State economic official advises region to weigh diversification
Norwich — The top 10 employers in the Norwich-New London region account for 35 percent of the region's jobs, creating a "concentration of employment that really isn't the healthiest," a top state economic development official told members of the Chamber of Commerce of Eastern Connecticut Friday.
"You need to diversify the economy down here," said Robert Santy, president and chief executive of the Connecticut Economic Resource Center, speaking at the chamber's annual economic-forecast breakfast at the Holiday Inn Norwich.
Santy was joined at the lectern by Kevin Lembo, the state's comptroller, who urged residents to support his idea for saving much of Connecticut's projected $500 million surplus this fiscal year — a pool of money he said has been too often raided without regard for long-term financial planning.
"Let's not call it the rainy day fund anymore," he said. "Let's call it the tax-stabilization fund."
Santy, fill-in for the under-the-weather CERC Vice President Alissa DeJonge, noted that eastern Connecticut has been losing manufacturing jobs at a rate faster than the rest of the state. Another negative, he added, is a "huge increase" in the number of people living in New London County who go to work every day outside the region.
"There are probably a lot of people leaving the region to find jobs," he said.
New London County has been among the hardest-hit regions in the country in terms of recouping jobs lost during the Great Recession. A large falloff in the region's labor force in recent years came at a time when employers such as Pfizer Inc. and Mohegan Sun and Foxwoods casinos were laying off workers in large numbers.
"Relatively lower labor force participation indicates more discouraged workers in the New London area who are leaving the labor force," according to a PowerPoint slide that Santy presented.
And the falling labor force may be a drag on the real estate market, Santy said, noting that the median price paid for a home in the region is below 2007 levels and is still on the wane.
The fact that the number of people commuting out of the region to work is on the rise either means they love living here or they haven't been able to sell their house, he said.
Still, Santy said some areas of the local economy are gaining strength, noting increases in the health care sector as well as accommodations and food services.
Santy said he believed the coming year would see accelerating, but not great, growth.
"2014 is looking like the best year since 2007," he said.
Comptroller Lembo said budget projections also are looking more positive than they have in a while. But he warned that $175 million of the current surplus projection came from a one-time tax amnesty program, and another over-performing area of collections was estate taxes, a category whose performance is variable.
Down the road, he added, budget projections showing a $1.1 billion deficit two years from now and $1.8 billion deficit in fiscal 2018 should call for belt-tightening rather than celebration. General fund spending in fiscal year 2013, he noted, increased only 1.3 percent, far below historic norms.
And while quarterly tax filers and those receiving bonuses are helping add to the state's coffers, he said collections from workers paying withholding taxes are still pretty flat. Lembo said he is taking a conservative approach to spending because he expects economic recovery to be on a long and slow trajectory upward.
"We've got a lot of promise," he said. "I think Chicken Little has been put out to pasture."
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