Tough Choices On Taxes, Spending Will Help Business
February 27, 2011
Connecticut taxpayers and businesses should be encouraged by Gov. Dannel P. Malloy's efforts to get spending under control and put our state government back on solid financial footing. The governor's newly unveiled budget proposal shows a willingness to embrace efficiencies and spending cuts that are essential to closing a $3.2 billion budget gap.
Streamlining state government will pay big dividends for Connecticut's citizens and taxpayers by lowering costs while improving services. Although not an easy task, we can do more with less. Don't let anyone tell you that this is not possible. It happens whenever you reduce waste and improve efficiency, something the employees of United Technologies do every day.
While curtailing spending and driving productivity are essential, we recognize that tax increases will also be necessary to solve the current fiscal emergency. But for Connecticut to prosper over the long term, Gov. Malloy and the General Assembly must strive for solutions that do not hamper business growth or damage the delicate economic recovery we've just started to see.
Tax increases should be modest and last only as long as absolutely necessary to resolve the budget crisis. Strict "sunset" provisions must be enforced to ensure today's temporary taxes do not turn into permanent tax hikes. Businesses big and small alike need certainty when making investments, investments that drive job creation. Therefore, significant structural changes in the way we tax businesses should be avoided.
One encouraging development is a focus on the state's pension fund, where there is a continuing gap between Connecticut's retirement promises and its ability to pay for them. Our unfunded pension liability is one of the highest in the nation but, by making tough choices now, Connecticut can head off a looming crisis.
Failure to do so will cast a shadow on our state's financial future, regardless of how we balance next year's budget. Gov. Malloy's proposal fully funds the state's pension obligations for this year — an important start on this large problem — but more must be done to curtail this growing liability.
At United Technologies, we too have faced the economic reality of growing pension obligations. In response, as have many private employers, we made necessary changes to our pension plan for current employees while advancing a more affordable and flexible defined contribution plan for new hires. In addition to making structural changes to our pension plans, UTC added more than $1.5 billion to its global pension funds last year alone to ensure we can honor commitments to our employees for their retirement.
In shaping its budget, the state will send important signals about its priorities. It's not enough for Connecticut just to be open for business; it also must compete with other states and globally. As we have noted before, Connecticut is a high-cost place to do business. That's why even in tough times, the keys to our future competitiveness must be protected.
An example is the state's research and development tax credit, which encourages businesses to invest in high-value knowledge work that is best suited to Connecticut's relatively high cost of living. This tax credit helps level the playing field and drive the innovation that gives Connecticut a competitive advantage. Safeguarding this program helps convince businesses inside and outside our state that Connecticut is serious about its economic future.
Another example is education, which is critical to maintaining a globally competitive workforce. UTC believes so strongly in education that we established our Employee Scholar Program. This program fully pays for tuition, books and fees for employees attending accredited institutions and it is widely recognized as the world's best. In Connecticut, UTC has spent more than $275 million on employees' educations since 1996.The state's commitment to quality educational performance should be equally strong. Education is a key to economic development and staying competitive.
No household, government or business can thrive by continuously spending more than it takes in. Nor can any organization succeed without sowing the seeds of growth. That's why measured cuts in state government, improved efficiencies, modest and limited tax increases and protection of key incentives are the steps we should take to promote lasting job growth and prosperity. Gov. Malloy's tone and leadership on resolving the state's budget crisis have us on the right track.
Greg Hayes is senior vice president and chief financial officer of United Technologies Corp.
Reprinted with permission of the Hartford Courant.
To view other stories on this topic, search the Hartford Courant Archives at