Connecticut Economy

Professor Lanza Launches Economic Newsletter

Professor Steven Lanza has launched The Connecticut Green Sheet, a short quarterly newsletter on the state’s economy (see the coverage by CT News Junkie at:

The Green Sheet “takes a page” from the department’s old Connecticut Economy Quarterly Review (the green is a nod to the Quarterly’s signature dark cyan accent color) and offers readers a current indicator of state economic activity (the General Drift Indicator or GDI) plus a forecast of anticipated nonfarm job changes.

Latest issue of The Connecticut Economy sheds light on public revenue and spending

Connecticut continues to boast the nation’s highest per capita income, but the state is among the bottom four in the percentage of that income used to fund state and local public services, according to a report in the latest edition of The Connecticut Economy: A University of Connecticut Quarterly Review.

In a study seeking to empirically determine the optimal amount of funding states should devote to public services without adversely affecting a state’s economy, Steven P. Lanza, executive editor of the magazine, collected 16 years (1993-2008) of personal income and government spending data for the 50 states from the U.S. Bureau of Economic Analysis and the U.S. Census of Governments. He finds that Connecticut under-spends on most government activities, including education and infrastructure, while spending more than the optimal amount on health care.

“Public spending in the Nutmeg state averaged just 17.6 percent of income in the years surveyed, more than six points below the optimal share,” Lanza writes. “With such a lean public sector, Connecticut essentially forfeited an additional 1.2 percent in yearly income it would otherwise have earned, had it adopted the optimal mix,” because public services could have been added that would have helped the private sector grow. According to the study, the optimal share of non-federal public spending is about 24 percent of income, somewhat higher than the 50-state average of 22 percent, and well above the figure for Connecticut.
Lanza also points out that public opposition in Connecticut to the expansion of government services may reflect dissatisfaction with the present tax mix, which seems to rely too heavily on property taxes and too little on “other revenue”—a category that includes tolls, excise taxes, or other special revenue sources.

The Connecticut Economy’s other editors, Prof. Dennis Heffley and emeritus Prof. Arthur W. Wright also weigh in with articles based on recent research. Wright considers whether the recent downturn in casino revenues can be staunched, and Heffley examines teacher salaries in Connecticut.

In addition to briefly tracing the history of Connecticut casinos—Foxwoods and the Mohegan Sun—and their significant contribution to state and local revenues since the early 1990s, Wright examines the impact of the recent recession on this source of public funding. He also considers how the anticipated rebound in casino gaming revenue in Connecticut might be affected by the expansion or development of new casinos in surrounding states.

Professor Heffley compares the annual wages of teachers—pre-school, kindergarten, elementary, middle school, and high school—across states and finds that Connecticut ranked 9th, 4th, 3rd, 1st, and 4th, respectively, in May 2009. But, according to the same data from the Bureau of Labor Statistics, Connecticut also ranked 2nd in annual wages across all occupations. Relative to the all-occupation figure, Connecticut ranks 41st, 15th, 5th, 6th, and 17th in teacher pay for the five categories. At the March 15th press release, it was also noted that, relative to other states, Connecticut has been falling in the rankings of teacher pay over the last decade.

Read the complete issue of The Connecticut Economy here.

Winter 2011 issue of The Connecticut Economy highlights the “Great Recession Cleanup”

With aftershocks from the Great Recession still reverberating, state officials are considering a mix of strategies to shore up Connecticut’s budget and steady its teetering economy. Several ideas that may help–taming tax expenditures, supporting community colleges, and fostering community development by reclaiming “brownfields”–are among the topics addressed in the Winter 2011 issue of The Connecticut Economy: A University of Connecticut Quarterly Review.

In this issue’s guest commentary, Joan McDonald, Commissioner of the Connecticut Department of Economic and Community Development (DECD), evaluates the state’s economic strategic plan in light of projected state budget deficits of $3 billion or more for each of the next three fiscal years. “Clearly, we in government are in uncharted waters,” McDonald says. “Business-as-usual is not an option for Connecticut.” The commissioner will attend the December 8th press briefing (Connecticut Center for Advanced Technology in East Hartford, 9:30-11:00 AM) and take questions from the media.

Community colleges have long provided a training ground for displaced workers and an inexpensive backstairs route to more advanced degrees, notes Quarterly Executive Editor Steven Lanza. Prodded by the Great Recession, this fall, a record 58,000 students enrolled in Connecticut’s 12 community colleges, a 5.7 percent jump over Fall 2009. “Little wonder,” writes Lanza in an article that highlights the earnings gains from greater educational attainment, “that amid a troubled economy… policy makers are taking a fresh look at the prospects, promise and payoffs of community colleges.”

