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

D. Dowd Muska

June 2007

References, Tables, Charts, and suggestions for additional Yankee Research can be found in the PDF attached below. 

Executive Summary
Connecticut’s property-tax burden has risen steadily — at a rate faster than inflation and population growth — for years. And given the state’s aging population, declining household income, and stratospheric cost of living, the ability of homeowners and businesses to devote more and more of their income to municipal governments is increasingly strained. Voters are responding to escalating property taxes by defeating local budget referenda in large numbers.
To date, efforts by Nutmeg State elected officials to lighten the property tax burden have proven ineffective. This failure is due to an inability (or unwillingness) to grasp the true cause of high property taxes: Excessive municipal spending.
It is time for effective solutions to the costliness of local government in Connecticut. Promising reforms fall into three broad categories:
1. Repeal/Repair State Mandates
State law imposes more than 700 mandates on Connecticut’s municipalities. Local governments are required to “bargain collectively” with their employees. The state determines how much municipalities must pay workers for construction projects. Cities and towns are even made to “use only those loose-leaf binders approved by the public records administrator.” Real property-tax relief should start with meaningful (and pro taxpayer) mandate relief.
2. Adopt ‘Anti-Mandates’
If there is not enough political will in Hartford to lighten municipalities’ mandate burden, the least lawmakers can do is enact requirements that would save local governments revenue. Examples of anti-mandates include minimum employee contributions for healthcare premiums, a shift to defined-contribution pensions, and denial of state funding to municipalities that sign costly “project labor agreements.”
3. Better Local Decision Making
Many of Connecticut’s towns and cities make fiscally unsound decisions all on their own. Wasteful education policies and “municipal mission creep” — i.e., “services” that are far from core obligations of the public sector – make significant contributions to citizens’ property-tax burden. Local-government officials must make smaller, more accountable government a priority.

Connecticut’s homeowners and businesses bear one of the highest property-tax burdens in the nation, and the half-measures and gimmicks enacted to address this serious fiscal problem have failed.

It is time for the cost of municipal government to be brought under control. Broad and deep spending reforms — not new revenue sources — are the answer to the Nutmeg State’s unnecessarily high property taxes.

“I voted no. I think the budget is bloated and needs to be re-addressed.” – Scott Larsen, father of two children in the Newtown School District, explaining his vote on the town’s first FY 2007-08 budget referendum.

“A [municipal spending] cap in and of itself doesn’t do anything. It’s like capping the growth of a 3-year-old child and saying, ‘That child just can’t grow anymore.’ That doesn’t make sense. We want the child to grow. Our municipalities and our state [are] going to grow.”
– Senate President Pro Tempore Donald L. Williams

A Rising Burden, A Growing Resistance

Voices from the left, center, and right agree: Connecticut has a property-tax crisis. Year after year, the Nutmeg State’s municipalities impose increasingly unaffordable burdens on citizens’ taxable property. As Figure 1 indicates, inflation-adjusted revenue collected by Connecticut’s property tax rose by 27.6 percent between 1991 and 2005 — a rate far higher than the state’s 6.4 percent population growth.

According to research by the Legislative Program Review and Investigations Committee of the Connecticut General Assembly, in 2002 the Nutmeg State’s property tax per capita was $1,760 — the second highest in the nation. (As
a share of personal income, Connecticut’s ranking was seventh.)

The property tax consumes 36.6 percent of combined state-local revenue — more than the personal-income tax (32.2 percent) or sales tax (21.3 percent).

Unlike Connecticut’s income- and sales-tax burdens, which accumulate slowly and are thus far less visible to taxpayers, citizens of the Nutmeg State pay their property tax obligations only once or twice a year. Thus, it is easy to understand why taxpayers have not taken their mounting property-tax burden in stride. Dozens of locally based taxpayer groups have been formed in recent years, and several longmoribund organizations have been revived.

Property-tax activists, with increasing encouragement from fellow voters, have grown adept at defeating tax-hiking budgets in referenda. A 2006 analysis by Donna McCalla of Hebron Dollars & Sense noted that Connecticut “continues to trend upward in terms of increasing budget defeats, and increasingly higher numbers of referenda required to pass budgets.”

