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A Plan For Rebuilding
Manufacturing Competitiveness and
Job Growth in Connecticut
2011
Prepared and endorsed by::
MAC, Manufacturing Alliance of Connecticut, Inc.
NHMA, New Haven Manufacturing Association
SMA, Smaller Manufacturers Association of Connecticut
CTMA, Connecticut Tooling & Machining Association
METAL, Metal Manufacturers’ Education and Training Alliance
Other Associations
The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
Connecticut, like the rest of the nation, is slowly emerging from a long and deep recession which has included major slowdowns in the housing, automotive, financial and retail sectors. The situation is exacerbated by increased competition from lower cost states and foreign countries combined with the difficulty of credit availability.
This year, as never before, it is incumbent upon the new administration and the members of the Connecticut General Assembly to look at long term structural solutions that will make Connecticut manufacturers competitive and help to grow well-paying manufacturing jobs right here in our state.
We present our top ten recommendations:
1) Connecticut must keep in place all previously-enacted legislation that was passed to help make CT manufacturers competitive with our border states. Principle among these is the phase-out of Personal Property Tax on Manufacturing Machinery and Equipment. Tax policy should encourage competitiveness and capital investment.
2) Connecticut should aid in the creation of credit facilities that can infuse CT manufacturers with much needed capital and Connecticut should institute job creation tax credits that incentivize hiring at CT manufacturing facilities.
3) Connecticut should re-examine the costly mandates that have been placed on health care plans in our state and avoid adding any new mandates. Connecticut should also require that future mandates can only be added with a two-thirds vote of the CGA.
4) Connecticut should require the Department of Environmental Protection (DEP) work with companies in their efforts to be compliant, and issue the necessary permits in a timely way to help them define and implement plans that bring them into compliance.
5) Connecticut should combat oppressive electric supply contracts that are costing many manufacturers untold thousands of dollars. The Energy & Technology committee should put together a task force to develop a code of conduct for electric supply brokers.
6) Connecticut should re-examine the costly mandates that are placed upon our towns and cities to help alleviate painful increases in local property tax rates and require that future mandates can only be added with a two-thirds vote of the CGA.
7) Connecticut must not further raise business costs. Connecticut should declare a two-year hiatus on the imposition of any new regulation, tax, mandate or statute that will increase the cost of manufacturing in Connecticut.
8) Connecticut should examine the feasibility of expanding existing tax credits that are available to manufacturers organized as ‘C’ corporations to the manufacturing companies that are structured as ‘S’ corporations, limited liability companies (LLC’s) and sole proprietorships.
9) Connecticut should compare tax rates, labor policies and regulatory compliance costs to our neighboring states in order to determine why per capita taxation is higher in Connecticut than in all of our neighboring states and then take steps to make CT competitive.
10) Connecticut must reduce healthcare costs, while improving quality and access. A strong private-sector industry is vital to competiveness.
Manufacturers in Connecticut have survived many difficult economic cycles. Despite the market upheaval of 2008 and the ongoing credit crisis, CT manufacturers continue to be the engine of the Connecticut economy. The manufacturing associations of Connecticut and their members and employees urge great caution that no action is taken to further impair the ability of CT manufacturers to recover in these difficult economic times.
Property Tax
Manufacturers recognize the challenges faced by Connecticut municipalities. They further believe that manufacturers are already paying their fair share and urge that municipalities be directed toward efforts to help manufacturers remain in their communities as active employers. Efforts should include:
- The critical phase-out of the Personal Property Tax on Manufacturing Machinery and Equipment must remain in place and on schedule.
- Contingency-based personal property tax audits should be prohibited outright.
- Manufacturing machinery and equipment installed by manufacturers in order to facilitate Load Response (LR) or Distributed Generation (DG) projects should be exempted from property tax and treated as manufacturing equipment.
- Environmental control equipment installed in a manufacturing facility for emissions compliance should be treated as manufacturing equipment.
Succession
Many manufacturing companies are family owned and are passed from one generation to the next. The imposition of any new estate tax that will affect the transfer of a family business between generations is extremely problematic for manufacturers.
Sales & Use Tax
- CT must carefully analyze the impact on manufacturing when considering joining the Multi-state Sales Tax Compact. Although the overall sales and use tax rate may decline as a result, manufacturers could be negatively impacted if certain categories of goods are included.
- Connecticut should eliminate tax on equipment installed by manufacturers in order to facilitate Load Response (LR) or Distributed Generation (DG) projects; environmental control equipment installed in a manufacturing facility for emissions compliance; and the labor associated with installing equipment that is exempt from the sales tax should be similarly exempt.
