Partnership for Growth II: A Blueprint for Connecticut's Economic Future
By James Abromaitis, Commissioner of DECD

A strategic plan is only as good as the inputs upon which it is based. This article will provide an overview of the extensive research that went into making Partnership for Growth II: A Competitiveness Agenda for Connecticut, a historic milestone in the State's Industry Cluster Initiative that provides policy makers with a comprehensive set of recommendations in the areas of manufacturing, technology, workforce development and inner city revitalization.

In 1998, the landmark report Partnership for Growth: Connecticut's Economic Competitiveness Strategy set the stage for cluster-based economic development in the state and led to the creation of what is now called the Governor's Competitiveness Council, a bipartisan cross-section of leaders from business, government, and education that oversee the state's Industry Cluster Initiative.

Over the past five years, Connecticut's Industry Cluster Initiative has redefined the way we think about economic development in Connecticut. It is a demand-driven strategy that is predicated on public/private sector collaboration, and it has helped create jobs, attract investment and keep Connecticut's businesses and workers competitive in the global marketplace.

Today, there are nine industry clusters in Connecticut: Aerospace Components Manufacturers, Agriculture, Bioscience, Insurance and Financial Services, Maritime, Metal Manufacturing, Plastics, Software/IT, and Tourism. By participating in the Industry Cluster Initiative, companies and workers in these industries have become smarter and more productive, and ultimately more competitive.

All good business plans, however, need to be updated to reflect changing business conditions and market forces that alter the economic landscape. By late 2003, the Governor's Council decided the time was right to create a new competitiveness agenda for Connecticut and began working on Partnership for Growth II. Completed in March of this year, the report was "intended to spur decisive action by leaders in both the public and private sectors..." and "meant to serve as a basis for legislation and prompt widespread participation in cluster efforts by government, business, educational and community leaders statewide" (Partnership for Growth II, page 3).

In building the analytical groundwork for Partnership for Growth II, three major research tools were used: Connecticut Economic Performance and Cluster Competitiveness Analysis prepared by the consulting firm Aslan Global; Connecticut's New Economy Benchmarks developed by the Connecticut Economic Resource Center (CERC); and Competitiveness Survey Findings compiled with help from nine of the State's leading chambers of commerce. In addition, information and insights were drawn from: industry clusters; regional meetings with leaders from businesses, government agencies, civic organizations and community groups, as well as several advisory boards; and economic policy advisors, including Harvard Business School Professor Michael Porter, consultants from Aslan Global, Michael Gallis and his associates, and economists from CERC.

Connecticut Economic Performance and Cluster Competitiveness

Aslan Global performed this analysis using the data and analytical approach of Harvard Business School's Institute for Strategy and Competitiveness, led by Professor Michael Porter (Partnership for Growth II, Appendix C, page 2).

Identifying key indicators, such as levels and trends in wages and employment, the report indicates that Connecticut's recent economic performance has been generally strong. The following are some more specific findings (Partnership for Growth II, Appendix C, pages 2-5):

• More people have been employed in Connecticut in recent times than before the major recession of the early 1990s.
• Although the number of people employed in Connecticut has been increasing, the unemployment rate also has been increasing, largely due to the national recession and dot-com collapse.
• Regional peers, including Rhode Island, New Hampshire, New York, Massachusetts and Vermont, have been ahead of Connecticut in terms of their rates of new job creation.
• Wages in Connecticut rose steadily from 1990 to 2001.
• Connecticut continues to be among the states with the highest average wages.
• Connecticut's productivity has grown an average of 4.4 percent annually in recent times.
• Connecticut's Gross State Product (GSP) performance between 1990 and 2002 has made it one of the top three most productive, or "competitive," U.S. states.
• Data suggest that Connecticut's merchandise exports recently have been lagging, although our steady growth rates have brought the State close to the U.S. average.

The study also reviewed Connecticut's innovative capacity. Connecticut scored strong on most of the selected innovation "inputs," but showed weaker scores in terms of transforming its knowledge assets into commercially successful products and services.

Comments were also made about Connecticut's cluster performance, noting a diverse set of clusters, some of which are nationally "known" and some of which compose a healthy set of "traded clusters" which makes the State's economy more heavily weighted compared to the U.S. overall.

Connecticut's New Economy Benchmarks

The goal of this report was to provide a fact-finding, objective and unbiased overview of Connecticut's competitiveness from a New Economy perspective. Overall, Connecticut is well equipped for the New Economy. "Research conducted… shows that the State possesses an abundance of the assets critical to meeting the challenge of this global, knowledge-driven economy and, in many key areas, ranks in the top five or 10 among the 50 states" (Partnership for Growth II, Appendix D, pages 2-3). The study assessed Connecticut's standing in four major categories: entrepreneurial and business vitality; technology strengths; creating and sustaining innovation; and global links. Key indicators and trends that could dramatically affect Connecticut's economic future were also explored.

The following are some of the findings from the major categories (Partnership for Growth II, Appendix D, pages 5-8):

Entrepreneurial and Business Vitality

• Connecticut ranks 13th overall in this category, outpacing both the Northeast and the U.S. in share of jobs in fast-growing "gazelle" companies (1998-2000).
• However, Connecticut shows very slow growth in most areas that make up this category, ranking 50th in pace of growth between 1992 and 2002.
• In addition, the level of Small Business Innovative Research (SBIR) grants has fallen 50 percent between 1992 and 2001.