Even the start of a new fiscal year does not keep some voters from acquiescing to local officials’ demands for budget approvals. In 2004, 11 towns did not have budgets in place by July 1, the start of Connecticut municipalities’ fiscal year. For both 2005 and 2006, the number was 15.

A clear signal that Connecticut’s property-tax revolt is intensifying is activism in larger municipalities. While middle-class and affluent suburbs still comprise the bulk of the Nutmeg State’s property-tax rebellion, more and more cities are seeing their residents press local officials for relief. At a March 2007 public hearing in Stamford, requests from parents not to cut the school-district budget and demands from municipal employees to keep their jobs “were nearly drowned out by the cries of other angry taxpayers … who said they can’t afford to pay for it all.” Also that month, a group of “spirited taxpayers” handed New Haven aldermen a “12-page proposal highlighting areas of the budget they believe should be trimmed, starting with a decrease in all departments of 10 percent.”

‘Relief’ That Doesn’t Address Spending

Connecticut’s property-tax revolt has not gone unnoticed by the state’s political establishment. Recent years have seen governors, state legislators, and local politicians adopt and propose a number of measures they claim will reduce taxpayers’ financial burden.

Relief — For Just A Few

Connecticut has offered a number of relief options for certain property owners — senior citizens, veterans, the disabled, and emergency volunteers — for decades. (The exemption for veterans was created in 1871.) The newest targeted-relief provision, adopted in 2006, allows municipalities to freeze the tax obligation of lower-income senior citizens. Applicants must be at least 70 years old and have lived in Connecticut at least one year. Unlike the preexisting “circuit breaker” relief option, which grants the elderly a credit against their property-tax bills and is reimbursed with state revenue, the “freeze” locks in homeowners’ tax bills — and municipalities must make up the lost revenue from this benefit on their own.

But the measure has proven more controversial than legislators and Governor M. Jodi Rell probably anticipated. It permits towns to place a lien on beneficiaries’ homes, in order to recoup lost revenue, and many local officials have been fearful of the political consequences of exercising that option. In addition, since the freeze inevitability causes municipalities to seek revenue from other sources, some taxpayers have balked at picking up the tab for seniors in their town. In a December 2006 referendum, Southington’s freeze was overturned by a 2-to-1 margin.

The Tax-Credit Rollercoaster

In 1995, lawmakers enacted an income-tax credit “for property taxes people paid on their primary homes and the motor vehicles they owned.” Users of the credit must not exceed income limits. Since its creation, the credit has been a political football — its value has risen and fallen with the fortunes of the state’s fiscal condition. (It is currently worth $500.)

Hartford Mayor Eddie Perez has advocated raising the credit’s value to $1,500, regardless of income, as well as the creation of a $3,500 credit for “residents in communities such as Hartford, Waterbury, Bridgeport, New Haven, New London, New Britain and Windham where less than 50 percent of the residents own their own homes and the local tax burden has played a role in slowing the growth of homeownership.”

Delaying the Inevitable

Revaluation, the process by which municipalities update the market value of all taxable property within their borders, is often a contentious issue for Connecticut local governments. As one legislative researcher observed, “mayors and selectmen approach revaluation like most of us approach root canals.” The fear and friction associated with revaluation in recent years is due to shifts in the state’s real-estate market. Homes have risen in value far faster than industrial and commercial property, and thus after a town’s grand list is reassessed,  homeowners are left to shoulder a larger burden than the business community. Even when a town’s mill rate drops to account for a higher grand-list value, the change is often not enough to create a lower tax obligation — in fact, the opposite regularly occurs, and a homeowner is left with a substantially higher burden.

Connecticut politicians have provided municipalities with a number of options for delaying the financial impact of revaluation — two methods were added in 2006. All involve a “phase in” assessment period that cannot exceed five years.

