Rhode Island newspaper says Connecticut's a mess
This editorial appeared in The Providence Journal.
Rhode Island has taken several important steps in recent years to walk itself back from the precipice of economic disaster.
It reformed state public pensions (though local ones remain a disaster). It resisted the annual temptation to hammer residents with broad-based tax hikes. It started to make energy and unemployment taxes less onerous for businesses, since Rhode Island cannot afford to drive more jobs away.
Those who wonder whether those steps were worth it might want to read a Jan. 9 story in the Hartford Courant ("Business Leaders Say State Economy is in Crisis").
The story reports that Connecticut's private sector leaders met this month to discuss their state's "sluggish economic growth ... dwindling population and an entrepreneurial climate that more and more businesses criticize as noncompetitive." Connecticut has been hammering its businesses and residents with ever-higher taxes to pay for ever-increasing costs associated with pensions and other benefits for public employee unions.
That has done much to damage its economic competitiveness. According to the Beacon Hill Institute, Connecticut was America's eighth most competitive state in 2001. By 2016, it had dropped all the way to 43rd.
That has driven away upper-middle-class people.
Jim Loree, CEO of Stanley Black & Decker, noted that the average income of a family leaving Connecticut, $123,000, is substantially higher than the income of a family moving into the state, $93,000. This churning has caused an "incredibly volatile" income stream in this state, leaving it "very vulnerable to market downturns."
Another problem, Loree noted, is that the state's tax revenues come from a very limited pool of potential taxpayers. Residents of a mere 10 towns produced 36 percent of the state's tax revenue. And an incredible 12 percent of all of the state's personal income tax came from 357 families alone. Should many more wealthy taxpayers flee, Connecticut would be in a world of hurt.
Meanwhile, the state's liabilities, including debt and pensions, soared to $85.5 billion in 2016. Moody's Investors Service listed the adjusted net pension liability at 20 percent of gross domestic product, and warned that funding obligations could triple in the next 15 years.
Will anyone choose to stick around to pay for that?
Connecticut's economic policies have created enormous difficulties for existing businesses, while driving others out. In the last two years, Aetna and General Electric announced they will move their headquarters out of state. Those "high profile exits undermine the credibility of the state and make it incredibly challenging for us," said Catherine Smith, commissioner of economic and community development.
Connecticut is working hard to retain Aetna, now that New York City has pulled out of a deal that would have moved the company's headquarters there. While CVS, in the process of buying Aetna, said this month it has no plans to move that headquarters, R.I. Gov. Gina Raimondo should see if at least some of those jobs could come to Rhode Island. It is certainly less risky than the Nutmeg State.
The editorial board is composed of the publisher and four journalists of varied editing and reporting backgrounds. The board's discussions and information gained from its meetings with political, civic, and business leaders drive the institutional voice of The Day, as expressed in its editorials. The editorial department operates separately from the newsroom.
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