STATE OF CONNECTICUT EXECUTIVE CHAMBERS HARTFORD, CONNECTICUT 06106
M. Jodi Rell Governor
FOR IMMEDIATE RELEASE May 27, 2008
Contact: 860-524-7313
Citing Economic Impacts, Governor Rell
Vetoes Minimum Wage Increase
Governor Also Vetoes Tip Credit Bill That Accompanied Increase
Saying that she does not want to take any action that will negatively affect businesses or jobs during a national economic downturn, Governor M. Jodi Rell today vetoed a bill that would have raised the state’s minimum wage from $7.65 to $8 beginning Jan. 1, 2009, and to $8.25 beginning Jan. 1, 2010.
In addition to vetoing House Bill 5105, An Act Concerning the Minimum Wage, the Governor also vetoed Senate Bill 55, An Act Concerning the Tip Credit, which is rendered unnecessary by the veto of House Bill 5105.
“There is no doubt that families, particularly low income families, have been hurt by our strained economy,” Governor Rell said. “We all feel the pinch when buying groceries, filling up the gas tank and heating our homes. Yet we must also realize that Connecticut employers face these same financial pressures and are having an extremely difficult time making ends meet.
“We cannot take a chance on hurting families or employers by signing another minimum wage increase into law at this time,” the Governor said. “Businesses have told me that they would not be hiring if the wage hike went into effect. Employers that are now operating on the margin may be forced to close or leave Connecticut to more business-affordable states, resulting in job losses that will undermine the already fragile foundation of financial security for thousands of families.”
Governor Rell signed the last increase in the minimum wage two years ago. Connecticut’s minimum wage is already well above the federal minimum, which is $5.85 per hour.
“Business owners tell me it is not just the cost of raising the minimum wage, but also the associated costs, such as higher Social Security, unemployment tax and workers compensation payments,” Governor Rell said. “For businesses with thin profit margins that are struggling, this bill could have a negative impact of $700 or so per worker per year.”
Moreover, businesses where all workers’ wages are tied to the minimum wage would also see increased costs, since all workers’ pay would have to be increased to maintain the differentials. Other businesses will simply increase their costs to consumers to keep up.
“We must not lose sight of the integral role that employers play in sustaining our economy, or the fact that, without employers, there are no jobs,” Governor Rell said. “It is not a minimum wage increase that will support our families – it is a thriving economy, accomplished through a business-friendly environment with successful employers and reasonably priced consumer goods and services.”
SB 55 would have offset the minimum wage increase in HB 5105 for hotel and restaurant employers by increasing the tip credit those employers could recognize for bartenders and waitstaff effective January 1, 2009. Without the increase allowed in HB 5105, SB 55 could actually result in reducing the current wages for those employees.
Last week, Governor Rell said her budget office is warning that the shortfall for the current fiscal year is growing while the projected deficit for Fiscal 2009 has increased to as much as $150 million. On Friday, the Governor ordered a hiring freeze for state agencies. The governor has already ordered a number of steps to reduce state government expenses, including a ban on out-of-state travel, limits on the use of state purchasing cards and reductions in the use of state vehicles and gasoline consumption.
Earlier this month the Governor instructed commissioners and other agency chiefs to review their current expenditures and stop all non-essential spending. She also directed them to begin a ban on out-of-state travel by all personnel unless the trip is paid for out of non-state funds.
“Every economic slump is followed by a period of economic growth,” Governor Rell said. “If Connecticut is to make the most of its natural strengths when that upturn arrives, we cannot afford to pass measures that burden state businesses. We will continue to plan for how we will make the most of our advantages – our strong work force, our ingenuity, excellent education resources and leadership in fields such as biotechnology, pharmaceuticals, aerospace, financial services and other 21ST-century growth opportunities.”
The Governor's Letter to the Secretary of State is attached below:
The Honorable Susan Bysiewicz
Secretary of the State
18-20 Trinity Street
Hartford, CT06106
Dear Madam Secretary:
I am hereby returning without my signature House Bill 5105, An Act Concerning the Minimum Wage and Senate Bill 55, An Act Concerning the Tip Credit. I have grave concerns about the potential negative impact on Connecticut employers of a minimum wage increase during these challenging economic times and believe that a concurrent tip credit is unnecessary without the passage of a minimum wage increase.
There is no doubt that families, particularly low income families, have been hurt by our strained economy. We all feel the pinch when buying groceries, filling up the gas tank and heating our homes. Yet we must also realize that Connecticut employers face these same financial pressures and are having an extremely difficult time making ends meet. Just last month you noted that “Connecticut businesses are clearly struggling to stay afloat as the national and state economy continues to see a major decline.” You also noted a “record number” of business closures: 2,752 for the first quarter of 2008. This trend is troubling and is a direct reflection of the nation’s flagging economy.
Seeking an increase in the minimum wage is laudable, but it is a decision that cannot be made absent consideration of its impact on the State’s economy. As leaders, we have to be cautious about mandating additional costs to be borne by Connecticut employers and must always be cognizant of “what is best for Connecticut,” not only in the short-term, but the long-term. What is best for Connecticut – what Connecticut desperately needs – is a successful economy, an economy that will create jobs and provide benefits to our residents – today, tomorrow and well into the future.
Connecticut already ranks among the highest state in the nation for business costs. At a time when employers are fighting for survival, an increase in the minimum wage will only serve to increase the cost of doing business in Connecticut and may well be the last straw for many employers. We must appreciate the ripple effect of a minimum wage increase – from higher Social Security and unemployment taxes and workers compensation payments to wage increases necessary to maintain payment differentials between different levels of employees (i.e., compression), and higher wages for union employees whose compensation is tied to the minimum wage. Employers that are now operating on the margin may be forced to close or leave Connecticut to more business-affordable states, resulting in job losses that will undermine the already fragile foundation of financial security for thousands of families. Alternatively, employers already operating on razor-thin margins will likely pass these additional costs onto Connecticut consumers, often the very same persons that the bill seeks to help and at a time when few families can afford additional price increases.
We must not lose sight of the integral role that employers play in sustaining our economy, or the fact that, without employers, there are no jobs. It is not a minimum wage increase that will support our families – it is a thriving economy, accomplished through a business-friendly environment with successful employers and reasonably priced consumer goods and services.
Senate Bill 55, An Act Concerning the Tip Credit, also returned without my signature, offsets the minimum wage increase set forth in H.B. 5105 for hotel and restaurant employers by increasing the tip credit that these employers may recognize for bartenders and waitstaff effective January 1, 2009. Absent the passage of H.B. 5105, this bill would only serve to reduce the current wages paid by these employers to waitstaff and bartenders and is therefore unnecessary, even harmful.
For these reasons, I disapprove of H.B. 5105, An Act Concerning the Minimum Wage and S.B. 55, An Act Concerning the Tip Credit. Pursuant to Section 15 of Article Fourth of the Constitution of the State of Connecticut, I am returning H.B. 5105 and S.B. 55 without my signature.
