UConn To Malloy: It’s Not All Roses and Marigolds After All

The romance between Fred Carstensen of the Connecticut Center for Economic Analysis (CCEA) at UConn and the administration of Governor Dannel Malloy suffered a setback when Mr. Carstensen discovered that new data supplied by the federal government indicates a slowdown in business activity. For reasons that are not clear, the dip in job growth in Connecticut surprised Mr. Carstensen, the Candide of economic analysts in the northeast.

In proving foresight may be vain:  The best laid schemes o' Mice an' Men,  Gang aft agley,  An' lea'e us nought but grief an' pain,  For promis'd joy!

Prior to the passage of a state budget that imposes hefty revenue enhancers on Connecticut’s tax-whipped businesses and its suffering middle class, the CCEA predicted in February that  Connecticut might well add 44,000 jobs in 2015 and 2016. This rosy estimate, Mr. Carstensen now says, was based on federal data that has been massively revised – and not for the better.

Earlier federal data showed strong job creation and output growth in Connecticut, but more recent data concerning the state’s gross state product (GSP)  reduced promising estimates by more than $4 billion; the revised growth figure fell to a lowly 0.6 percent.

Based on the new and more accurate federal figures, CCEA is now reporting that Connecticut ‘s GSP growth in 2014 lags behind that of Massachusetts, New York, New Jersey, Pennsylvania, Ohio and – adding insult to injury – “even Rhode Island.” The slowdown in business activity in Connecticut means that job creation in Connecticut during the next two years “will likely stall and may even now decline,” according to the revised CCEA report.

One policy in particular, the hospital tax, is especially onerous, Mr. Carstensen tardily advises.

In fiscal year 2011-2012, Connecticut imposed a $350 million annual tax on its hospitals, returning $400 million in state grants to the industry, a budget maneuver that allowed Connecticut to qualify, under Medicaid rules,” for a 50 percent federal reimbursement on its payments, or $200 million,” according to a report in CTMirror  .

In order to accommodate persistent budget deficits, the Malloy administration and the Democrat dominated General Assembly steadily reduced its give-back amount to hospitals – but, significantly, the hospital tax remained constant. Reimbursement rates rose, state grants to hospitals were reduced and, predictably, the state forfeited its federal aid. This year, CTMirror reports, “will get back less than $96 million, and the state will receive about $65 million in aid – about $200 million less than it would have had payments to hospitals remained at 2011 levels.”

If Robert Burns, the author of “To A Mouse,” had been in charge of UConn’s Connecticut Center for Economic Analysis, the Center’s job growth predictions might have been more accurate:

But Mousie, thou are no thy-lane,