The state’s economic future looks gloomy, according to a new study by the University of Connecticut.
Researchers from the Connecticut Center of Economic Analysis predict persistently high unemployment, stagnant personal income and weak real estate markets.
To help turn things around, they recommended on that the state reclaim more than $1 billion in unused research and development tax credits to build and equip manufacturing, pharmaceutical, bioscience and research space that would create nearly 40,000 high-wage jobs.
The report -- "Drifting Down: What Will Restore Connecticut's Economic Vitality?" – says applying unused tax credits to economic development would be a "real game-changer."
It recommends that Connecticut make agreements with companies currently holding tax credits, which would allow the state to begin making five annual payments of $200 million in exchange for the credits.
The report also says legislation enacted this year at the state Capitol should improve the state’s performance in a few years, but no policy is likely to bring a strong recovery in the short term.
"There is little to argue that the state's revenue picture will improve sufficiently to reduce massive, multibillion-dollar budget deficits over the next two to four years," according to the report from Peter Gunther, a senior research fellow at the center.
The report comes after a slight glimmer of improvement in employment figured.
The state added jobs in April, causing a dip in unemployment, from 9.2 percent in March to 9 percent.
However, the University of Connecticut study said employment will likely contract in the coming months.
Dan Kennedy, a senior economist at the Department of Labor, said the state agency will release its own data soon. He would not comment on the university's forecast.
The state Department of Revenue Services said about $1.3 billion in research and development tax credits were carried forward to the 2008 income year. No more than one third of the credit may be taken as a tax credit in a year, requiring that the remaining two-thirds be carried forward, the agency said.