Aggressive bonding could double job growth
If the administration of Gov. Dannel P. Malloy more aggressively tapped into its $6 billion stockpile of approved but unissued bonds, it could double or even triple the rate of job growth, according to economists at the University of Connecticut.
Since 2010, the number of unissued bonds has grown from $3 billion to $6 billion, according to the latest outlook by UConn”™s Connecticut Center for Economic Analysis (CCEA). And with matching federal funds, that means there is about $8 billion available in potential capital expenditures.
“There”™s a whole lot there that they”™re just not using,” said Peter Gunther, a CCEA senior research fellow. “That could be used for additional stimulus, but it doesn”™t seem to be in the pipeline.”
Connecticut”™s economic recovery has been sluggish and it is one of few states not to have climbed back to its 2007 income levels. Many people who have returned to work are working in lower-paid positions. But CCEA economists say an accelerated recovery is possible, especially with expanded bond funding.
As of August, about 1,654,000 people were employed in Connecticut, according to the state Department of Labor.
Based on low but rising interest rates, that number is expected to jump by 9,000 jobs in 2014, according to CCEA forecasts. But with expanded use of bonds, it could jump by as much as 31,000 jobs.
In response to the CCEA report, Secretary of State Benjamin Barnes said he believes the state is using its bonds appropriately and at an aggressive rate. It takes time, he said, to plan, design, bid and build.
“I am troubled by the implicit assumption that the state could complete billions of dollars worth of infrastructure development in a year or less if we only had the temerity to issue all those bonds at once,” Barnes wrote to CCEA director Fred Carstensen in a letter forwarded to the Business Journal. “We have more to do to improve the state”™s ability to deliver construction, but there is no magic button that will make all these projects get done right away.”
Barnes, also the state”™s budget director, continued, saying there were consequences to borrowing much more money all at once. For every billion dollars in outstanding debt, the state must pay $100 million in annual debt service. In the long term, there would still be an overall growth and spike in tax revenues. But the benefit might not be immediate, possibly resulting in the need for higher taxes or cuts in public services.
“While it is certainly true that large capital projects are sometimes delayed for any number of technical, legal or logistical reasons, I am not aware of any instance in which the administration has intentionally cancelled or delayed for financial reasons,” Barnes said.
Though Carstensen had not officially received the letter as of publication, he told the Business Journal he has reason to believe bond issuances have been delayed. He said he plans to continue investigating the claims, making a call for further government transparency.
New initiatives such as Open Connecticut have increased the availability of state budget information online. However, specific information about bonds and other economic development policies are still hard to access, Carstensen said.
“Good government needs accountability and transparency,” Carstensen said. “We only get accountability with transparency.”