Monthly Archives: November 2012

CT Metro Areas: Lagging the Nation and the World in Growth

by Categorized: Economy, Jobs, Wealth Date:

How’s Connecticut faring in the world? For income, just fine, thank you.

Growth is a different story. The Brookings Institution issued a report Friday ranking the world’s largest 300 metro areas in growth in 2012, based on output per-person and jobs. Even among lagging U.S. metros, Bridgeport-Stamford and Hartford ranked low, Nos. 255 and 226 respectively.

(Click on the Metro Monitor Interactive link and don’t use Internet Explorer.)

New Haven was the rabbit at No. 195, still well below New York (155) and Boston (117).  At least we were ahead of Providence in perennially ailing Rhode Island, which clocked in at No. 267.

To no one’s surprise, “The analysis found that the fastest-growing metropolitan economies were in developing Asia, Latin America, and the Middle East and Africa, while the slowest-growing metropolitan economies were in Western Europe and North America,” Brookings said.

First overall was Macau, with more than 5 percent growth in both output per person and jobs. Athens, Greece was last by a longshot.  The top U.S. metro for 2012 growth was Houston, at No. 40.

Looking back a few years, Connecticut metro areas have long been laggards. From 2007 to 2011, Bridgeport-Stanford was No. 260; Hartford was No. 219; and New Haven was 262. For 1993 to 2007, the three Connecticut metros ranged from No. 224 to No. 254.

For all those years of poor growth, we have maintained a strong lead in per-capita income and, more important, we remain high on the list of median family income, though that figure is slipping.

Brookings make the point that the global economy is a big-metro economy. The combined 300 metros represent almost half the world’s output but only 19 percent of global population.

 

Westport Financial Advisor Charged With Insider Trading After Takeover Bid

by Categorized: Corporate finance, Wall Street Date:

The SEC’s aggressive enforcement of insider trading laws continued Friday as a Westport advisory firm founder , I. Joseph Massoud, agreed to pay $1.4 million and exit the industry to settle charges he illegally made $676,000 based on information he received as a bidder for a financial firm.

Massoud, 44, and his firm, Compass Group Management, received information in 2009 about Patriot Capital Funding Group, also of Westport, which was seeking buyers, according to an SEC lawsuit in filed in U.S. District Court in Connecticut and assigned to Judge Robert N. Chatigny in Hartford.

Massoud’s firm had previously formed Patriot Capital and spun it off in a 2005 public offering, and he was the Patriot Capital chairman until 2006.

“For access to the data, Compass Group had to enter into a confidentiality agreement that prohibited its employees from buying Patriot Capital stock,” the Securities and Exchange Commission said Friday.
Despite that, the SEC said, Massoud purchased shares of Patriot Capital starting in May 2009. He later learned from the Patriot Capital CEO that his bid was “waaaaay off,” and he bought more shares, the lawsuit says. In August, after Patriot announced a merger with New York-based Prospect Capital Corp. and its shares rose, Massoud sold all of his shares at a profit.

“Massoud abused his access to nonpublic data for what turned out to be a short-term personal gain,” said John T. Dugan, associate director of the SEC’s Boston Regional Office. “As a result of the SEC’s action, Massoud must pay back double what he made in the scheme and he can never work in the securities industry again.”

In agreeing to the settlement, Massoud neither admitted nor denied the allegations. His lawyer, Robert J. Anello of Morvillo, Abramowitz, Grand, Lason, Anello & Bohrer in New York, said he was not aware of any criminal investigation separate from the civil charges filed by the SEC.

“Mr. Massoud is pleased to have been able to resolve this personal trading matter. He has helped build significant value for shareholders and investors over the last 15 years and looks forward to future endeavors.”

The charges follow last week’s landmark SEC insider trading case against SAC Capital, which implicated but did not charge Steven A. Cohen, the billionaire founder of SAC, of Greenwich.

If the SEC charges against Massoud are correct, it seems like an exceptionally brazen offense, requiring investigators only to search readily available records.  Insider traders who thought the agency would never bother to go after them may be in for a bit of a surprise.

