Column by Senator Len Fasano Regarding Governor M. Jodi Rell’s Proposed State Budget [Commentary]

March 5, 2007

The 2007 Legislative Session is well underway and by now Connecticut residents are certainly aware that Governor Rell is proposing to significantly increase state spending, especially for education – and to pay for it by raising the state income tax by 10 percent over the next two years.

Municipalities have been clamoring for more – and more equitably distributed – state aid to education for a very long time. Providing children with a quality education is an expensive proposition, and local government officials hate increasing local property taxes to pay for it almost as much as local taxpayers hate having to pay increasingly higher property tax bills.

In proposing her state budget for the next two years, Governor Rell said that increasing the state income tax, along with implementing her proposal to phase-out some other taxes, will lead to property tax relief at the same time that it improves programs and services, especially education, for Connecticut residents.

While Governor Rell’s budget proposal certainly does have its good points, I wonder if most Connecticut residents will believe that paying significantly higher state income taxes is worth it to them. Furthermore, I question whether the Governor’s proposed state budget will lead to meaningful local property tax relief for most state residents.

More to the point, I question whether the people I represent in North Haven, East Haven and Wallingford will feel that Governor Rell’s proposed state budget is a good deal for them when they are required to pay more in state income taxes – especially if they do not, in fact, see a significant decrease in their local property taxes.

Let me explain my skepticism. Governor Rell’s proposed biennial state budget calls for spending $17.462 million next year, and $18.328 million in Fiscal Year 2009. That represents an increase of 6.9 percent next year, and five percent the following year. Connecticut has a spending cap which state law forbids us to exceed except under specific, urgent, circumstances – and only then if both the Governor and three-fifths of the General Assembly agree. Now, at the very beginning the budget-making process, Governor Rell is calling for spending that would break through the cap by $203 million this year and by $520.8 million next year. If passed as currently proposed, Governor Rell’s budget would come in under the spending cap by $28.4 million in Fiscal Year 2009.

It is worth noting here that the General Assembly first agreed to abide by a spending cap at the same time it voted to establish the state income tax. The idea was to reassure Connecticut voters that the legislature would not treat the revenues generated by the, then new, state income tax as a bottomless pot of money. Not surprisingly, an overwhelming majority of Connecticut voters in 1992 said they want the General Assembly to abide by a spending cap. The question now is whether the voters will believe that adopting Governor Rell’s budget justifies breaking through the spending cap.

The centerpiece of Governor Rell’s proposal calls for making the single largest investment in education in Connecticut’s history – $3.2 billion over the next five years. In addition, Governor Rell has characterized her proposed budget as an investment in health care, the environment, open space, farmland preservation, affordable housing, safe neighborhoods and transportation.

Paying for all of this will be expensive. That is why Governor Rell is calling for increasing the rate on income currently taxed at 5% to 5.25% for the 2007 income year, and increasing the rate to 5.5% for the 2008 income year, and on into the future.

Considering that, if the Governor’s proposal is adopted, taxpayers in every community will be asked to foot the bill, I believe it is fair to ask who would benefit under this state budget. We asked that question of the General Assembly’s nonpartisan Office of Fiscal Analysis (OFA), and the answer was not reassuring.

OFA compared the impact of the Governor’s proposed state income tax increase on the residents of each municipality with the projected increase in state aid to each municipality. According to OFA, residents of 146 municipalities would, collectively, pay a larger increase in state income taxes next year than their communities could expect to see returned in the form of an increase in state aid. In Fiscal Year 2009, the residents of 118 municipalities would, collectively, pay a larger increase in state income taxes than their communities could expect to see returned in the form of an increase in state aid.

The next logical question is, how would North Haven, East Haven and Wallingford fare under the Governor’s budget?

I am sorry to say that, when measured according to how much of an increase in state aid communities could expect in comparison to the additional state income tax its residents would be required to pay, North Haven, East Haven and Wallingford lose under Governor Rell’s budget.

Which communities benefit when measured according to the same criteria? The list includes Bridgeport, Hartford, New Britain and Waterbury. New Haven would benefit, but not until Fiscal Year 2009.

It is interesting to note that the Yankee Institute for Public Policy did its own analysis of how each municipality would fare under Governor Rell’s proposed budget. Once again, North Haven, East Haven and Wallingford are among the communities that could be expected to get back less in terms of an increase in state aid when compared to how much more residents would be expected to pay in state income taxes. And, once again, the list of communities that would benefit includes Bridgeport, Hartford, New Britain, Waterbury and New Haven.

As a lifelong resident of our region of the state, I know how hard we work to earn what we must to provide for our families and, yes, to pay our taxes. I think it is safe to say that none of us are opposed to improving government programs and services. Certainly, our schools could benefit from more state funding, as could a lot of other worthwhile programs and services.

The question I would like my constituents to consider is whether they would willing to pay more in state income taxes – with no guarantee that their municipal governments would in fact provide local property tax relief – in return for the benefits promised under Governor Rell’s proposed state budget. Please, let me know what you think. I can be reached at my legislative office in Hartford at 1-800-842-1421, or via e-mail at [email protected].