Connecticut “spends” several billion dollars a year by not collecting all the taxes it could. Through “tax expenditures” (TEs), the state forgives many taxes, provided would-be taxpayers pursue state-favored goals or purposes. For example, sales taxes are exempted for clothing purchases under $50, with the goal of helping the poor—although non-poor buyers of such clothing also benefit. Quarterly co-editor Arthur Wright examines whether state officials might find some sizable extra revenues among all the TEs, widely scattered throughout the tax code, to help balance state budgets over the next three years.

For the past decade, returning brownfield properties to productive use has been a key component of Connecticut’s “smart growth” strategy. An interdisciplinary group at UConn, the Center for Transportation and Livable Systems (CTLS), recently conducted a survey of Connecticut’s 299 known brownfield sites, noting that redevelopment has been slow. “Sound, effective policies offer a chance to simultaneously rejuvenate inner cities, contain sprawl, reduce commuting costs and improve environmental quality,” the CTLS study suggests.

In a related study, Quarterly co-editor Dennis Heffley reports that the cost of brownfields, in terms of reduced property values, may approach $3,000 per home in affected towns. “Aggregating these costs across homeowners… could yield a total loss that would justify efforts to remediate these sites, especially if the improved property values also generated additional local tax revenue and alleviated the pressure on state government to supplement local tax collections,” Heffley writes.

In other articles, the editors and contributors to the Quarterly:

  • Report the latest data and forecasts of jobs, unemployment, housing prices and permits for the four largest market areas in the state.
  • Provide tables, charts and commentary on labor market activity.
  • Forecast that the state’s economy looks becalmed, making for very slow growth in jobs and state GDP.
  • Map trash disposal and recycling spending in 2008 for each of Connecticut’s 169 cities and towns in the Quarterly’s centerfold.

For free access to this and earlier issues of The Connecticut Economy, dating back to 1993, see:

Fall 2010 issue of The Connecticut Economy examines key election issues

Flagging economic growth and concerns about high unemployment have created a sense of urgency for mid-term election candidates as well as voters. The Fall 2010 issue of The Connecticut Economy: A University of Connecticut Quarterly Review analyzes several topics high on voters’ to-do lists, including job growth, tackling the state’s budget problems, reducing transportation bottlenecks, and increasing the competitiveness of Connecticut manufacturers.

The two major-party gubernatorial candidates, businessman Tom Foley (R) and Stamford mayor Dan Malloy (D), outline their goals for the economy in the issue’s “Forward Look” feature. Both candidates also addressed attendees at the September 8th press release event at the UConn Stamford campus, as part of the morning-long Fairfield County Economic Summit & Outlook symposium co-sponsored by CBIA, the Stamford Chamber of Commerce and the University of Connecticut.

Connecticut lawmakers managed to meet the constitutionally required “balanced budgets” for the current biennium (FY 2009/10 and FY 2010/11), yet the state still faces persistent structural deficits of about $3 billion per year, plus a roughly equal amount of unfunded liabilities for pension and retiree health insurance benefits promised to state employees. Noting, “This is not a problem we can simply wish away,” co-editor Arthur Wright sees this challenge as “Job One” for all state candidates.

With more than half of the state’s 1.6 million jobs concentrated in the Hartford and Bridgeport-Stamford market areas, commutes to work in these regions are often difficult and costly. Exploring how to make the journey to work more cost efficient – essential to stronger job growth in the state – Edward Deak, a professor of economics at Fairfield University, suggests several innovative traffic management solutions.

In election season, claims resurface that Connecticut is unfriendly to business. But co-editor Dennis Heffley and two colleagues, Professor Subhash Ray and Assistant Professor in Residence Lei Chen, challenge the state’s high-cost reputation in a study of manufacturing competitiveness that measures “overall unit costs” (labor, materials and energy, capital, and other costs such as temporary staff, data processing, advertising, and taxes and license fees). Using data from the 2007 Economic Census, the authors show that “high average wages do not necessarily imply high production costs.” Despite having the 4th highest wages for manufacturing production workers, Connecticut’s cost of producing a dollar’s worth of manufacturing output is 43rd highest among the 50 states. Only Oregon, North Carolina, Virginia, Arizona, New York, Wyoming, and New Mexico have a lower overall unit cost.

