Study: Spending Reforms Are Key to Property Tax Relief in Conn.

Published October 1, 2007

Spending reforms are essential to solving Connecticut’s property tax crisis, but legislators and Gov. M. Jodi Rell (R) will need political courage to adopt them, according to a new study by the Hartford-based Yankee Institute for Public Policy.

“Reform Spending, Relieve Taxpayers: Real Property-Tax Relief for Connecticut,” released in June, explores spending reform, an element of the property tax debate seldom discussed by the state’s mainstream media and political elites.

Sharp Spending Hike

In inflation-adjusted dollars, between 1991 and 2005 Connecticut’s property tax burden rose by more than 27 percent–far greater than the state’s meager population growth. Meanwhile, the state’s median household income declined, spurring the formation of dozens of taxpayer groups now active in Connecticut.

Recent years have seen citizens defeat budget referenda in several Nutmeg State towns that permit property owners to vote directly on municipal finance.

While politicians, bureaucrats, and left-leaning activists aggressively push revenue-increasing “solutions” to Connecticut’s high property taxes–including local-option taxes and greater state subsidies to localities–spending relief has been off the table. In response to the state’s failure to consider this side of the issue, the “Reform Spending, Relieve Taxpayers” report presents three broad categories of reforms for spending relief.

700 State Mandates

The first involves the immense burden that state mandates place on local governments. More than 700 such requirements affect everything from “collective bargaining” with employees to the type of loose-leaf binders used by town officials. No effort to achieve property tax relief will succeed without weeding out the many costly and unnecessary mandates placed on local governments.

The study also introduces the concept of “anti-mandates.” It points out that if the state can require municipalities to spend more tax dollars, it can also enact mandates that lower the cost of local government.

Personnel reforms are the most promising target for anti-mandates in Connecticut. Higher employee contributions for health care premiums, for example, would generate significant relief for taxpayers, as would a shift to defined-contribution pensions, according to the study.

Open Collective Bargaining

In addition, a requirement that municipal governments open the collective-bargaining process to public comment–and even public participation–would be effective, the study notes. As Flo Stahl, president of the Avon Taxpayers Association, recently wrote in the Hartford Courant, “Let municipalities bring [contract negotiations] out of the shadows, where they have languished for decades. It’s time for towns and cities to show respect for taxpayers, who fund these contracts.”

Another anti-mandate worth considering is the denial of state aid to “redevelopment” projects, which often become costly boondoggles for state and local taxpayers alike. The U.S. Supreme Court’s controversial 2005 Kelo decision, for example, resulted from a redevelopment project in New London, a city on Connecticut’s eastern shore.

Mission Creep

Finally, the study recommends Connecticut’s towns and cities stop making fiscally unsound decisions all on their own. Wasteful education policies and “municipal mission creep”–such as “services” that are far from core obligations of the public sector–add significantly to property tax burdens and are not mandated by politicians in Hartford.

Local government officials need to make smaller, more accountable government a priority, the study notes.

By shifting attention away from “revenue enhancements” and toward the need for spending reforms, “Reform Spending, Relieve Taxpayers” seeks to broaden the debate over property taxes in Connecticut. With the property tax issue raging in many other parts of the nation, the study’s recommendations are applicable to many other states as well.

D. Dowd Muska ([email protected]) is the Philip Gressel Fellow for Tax and Budget Policy at the Yankee Institute for Public Policy, and author of “Reform Spending, Relieve Taxpayers: Real Property-Tax Relief for Connecticut.”

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“Reform Spending, Relieve Taxpayers: Real Property-Tax Relief for Connecticut”: