Higher property taxes a lousy state budget fix
It is now apparent that the state’s towns and cities will take a substantial hit as Gov. Dannel P. Malloy and the state legislature address a projected deficit gap in excess of $900 million for the fiscal year that begins July 1.
The Appropriations Committee chose to take the ax to the Education Cost Sharing grants that the state allocates to local school systems as its share of paying for the cost of educating the children of Connecticut. In his revised budget proposal, released Tuesday, Malloy also takes aim at education and additionally calls for repealing the plan to devote the revenues produced by a half-percent of the sales tax for municipal aid. That would amount to a $220 million cut in aid promised to municipalities.
The legislature intended the sales tax money to make up for loss of local revenues tied to a new cap on the motor vehicle tax rate. It was also meant to ease the burden on communities that have large percentages of nonprofit and government-owned, and so tax-exempt, properties. Most likely is some combination of cuts to both education and municipal aid, which in most communities will translate into substantial property tax increases, the most regressive of taxes.
A report last year by the Institute on Taxation & Economic Policy found that for those in the lowest 20 percent tax bracket in Connecticut, paying property taxes accounted for 5.3 percent of their income, and for the middle class, about 5 percent. Conversely, those in the top 4 percent devote only 2.7 percent of income to paying their property taxes, the top 1 percent, just 1.2 percent of income.
Ironically, the earmarking of that half-percent of sales tax, passed just last year and signed into law by the governor, was at least a small step toward property tax reform. In the midst of yet another budget crisis, it may quickly dissipate. By shifting the burden to towns and cities, something Malloy had sought to avoid during his first five years in office, the governor and Democratic legislature seek to avoid tax increases at the state level in an election year for lawmakers.
Even with cuts in municipal and education spending, substantial reductions will also be necessary in state government, including layoffs. The bottom line is that a stagnant economy in Connecticut and a loss of wealth — lower-paying jobs grew and higher-paying jobs exited in the wake of the Great Recession — the state has been left with a government it cannot afford.
Voters should look for candidates back to top
In this coming election, voters should look for candidates with big ideas for reorganizing government and the way taxes are assessed to pay for it. Such substance was sadly lacking in the 2014 race for governor, in which both candidates focused instead on raising the negative poll numbers of their opponent. As for addressing the current crisis, it will largely fall to the Democrats.
With long-standing majorities in the House and Senate, and in control of the governor’s seat since 2011, the majority party fully owns this situation. Voters are unlikely to be pleased with whatever the outcome, giving Republicans more ammunition to attack the fiscal record of the Democrats as they try to gain seats in the House and Senate.
An editorial earlier this week focused on one of the more outrageous proposed cuts, $4.6 million in Education Cost Sharing money to Groton. With that move the state would essentially shirk its commitment to help pay for the education of the children of military personnel who live in Navy housing, which is not subject to property taxes. That is about one in four students in Groton. Also taking a big hit if the ECS cuts win final approval would be Stonington, facing a $1 million reduction, which would cut the state education aid by half for the town.
We note with much chagrin that veteran state Rep. Diana Urban, D-North Stonington, who represents Stonington, voted in favor of this abomination on the Appropriations Committee. Urban called it a political calculation. A bill had to get out of committee, Urban said.
Playing ball reserved her ability to fight another day, a point she referenced at the April 6 committee meeting approving the revised budget. “Looking at some of the ECS formula cuts, in essence in my area, we had a 50 percent cut and doing that in one fell swoop is just not possible for the schools to absorb that. So I know that we are going to be working on that and trying to make things whole so that we don't do that to our kids and their education,” Urban told the committee. If she can’t make things whole, Urban will have some serious explaining to do.