Corporate
- Connecticut should avoid moving to Unitary or any other taxation methodology that would extract more revenue from Connecticut manufacturers. Manufacturers are paying their fair share.
- Eliminate the $250 Entity Tax on all businesses with 10 or fewer employees.
- Connecticut should examine the feasibility of expanding certain existing tax credits that are available to manufacturers organized as ‘C’ corporations to the manufacturing companies that are structured as ‘S’ corporations, limited liability companies (LLC’s) and sole proprietorships.
- Eliminate the 70% cap on corporate income tax credits.
- The CGA should amend the Manufacturing Job Creation Tax Credits passed three years ago to include the creation of any new manufacturing job in Connecticut (from the current requirement that 50 jobs be created) to spur employment growth in manufacturing.
- Encourage manufacturers to reinvest in their Connecticut facilities by creating tax-exempt investment savings accounts.
- Expand the investment tax credits provided to the insurance industry to manufacturing.
- Maintain tax credits and other incentives that encourage manufacturers to invest in research and development and technology development.
The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
ENERGY
- The cost of energy in Connecticut remains problematic for CT manufacturers. The CGA has passed a considerable amount of legislation that has been helpful and prices are declining. Connecticut must maintain stable energy policies and allow free market competition to fully take hold in the marketplace.
- In the 1998 legislation, Connecticut’s regulated utilities were required to dispose of generation assets. If CL&P and UI are willing to undertake generation projects, and can demonstrate that such initiatives will provide rate relief through reduced FMCC charges or reduced peaking costs, then they should, at their own risk, be allowed to participate in the generation market.
- Energy costs in Connecticut are spiraling upward. Connecticut must do serious planning for our future energy needs. In addition, our elected officials should support reasonable power generation and transmission proposals. Connecticut must be an active multi-state partner in finding acceptable methods of providing for our energy needs.
- The CGA should avoid tapping into funds collected for Energy Conservation. These are not taxpayer funds; they are ratepayer funds that should be left in place to accomplish their intended goals.
- Connecticut should provide energy generation facilities and equipment located in Connecticut with an exemption from sales and use tax. Machinery, equipment, parts and supplies used in the production of energy should be considered manufacturing equipment and exempt from sales taxes as well as the gross earnings tax (GET) on fossil fuels purchased by energy generators.
- In order to combat the oppressive electric supply contracts that are costing many manufacturers thousands of dollars, MAC asks the Energy & Technology committee to put together a task force to develop a code of conduct for electric supply brokers. Brokers are not currently regulated by the DPUC and have no restrictions on how they conduct business. Conversely, aggregators must be licensed by the DPUC after a thorough hearing process. This task force would be made up of licensed aggregators, licensed suppliers, brokers, and, perhaps, representatives from the DPUC. A code of conduct for brokers would create a level playing field among brokers and suppliers as well as ensuring Connecticut businesses that the contract they sign follows the set rules.
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The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
ENVIRONMENTAL
Connecticut should require the Department of Environmental Protection (DEP) work with companies in their efforts to be compliant, and issue the necessary permits in a timely way to help them define and implement plans that bring them into compliance. In addition, Connecticut should:
- Adopt comprehensive Brownfield legislation that simplifies the rules and requirements, clarifies liabilities and in other ways incentivizes private investment in the redevelopment of environmentally impaired properties of all sizes.
- Reform the state’s Underground Storage Tank Fund so that it can be an effective resource in small business compliance with state and federal requirements.
- The CGA should continue to monitor the work of the Brownfields Task Force and the Planning and Development Committee Smart Growth Working Group and implement all recommendations that move properties toward compliance.
- Amend or repeal the “Upjohn Statute”, (C.G.S. § 12-63e) under which property owners of polluted sites are assessed property taxes based upon the full value of the property as if the site were clean. Manufacturers working to clean up contaminated sites need relief from municipal taxes to offset the ongoing cost of monitoring and remediation.
- Stimulate private capital investments by earmarking any grant money the state receives from federal sources to existing Connecticut businesses to be used for Brownfield remediation and development, including businesses already located on existing Brownfield sites where those companies may have caused the contamination, but were only following the best disposal practices of the day.
- Request that the Connecticut Academy of Science and Engineering perform an evaluation of all the pollution sources in Connecticut. This report should quantify the sources of impact upon the water, air and land of the state. As an example, an air study should include such sources as transport over state boundaries, forest and land use, transportation (auto, trucks boats, passenger and freight rail), and home heating, commercial heating, animal sources etc. The objective is to identify, rank and prioritize the major impacts and their sources.
