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February 10, 2014 Editorial

Malloy plays election-year politics

Gov. Dannel P. Malloy hasn't officially announced his intentions to run for re-election but he's already campaigning to retain his chief executive's seat.

After scaling back controversial teacher reforms, proposing a modest tax cut to middle class families, and calling for another minimum wage increase, Malloy is aggressively pandering to key constituencies that will decide the 2014 gubernatorial race.

It's brilliant politics, but what it all means to Connecticut businesses remains unclear.

Malloy's efforts to curry favor with his Democratic base will likely mean another increase to the state's minimum wage, creating more burdens for small businesses and putting another dent in Connecticut's “Open for Business” mantra.

Malloy wants to increase the minimum wage to $10.10 per hour by 2017, which would be the highest in the country. The move comes less than a year after the legislature approved increasing the minimum wage from $8.25 to $9 by Jan. 1, 2015.

We've already come out against last year's minimum wage hike; this measure simply adds salt to the wound.

It was only a year ago when Malloy himself raised concerns about increasing the minimum wage fearing it could upset Connecticut's fragile and lethargic economic recovery. Now the governor is doubling down on his support for the measure, despite the economy still only sputtering along. It would be wiser to see how businesses absorb a $9 minimum wage before agreeing to further increases. Additionally, carrying the title as the state with the highest minimum wage won't make businesses eager to invest in Connecticut.

On the plus side, Malloy has proposed a moderate, sensible plan to deal with this year's projected $500 million budget surplus. The first-term governor wants to use $100 million to reduce unfunded pension obligations and add $250 million to the Rainy Day Fund, which would nearly double the state's cash reserves. That should help put the state's long-term finances on more steady ground, particularly with a $1 billion deficit looming in fiscal 2016.

Malloy also wants to provide $155 million in gas and sales tax rebates, a small gesture aimed at currying favor with middle class voters. It would be more fiscally prudent to save those dollars as well, but at least a rebate is only one-time revenue, which means it doesn't create long-term budget holes.

The same can't be said, however, for the $55 million in new tax breaks and sales tax exemptions Malloy is pushing for teachers, cities, and towns. Those initiatives are largely politically motivated and will add to the state's projected fiscal 2016 deficit.

How will lawmakers make up for the lost revenue? Malloy hasn't provided those details, but he should before pitching new tax cuts. Any measures that add to the state's long-term deficits must be looked at with skepticism by the business community.

Meanwhile, Malloy's $134.5 million planned investment in the state college system — called Transform CSCU 2020 — holds some promise for businesses in need of developing a future workforce.

The initiative includes expanding advanced manufacturing programs at community colleges, which dovetails with Malloy's proposal to create a $25 million fund to help manufacturers modernize and scale up their operations to prepare for increasingly aggressive production schedules in the years ahead. Supporting advanced manufacturers is good policy because they tend to be impacted the most by the high costs of doing business in the state.

Malloy's higher education plan also calls for building stronger partnerships with business and industry to give students access to internships, externships, and a strong career network. The state's colleges and universities do need to build stronger ties with the private sector. We'll wait and see how well this initiative delivers on that promise.

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