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A Cup of Holiday Gloom
CBIA surveys chart dearth of confidence in state's recovery
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Business New Haven
12/23/2002
By: BNH
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Business executives' confidence that state government will make decisions that will bolster the state's economy has plunged since 2001 and is now at its lowest level since 1995. So says the annual survey of Connecticut Business & Industry Association (CBIA) member companies with regard to key issues impacting the state's business climate.
Only 43 percent of the executives responding to the survey said they were either “highly” or “somewhat” confident. That's down sharply from 68 percent last year, although still slightly above the 41 percent expressing confidence in 1995.
This year's confidence drop has translated into more companies saying they would choose an out-of-state location instead of Connecticut if they were to relocate or expand their business - 40 percent, up from 32 percent last year.
“With the state facing growing budget deficits and job losses, clearly we need to restore business confidence in Connecticut,” says Kenneth O. Decko, CBIA's president and CEO. “Reviving our economy is a key to solving the budget deficit and critical to providing the jobs people need.”
Asked what state government might do to encourage them to expand in Connecticut, “reduce workplace costs” was the answer cited most frequently, by 39 percent of respondents. The business costs that concern business people most keenly are employee health benefits (cited by 54 percent), state and local taxes (16 percent) and workers compensation (11 percent).
With regard to taxes, companies reported that the levy that most inhibits them from growing is the property tax on business machinery and equipment (cited by 28 percent of respondents), followed by the corporate income tax (22 percent) and the property tax on buildings and real estate (21 percent).
In a separate CBIA survey, purchasing managers at Connecticut companies said that the weak economy during 2002 hurt their companies' operating budgets as their firms struggled to crawl out of the recession.
According to the survey, conducted among members of the Connecticut Association of Purchasing Management (CAPM), the weak recovery continues to create challenging conditions for production, orders, inventories and employment levels at state firms. While figures are considerably better than those for mid-2001 to early 2002, almost all are unchanged from the third quarter of 2002.
Respondents noted that the weak economy wrought havoc with their own operating budgets, as managers slashed budgets by a median of ten percent during the year. Of the 72 percent of firms who cut budgets in midstream, 47 percent reported reductions in excess of ten percent in spending and 19 percent reduced operating budgets by more than 25 percent.
“There's no way you are going to see solid economic growth with firms significantly trimming budgets in midstream,” notes Peter M. Gioia, CBIA economist. “It's a significant handicap to economic recovery.”
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