Economy Promising, Regulations Stifling, Small Businesses Say

Travelers Institute, the public policy arm of Travelers Cos. Inc., whose operations span north central Connecticut, found in a recent survey of 600 small businesses nationwide that owners were confident the economy would improve this fiscal year. However, those same businesses reported they felt stifled by regulatory costs.

In a press release dated May 4, the institute said nearly two out of three small business owners surveyed between Feb. 18 and March 11 of this year found tax-related regulations too burdensome. Fifty-one percent found health insurance mandates challenging. Additionally, 47 percent found operational regulations (licensing, permitting, and inspection issues) troubling; and 52 percent felt government regulations have a greater impact on small businesses compared to their larger counterparts.

Though a spokeswoman for the institute said Connecticut-specific data was not available, local economists and business owners told Patch that the issues discussed in the survey resonate with small businesses in north central Connecticut.

John Smith, president of Suffield Chamber of Commerce, said state regulations currently adopt a "one size fits all" approach, which works against small businesses.

“They don’t differentiate between what works for a large company – say the size of Cigna – and what works for a small business. Different regulations are needed for differently sized companies,” Smith said.

Drew Crandall, board of director at the Tolland Country Chamber of Commerce, whose regions include Tolland, Ellington, Mansfield, Somers and Vernon, said the number one problem that small businesses face in his region is not the economy.

“It’s taxation and health care regulations that are more concerning,” Crandall said.

On a positive note, he said small businesses are starting to rebound and hire employees.

“We’re definitely not booming, but compared to the past few years, owners are feeling a lot more positive. The economic climate is quite good for small businesses,” he said.

In March of this year (per latest data available at the Connecticut Department of Labor), the Hartford labor market – which includes north central Connecticut – posted an increase in 400 manufacturing jobs, 1,000 retail jobs, and 1,900 professional businesses services jobs such as lawyers and architects.

“Statewide, we saw an increase of 26,000 jobs as of March this year, compared to the same time last year. The Hartford region alone saw a growth of 8,000 jobs in this period, and that’s significant growth. The north central region has been the driver of growth for the state as a whole,” Patrick J. Flaherty, an economist at the Connecticut Department of Labor, said.

He added that in particular, the growth in manufacturing and professional businesses services jobs were enabled by small businesses.

According to Traveler’s Institute, there are 73,779 small businesses in Connecticut, which comprise a whopping 50.8 percent of all employment in the state’s private sector.

In addition to presenting findings from its primary research, the survey also includes secondary research from the December 2010 Small Business Survival Index by the U.S. Small Business and Entrepreneurship Council.

The council ranked Connecticut 41st for its climate for small businesses.

It found that small business owners in the state struggle with high corporate income and corporate capital gains taxes, property taxes, and gas and diesel taxes. Other concerns include a
 high state minimum wage and a large number of health insurance mandates.

However state rankings don’t always show the full picture, economists point out.

“Some of these rankings that look at the cost side of the equation seldom examine the benefit side of the equation,” Steven Lanza, an economist at the University of Connecticut, said.

“If input costs increase it does not mean that production costs will increase also. Businesses will find alternatives,” he said. “The reason why small businesses are located in Connecticut despite high costs is close proximity to input markets such as labor, and the market for final goods and services.”

Lanza was keen to add that he is not oblivious to regulatory excesses in the state that hamper business growth.

“These studies talk about health insurance mandates posing a problem to small businesses,” he said. “Absolutely there is no reason for the state to mandate insurance. We should leave it up to insurance companies to sell what they want and to their customers to buy what they want. That being said, the size of Connecticut’s state government is tiny compared to other states. So the state’s footprint on the economy is very small.”