Analyzing voter turnout in 2006 – the last time Connecticut elected both a governor and a U.S. senator – Scott Condren, an economics major and Quarterly summer intern, examines the determinants of the earlier voter turnout (educational attainment, party affiliation, socioeconomic conditions, income, marital status, population density, and age) and discusses why the relative importance of some factors might change this year. He concludes that “…lessons from 2006 may not apply for 2010.” The centerfold of the current issue also maps the voter turnout percentage from the 2006 election and gives each town’s party registration breakdown.

Connecticut has not posted any significant nonfarm job gains in two decades. But when the self-employed are included in the count, the state’s job growth story changes. Steven Lanza, the Quarterly’s executive editor, finds that since the mid-1990s the ranks of the state’s self-employed have grown by 27,000 jobs annually. That’s a job growth rate of 1.3% per year, only slightly below the comparable U.S. average of 1.7%. Lanza also examines regional differences and public policy implications that result from “Connecticut’s recent growth in jobs due almost entirely to a swelling in the ranks of the self-employed.”

Other features of the fall issue include tables, charts, and commentary on regional labor market activity within the state and a forecast that stubborn unemployment rates will keep the state’s economy weak for some time, although the impact on Connecticut’s real gross domestic product may be less severe – 4.3 % by the current forecast compared with 5.5% previously predicted.

For free access to this and other issues of The Connecticut, dating back to 1993, visit:

Summer 2010 Issue of The Connecticut Economy: Summer Fun with a Dose of Reality

A rising tide of shopping and recreation activity along with a small surge in jobs offer hints that the recovery is making some waves. But the state’s budget crunch reminds us that it is still no day at the beach for Connecticut’s economy. With the economic climate improving, the Summer 2010 issue of ‘The Connecticut Economy: A University of Connecticut Quarterly Review’ explores the potential for baseball and winemaking to spur economic development. Mindful of the economic risks ahead, the magazine also examines the looming threat of the state’s unfunded pension liabilities.

A guest commentary by Robert Santy, President and CEO of the Connecticut Economic Resource Center, examines the convergence of forces that gave rise to the state’s 30 vineyards, making them a vibrant tourist draw and potential source of economic growth. Santy also spoke and responded to media questions at the June 8th press release of the summer issue at CERC’s Rocky Hill headquarters.

Rumor has it that Connecticut could be in line for a major-league baseball team. The state has a rich heritage of professional baseball (surely you recall the Hartford Dark Blues and the New Haven Elm Citys), and the Tampa Bay Rays — despite being perennial contenders in the American League East– cannot seem to attract a crowd in their current home. Executive Editor Steven Lanza analyzes the logic behind such a move and the potential benefits to the Nutmeg State of relocating the Tampa Bay team to “a geographic ‘sweet spot’ midway between Gotham and Beantown.”

Connecticut may need a good diversion: its unfunded liability for state retiree pensions and benefits totals $7,395 for every state resident, based on 2009 Census population figures. Compared with more populous states, Nutmeggers’ liability is 2.6 times New York’s, 3.2 times Massachusetts’, and 4.4 times California’s. Quarterly co-editor Arthur Wright and UConn economics professor emeritus Peter Barth examine the available “solutions” as Connecticut tries to honor its retirement promises to state employees.

Commercial winemaking in Connecticut began in the mid-1970s, and the industry, as in other states, has sought to encourage growth by promoting “wine tourism.” The spillover benefits of winemaking to other businesses–food, lodging, and entertainment–and its compatibility with farmland preservation goals might justify targeted subsidies or tax credits, similar to those offered to the film industry. Co-editor Dennis Heffley and graduate students Christopher Jeffords and Jeremy Jelliffe examine the features of winemaking that might warrant a public effort to promote its production, but they also note that such policies are not universally endorsed.

Other features of the summer issue include summaries of recent data and forecasts for the state’s largest labor market areas, as well as a centerfold map of public library resources and usage in each of the state’s 169 towns.

For free access to this and other issues of The Connecticut Economy, visit:

Prof. Carstensen article in Hartford Courant

Last Sunday’s Harford Courant featured a full page article by Prof. Carstensen. As a director of the Connecticut Center for Economic Analysis (CCEA), he is frequently asked to testify in Hartford or speak in the media, and this article summarizes his take of the state of the State of Connecticut.

