1. CT Forecast CECB 11/02, Slide1 Connecticut Outlook 2002:3 to 2006:4 Edward J. Deak, Ph.D. Professor of Economics Fairfield University Connecticut Model Manager NEEP

2. CT Forecast CECB 11/02, Slide2 U.S Macro Forecast Economy.com 11/7/02 Recovery continues w/o double dip –Productivity, low interest rates, fiscal stim Shift growth engine: Housing to Bus Inv Home prices vulnerable: Prices>Income Rising business activity: Jobs, travel, Inv Requires: Liquidity in equity+bond mkts Risks on downside

3. CT Forecast CECB 11/02, Slide3 Tracking the CT Recession and Recovery? CT IndicatorBest Worst Diff Sept 2002 Nonag Employ7/0012/01-28.9k 1,672.8k 1,701k1,672k Unemploy Rate6-8/0012/01+1.9% 4.1% 2.1%4.0% Wkly New Claims9/0010/01+2,886 5,215 3,1686,054 Labor Force7/003/02-45k 1,719.9k 1,753k1,708k

4. CT Forecast CECB 11/02, Slide4 CT Forecast 2002 Indicator2001 2002 %  CT %  US Jobs (mil)1.6831.676 -0.4-0.8 Mfg Jobs(th) 254 243 -4.3-5.2 Nonmfg Jobs (th)1,4291,433 0.3-0.1 RPer Inc (B$96)130.4130.6 -0.30.1 UE Rate (%) 3.29 3.85 6.0% Home Pmts9,2909,761 5.11.7 Lab Force (mil)1.7181.714 -0.20.6 RGSP (B$96)150.78154.44 2.42.3

5. CT Forecast CECB 11/02, Slide5 New Unemployment Claims Weekly Average (sa)

6. CT Forecast CECB 11/02, Slide6 Major Job Cuts 4/02-10/02 Ames Dept Store 1,421 – Retail Envirotest 490 – Services Bayer Pharmaceuticals 450 – Chemicals Anderson Accounting 310 – Bus services Kaman 300 – Aerospace Aetna 300 – Insuracnce SNET/SBC 300 – Telcom Computer Sciences 165 – Bus services Bridgeport Machines 140 – Machine tools Pratt & Whitney 127 – Aircraft engines Sikorsky 150 – Helicopters

7. CT Forecast CECB 11/02, Slide7 Major Job Addition 4/02-10/02 Latex Foam 85 – Rubber + plastics People’s Bank 43 – Finance A.J. Wright 40 – Retail ING 100 – Financial services

8. CT Forecast CECB 11/02, Slide8 CT Forecast to 2006 CT Indicator20022003200420052006 Jobs (mil)1.6761.6891.7231.7421.755 Mfg Jobs (th) 243 245 248 247 247 Nonmf Jobs(mil)1.4331.4451.4751.4951.508 Per Inc ($B96)130.3132.1134.9137.4140.1 Home Pmts9,7618,9239,2968,9418,939 Lab Force (mil)1.7141.7221.7371.7511,764 RGSP (B$96)154.4158.4164.3168.5174.2 Pop (mil)3.4363.4423.4473.4533.459

9. CT Forecast CECB 11/02, Slide9 Trends in CT Indicators 1999-2006

10. CT Forecast CECB 11/02, Slide10 CT Tax Category

11. CT Forecast CECB 11/02, Slide11 Deficit Options: FY ’03, ’04, ‘05 A Two Part Struggle Tax  : Pers Income, sales tax/base, corp tax Securitize tobacco settlement revenues Cut + reform state spending - Options –Reduce government work-force cost –Reform Medicaid: Optional services –Streamline ed support services: Multi-town districts –Cut low value public programs –Use technology to cut costs: Web FY ’04 + ’05 $1.5B estimated deficit –Revenue growth 2%+, expanding service demands

12. CT Forecast CECB 11/02, Slide12 CT Forecast Risks National: Fear of double dip recession Consumer debt + dock strike + holiday $ + refinance Federal and state deficits Federal (i) changes + deflation fears Lackluster equity markets + Energy prices Global instability – War with Iraq State: State Budget deficit – Pain:  taxes +  spending Higher energy costs + equity slide Defense funding + IT spending