F. Brennan, senior vice president of public policy for the CBIA, said in a phone interview.

Brennan said that while individual business surveys can be looked at with a jaundiced eye, the fact that nearly every ranking places Connecticut near the bottom should not be ignored because they have an impact. Corporate site finders, for instance, might shy away from a state perceived as having a negative view toward business, he said.

And, while Brennan said that most of the legislation perceived to be anti-business during this year's General Assembly session was defeated, the very fact that these initiatives recur year after year adds to the state's poor reputation among executives. He pointed to one bill this year that would have limited tax credits that companies could receive based on the salaries of their chief executives.

"It just doesn't send a positive message that Connecticut is a good place to relocate your business," Brennan said.

Despite the state's latest ranking, Tony Sheridan, chief executive of the Chamber of Commerce of Eastern Connecticut, said he believes Gov. Dannel P. Malloy's administration is starting to turn the corner in improving the business climate.

"I think we're heading in the right direction," Sheridan said. "The state has improved the climate significantly."

Sheridan pointed particularly to the turnaround of the state Department of Energy and Environmental Protection, perhaps the most disliked department up until Malloy came to office and named Dan Esty as commissioner. Esty, recently departed, accelerated the permitting process, significantly improving state services, Sheridan said.

"We're finding a significant pickup here at the chamber and a more positive attitude (among business people)," he added.

Though Connecticut ranked poorly on a national scale, it was somewhere around the middle when it came to nearby Northeastern states. It was behind New Hampshire, Maine, Vermont and Rhode Island in terms of the chief executive business-climate ranking, but came in ahead of Massachusetts, New Jersey and New York.

The 10th annual survey of CEOs placed Texas, Florida, Tennessee, South Carolina and North Carolina among the Top 5 states for doing business. More than 500 CEOs graded states they were familiar with on such factors as taxes and regulations, workforce quality (including employee attitudes toward management) and the overall quality of life (including cost of living and affordable housing).

"If there is a pattern in the survey, it is that states have diverged in recent years in their experimentation with economic freedom," said J.P. Donlon, executive editor of Chief Executive Magazine, in an article accompanying the rankings. "Those lightening the burden of government have generally improved economic growth over those insisting that state-directed spending and governance is best."

The CBIA's Brennan said the state still has a ways to go in terms of turning its business reputation around. He pointed out that the 20x17 campaign just launched a couple months ago and said he wasn't expecting a measurable difference in Connecticut's ranking until sometime next year.

"The message is starting to get through," he said. "At least we're trending in the right direction."

l.howard@theday.com

ECONOMIC FACTORS

GDP Growth

Connecticut: Down 0.1 percent from 2011-2012

Nation: Up 2.5 percent from 2011-2012

Unemployment

Connecticut: 7.4 percent in Dec. 2013

Nation: 6.7 percent in Dec. 2013

State-Local Tax Burden

Connecticut: 12.3 percent

Nation: 9.9 percent

SOURCE: Chief Executive Magazine

http://chiefexecutive.net/best-worst-states-for-business-2014

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