Gov. Dannel P. Malloy unveiled his budget this week, and in so doing he pulled the rug out from under Connecticut’s 169 cities and towns. That may not be a bad thing in the long run.
By shaking up the way towns and cities can raise funds and shifting a lot of that power to the state, the governor has made it clear that municipalities must start to change not only how they raise money, but how they see themselves and how they govern in the future.
Seismic change starts with the best of intentions. The proposed repeal of property taxes on cars for Blue Book values under $20,000 is arguably the most progressive piece of the budget, but that leaves cities and towns in a terrible bind as they scramble to replace the income. Malloy’s budget also gradually gets rid of PILOT (Payment In Lieu of Taxes), which reimbursed towns for taxes lost on state-owned property. The administration claims increased ECS and other grants will make up the difference, but right now local governments aren’t sure how that’s going to shake out. Many cities and towns will end up with sudden, large budget gaps, and be forced to make some painful decisions.
The upshot — if towns and cities can’t make their budgets balance — will likely be higher property taxes and even more service cuts. Not even the prospect of ridding the state of an unpopular and regressive tax dulls the pain of those potential cuts.
“To me it was a good attempt, like a high-five — and then a punch in the gut,” said Torrington Mayor Ryan Bingham.
In fact, when the governor claims the budget doesn’t raise taxes, he’s not factoring in the likely effect of the passing of the buck down to the town level. Unfortunately, towns can’t pass down the gaps in their budgets to another level of government. They have to make decisions themselves.
Ironically, all of this means that cities and towns will be even more dependenton the state. State aid will make up a larger portion of the budget, and towns will find it ever more difficult to craft budgets before the state finalizes its own. Larger towns will now have many residents who pay no tax to the town at all, except indirectly through state taxes. Education policies already largely come from the state, and education makes up the largest share of town government. Tighter ties to the state aren’t a huge surprise, municipal governments have been growing ever more dependent on the state for decades. But this increased dependence will serve to make towns vulnerable, and less in control of their own destiny.
There are a few solutions. First, towns could lobby the state to allow them to raise what are called local option taxes. This is basically a small additional tax on things like entertainment, hotels, and retail collected by the town instead of the state. There’s now a bill in the legislature proposing just this, and officials from the state’s larger cities have pushed for this power for years. There are several towns in neighboring Massachusetts, like West Springfield, that do this to help raise money. Local sales and hotel taxes wouldn’t be onerous, but could prove to be a boon for towns with large retail bases. The downside is that sales taxes, like car taxes, are regressive. This means that poorer residents bear a proportionally heavier burden relative to their income than those with more wealth.
Another possible solution is regionalization of services, something that has been discussed a lot in the past but hasn’t found a lot of traction. Connecticut towns don’t relish the idea of sharing services and personnel, and so the idea has been slow to take root. Still, there are some potential savings to be found, and the new Speaker, Brendan J. Sharkey, is supposedly a regionalization advocate.
No matter what cities and towns decide to do, they’re going to have to take a long look in the mirror. If the governor’s budget proposals pass through the legislature intact, which is by no means guaranteed, towns will be forced to take a hard look at the services they provide, at potential new cost-saving or revenue-raising measures, and at their true purpose and place in a changing, more interconnected world. The individual incorporated town or city has served New England’s communities well for centuries, but maybe it’s time for this most change-resistant of institutions to evolve.
Susan Bigelow is an award-winning columnist and the founder of CTLocalPolitics. She lives in Enfield with her wife and their cats.