The Car-Tax Repeal: DOA

In her February 2006 State of the State Address, Governor Rell proposed that non-commercial motor vehicles be free from the property tax. The governor called her proposal “a bold step to eliminate a regressive tax and to put millions of dollars back in the economy.” Municipalities would no longer be burdened by the time and expense of collecting the tax, and revenue lost would be reimbursed through funds collected through the state’s share of slot-machine “win” at tribal casinos. But the governor’s proposal, which would be funded through the elimination of the property-tax credit, failed to win approval in either the 2006 or 2007 legislative sessions.

Even More Local Taxation?

Currently, Connecticut’s cities and towns have no statutory authority to tax either sales or income. Aside from licenses, fees, and a tax on real-estate transfers, the revenue municipalities raise on their own is derived solely from taxing property. (Subsidies from Hartford and Washington supply the remainder of the funds for local-government costs.)

Some want to free municipalities from the limitations placed on their ability to tax. For example, a Groton town councilor has endorsed “a 1-percent local sales tax in addition to the state’s 6 percent” and a “one-quarter percent local income tax in addition to the state’s 5 percent.”

It remains to be seen whether Connecticut’s voters would accept measures that expand local governments’ taxing authority. A nearby state recently offered a cautionary tale for supporters of such plans. In May 2007, a mere 32.3 percent of Pennsylvania voters endorsed a ballot question that would have empowered school districts to tax incomes to “reduce taxes on each qualified residential property by an estimated amount of $450.” Approval of the question topped 50 percent in only 9 of 498 school districts.

Revenue sharing is also seen by some as a means to address the property-tax crisis. The 2003 report of the state’s “Blue Ribbon Commission on Property Tax Burdens and Smart Growth Initiatives” endorsed:

* sharing, on a regional basis, a portion of the state sales tax generated in each municipality with the host community getting the greatest share as agreed to by the members of the regional organization (i.e. a Council of Governments)

* sharing any other additional revenues on a regional basis. To date, neither of the commission’s proposals have been adopted by legislators.

The ‘Efficiency’ Charade

Revenue-sharing plans are closely linked to larger attempts to consolidate municipal government in the Nutmeg State. Connecticut’s 169 cities and towns are political subdivisions of the state, but they retain a degree of autonomy that municipalities elsewhere lack. The tradition of “home rule” runs very deep, but to some it is the biggest contributor to Connecticut’s property-tax crisis.

Many argue that the existence of so many municipal governments — the New York Times recently disparaged them as “169 fiefs” — makes it impossible to benefit from the public-sector economies of scale said to be achieved elsewhere. This criticism, from an official with the Connecticut Rural Development Council, is typical:

 Connecticut is one of only a handful of states that provide the bulk of their services through local, municipal government. Most states have strong county forms of government. Many counties are larger than the entire State of Connecticut and some have more people. That means, one large regional school district, one large county police force, one large public works department and all the way down the line. The savings via these economies of scale are tremendous.

Regional-government proponents seldom advocate forcing the state’s municipalities to consolidate services. For now at least, their preferred tool is providing “incentives to towns to streamline government.”

Yet two significant weaknesses of regional-government reforms seldom surface in discussions of Connecticut’s property tax. First, many cooperative efforts already exist at the municipal level in the Nutmeg State. Connecticut has regional SWAT teams, animal-control facilities, and health districts. Communities share emergency dispatch centers, and jointly bid on fuel and sand/salt for winter road-clearing. A 2000 report by the Office of Policy and Management’s Advisory Commission on Intergovernmental Relations concluded: “There are some 37 types of regional or inter-municipal organizations authorized by Connecticut General Statutes and federal legislation, including three inter-district education programs. There are also a wide variety of locally-generated, voluntary inter-municipal arrangements in Connecticut which address a wide range of issues.”

