A few weeks ago, Gov. Malloy announced that the State will be handing out nearly $81 million in grants and loans to help 16 companies relocate, expand and create jobs. Sixteen companies will collect $80.7 million in taxpayer funds to assist with relocation, expansion and creation of jobs statewide. The Governor said the companies receiving funds are expected to retain 15,003 jobs and create 3,876 new jobs.
In these times of economic uncertainty for our state, that sounds promising. But at what price? Is this program a wise allocation of hard-earned taxpayer dollars that will spur investment and benefit our economy for years to come? Or, is it a foolhardy attempt to bribe companies to do what their shareholders would do anyway? Is this simply corporate welfare for those who least need it?
In some instances, the funds have been used to move company headquarters closer to the CEO's home, shortening their commute time. In 2014, First Five, Connecticut’s signature economic development program, prompted five CEOs to move their companies. In return, they got taxpayer funding – and a shorter commute to work. A plan to move the hedge fund Bridgewater Associates, one of the world's largest, from Westport to Stamford at a cost of $115 million in taxpayer money fell through. The move would have reduced the commute for its billionaire founder Ray Dalio by two thirds. Instead of driving about 45 minutes from Greenwich to Westport, Dalio would drive only 15 minutes to Stamford, according to a study by the Yankee Institute for Public Policy.
Is awarding companies hundreds of millions of taxpayer dollars while the state is cutting services to deal with deficits the right choice? To make matters even worse than simply a poor policy decision, there have been instances of fraud and abuse in this program as well.
A former resident of Vernon was indicted last year by a federal grand jury for using a fake pita company to fraudulently obtain $3 million, including $400,000 from the state of Connecticut. Moshen Youssef, supposed owner of Amoun Pita of South Windsor, was indicted on 14 counts. Two of the charges related to obtaining $400,000 from the Connecticut Department of Economic and Community Development's Small Business Express program. According to DECD, the state funding was meant to retain 11 jobs and hire 25 more people. At the time of his loan application, Youssef had only an average of $33.62 in the bank, according to the indictment.
Absent the fraud and abuse, the politicians in Hartford can make the argument that each of these incentive programs is money well spent. But collectively, are we really making a difference in the overall economy? The reality is these programs reduce tax revenue at both the state and local level, and increase state borrowing.
Legislation passed and signed into law in 2017, requires the state auditors to conduct performance audits and evaluations of the various business assistance programs administered by the Department of Economic and Community Development. It also requires the findings of those audits to be discussed by the appropriations, commerce and finance committees.
As governor, I will make it a priority to thoroughly review these incentive programs to make sure taxpayers are getting a fair return on their investments.
Beyond this, and more importantly, my administration will initiate programs that benefit all businesses in our state, not just a favored few.
We will reduce and eliminate counter-productive nuisance taxes. We will reduce occupational licensing requirements that don’t add to public health or safety, but do deter job formation. We will streamline and accelerate governmental approvals when they are required. We will seek an expanded training wage to create more opportunities for low-skilled individuals to enter the work force. We will partner with businesses to create rigorous technical education and training programs that lead to meaningful, good-paying jobs without the need for a college education.
We will let companies know that Connecticut is open for business, and that we welcome innovation to create growth and opportunity.