Recycling Connecticut Jobs, Thousands of Them

by Categorized: Commerce, Economic Development, Economy, Energy, Public finance Date:

Way back in the primordial era when recycling was a new thing, critics said it would cost thousands of jobs of people who make glass, plastic and aluminum.
With recycling as a way of life and an industry, a new report from the Connecticut Economic Resource Center says it’s responsible for 4,790 jobs and $738 million in annual value in Connecticut — directly and indirectly.
That includes the equivalent of 2,710 direct jobs of haulers, sorters, wholesalers, people at redemption centers and the like, with direct spending of $435 million on the industry. The larger numbers are indirect jobs and “induced” jobs, as the industry spends money on goods and services, and as recycling employees spend money in the community.
The report by the quasi-public CERC was done for the Connecticut Resources Recovery Authority, the trash-to-energy agency in central Connecticut. It’s a surprising total. By comparison, there are, for example, 5,800 electrician jobs in the state.
“We’re trying to make this estimate as conservative as possible,” CERC research director Alissa DeJonge said. “We did not include composting, which actually is going to become a major issue this year because of the storm cleanup.”
The report showed that CRRA itself is responsible for 30 percent to 40 percent of the total industry employment in the state, through its recycling processing center in Hartford and satellite transfer stations. The vast majority are people doing contract work for the agency.
CRRA is eager to portray the industry as vibrant, but spokesman Paul Nonnenmacher said even the agency did not understand how big it was until the report was done. “We were all surprised when we saw the numbers,” he said. “There’s a lot of activity and it’s been under the radar forever.”
Unlike most industries, which are either public and taxpayer-financed, or private, recycling is a mix of public services, as towns pay fees for recycling, and private sales to end-users. The health sector is another example of such a blend.

 

Fast Food Walkout In New York Adds to Spate of Low-Wage Actions

by Categorized: Consumer, Economy, Labor, Retail Date:

Workers at fast-food outlets in New York walked off the job Thursday, another action by low-wage workers of the sort we should expect to see happening more.

Organizers hope to see the protest lead to unionization and wages of $15 an hour, but as Steven Greenhouse explains in the New York Times, it’s a tough industry to organize because of high turnover and fractured workforces, and anyway, those wages might not be attainable.

No word yet of a similar action in Connecticut, where the cost of living is high and minimum-wage workers typically need public assistance of one kind or another.

Give credit to the strikers, as they could easily lose their jobs at a time when unemployment remains around 9 percent. That’s a sign of how bad it’s become for low-wage workers.

Will the $1 meal at Mickey D’s go the way of the Twinkie? I say good riddance if it does.

First Round of State Cuts: Part of A Long Era of Budget Slogging

by Categorized: Public finance Date:

As Malloy’s top deputies faced the media to explain $170 million in state budget cuts Wednesday, a pattern emerged.

Yes, the cuts were hard to make, budget czar Ben Barnes and top advisor Roy Occhiogrosso said as reporters asked about the highlights in the 10-page list.  But no, these reductions are not, in large part, an assault on the services taxpayers have come to expect.

That will happen later. Make no mistake, the $362 million gap for this fiscal year, and the projected shortfall of $1.1 billion for 2013-14, are not a one-shot crisis. They are part of a years-long slog with flareups and periods of calm, much like a patient fighting a  cancer that has spread.

Gov. Dannel P. Malloy is in a jam here, not because the crisis of the moment is bigger than the one he inherited when he took office two years ago; it isn’t. But he’s already played the best cards — a tax hike and a deal with state employees.

Many of these first cuts fall in the category of management: Spending reductions that the state commissioners — more powerful under Malloy than under the two previous governors — can work around by doing things faster, better.

Of the $170 million, $47 million represents cuts that were going to happen anyway, so-called lapses, money the commissioners were not going to spend. Even with those lapses, Malloy is less than halfway toward solving this year’s problem, and his plan for the next fiscal year is due in a few short weeks.

Next will come program cuts, probably made through the legislature — deeper reductions that reduce what the state does in a more painful way.  Looking ahead, Malloy and lawmakers will have to make policy cuts, as Barnes warned on Tuesday — broad changes in the promises the state makes to its citizens, such as who is entitled to Medicaid and what services are available to homeless people.

That includes the closing of facilities, and not just prisons, Barnes warned Wednesday.

This is not to say the first round of cuts will be painless, rather that the idea is to manage the state’s agencies more efficiently to buffer the pain.

“People will feel the impact in a way that makes none of us happy,” Occhiogrosso said. But he noted, “To look at any one of these cuts in isolation misses the larger point.”

The larger point is that the budget shortfalls — caused by a slower than expected economic recovery and sharp rises in Medicaid costs and pension payments — stretch out for years, averaging just under $1 billion a year through 2016.

Worse still, the state government would have to slice spending by an average of $1.7 billion in each of the next three years just to stay withing the mandatory spending cap, as defined by overall income and economic growth.

And those scary numbers are all based on the personal income tax growing at 7.2 percent a year in each of the coming three years — up from an average of 4.6 percent gains in 2011 through 2013.  Oh, and federal grants would have to leap by 30 percent to $4.9 billion, for the hole to be only as large as projected.

Read Ben Barnes’ presentation here

We’ve heard all this before, including the need for deep reforms.  But this time it seems different for four reasons. First, this isn’t a recession like 1991, 2001 or 2008, so we don’t necessarily have better times to look forward to.

Second, Malloy has already raised taxes by $1.5 billion in the last go-around, and he says he won’t seek new tax hikes. There’s not much room for that trick even if it could work.  The cigarette tax, for example, is starting to show reverse results as smoking declines, and corporations have developed an appetite for more tax credits that they’ll get here, or move elsewhere.

Third, financial engineering such as borrowing and shorting the pension funds will be last resorts only, for the same reasons. The bond rating agencies have spoken clearly. That said, Occhiogrosso would not say borrowing is off the table.

And fourth, the state employee payroll is already down by 3,700, more than 12 percent, since 2008 — and employees are overdue for raises totaling $112 million and $152 million over the next two years. Malloy has already promised no layoffs through 2015, so he shouldn’t look there for more wiggle room.

After Wednesday’s relatively easy round of cuts, there’s nowhere to run to, nowhere to hide.

Well, almost nowhere. The state’s Medicaid budget, $5.1 billion this fiscal year, is projected to grow to $6.2 billion in three years as federal health reform kicks in and the number of eligible adults rises sharply.  The good news is that federal Medicaid reimbursement will rise even faster, which is why overall federal grants will surpass the state sales and use tax by 2015.

And in a glimmer of hope noted optimistically by retiring Sen. Edith Prague, who didn’t seek her old seat but has no shortage of energy to finish out her term, there are ways to reverse Medicaid spending trends. Barnes said Tuesday, for example, that the state could hope to persuade federal Medicaid officials to allow Connecticut to keep elderly people out of skilled nursing homes, in less community care — at least in some instances.

“I have no idea how successful we will be,” Barnes said, but the savings “could potentially be hundreds of millions of dollars a year.”

I asked Barnes to compare this crisis with the one in 2011, when he presided over the filling of a $3.5 billion hole.

“I like to think I’m a little smarter today than I was back then,” Barnes said. “It’s a challenge but we have the benefit of a group of commissioners who have had an opportunity to understand…what’s driving their costs.”

They’ll need that skill because even though Democrats are in power, government will remain a sector under siege for a long time.

For example, in response to a question about $19 million in cuts to community programs for people with mental retardation — less than 3 percent of those line items — Barnes said, “a significant portion can be achieved without a cut in services.”

In the next round, that won’t be true.

Named To “Dirty Dozen” And Fighting Back

by Categorized: Energy, Politics Date:

CORRECTION: An earlier version of this story said U.S. taxpayers were named as a recipient of the Dirty Dozen award for the Raymark Superfund site in Stratford. The site would require taxpayer funding to be cleaned up but the group did not cite taxpayers.

ORIGINAL STORY:

By pushing to roll back a 2010 state law banning pesticides at public schools, a trade group with a nice-sounding name has landed on the Toxics Action Center’s annual “Dirty Dozen” list of environmental pariahs.
The group is called The Connecticut Environmental Council, a coalition of pest control, grounds keeping and tree care groups. It opposed the 2010 state law banning “integrated pest management” for schools, which instead requires organic and natural means of protecting playing fields. And the council is lobbying hard to repeal the law in the upcoming legislative session.
Two other groups were named to the advocacy group’s 25th annual Dirty Dozen list for Connecticut issues. the list singled out 12 offenders in New England.

In Connecticut, the others named were  General Electric, for what Toxics Action said is decades of delays in cleaning the Housatonic River of PCB’s; Connecticut Resources Recovery Authority, for burning trash;

Toxics Action also named the notorious Raymark (Raybestos) Superfund site in Stratford, which has not been cleaned up by environment officials in part because the Superfund does not have enough money.

“The common thread that united all of the Dirty Dozen award winners is that they are dinosaurs,” said Jonathan Leibovic of Toxics Action. “Their business practices are relics of a bygone era.”

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State Budget Crisis, 2013-16: Nowhere To Hide

by Categorized: Economy, Public finance Date:

Ben Barnes, the state budget czar, brought a pile of ugly numbers to a packed room full of lawmakers Tuesday with a broad message and a statement — “not a pledge” — that Malloy won’t seek more tax hikes.

The state not only faces budget shortfalls of $363 million this year and $1.1 billion in 2013-14, but the spending plan will fall short by nearly $1 billion in each of the next three years if we keep services right where they are. That’s because of rising Medicaid, healthcare and pension costs.

Worse still, the state government would have to slice spending by an average of $1.7 billion in each of the next three years just to stay withing the mandatory spending cap, as defined by overall income and economic growth.

And those scary numbers are all based on the personal income tax growing at 7.2 percent a year in each of the coming three years — up from an average of 4.6 percent gains in 2011 through 2013.  Oh, and federal grants would have to leap by 30 percent to $4.9 billion, for the hole to be only as large as projected.

Read Barnes’ presentation here

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The Electoral College Cheer!

by Categorized: Politics Date:

My friend, fellow columnist and blogger Rick Green has posted an appeal for Connecticut to join the National Popular Vote Initiative, doing away with the electoral college in favor of a one-person, one-vote system to elect the president.

Supporters say the plan would eliminate distortions of the sort we’ve seen in recent years, in which battleground states get all the attention and the rest of us only see a presidential candidate when he or she is hunting for cash.

They point to elections in which the popular vote didn’t reflect the electoral college, notably in 2000, when Al Gore beat George W. Bush but lost. (Set aside the fact that only nine people had real votes that year and Bush won, 5-4.)

I didn’t realize until recently this was a serious cause. It’s seriously flawed. All market systems have distortions, and a national popular vote would bring on the mother of all skewed elections: No human outside of a big metro area would ever see a candidate.

Even Hartford wouldn’t make the cut.  The top 40 metro areas, from New York to New Orleans, have about 150 million people. The rest of the 361 U.S. metro areas, including Hartford at 1.2 million people  (No. 45) and Bridgeport-Stamford at 900,000 (No. 55) have a combined 100 million.

Maybe Hartford-New Haven, as a combined market, would get some love — and maybe we’ll get an NBA team, too.

Carson City Nevada, No. 361, with 55,000 souls? Plenty of attention this year, and that’s fair — Nevada is a down-the-middle state where issues matter.

Anyone who howls when a candidate wins the popular vote but loses the election must be assuming the campaigns would have the same strategy if there were no electoral college.  That would be a mistake. Bush could have easily won the popular vote in 2000 by showing up a few times in California.

The broader economic point is this: Swing states can swing over time. And the electoral college forces candidates, and presidents, to pay attention to their base in the reliable red and blue states, as well.  It’s balanced, like the House and Senate balancing big state-small state powers.

There’s nothing preventing states from splitting their electoral votes based on the popular votes in their borders, if they want more attention.

A straight national popular vote? Look at a Census list from, say, 1976. Same top 40 metro areas, more or less. That’s where the power would sit forever. And that’s not good economics.

 

Weekend Shopping Report: Online and Thanksgiving Drive Increases

by Categorized: Economy, Retail Date:

Online and Thanksgiving night sales drove consumers to spend 12.8 percent more at stores and web sites over the weekend, but without those two engines, the boost was less dramatic.

The dollar increase in online spending was a whopping 21 percent, and the number of shoppers on Thanksgiving was also up 21 percent, according this years’ survey done for the National Retail Federation.

In all, 139 million Americans made 247 million shopping excursions over the long weekend, starting Thursday, up 9.3 percent from 226 million trips or online sprees in 2011, the survey showed.  And last year was a record, up from 212 million shopping trips the year before.

This year’s average outlay per-shopper: $423, up from the average of $398 spent last year.  In all, the total reached $59.1 billion this year, up from $52.4 billion reported last year in a similar survey.

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