Technology Strengths

• Connecticut ranks 8th overall in the technology "concentration" score, 3rd in the percentage of high-tech jobs (2002), and 10th in the number of technology establishments (2002).
• Our technology productivity has skyrocketed 55 percent between 1992 and 2002.
• The State also ranks 4th in percentage of households with Internet access (2001).
• However, Connecticut's technology share of total employment has decreased almost 12 percent since 1992, while our share of U.S. growth in technology has ranked us 43rd (between 1992 and 2002).

Creating and Sustaining Innovation

• Our 8^th graders rank among the top 16 states in scores on the National Assessment of Educational Progress (NAEP) tests in math and science (2000).
• Almost one-third of Connecticut adults holds a bachelor's degree or higher (2002), and we rank 8^th among states in the number of Ph.D. scientists and engineers in its workforce (2001).
• However, while Connecticut's NAEP scores compare well nationally, the U.S. as a whole ranks between 15th and 20th among nations in technology, math and science achievement. Meanwhile, Connecticut ranks 39th among the states in this category in terms of pace of growth.

Global Links

• Thanks in part to our immigrant population and high percentage of international graduate students, we rank 8^th overall among states in regard to substantial connections with foreign countries.
• However, Connecticut and the Northeast lag the U.S. in growth in exporting goods (1992-2002).

Competitiveness Survey Findings

Working with nine chambers of commerce, an outreach effort was conducted to gain feedback about business issues affecting Connecticut companies and their competitiveness. More than 1,200 surveys were completed and returned (a response rate of nearly 11 percent). The responses covered the areas of competitiveness, collaboration, urban revitalization, government priorities, manufacturing, education, transportation, cost of doing business, state government, regionalism and marketing/branding.

The top competitive strength identified by businesses was community colleges, while the weakest was healthcare costs. In regard to collaborative relationship, the top strength was indicated as local customers, while weakest was business incubators. Meanwhile, location was ranked a top urban strength, and taxes, the weakest. In the area of government priority, almost every choice was seen as important, such as streamlining compliance, increasing training in science, math and technology and building public-private research funds. The major theme that emerged from the feedback was that more needs to be done to make Connecticut globally competitive.

Partnership for Growth II Recommendations

As mentioned earlier, this research served as a basis for the development of the recommendations outlined in the Partnership for Growth II report. The issues addressed focus on five major categories (Partnership for Growth II, page 4):

Increasing the Competitiveness of Connecticut's Small and Midsize Manufacturers - assistance for this industry to adjust rapidly and effectively to the national and global changes, including launching a "next generation" manufacturing initiative and strengthening state and federal policies.

Specific proposals include: creating a five-year Manufacturing Competitiveness Enhancement Program; repealing or phasing out the property tax on newly acquired manufacturing equipment; and creating a Legislative Commission on Manufacturing Best Practices that would conduct a peer state best practices study comparing the costs, capital investment and depreciation incentives, and tax credits.

Capitalizing on Connecticut's Technology and Innovation Assets - ways to achieve technology growth to achieve more jobs, better jobs and more economic opportunity for residents.

Specific proposals include: creating a professionally managed seed capital fund for early stage companies in bioscience and technology; making the amendment to the R&D tax credit exchange (CGS 12-217j) permanent; and allowing limited liability companies (LLC) and limited liability partnerships (LLP) the same tax benefits applicable to corporations, only if these benefits are reinvested in the LLC or LLP.

Expanding Business Growth in Connecticut Inner Cities - generating practical opportunities for inner city communities, including generating additional capital for business growth, accelerating inner city entrepreneurship, reinforcing a positive image of inner city opportunities and minority business leaders, and expanding job readiness training.

Specific proposals include: establishing a privately managed $25 million inner city equity investment fund; allowing cities of over 100,000 residents (on a pilot basis) to "de-categorize" and use State funds flowing into these cities in a flexible manner; and building upon the successful National Foundation for Teaching Entrepreneurship's (NFTE) entrepreneurial training initiative in Connecticut, which has already trained 2,800 inner city students throughout the State.

Strengthening Connecticut's Economic Foundations - cross-cutting factors that affect all clusters, including workforce training, an advanced transportation and communications infrastructure, strong business-education links, competitive taxes and regulations, a reputation as a "hot spot" of innovation and high technology, and a high quality of life.

Building Upon Private-Public Collaboration and Commitment - efforts that should be incorporated by the Governor's Council, industry clusters, private sector leadership and State government to bring about a greater level of collaboration and achieve goals that benefit themselves and people in the region.

Partnership for Growth II outlines both short- and long-term strategies that will greatly enhance Connecticut's business climate and, on a larger scale, its position in the global economy. Grounded on excellent research and economic analyses, this new report provides Connecticut with a blueprint for economic growth and prosperity for years to come.

To read Partnership for Growth II: A Competitiveness Agenda for Connecticut, visit www.YouBelonginCT.com and click on the Industry Clusters button.

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Housing Update
Housing permit activity surges in March

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 929 new housing units in March 2004, a 54.8 percent increase compared to March of 2003 when 600 units were authorized.

The Department further indicated that the 929 units permitted in March 2004 represent a 66.5 percent increase from the 558 units permitted in February 2004. The year-to-date permits are up 29.3 percent, from 1,683 through March 2003, to 2,176 through March 2004.

Nine out of the ten Labor Market Areas showed gains compared to a year ago. Norwalk led all municipalities with 76 units, followed by Milford with 29 and Danbury with 27. From a county perspective, Fairfield County showed the largest year-to-date gain of 105 units (or 88.2 percent).

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