Economists at the University of Connecticut recommended Thursday looking at instituting a statewide property tax to close more than $1 billion funding gap in the state’s education cost sharing formula.
They pitched that idea in their quarterly “Connecticut Economy” report released Thursday at the Connecticut Education Association’s Hartford offices.
Stan McMillen, a contributing economist, said that for the last five fiscal years, the state has underfunded its share of education funding to municipalities required by statute. He said when increased special education costs and the costs of the school readiness program are factored in, the shortfall totals around $1.09 billion.
In the report, McMillen weighs several options including increasing the state sales tax to 8.3 percent or hiking the income taxes by 13.8 percent. However, he spends much of the report discussing a more “outside the box,” option in enacting a statewide property tax to pay for education.
Asked about potential negative consequences of enacting a new tax, McMillen said it was a “pay me now or pay me later” issue.
“We’re underfunding by $1.09 billion. That’s going to have downstream consequences,” he said.
McMillen said the first thing companies looking to expand in a state look for is the availability of qualified, educated workforce. He said if Connecticut does not adequately fund education it will end up with an insufficient “pipeline” of workers as older residents age out of the workforce.
States across the country are competing for the same jobs and shortfalls in education funding impact Connecticut’s competitiveness, he said. He said the state’s worst-in-the-nation achievement gap between low and high income family students is well known in other states.
“We’re competing for resources, we’re competing for jobs and the best way to generate jobs is to make an investment in the pipeline. That’s what this is all about,” he said.
Steven P. Lanza, executive editor of the report, said there are arguments both for and against a statewide property tax. He said other states in the area like Vermont and New Hampshire have instituted a statewide tax.
“Nobody likes to see taxes go up,” he said, but added economists were looking to find the least burdensome way of closing the gap. “. . . What we’re trying to do through funding ECS is to lift all boats and hopefully generate a skilled workforce but we recognize that requires public investment to do that.”
As opposed to increases in the sales tax or income tax, Lanza said a property tax would be a more predictable source of revenue.
“Property can’t get up and move so easily. So you know the tax base is going to stay there and you can be pretty certain about the revenue that you’re going to raise,” he said, adding that there could be negative secondary effects to adding the tax.
Lanza said it will not be easy for the state to raise an additional billion in revenue, but he said it was imperative that the state find a way to fully fund education.
“Coming up with a billion dollars is not easy to do, and yet it is a constitutional mandate from the state Supreme Court saying we should be fully funding education cost sharing and we’re not doing it,” he said. “This is sort of the price tag to do it and it won’t be easy no matter how you slice it.”
McMillen said the $1.89 billion currently dedicated toward ECS funding and funds generated by the new tax should be taken out of the state’s General Fund, where it is possible for the legislature to raid the money for other purpose.
“You put it somewhere where the legislature can’t touch it and the state can administer it more efficiently than the legislature can with the General Fund,” he said.