He opines that Connecticut has an economy with a shrinking working age population with declining skills that is typically slow to recover from a recession. From a policy perspective, he argues that the State needs to push the life science sector and address the unusually high energy costs and the inadequate transportation infrastructure. The aging population will also require more services than before. Finally, the State needs to provide a stable business environment with respect to taxes.

Spring 2010 issue of The Connecticut Economy examines the state budget and local property markets

With jobs disappearing, unemployment growing and Connecticut facing an ongoing budget nightmare—in an election year no less—the Spring 2010 issue of The Connecticut Economy: A University of Connecticut Quarterly Review analyzes the state’s grim budget prospects, and examines the economic consequences of local policies—including zoning controls, taxes, spending and regional cooperation—that affect property values and the housing mix.

The latest issue examines the state’s economy and finds plenty to still raise concerns: high unemployment, slow job growth, and red-ink budgets at all levels of government. With education claiming a large portion of public spending, especially at the town level, “A Forward Look” by John Yrchik, Executive Director of the Connecticut Education Association (CEA), argues that Governor M. Jodi Rell’s use of federal stimulus money will disadvantage K-12 education when the extra funding runs out. Yrchik spoke and responded to media questions when editors of The Connecticut Economy presented their findings at a March 10th press release event at the Hartford offices of the CEA.

Connecticut has resorted to borrowing, one-shot fixes, and tinkering to balance its budgets; but those days will end in July 2011, contends Quarterly co-editor Arthur Wright in an analysis of the state’s enduring budget saga. That’s when Connecticut’s budget for the next biennium, FY2012-FY2013, begins. Whether the state’s political leaders cut the deficit via higher taxes or reduced spending, the challenge will be to choose the best combination, says Wright, adding: “Better as a state, and as individual voters, we begin facing such issues this year, with so many elections for State offices going on.”

There is little question that Connecticut is an old state and growing older. The 39.4 median age of the state’s population ranks it the 7th oldest state in the nation. So, if Connecticut hopes to replace its aging, retirement-bound baby-boomers with a cadre of younger workers, it has to import them with a mix of challenging jobs, good pay and affordable housing, notes Quarterly Executive Editor Steven Lanza. Yet, like towns all across America, Connecticut communities have long used zoning controls to regulate the pace, mix and location of development. Lanza examines whether zoning works at cross-purposes with broader public policy objectives such as attracting young professionals to a rapidly graying state.

To shed light on how local policies affect real property values, recent UConn PhD Ekaterina Gnedenko (Agricultural & Resource Economics) and co-editor Dennis Heffley apply an “open-city” model to examine how local public policies—including municipal taxes, spending, zoning and regional cooperation—affect property values. The model’s underlying assumption—that town officials seek to maximize local property values—is a controversial one. But they note that “…if property values reflect not just a town’s site and socioeconomic conditions, but also ‘how the town is run’—then public officials who seek to enhance property values may be serving the interests of their constituents well.”

The editors and Quarterly contributors also:

  • Map the change in percent of available land used for development purposes between 1985 and 2006 across Connecticut’s 169 towns, based on satellite images.
  • Provide a region-by-region look at Connecticut’s economic performance, analyzing jobs, unemployment, housing prices and permits for the state’s four largest market areas.
  • Use tables, charts and commentary to report labor market data for Connecticut, showing higher unemployment rates across the board.
  • Forecast deeper job losses than previously estimated, but the start of recovery during 2010 and 2011.

For free access to this and other issues of The Connecticut Economy, visit:

Winter 2010 Issue of The Connecticut Economy Highlights Education and Economic Recovery

Like other states, Connecticut is still wrestling with the effects of the current recession. The latest issue of The Connecticut Economy, published by the Department of Economics, features Managing Editor Steven Lanza’s analysis of state-level economic resilience. Using the 2001 recession as a source of data, he finds that a variety of factors help to explain the difference in recovery time across the 50 states. He estimates several models that account for about two-thirds of the variation in recovery times in the earlier recession, but unfortunately none of the models points to a very quick recovery for Connecticut in the current recession.

Co-editor Arthur Wright diagnoses how President Obama’s stimulus bill has made a difference in education and transportation in Connecticut, both important sectors for long-run growth. Wright also questions what might happen when state taxpayer funds are used to replace the federal stimulus dollars to sustain ongoing projects and programs. The centerfold map of the Winter issue shows the variation in federal stimulus spending per person across the state’s 169 towns. As of November, the heaviest stimulus spending per capita had occurred in poorer urbanized areas and towns with considerable transportation infrastructure.

