February 1, The Honorable Dannel P. Malloy Governor State of Connecticut State Capitol Hartford, CT Dear Governor Malloy:

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1 February 1, 2016 The Honorable Dannel P. Malloy Governor State of Connecticut State Capitol Hartford, CT Dear Governor Malloy: Our nine organizations have come together to reinforce our commitment to Connecticut and to offer you and the Legislature the expertise of the private sector entities that we represent. We welcomed your efforts last year to address the significant deficit in the FY 16 budget on a bipartisan basis and look forward to working with you this year to accelerate economic growth while continuing to make fiscal progress. It is crucial that these efforts be sustained in the 2016 legislative session in order to address the annual deficits projected in the budget for FY 17 and beyond. Engaging private sector leaders will be critical to developing and executing effective strategies to achieve four objectives that are absolutely fundamental to sustaining Connecticut s long-term growth: retaining and recruiting young talent across all sectors; strengthen the livability and competitiveness of our urban centers; ensuring a best in class transportation system through operational improvements and infrastructure investments; and re-establishing our historical 4% annual increases in per capita income. We must demonstrate steady progress toward achieving these critical objectives in order to regain the confidence of the private sector that generates the tax revenues that support both services and infrastructure investments. Such revenues, services, and investments drive and sustain meaningful economic and employment growth and ensure a premier quality of life for all residents. In that spirit, we offer several specific ideas designed to accelerate that progress. Page 1 of 5

2 PRIVATE SECTOR ENGAGEMENT We urge you to leverage Connecticut s exceptional economic foundation by establishing a more structured and sustained engagement of private sector expertise and support on the key policy issues that drive, rather than inhibit, job retention and growth and capital investment. Such engagement will enable us to address our fiscal issues more effectively so as to support a dynamic set of growth strategies focused on the four aforementioned objectives. Similar collaboration and innovation will also help to revamp the State s delivery of public health, safety, and social services. Simply stated, replacing the historical and often rigid approaches to economic growth and the delivery of public services with innovative strategies and processes will save money, increase meaningful employment opportunities, and enhance residents quality of life. Every State faces the confluence of global economic volatility, underfunded retiree pension and health care benefits, and structural budget challenges. We confidently assert that Connecticut's greatest advantage in addressing our challenges lies in the latent but powerful combination of the intellectual capital and experience in the private sector with that of state government leaders. That combination, working imaginatively and collaboratively, will exploit our opportunities and demonstrate that politics is indeed the art of the possible. GROWTH I. STRATEGIC ECONOMIC DEVELOPMENT PLAN: We encourage you to engage our organizations to work on enhancing Connecticut s current economic development strategy to achieve the four objectives cited above. Two immediate opportunities for engagement include the February 16 th Summit hosted by the Department of Economic and Community Development ( DECD ) and the Commission on Economic Competitiveness (the Commission ) and its research effort with McKinsey & Company. Both initiatives provide the opportunity for private sector input to help develop and implement the key tactics of a comprehensive and data based strategy that leverages Connecticut s assets in the health sector, higher education, insurance and financial services, precision manufacturing, science and technology, and entertainment and sports programming while strengthening the State s foundation of fiscal responsibility and predictability. II. BI ANNUAL PLANNING: We similarly encourage you to convene our organizations, DECD, the Office of Policy and Management ( OPM ), and other appropriate parties to establish a bi-annual statewide dialogue on Connecticut s economic and employment strategy and objectives. We suggest modeling the dialogue on efforts in Michigan and Minnesota to engage private and public leaders in a sustained non-partisan effort to enhance public-private relationships and manage a multi-year plan that strengthens Connecticut on all economic, fiscal, and quality of life fronts with the effort to commence early this year in order to hold the first such meeting in July of Page 2 of 5

3 SPENDING DISCIPLINE While aggressively pursuing growth strategies and private sector engagement, Connecticut must also strengthen its predictability in tax policy, spending controls, and productivity improvements in order to provide the investment resources necessary to enhance our education systems, infrastructure, quality of life, and urban livability. The combination will also allow for targeted tax relief to encourage private sector employers of all sizes to expand, attract workers with in demand skills, and allow retired residents to remain in Connecticut. I. PRIVATE SECTOR ENGAGEMENT: In addition to engagement with DECD and the Commission, the private sector has the desire and expertise to assist the State in reforming and restructuring a number of major components of the State s annual budget to control costs and to improve services. Specific areas for that engagement include: reforming Medicaid funding to maximize federal revenue, ensure access to affordable care, improve the quality of care, and establish a shared savings component in the Medicaid program that engages all participating providers; implementing the recommendations of the Connecticut Institute for the 21 st Century regarding several State funded and managed services; and supporting your efforts to secure changes in work rules, pension calculations, and other key components of State employee labor agreements and to work with you, the State Comptroller, and the State Treasurer to address the underfunded and unfunded components of the State retiree pension and health care benefits. II. CONSTITUTIONAL AMENDMENTS: Two of the most important actions to be accomplished this legislative session are to take the actions necessary to pass the two Constitutional amendments noted below. The prompt passage of the amendments this session will send a strong signal to the private sector and the credit rating agencies that we have the determination and tools to control and prioritize spending so as to ensure sustainable economic and employment growth. As importantly, we and our investors pledge our efforts to encourage the State s residents to adopt both amendments on November 8, TRANSPORTATION FUNDING AMENDMENT: We enthusiastically endorse your leadership to secure passage of a well-crafted Constitutional amendment that ensures that all Special Transportation Fund monies are used for infrastructure. We have provided you with a draft of an amendment intended to improve the likelihood of the public s support for the increased revenues recommended by the Transportation Finance Panel to fund your Let's Go CT Now plan. Accordingly, we urge the adoption by the Legislature of the attached Constitutional Amendment by May 1, 2016 to ensure that it is on the November 8 th ballot. Page 3 of 5

4 SPENDING CAP AMENDMENT: We salute your efforts to control the growth in state spending and your use of the Constitutional spending cap to do so. The recent opinion of the Attorney General, however, essentially renders the 1993 amendment null and void and exacerbates our concern about the willingness and ability of future Governors to follow your lead. In that spirit, we have provided you with a draft of a Constitutional Amendment to be adopted by the Legislature by May 1, 2016 to clarify and strengthen the spending cap approved by voters in 1992 to ensure that it is on the November 8 th ballot. We note that a Forum on the history and future of the current spending cap amendment will be held at the UConn Law School on February 9 th. CONCLUSION By building and sustaining the engagement of the private sector and focusing on growth initiatives and disciplined spending, we will ensure that Connecticut competes aggressively and successfully for jobs, capital, and talent. We thank you for your continued leadership and look forward to working with your team to organize meetings with you, members of your administration, and Legislators to pursue these critical initiatives. Sincerely, Central Connecticut Chambers of Commerce Connecticut Business & Industry Association Anthony Mattioli - Chair VP/Commercial Lending Thomaston Savings Bank Bob Sobolewski Chair ebm-papst (Retired) Jim Albert Chamber of Commerce of Eastern Connecticut, Inc. Gail Weber Chair Co-Owner, Minuteman Press Norwich/New London Tony Sheridan President Joe Brennan President Greater New Haven Chamber of Commerce Larry Bingaman Chair CEO South Central CT Regional Water Authority Tony Rescigno President Page 4 of 5

5 MetroHartford Alliance Bonnie Malley Chair Chief Financial Officer The Phoenix Companies Oz Griebel Middlesex County Chamber of Commerce Vincent Capece Chair President/CEO Middlesex Hospital Larry McHugh President The Bridgeport Regional Business Council The Business Council of Fairfield County Reyno Giallongo Chair Chairman and CEO First County Bank Chris Bruhl Waterbury Regional Chamber of Commerce Tim Bergstrom Chair Regional President Webster Bank Lynn Ward Armando Goncalves - Chair Div. Pres., Sr. V. P. People s United Bank Paul Timpanelli cc: Senate Pro Tempore Martin Looney Speaker of the House Brendan Sharkey State Senator Bob Duff, Senate Majority Leader Senate Representative Joe Aresimowicz, House Majority Leader State Senator Len Fasano, Senate Minority Leader State Representative Themis Klarides, House Minority Leader Catherine Smith Ben Barnes Brian Durand Page 5 of 5

6 Spending Cap Amendment - DISCUSSION DRAFT ARTICLE XXVIII. Article third of the constitution is amended by adding section 18 as follows: Sec. 18 a. The amount of general budget expenditures authorized for any fiscal year shall not exceed the estimated amount of revenue for such fiscal year. b. On or before July 15th, annually, the Secretary of the Office of Policy and Management and the director of the legislative Office of Fiscal Analysis shall each submit to the joint standing committees of the General Assembly having cognizance of matters relating to appropriations and the budgets of state agencies and finance, revenue and bonding a consensus calculation of the percentage increase in personal income and the percentage increase in inflation for the previous fiscal year. c. The general assembly shall not authorize an increase in general budget expenditures for any fiscal year above the amount of general budget expenditures authorized for the previous fiscal year by a percentage which exceeds the greater of the consensus calculation of the percentage increase in personal income or the consensus calculation of the percentage increase in inflation, unless the governor declares an emergency or the existence of extraordinary circumstances and at least three-quarters of the members of each house of the general assembly vote to exceed such limit for the purposes of such emergency or extraordinary circumstances. d. No later than April 15, 2017 the general assembly shall by law define "increase in personal income", "increase in inflation" and "general budget expenditures" for the purposes of this section and may amend such definitions, from time to time, provided general budget expenditures shall include expenditures to fund state retiree pension and health care benefits and shall not include expenditures for the payment of bonds, notes or other evidences of indebtedness. The enactment or amendment of such definitions shall require the vote of threequarters of the members of each house of the general assembly. e. As used in this section, general budget expenditures means expenditures from appropriated funds authorized by public or special act of the General Assembly, provided general budget expenditures shall not include (1) expenditures for payment of the principal of and interest on bonds, notes or other evidences of indebtedness, expenditures pursuant to section 4-30a, or current or increased expenditures for statutory grants to distressed municipalities, provided such grants are in effect on July 1, 1991, and (2) expenditures for the implementation of federal mandates or court orders shall not be considered general budget expenditures for the first fiscal year in which such expenditures are authorized, but shall be considered general budget expenditures for such year for the purposes of determining general budget expenditures for the ensuing fiscal year. As used in this section, federal mandates means those programs or services in which the state must participate, or in which the state participated on July 1, 1991, and in which the state must meet federal entitlement and eligibility criteria in order to receive federal reimbursement, provide expenditures for program or service components which are optional under federal law or regulation shall be considered general budget expenditures. 1