Second, it is far from clear that efficiencies automatically result from consolidated government. Scholar Steven Hayward is doubtful:

 The biggest problem with regionalism is its premise that having major metropolitan areas divided into multiple jurisdictions is “inefficient” and undesirable. [Proponents of municipal consolidation] fail utterly to consider one of the seminal ideas of modern urban economics: The Tiebout Hypothesis. University of Chicago economist Charles Tiebout posited in his 1956 article “A Pure Theory of Local Expenditures” that there is no objective way to determine the “right” level of public services that a local government should provide. Therefore, the optimal level of local public services is best determined through municipal competition, by which local jurisdictions offer different bundles of public goods and people express their preferences by voting with their feet.

It is not self-evident that regionalism is more efficient than municipal competition. Just as competition in the private sector keeps prices down, competition among cities, scholarly research has found, acts to keep local taxes down.

While many theorists are convinced that regionalization is an unalloyed good, evidence documenting its benefits is difficult to find. In 2005, the Indiana General Assembly’s Marion County Consolidation Study Commission examined the academic research on municipal-service consolidation in North America. Commission staffers found that “the results of these analyses were spotty and often based on case-by-case analysis.” Nonetheless, they concluded that “significant gains in efficiency are unlikely,” from regionalization, and “morale problems” with public employees would be “a significant land mine.”

Connecticut’s taxpayers don’t have to look far for anecdotes about the failures of consolidated government. The Metropolitan District Commission (MDC) is a “municipal corporation chartered by the General Assembly in 1929” that provides “water, sewage collection and treatment, household hazardous waste collection and mapping services” to towns in the Hartford region. The MDC’s recent history has been rather rocky — corruption, cronyism, mismanagement, employee lawsuits, state and federal environmental fines, and a costly, seven-year feud with the Connecticut Resources Recovery Authority have left the agency as anything but a poster child for regional government.

The state’s 17 regional school districts provide additional fodder for skeptics of the benefits of municipal consolidation. A 2005 analysis by the Yankee Institute’s Gressel Center found Regional School Districts 4, 11, and 12 to be among the least efficient in the state. (Regional School District 11 has been battling with some of its member towns for years — since 2004, Scotland “has made repeated attempts to withdraw its students” and the district has “recently seen upheaval in its central office compact.”)

Regional School District 6, which serves Goshen, Morris, and Warren, has been engaged in a battle over fees the district wants to charge member towns for the use of school facilities. The three towns’ leaders “have said they’ll take the problem to court if necessary.”

Regional School District 12, which serves Bridgewater, Roxbury, and Washington, is currently experiencing a bitter feud. In November 2006, Bridgewater sued the district to stop it from spending $65,000 on a “two-phase survey of land in Roxbury that could be the site of a new consolidated elementary school.” The district maintains that it has “full authority to consolidate … elementary schools” without obtaining voters’ approval to make a “fundamental change” to the 1967 agreement that created Region 12.

Rell’s Flawed Levy Limit

The most recent reform proposal to be introduced to the state’s property-tax debate arrived in March 2007, when Governor Rell proposed a cap on property taxes somewhat similar to “Proposition 2½,” a measure overwhelmingly approved by Massachusetts voters in 1980. The Bay State’s tax cap has two components. A “levy ceiling” limits municipalities to taxing no more than “2.5% of the total full and fair cash value of all taxable real and personal property in the community.” And a “levy limit” is “the maximum amount a community can levy in a given year.” With certain exceptions, each year’s levy cannot grow by more than 2.5 percent.

The Rell plan calls for a 3 percent levy limit — but no levy ceiling. It would permit budget growth beyond 3 percent if a municipality’s grand list exceeds 1.5 percent. Debt service would be exempt from the cap, emergency spending would be permitted, and as in Massachusetts, voters would be allowed to approve “overrides” of the cap.

Rell’s proposal was quickly attacked by many municipal officials and state lawmakers. John Weichsel, Southington’s town manager, called the cap “an artificial entity” that “does not recognize reality.” New Haven Mayor John DeStefano claimed the limit would force him to “either … eliminate parks, public works, elderly services and the city plan department, or … eliminate half the police department, which has 500 personnel.” Aside from conducting an “informational forum” on property-tax caps, legislative Democrats took no action on the governor’s proposal during the 2007 session.

