Can Connecticut’s economy be fixed ?

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Connecticut’s economy has been stagnant now for two decades. Employment remains at 2000 levels and a major exodus of jobs, firms and residents is underway. How can this have occurred for the nation’s wealthiest state sandwiched between the two modern hi-tech industrial powerhouses of Boston and New York City?

Our first observation is that Connecticut is the nation’s wealthiest state only because several hundred residents — about 5 percent of the 3.6 million population — live in the Gold Coast adjacent to the New York City economy and enjoy six- figure incomes. Gold Coast residents supply about 40 percent of the state’s income revenues and receive little in state outlays for services. Excluding the Gold Coast, the question now becomes why is Connecticut — a state whose typical incomes are just about equal to those of the nation — in such difficult economic straights.

That’s the really important question. It’s not that Connecticut is the wealthiest state, but that the 95 percent of other Connecticut has had a failing economy for several decades. Fortunately the answers are straightforward.

Economic growth takes place primarily in cities for well known reasons. But Connecticut’s larger cities are not only small, mostly around 125,000 people, but outside of Stamford in the Gold Coast, are severely depressed and dependent on the state for basic social services, including education.

In 1950 fully one-fourth of Connecticut’s residents lived in just three cities — Bridgeport, Hartford and New Haven. And those cities were nationally prominent industrial powerhouses participating in our huge war effort. Today they’re each severely depressed and together account for only about 10 percent of the state’s population.

Connecticut’s cities failed to adopt to modern times. Outside of the three remaining defense firms with about 50,000 employees — Pratt & Whitney, Sikorsky and Electric Boat — there’s no significant manufacturing in our state. Modern high-tech computer industries have bypassed Connecticut. Not only do we lack requisite skilled labor forces, but none of our extensive public and private colleges are first rank schools in computers, high-tech, engineering, sciences, etc. In contrast, both Boston and New York Cities not have a dozen world class high-technology colleges/universities, but also an unparalleled high-tech work force. In a word the high-tech economy has bypassed Connecticut.

A second handicap is that our population is dispersed among 169 town and small cities. It’s unique — and imposes high duplicative costs of municipal services. Calculating the high six-figure salaries of over 150 school superintendents illustrates the point. A related handicap is the high cost of providing municipal public services owing to very strong public unions whose salaries and benefits are among the highest in the nation. That’s also true at the state level where union salaries comprise 40 percent of the state’s $20 billion budget.

Taken together, our very large number of small towns and cities together with among the nation’s highest paid public unions means Connecticut is a very high cost state in which to do business. And to live. High public union salaries/benefits require high property taxes across the state. And high state public union salaries/benefits require high state taxes.

So we have a “double whammy” — high costs from duplicative public services and very high costs of public union salaries/benefits. Reportedly over 1,000 University of Connecticut retired professors enjoy annual pensions over $100k –with some as high as $300k.

A third handicap is how education outlays are allocated. We spend over a billion dollars annually on UConn despite having more than a dozen nationally prominent colleges and universities including the great Yale complex — one of the world’s leading universities.
UConn is located out in the Storrs farm land far away from any city. Reportedly its graduates mostly leave Connecticut for jobs outside the state. And UConn is not prominent in the high-tech computer, math, science and engineering fields as are the public universities of adjoining New York and Massachusetts. UConn’s staff is among the highest paid in the nation and highly union organized.

In contrast to over-spending on our public colleges, educational spending in our depressed welfare cities is viewed as inadequate, even though largely supported by state aid. However, the example of Norwalk, a middle income commuter city on the fringe of the Gold Coast, suggests that more spending doesn’t produce desired results. Norwalk keeps school teacher salaries competitive with the surrounding wealthy towns with incomes four to five times higher. But less than one-half of Norwalk’s graduates ever go on to graduate from a four-year college. Norwalk has a 10 percent poverty rate, high levels of single parent families, and a highly diversified population many of whom are first generation non-English speakers. The Norwalk experience suggests major new infusions of school aid to the welfare cities will not have pronounced improvements in educational outcomes.

A fourth handicap is that Connecticut is sandwiched between two of the world’s most dynamic and economically most successful cities – Boston and New York. That encourages its best and brightest school grads to emigrate outside the State. Reportedly Connecticut is a highly transient state where only one third the residents were born here.

A fifth handicap is how the “gift” of the small Gold Coast population providing 40 percent of state revenues are used. That gift supports social services across the state. And largely underpins the high salaries/benefits of State and municipal public union workers comprising our largest state industry. The obvious question (except to elected officials) is why a state like Connecticut should have among the highest paid public unions when we excluding the small Gold Cost our State income are just about average.

Taken together these five handicaps are not resolvable in the near term. And perhaps not for several decades. Of course that does not prevent candidates for office from claiming they have the “magic answers” of restoring Connecticut to its former glory years when Pratt & Whitney employed almost 100,000 people, producing one-half the airplane engines used by the Allies in the WWII. Or when Bridgeport was known as the “Arsenal of Democracy” with the world’s largest collection of brass machine shops producing enough ammunition to fill more than 600 freighters who supplied Allied forces in Europe and in the Soviet Union.

Connecticut, outside the Gold Coast, has really been bypassed by modern industries and remains a very high-cost state within which to do and attract business. Its cities resemble rust belt cities of the Midwest. It’s population is dispersed and subject to very high costs of doing business and owning homes. The economics of cities and states is well understood. So it’s important for elected officials to understand there are no magic bullets and that many if not most wealthy residents will retire outside Connecticut to escape the tax man. And we haven’t even talked about our failing commuter railroads and impossibly cramped highways providing access between thriving Boston and New York City.

That said, Connecticut has perhaps the most attractive set of leafy small towns and villages nestled in its many river valleys of any state in the union. Many dream of retiring in those idyllic settings. Providing they have the income.

Peter I. Berman lives in Norwalk.


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