7 f. Any unappropriated surplus shall be used to fund a budget reserve fund or for the reduction of bonded indebtedness; or for any other purpose authorized by at least three-quarters of the members of each house of the general assembly. Any use of the budget reserve fund other than the reduction of bonded indebtedness shall require the vote of three-quarters of the members of each house of the general assembly. g. Original jurisdiction is vested in the supreme court to be exercised on the petition of any registered voter of Connecticut whereby said court may compel the general assembly, by mandamus or otherwise, to perform its duty to define "increase in personal income", "increase in inflation" and "general budget expenditures" for the purposes of this section. Said court may take such other action to effectuate the purposes of this article, including the establishing of definitions of "increase in personal income", "increase in inflation" and "general budget expenditures" if the general assembly fails to define "increase in personal income", "increase in inflation" and "general budget expenditures" by the fifteenth day of April 15, Any such petition shall be filed within thirty days of the date specified. The Supreme Court shall render its decision not later than thirty days following the filing of such petition. Upon receiving such decision the secretary shall publish the same forthwith, and, upon publication, such definitions of "increase in personal income", "increase in inflation" and "general budget expenditures" shall have the full force of law. 2

8 ARTICLE XXVIII. Transportation Funding Lockbox Amendment DISCUSSION DRAFT Article third of the Constitution is amended by adding section 19 as follows: Sec. 19a. The Special Transportation Fund shall remain a perpetual fund. The general assembly shall direct the resources of said fund solely for transportation purposes including but not limited to the payment of debt service on obligations of the state incurred for transportation purposes. "Transportation purposes" include expenditures for consulting and engineering services so designated by Connecticut Department of Transportation (CDOT) as necessary for any such construction, expansion, and maintenance but does not include the salary and benefit costs for any employee of the state of Connecticut. All sources of transportation revenues including but not limited to funds, moneys and receipts of the state required to be credited, deposited or transferred to said fund by state law on or after the effective date of this amendment shall continue to be credited, deposited or transferred to the Special Transportation Fund, so long as such sources are collected or received by the state, or any officer thereof, and the general assembly shall enact no law authorizing the resources of said fund to be expended other than for transportation purposes. b. No later than April 15, 2017 the general assembly shall by law define "transportation purposes" and "transportation revenues" for the purposes of this section. The enactment of such definitions shall require the vote of three-quarters of the members of each house of the general assembly. The general assembly may amend such definitions, from time to time. The amendment of such definitions shall require the vote of three-quarters of the members of each house of the general assembly. c. To ensure the appropriate engagement of the citizens and private employers in the prioritization of such "transportation purposes", the governor and the general assembly, no later than April 15, 2017, shall establish an advisory body consisting of representatives of the private sector to provide guidance on transportation purposes, the projected capital and operating costs of transportation purposes, and recommended revenue sources to fund transportation purposes. d. Original jurisdiction is vested in the Connecticut Supreme Court to be exercised on the petition of any registered voter of Connecticut whereby said court may compel the general assembly, by mandamus or otherwise, to perform its duties to define "transportation purposes" and "transportation revenues" for the purposes of this section and to establish the aforementioned advisory body. Said court may take such other action to effectuate the purposes of this article, including establishing definitions of "transportation purposes" and "transportation revenues" and establishing the aforementioned advisory body if the general assembly fails to define "transportation purposes" and "transportation revenues" and establish the aforementioned advisory body by the fifteenth day of April, Any such petition shall be filed within thirty days of the date specified. The Connecticut Supreme Court shall render its decision not later than thirty days following the filing of such petition. Upon receiving such decision the secretary shall publish the same forthwith, and, upon publication, such definitions of "transportation purposes" and "transportation revenues" and the establishment of the aforementioned advisory body shall have the full force of law. 1