Connecticut, like other states, has recognized the long-term role of education in determining a state’s quality of life and economic performance. A guest commentary from Michael P. Meotti, Commissioner of the Connecticut Department of Higher Education, argues for increasing the educational attainment of the state’s citizens, emphasizing that “the knowledge and skills of our people will be the driving force of the Connecticut economy over the long term.” Two of the issue’s articles assess various aspects of the state’s educational system.

With nearly 58 percent of all Connecticut municipal spending earmarked for schools, recent cutbacks have forced educators to make do with less. Yet, despite these fiscal pressures, a study measuring the efficiency of the state’s high school districts, by co-editor Dennis Heffley and UConn graduate student Can Bekaroglu, finds that many districts fare well in preparing students for the SAT Reasoning Test—a primary “assessment tool” used by colleges and universities to evaluate readiness for higher education. Many regional high school districts and some of the familiar “premier” districts top the efficiency list, but a few districts with more modest SAT results are still quite efficient in improving the relative performance of their students. The value-added measure of performance used in the study helps to control for “student inputs,” but further analysis of the results indicates that socioeconomic factors and district size affect the measure of efficiency.

Connecticut boasts 42 colleges and universities and higher-ed enrollment exceeding 180,000; and it is near the top of the class when it comes to educational attainment—4th among states in the share of adults with at least a bachelor’s degree (34.8%) and 3rd in the share of advanced degree holders (15.1%). But contributing editor Bruce Blakey and his son, Robert, point out that there is still plenty of room to improve education in the Nutmeg State. International comparisons have raised concerns about the quality of U.S. education in areas like math and science, although such comparisons sometimes fail to control for the fraction of youth attending school or being tested. Closer to home, however, broad disparities in student backgrounds and resources across the state’s 169 towns result in big differences in test scores, graduation rates, and college attendance.

For free access to this and other issues of The Connecticut Economy, visit:

Fall Issue of The Connecticut Economy Tackles Some Timely Topics

Prospects of an end to the recession have raised hopes but also important questions about the state’s economy. The latest issue of The Connecticut Economy: A University of Connecticut Quarterly Review was unveiled at the UConn Stamford Campus on September 11th at the Fairfield County Economic Summit and Outlook, sponsored by the Connecticut Business and Industry Association (CBIA).

Featured articles include Bruce and Robert Blakey’s assessment of the potential statewide impacts of employment cuts in Fairfield County’s financial services sector. With Fairfield County accounting for 38% of Connecticut’s personal income and nearly 47% of the state’s income tax revenue, any significant “downsizing” of this critical sector also spells trouble for the rest of the state. Fortunately, Fairfield County has demonstrated its economic resilience in past recessions and seems determined to “reinvent” itself, as described in A Forward Look by Mike Freimuth, Stamford’s Director of Economic Development.

Concerns about traffic congestion in urbanized areas and the push for a “greener” Connecticut have prompted proposals to extend the state’s commuter rail system. Executive Editor Steven Lanza and UConn undergraduate Bryan Murphy explore the potential benefits of rail expansion by examining the effects of the current network on home prices. They show that, after controlling for other factors, households are willing to pay about 5% more for homes in towns with a commuter rail station. These “capitalized” benefits of existing stops may be useful to policymakers in estimating the potential benefits of new commuter links.

Art Wright jumps into the health care reform fray by studying the sources of variation in Medicare spending per enrollee across states, over the period 1991-2004. Medicare has been seen as a model for the controversial “public option” in reform proposals, as well as an example of the problems that might accompany further public involvement in health care. Wright’s study shows that the sources of large spending differences in the Medicare program are not easy to discern. The distribution of doctors seems to be an important factor, but the nature of the relationship is complex.

Connecticut has been wrestling with a large budget deficit that requires expenditure and tax adjustments. Dennis Heffley teams up with former grad students MaryJane Lenon (PhD, 1989)—currently MBA Director at Providence College—and Raymond Salani III (MA, 2008) to examine the effects of the tax mix on non-federal revenues per head. Using data for all 50 states and 12 fiscal years, their panel-data analysis suggests that states may have few options to increase the tax take by simply adjusting their tax mix. The few apparent “targets of opportunity” tend to be politically unpopular with voters or risk offending special interests.

For free access to this and other issues of The Connecticut Economy, visit: