A CT program was meant to boost manufacturing. It’s changed.

In the early 1990s, the state created an economic development program to provide direct financial assistance to manufacturing companies facing offshore competition.

But in the decades since, the now $1 billion-plus program has morphed, dispensing cash to large companies in a wider range of sectors — to stem job losses, prevent relocation and stimulate investment following the Great Recession.

Recently, the Lamont administration has sought to scale it back.

The principles behind the program were laid out at its origin: “The maintenance and continued development of the state’s manufacturing sector is important to the economic welfare of the state and to the retention and creation of job opportunities within the state,” the Economic Development and Manufacturing Assistance Act of 1990 stated in its introduction.

“Assistance from the state can promote the retention, expansion, and diversification of existing manufacturing businesses and encourage manufacturing and other economic base businesses from other geographic areas to locate into the state.”

But manufacturing, the program’s initial priority, has since taken a back seat; the Department of Economic and Community Development has rolled out a slate of new, more focused assistance programs for the sector. Still, the original program’s name, the Manufacturing Assistance Act, hasn’t changed.

Over that time, the industry has lost over 140,000 jobs, a 48% drop — even as the state borrowed more and more money to award multimillion-dollar grants and low-interest loans, under the MAA, to companies that promised to retain or create jobs here.

Most of those businesses haven’t been manufacturers.

For the program’s first two decades, the majority of MAA grants and loans — roughly $31 million — went to manufacturing companies, according to the agency's annual reports. But since then, that share has dropped closer to 40%, according to publicly available data .

The economy was shifting. Connecticut’s service-based sectors — health care, education, insurance, finance and hospitality — were gaining strength, a common pattern in advanced economies known as deindustrialization.

The state assistance program couldn’t fend off global economic forces that saw China and India become manufacturing powerhouses while container ships, massive port complexes and transportation networks swelled to accommodate growing international trade.

In 2008, the legislature added language that expanded the types of companies targeted for MAA support to include those within any “economic base business sector,” which the bill defined as:

"A business that the commissioner determines will materially contribute to the economy of the state by creating or retaining jobs, exporting products or services beyond the state's boundaries, encouraging innovation in products or services , adding value to products or services or otherwise supporting or enhancing existing activities important to the economy of the state.” [emphasis added]

Rick Robbins, executive director of compliance, planning and programs for DECD at the time, said in written testimony to the Commerce Committee that the state’s economic challenges “are not the same as those that faced the state when MAA was first enacted.”

The new language, Robbins said, aimed to “modernize this important program so that the state will be better positioned and equipped to address the economic development needs and challenges of today and those anticipated for the near future.”

That “near future” may have been closer than they realized.

A ‘land rush’

By the end of that year, economists had declared that the U.S. economy was in the midst of a great recession , triggered by the housing bubble collapse. The stock market bottomed out in March 2009. GDP, which measures the size of the economy, reached its low point that June. By October 2009, unemployment was at 10%.

Federal lawmakers scrambled to pass an $800 billion stimulus bill known as the American Recovery and Reinvestment Act, but the economy stayed sluggish. It would be years before GDP and employment levels returned to pre-recession form.

In Connecticut, state officials sought to reduce job losses and stoke the economy through a program called “First Five,” which offered hundreds of millions of dollars in direct assistance to the first five businesses that could create 200 new jobs within two years (or within five years if the company invested $25 million in its Connecticut operations).

First Five was funded through the Manufacturing Assistance Act. The idea came from Gov. Dannel Malloy, who took office in January 2011 and announced the plan the following month. He called it “a no-brainer.”

Connecticut’s working population had topped 1.8 million in the early 1990s, but declined and languished for over a decade. The Great Recession arrived just as job growth appeared to be gaining momentum.

First Five took an aggressive approach, authorizing the DECD commissioner to override monetary limits, combine direct assistance with other incentive programs and exempt eligible companies from legal requirements that might slow down their receipt of funding.

Malloy’s budget chief, Benjamin Barnes, said First Five would create “a ‘land-rush’ level of excitement” for companies. “As you well know, Connecticut has a poor history of job creation,” Barnes said in written testimony to the Commerce Committee. “Gov. Malloy wanted to take aggressive steps to turn around this poor record of job creation with a robust program of incentives right from the start of his administration.”

The bill passed both chambers with bipartisan support. By that October, four of the First Five companies had announced deals with the state: Cigna, TicketNetwork (which later withdrew from the program), ESPN and NBC Sports .

In a special session the day after the NBC Sports deal was announced, Connecticut lawmakers expanded the program to up to 10 companies. Now, since First Five’s inception, 19 companies have received MAA funding through First Five, and only four were manufacturers. MAA’s other top recipients were largely in service sectors like finance and insurance.

The 2011 special session bill , for which the state tapped hundreds of millions in borrowed dollars (i.e., bonding), also boosted workforce development programs; added a tax credit for job creation; expanded the state’s angel investor and film industry tax incentives; added funding for brownfield remediation and the quasi-public investment arm Connecticut Innovations; and created another direct assistance program for companies known as Small Business Express to quickly dispense financing to distressed companies.

Rep. Minnie Gonzalez, D-Hartford, said the legislation had “cause to be proud” during remarks on the House floor.

“We did something good. We’ve got a lot more to do. The legislature takes action by passing the initiatives in this bill. And as the governor will be the first to admit, it then falls on him and the executive branch to execute,” she said.

Small Business Express offered businesses with fewer than 50 employees up to $100,000 in grant funding and as much as $350,000 in loans, much of which was forgivable if the company created new jobs.

With most Manufacturing Assistance Act funds now going toward large employers, Small Business Express quickly drew interest from Connecticut’s thousands of specialized manufacturing companies. From 2012 through 2022, over 27% of the funds distributed through EXP, as it's known, went to manufacturing companies, according to a CT Mirror analysis of publicly available data.

But some lawmakers were wary of the legislation’s generous approach to economic development.

“When we look at this bill, it seems that we are focusing on one basic industry or two basic industries, and we are also focusing on corporations much more than we are the people that are working,” Rep. Toni Walker, D-New Haven, said.

‘Picking winners’

Direct state assistance to for-profit companies — in the form of grants and loans through MAA and other programs — grew substantially by the mid-2010s, from less than $15 million annually to over $160 million, according to agency annual reports.

The Lamont administration, which took office in 2019, estimated that by 2016, DECD was borrowing around $200 million a year to cover the cost of cash assistance to businesses.

And Connecticut wasn’t the only state expanding business incentive programs to lure corporate investment from elsewhere during that time. States and local governments now spend about $60 billion annually on these programs, according to a report by the W.E. Upjohn Institute for Employment Research. From 1990 through 2015, the average incentive tripled in size, the report found.

But skepticism of their effectiveness also grew as analysts and state officials started calculating the return on investment — specifically, the per-job expenses governments were incurring.

A DECD report in January 2019, as Malloy was leaving office, estimated the state’s First Five program cost nearly $9,000 per job. (Gov. Ned Lamont’s administration later clocked that figure closer to $16,000.)

From the time First Five launched, July 2011, through the end of the Malloy administration, Dec. 2018, Connecticut’s entire labor force grew by just 1.1%.

When Lamont took office, his economic development chief David Lehman quickly got to work overhauling the state’s business assistance strategy. “We’re taking a hard look and making sure that if we are going to put it on the credit card, there’s a real ROI and benefit,” Lehman said in a January 2020 press conference announcing a series of new measures.

To that end, Small Business Express, an emergency program created to fill the void in bank lending that followed the Great Recession, would soon be retooled as a “partnership” between the state and a handful of Community Development Financial Institutions. DECD would budget up to $75 million annually to be disbursed to these lenders for the purposes of low-interest loans to small businesses. EXP would no longer offer grants.

“We're going to shift from being a direct lender to working with private lenders, to not compete with banks but to figure out if we can increase capacity by working alongside banks,” Lehman said.

Per statute, First Five came to an end in June 2019, and the new administration cut back on borrowing to support the Manufacturing Assistance Act. First Five companies had created jobs and made new investments in the state, but Lehman said it wasn’t clear that was a direct result of the cash assistance — a scheme he described as “picking winners.”

The Lamont administration pushed instead for a new program, JobsCT, which would offer tax breaks to companies that created 25 or more jobs — no up-front money from the state, no borrowing to support the effort. The incentive would be delivered only after companies could show they’d added jobs.

“You invest in Connecticut, and we invest in you,” Lamont summarized.

Getting it right

Lamont and Lehman’s plans were sidelined in 2020 when the global COVID-19 pandemic shut down businesses and caused a two-month recession .

In March 2020, DECD mobilized $50 million in cash assistance through the Small Business Express program to help small enterprises and nonprofits survive the shutdown with grants of up to $75,000. That October, the state added $50 million in federal CARES Act funds to provide additional cash support to businesses.

But in the years since then, the Lamont administration has made good on its original plan. And the Department of Economic and Community Development has significantly reduced direct business assistance.

In 2022, Connecticut kicked off its new small business loan program, known as Small Business Boost Fund (which replaced EXP), and the legislature adopted the JobsCT tax credit scheme. Scaled-back Manufacturing Assistance Act funds, now about $50 million, are slated to support a grant program fostering startup “clusters” around the state, with a focus on innovation in biotechnology, finance, insurance and advanced manufacturing sectors.

Under Lamont, the Legislature has also expanded the Manufacturing Innovation Fund, which provides financial support for job training and apprenticeships, education for small companies in new manufacturing technology and grants of up to $100,000 toward equipment purchases. The fund has invested over $100 million in the sector since its inception in 2015 and was recently approved for an additional $15 million in bonding.