State Subsidies: Curse More Than Blessing

By far, the “solution” most commonly offered to address Connecticut’s rising property-tax burden is increased revenue from state government. The desire for more subsidies from Hartford cuts across party lines, is shared by urban, suburban, and rural municipal officials, and is a major factor in the campaign to hike the state’s income tax.

Local governments, the lobbyists they employ, and public-employee unions regularly produce an array of statistics and graphs that depict what they say is the state’s “underfunding” of municipalities. This stinginess is said to be particularly harmful to school districts, which usually comprise over 50 percent of local-government spending:

Connecticut relies more than any other state on the property tax to fund K-12 education, and ranks second in            total reliance on the tax to fund municipal services. By weakening the link between the property tax and                    educational funding, we can reduce reliance on that regressive source of revenue and provide, over time,                   greater flexibility and local control over other parts of municipal budgets.

Bozrah’s Republican first selectman agrees:

It is widely recognized that Connecticut’s commitment to local public education is too low. Our local property            taxpayers bear a larger financial burden for funding public education than property taxpayers in any other              state. It’s a trend that needs to change. As we enter the local budget cycle the battles will commence between              education supporters and those who are tired of paying rising property taxes. The ire of Connecticut residents is directed at local government. In most cases it should be directed at state and federal officials who have chronically under funded local education.

Such thinking dominates discussions of Connecticut’s property-tax problem. But although their views seldom receive much attention, skeptics of greater state funding of local government can cite a considerable amount of research to justify their doubts.

“In my research regarding the performance of public schools in the United States,” writes Harvard education economist Caroline Hoxby, “I have consistently found evidence that both students and taxpayers are better off under locally based systems of school funding and school control.”

Connecticut-based evidence of Hoxby’s conclusion was supplied by the aforementioned 2005 Yankee Institute analysis of school districts. “The Value Gap,” which examined per-pupil spending in Connecticut in relation to students’ performance on the Connecticut Mastery Test, found that the Nutmeg State’s most efficient districts tended to have a much smaller share of their expenses covered by state aid. The least efficient districts, which included those in the state’s largest cities, typically had well over 50 percent of their school-district budgets funded by state revenue.

A similar 2005 analysis by an Illinois think tank produced the same results for the Prairie State’s government schools, and concluded that:

funding schools from local property taxes artificially creates incentives that mimic ever so slightly market forces that would be at play were we to fund schools through students rather than administrators. The effect of these market forces is that schools in states where education is financed more by local property taxes than state revenue funds tend to perform better and spend more on students and teacher [sic] and less on administration.

Since advocates of “rebalancing” the state-revenue fiscal partnership can produce so little evidence that their approach will boost school performance and reduce Connecticut’s property-tax burden, it is reasonable to ask whether their agenda is more about making a subjective case for “tax fairness” and less about adopting proven strategies to boost government efficiency.

A final factor worth consideration — yet one that is often overlooked by advocates of greater state funding of local government — is politics. Municipalities have a great deal of lobbying muscle in Hartford. But they are far from the only political force seeking to influence lawmakers. Governors and legislators face pressure from many other groups, including Big Business, nonprofit social-service providers, the healthcare lobby, and unionized state employees.

Thus, the subsidies local governments receive from the state are subject to an inherently political process. And not surprisingly, when Connecticut’s finances are in trouble, municipal aid is often one of the first branches of the budget to be pruned. For example, in 2002, legislators expanded the governor’s “rescission authority,” which allowed Connecticut’s chief executive to roll back state aid to local governments. (The Connecticut Conference of Municipalities chose to resort to legal action to block what it claimed was then-Governor Rowland’s illegal withholding of state revenue.) Legislators routinely fail to follow the statutes that require reimbursement for property that the state does not permit municipalities to tax, such as universities and hospitals. And a recent Norwich Bulletin investigation found that local governments received $3 million — not adjusted for inflation — less in casino revenue transfers from the state in 1994 than in 2004.

