Thirty years ago, so many companies flocked to Connecticut that Stamford, a waterfront enclave of about 100,000 residents, became the third-largest center of corporate headquarters in the U.S., behind only New York City and Chicago.
Now businesses are lining up to get out, threatening a state already contending with crippling budget deficits, a nearly bankrupt capital city and an economy that never fully recovered from last decade's recession. This summer, Aetna Inc., based in Hartford since 1853, said it would relocate its headquarters to New York, while Alexion Pharmaceuticals Inc. announced plans to decamp for Boston, where former Connecticut behemoth, General Electric Co., moved in 2016.
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"We don't need more taxes, we need more taxpayers," said Joe Brennan, president of the Connecticut Business and Industry Association, the state's biggest business lobby.
The specter of corporate relocations are a key reason why Connecticut still doesn't have a budget four months into its fiscal year. Facing a two-year deficit of $3.5 billion, Democrats are hesitant to raise taxes, as Gov. Dannel Malloy did in 2011 and 2015, out of concern it will only hasten the exodus. As a result, the state's fiscal problems are likely to ripple downhill, with Malloy poised to cut almost $1 billion from local aid if a budget isn't enacted.
The cuts could hurt Connecticut's long-term economic attractiveness if there's "significant disruption" to municipal services, property-tax rates, or the quality of schools, S&P Global Ratings said on Oct 13. That's when the company revised its outlook on the state's A+ credit rating to negative — a first step toward a potential downgrade — citing the slow-growing economy, reduced ability to raise taxes and mounting debts.
More than 30% of Connecticut's budget goes to debt service, pension payments and retiree health care, all of which will linger for decades, Brennan said.
"It just makes it more difficult for businesses to have confidence in Connecticut," he said.
Yet, reviving Connecticut's economy isn't as simple as cutting taxes and rolling back regulations, economists said. Though it enjoys a highly educated population — with the fourth-highest share of residents with bachelor's degrees — it lacks a thriving metropolitan center.
Hartford, the capital and a center of the insurance industry, is on the brink of bankruptcy. Bridgeport, the most populous city, is still only about as big as Syracuse, New York.
Not Its Moment
"No one is leaving Connecticut for Boston or New York City because of taxes," said Patrick Flaherty, an economist at the state's Department of Labor. "We are quite frankly a suburban state. It's not what people want at the moment."