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The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
WORKFORCE DEVELOPMENT
- Many small and mid-sized manufacturing companies benefit from CONNSTEP programs and services. CONNSTEP funding must be increased to prior levels or higher in order to restore and maintain service levels.
- Connecticut has both a graying workforce and a dwindling pool of available workers. We must address these issues. There exists within Connecticut a ready need for skilled and semi-skilled manufacturing employees. Connecticut must be a partner in helping to fill these openings. This includes a greater emphasis on customized job training and manufacturing apprenticeships.
- The community colleges, vocational technical schools and the Agriculture and Technology Center must be on the same page and need to address the issue of manufacturing skill training in an immediate way.
- The legislature should create new or enhance existing tax credits in the area of training and education as incentives to small and mid-sized manufacturers with particular emphasis on programs that encourage internships and job shadowing.
- Employees enrolled in apprenticeship programs need to be exempted from collecting unemployment compensation until a reasonable time has passed for evaluating the new hire. Manufacturers willing to hire and train new employees believe that this exemption should exist for the first 30 days of employment.
The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
HEALTH CARE COSTS
Health care costs in Connecticut continue to escalate, fueled in part by the constant addition of mandated benefits. Connecticut must resist adding additional costly mandates to employer funded health care plans.
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The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
EMPLOYEE BENEFIT COSTS
Connecticut is a high cost state in which to manufacture. Not the least of these expenses is the fully absorbed cost of employee wages and benefits. Manufacturers recognize that this is a high labor cost state and that wages are determined between employers and employees but MAC also believes that controlling benefit costs is essential. To that end we must:
- Avoid moving toward mandatory paid sick leave. Most manufacturers already offer employees an array of paid-day options and imposing a one-size-fits-all approach will be expensive and disruptive to employees and employers.
- Deem that illegal aliens are not eligible for benefits under the Second Injury Fund, which is funded by employers as an added cost to their workers’ comp premiums.
- Encourage the hiring of probationary employees by changing the threshold, CGS Sec. 31-255a(c), from $500 in wages, to thirty days of employment that an employee must complete in order to qualify for unemployment compensation. This lessens exposure for employers who hire probationary employees or hire for on-the-job training (OJT).
- Amend the statutes to eliminate permanency awards for pre-existing conditions. With the elimination of the Second Injury Fund, employers may find themselves financially responsible for 100% of a disability despite the fact that the entire disability or a substantial portion of it may have pre-existed employment and is not the result of an on-the-job injury.
- Reject captive audience proposals that restrain workplace communications and prevent employees from hearing directly from their employers about issues that affect their jobs, benefits or workplace.
- Reject “card check” proposals that take away the democratic, secret-ballot process in labor union elections and deny workers the right to hear all sides and make their decisions without pressure.
- Amend provisions on repetitive trauma to reduce permanent disability awards for that portion of disability resulting from lifestyle and/or the aging process.
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The best way to grow and attract jobs in Connecticut is to create an environment where manufacturing thrives and prospers.
ADDITIONAL MANU-FACTS
Connecticut lost 53,891 manufacturing jobs
between 1997 and 2007.
If we had kept those jobs the effect on
the Connecticut economy would be:
- A total additional $20 billion more in total manufacturing sales in 2007.
- An additional $30 billion in total sales from all industries in 2007.
- An additional 79,000 total non manufacturing jobs in 2007.
- An additional 132,000 jobs in Connecticut in 2007.
- An additional $4.5 billion in manufacturing employee compensation in 2007.
- An additional $3.6 billion in employee compensation in the non-manufacturing sector in 2007.
- An additional $7.8 billion in Connecticut's gross domestic product from the
manufacturing sector in 2007.
- An additional $14.2 billion in Connecticut's gross domestic product in 2007.
- An additional $6.4 billion in gross domestic product from Connecticut's
non-manufacturing sector in 2007.
- Each $1 Million in increased sales in manufacturing sector creates:
- 2.5 jobs associated directly with those sales.
- About 1 other manufacturing job indirectly associated with those sales.
- Nearly 5 other jobs associated with the indirect and income effects from those sales.
- A total of 8.3 Connecticut jobs associated with those sales.
- An additional $935,500 in sales, $615,475 in the non-manufacturing sectors.
- An additional $585,197 in income in the state.
- An additional $341,582 in income indirectly related to the increase of 1 million in sales.
- Purchases of $369,567 from Connecticut companies.
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