Still, some startup businesses and investors argue the Lamont administration’s marquee programs, JobsCT and Boost, don’t offer the kind of cash support advanced manufacturers need, particularly with the rapid changes happening in the sector and Connecticut’s higher-cost environment . EXP was more flexible and substantial, they say.

Of all the loans made through the Boost program so far, only around 10% of funds have gone to manufacturers. JobsCT requires applicants to have created 25 jobs, and the tax credits don’t pay out until several years on — which could mean many fledgling manufacturers developing new technologies with a bare-bones staff wouldn’t qualify. So far, 28 companies have applied for JobsCT, and a handful have been approved to receive credits in the coming years.

Earlier this year, a report to the Commerce Committee sounded the alarm over Connecticut’s shortcomings in the rapidly changing advanced manufacturing field — where the state frequently touts itself as a leader.

Connecticut ranked third in the number of patents it produces, the report found, but it came in 27th in a measure of product innovation — the share of Connecticut companies that introduced new or improved products to the market. That indicates an unmet need for state support for small, innovative manufacturing companies, the report suggested.

“[It] looks to me like a ticking time bomb,” Sen. Joan Hartley, D-Waterbury, said at the conclusion of the presentation.

Chief Manufacturing Officer Paul Lavoie said the findings of the report were misleading. “Connecticut’s manufacturing sector is highly innovative, but the fact is much of the important Department of Defense work that our companies do is highly classified, and they are not necessarily asked to do product development,” Lavoie wrote in an emailed response to questions. “They just make the classified parts as designed by the DOD.

“So while many of the patents we generate may be tied to defense-related applications, the product innovation numbers are skewed downward due to the nature of the work we do in the aerospace and shipbuilding sectors.”

He also noted that DECD’s Office of Manufacturing offers 38 different programs to help companies with innovation, workforce development, supply chain resiliency and reducing costs.

On the innovation front, his office partners with an organization called FORGE, which offers grants and technical support for inventors and entrepreneurs in manufacturing. Since its inception, FORGE has worked with over 100 companies, Lavoie said.

A manufacturing comeback — with a new look

There is likely no perfect combination of state programs that could guarantee Connecticut recovers all the manufacturing jobs it once had. But Lavoie said the sector’s output has been steadily increasing since 2020.

Manufacturing currently represents about 12% of the state’s GDP (third-largest after the real estate and finance/insurance sectors). Lavoie has set a goal of expanding manufacturing’s share to 20% by 2030.

Technological innovation has changed what manufacturing looks like . And with much of the workforce retiring, Lavoie said, his focus is on productivity — growing industrial output with fewer people. “The biggest challenge is the lack of an available and skilled workforce,” he said.

“In manufacturing, we have the opportunity to have machines do the work of people we are never going to hire. There simply is not enough people to fill our open jobs," Lavoie said. "We need to drive innovation and automation to get work done.

"This is not a job replacement strategy, it is a job enhancement and survival strategy.”

Selling that new vision has been the bulk of Lavoie's work as the state's chief manufacturing officer.

He's embarked on what he's called a "hearts and minds campaign" to engage more closely with the manufacturing community and elevate the industry's profile in Connecticut. Earlier this month, Lavoie gathered manufacturers and industry advocates at ship repair company Birdon, in Portland, to unveil a new marketing effort aimed at educating young people — and their parents — about the opportunities for stable, well-paying careers in manufacturing.

He played a new advertisement for the audience, gathered in Birdon's cavernous hangar, which showed a series of young people operating high-tech machinery. It was punctuated with the tagline: "I got it made."

The marketing campaign, alongside expansions to the Manufacturing Innovation Fund and DECD's dozens of targeted assistance programs for the sector, come as industrial policy is undergoing a sea change at the federal level, as well.

The Biden administration has passed billions of dollars in targeted new investment in advanced manufacturing sectors, with the specific goal of returning high-tech production — which had decamped to lower-cost regions decades ago — back to United States soil.

Lavoie said Connecticut is “very well-positioned” to take advantage of the federal incentives. “We have our niche as it relates to the CHIPS and Science Act,” he said, pointing to assistance the department recently provided to Farmington’s Mott Corp., a semiconductor supplier, which received a federal grant to expand production. And the state has been awarded several federal grants recently, including one each through the Departments of Defense, Energy and Commerce, Lavoie said.

In contrast to state incentives like MAA — aimed at companies adding employees or stemming job losses — these federal grants are largely going toward developing the workforce itself, fluent in the skills and technologies that are hallmarks of 21st Century manufacturing, Lavoie said. The strategy assumes the jobs will be there, assigning the state a role in helping to fill them.

"Everywhere I go, there's people are telling me, 'I have more work than I know what to do with. I just need to find people,'" Lavoie said.

"We need to upskill and reskill our workforce," he said. "All these federal grants give us money to be able to do that."