House Speaker Brendan Sharkey reminded a group of advocates on Thursday that before the recession began back in 2008, a movement to reform the state’s dependence on the property tax to fund education and other local services was beginning to pick up steam.
Sharkey said that when former Gov. M. Jodi Rell was still in office there was “outright rebellion” brewing over the property tax before the markets crashed. He predicted that “once that world crisis and national crisis [abates], the property tax will be the crisis once again.”
“I believe there’s a drag on the economy based on the fact that we rely so heavily on the property tax,” Sharkey said Thursday at a Capitol budget forum sponsored by Connecticut Voices for Children.
In order to relieve some of that burden, Sharkey has been a longtime proponent of regional cooperation. He even chaired a committee that helped create and fund through the state budget a program to incentivize cities and towns to work collectively to create efficiencies and lower the cost of delivering services.
But with the state facing a $2.2 billion budget deficit over the next two years, Sharkey admitted there may not be many incentives for that type of cooperation in the future.
“We’re going to need cities and towns to step up and start doing the things we’ve been talking about,” Sharkey said.
He said cities and towns could save millions of dollars if they could regionalize contracts for school buses. The problem is not every city or town uses the same school calendar.
“Why can’t we create regional school calendars?” Sharkey said. The move toward a regional calendar wouldn’t cost any money, but could potentially save the school district millions because it could potentially reduce the size of its transportation budget.
Fred Carstensen, an economist at the Connecticut Center for Economic Analysis, told Sharkey that everything he said sounds great, but at the end of the day the state still has a revenue problem.
He said if the state decides to cuts $2.5 to $3 billion to balance the state budget with no new revenue increases, then “you’re talking about losing 30,000 to 35,000 jobs.”
Even worse, “you’re talking probably the state of Connecticut going into an official recession,” Carstensen told Sharkey. “How are you going to accomplish any of this?”
Carstensen said the state has a poor revenue structure from the property tax to the “insanely complex and inefficient sales tax system.” He said he sees no initiative to do a systematic look at how the state generates revenue and the problems that revenue system currently creates for the state.
“We have to have a better than a ‘let’s stab at this’ and ‘let’s try that’ approach to how we do taxes in this state,” Sharkey said.
He agreed the state needs to take a look at its tax structure in order to sustain the services it wants to maintain. At least one member of the audience suggested raising corporation taxes.
Connecticut Voices for Children has published policy papers that argue Connecticut has a revenue problem, not a spending problem like the state’s largest business lobby opined in its recent report.
“Before the recession, state taxes held steady for almost two decades as a share of personal income, and spending had held steady as well,” the report says. “What changed in 2008 and 2009 were revenues: they fell through the floor, by billions of dollars per year.”
Office of Policy and Management Secretary Ben Barnes said the state is receiving a couple billion dollars in new revenues from the tax increase Gov. Dannel P. Malloy implemented two years ago. The problem is they’re just not meeting the estimated targets set in the budget based on historical economic recoveries.
“The economy is growing again, but not nearly as much as we expected,” Barnes said.
That means that revenue remains static at a time when an increased number of people in the state need, or are eligible for, state services.
Barnes is close to sending Malloy’s next budget to the printer and was purposefully evasive about what exactly it entails.
Malloy, too, was coy about the state budget, but he reiterated that “it’s not our intention to raise taxes in this budget.”
He said they already raised taxes once when faced with a budget hole that represented about 17 percent of the state’s revenue. But he said they certainly put in place revenue tools that will produce additional dollars when the economy turns around.
While it seems Malloy is leaning toward cutting his way out of the 2013 deficit, he did promise to preserve the sweeping education reforms implemented last year.
“Education is one of those things that is extremely important to me. I’m going to stand by our commitments on the education front,” Malloy told the group.
He said he will strive to find efficiencies in state government to preserve the initiatives he implemented from education to economic development. Many of which have to be looked at on a long term basis as investments.
“Tough economic times, slow growth economic times, a need to provide an appropriate and respectful level of services, and continue the process of doing that less expensively,” Malloy said summing up the budget he will unveil Feb. 6.