Given the unpredictability of the political process in Hartford, and the volatile nature of the state’s major revenue source, the personal-income tax, it is difficult to understand the desire so many local government officials have for greater state “help.” “Dependence” on the property tax — which was found by the Legislative Program Review and Investigations Committee of the Connecticut General Assembly to be the most stable of Connecticut government’s major revenue-raising mechanisms — is perhaps a strength, and not a weakness, of municipal government in the Nutmeg State.

The Real Problem: Excessive Expenditures

Whatever the merits and drawbacks of the competing “property-tax relief” proposals touted by Connecticut’s politicians, lobbyists, and mainstream media, all plans share one thing in common: They do little, if anything, to reduce municipal spending.

Fiscal policy has two components: revenues and expenditures. But it’s hard to find any serious scrutiny of the latter in discussions of Connecticut’s property tax — overwhelmingly, attention is devoted to finding more revenue. (Even the governor’s recent proposal for a property-tax cap does not qualify as an expenditure reform, because it would permit municipalities to spend any additional funds they receive from the state and federal treasuries.)

Two examples well illustrate the puzzling absence of expenditure reform in explorations of the state’s property-tax problem. A 2001 report by the Connecticut General Assembly’s Office of Legislative Research outlined five policies designed to address rising property taxes:

Tax relief measures ease the burden on individual taxpayers, such as elderly homeowners and manufacturers, through exemptions, rebates, and credits against other taxes.

* Funding shifts substitute state funds to pay for education or other local government costs, thus reducing the level of government expense the property tax must bear.

* Assessment reforms address the way municipalities assess property taxes in an attempt to apportion the tax burden more fairly among types of property.

* Growth restraints limit the amount of property taxes municipalities can levy to restrain increases in property taxes.

* Revenue diversification allows municipalities to levy other taxes in addition to property taxes, thus reducing the property tax burden.

Five years later, a New London columnist offered a similar list:

Methods of fixing the property tax fall into five categories: 1. More state assistance to local governments. 2. Expanded taxing authority for local governments. 3. Limits on property taxes. 4. Targeted assistance to taxpayers in hardship cases. 5. Revenue sharing.

This unwillingness to even mention expenditure habits at the local level is puzzling, given the ample research that indicates Connecticut municipalities simply spend too much money.

Research by the Federation of Connecticut Taxpayer Organizations has found that “between 75 percent and 85 percent of … property taxes … fund government labor costs.” And there are disturbing indications that local-government compensation is much more generous than it should be.

As Table 1 indicates, average hourly wages for employees in Connecticut government are substantially higher than those for workers in the private sector.

Excessive compensation is not limited to the wages and salaries municipalities pay their employees. A 2006 analysis by the Yankee Institute’s Gressel Center, “The Two Connecticuts: Private vs. Public Compensation in the Nutmeg State” found that healthcare coverage, pension plans, and paid leave in Connecticut government are far superior to those offered in the private sector.

The number of municipal employees should also be a significant concern for Connecticut taxpayers. During contentious local-budget battles, elected officials, public-employee unions, and school-district supporters often speak of “layoffs” and “cutbacks.” But data from the U.S. Census Bureau indicate that employment in Connecticut local government has been growing — and at a rate much faster than either private-sector job growth or population growth. As Table 2 shows, between 1990 and 2005, employment in local government grew by 27.5 percent.

With 50 percent of the property-tax issue — i.e., expenditures — missing from the “debate,” many taxpayers lack essential information that would enable them to explore more options for meaningful relief. Systematically excluding discussions of wildly generous compensation, declining labor productivity, and expenditures for services that are not core functions of government (a problem that will be examined  below) serves to make conversations about the state’s property-tax crisis disturbingly one-sided.

In short, the terms of Connecticut’s property-tax debate need to change — away from the symptom (high tax bills) and toward the disease (municipal spending). Relief proposals that target municipal expenditures fall into three categories:
1) Mandate Repeal/Repair
2) ‘Anti-Mandates’
3) Better Local Decision making

1) Reduce State Micromanagement
State government has placed hundreds of mandates on Connecticut’s municipalities. A 2002 report that attempted to document mandates in place at that time ran over 500 pages long. Repeal of many of these mandates is long overdue. Repair of many others is also in order.

Restore Employee and Employer Freedom

The most pro-taxpayer reform state government could enact to address the spiraling cost of local government is the repeal of forced unionism.

In the 1960s, Connecticut lawmakers passed the Municipal Employee Relations Act (MERA) and Teachers Negotiation Act (TNA). These laws, which mirror the federal statutes that govern private employment, grant unions the privilege to speak for workers through “collective bargaining.” Every few years, union officials negotiate with management over the terms of employment for all workers in a “bargaining unit.” Employees in “organized” workplaces have no choice but to accept the union’s “representation” — if they refuse, they will be fired.

Leaving aside the serious ethical problem of this arrangement — i.e., the question of why private agreements between employer and employee should be subject to interference by a third party — forced unionism’s fiscal implications are profound:
Collective bargaining, with its roots in the industrial, mass-production sector of the economy, operates under a “factory model” of bargaining: One size fits all. In this system, unions focus on securing for their members                  contracts with uniform benefits, working conditions and salaries.

Because unionized workplaces must pay employees according to the strict terms of a contract, managers are not free to financially reward workers who excel — nor can they punish laggards.

Terminating unproductive employees can also be a long and costly process, and management authority is often stripped away by contract provisions that go far beyond the regulation of schedules, wages, and benefits. Persistent union filing of “grievances” also hamstrings municipal managers:

* In August 2004, AFSCME Local 1303-119 filed a grievance when East Haven Mayor Joseph Maturo jumped into a storm sewer to retrieve a metal grate, rather than “bring in four union laborers and pay each of them for a minimum of four overtime hours.”

* In January 2005, a deputy chief with the Torrington fire department was suspended without pay for five days after AFSCME Council 4 filed a grievance charging him with calling a towing service, rather than city mechanics, to retrieve a broken rescue truck.

* In September 2005, Danbury’s police union successfully filed a grievance to stop the city’s Civil Service Commission from administering an exam for potential deputy chief candidates.

* In December 2005, the Derby teacher union filed a grievance because the superintendent of schools “created two ‘literacy coach’ positions without negotiating their salaries and work conditions.”

* In May 2007, the Norwalk Board of Education denied a grievance from two teachers demanding “back pay, full secretarial support and release time from their teaching duties” because they believed their sports-related tasks amounted to full-time work, despite a 1995 letter that explained they were sharing the full-time position of athletic director.

Another severe fiscal impact of forced unionism involves politics. By requiring workers to pay union dues — or for those not wishing to join, an “agency fee” — in order to keep their jobs, Connecticut public-employment law permits local government unions to amass considerable funds they are free to use for activities that lie outside negotiating contracts and resolving labor-management disagreements. Connecticut has adopted none of the “paycheck protection” measures other states use to ensure that workers’ dues cannot be used for politics without their permission. Thus, municipal-union bosses are free to devote millions of dollars to candidates running for office at the federal, state, and local levels. And the candidates unions support seldom endorse smaller government and tax cuts.

It is important to note that the repeal of forced unionism would not mean the end of unions in local government. Employees would be able to contract with any labor organization that seeks to represent them. (Dues would be voluntary, of course.) Municipal managers would be free to hire the best employees at the lowest cost to taxpayers. Rigid salary schedules and benefit packages would no longer restrict local governments from rewarding their  most productive employees and penalizing workers who do not measure up. In other words, a degree of private sector-style accountability and efficiency would be injected into a level of government that suffers from escalating expenses and declining labor productivity.

A costly legacy of flawed economic thinking from the late 19th and early 20th centuries, forced unionism is disappearing in the private sector. For the benefit of taxpayers — as well as the local-government employees who do not wish to be “represented” by the union that has gained exclusive authority to control their workplaces — Connecticut lawmakers should repeal it.

Restore Balance in Arbitration

A milder reform of Connecticut municipal-union law that nonetheless holds much promise to reduce property taxes relates to binding arbitration, the method used to resolve contract negotiations that have broken down:

Connecticut uses a form of binding arbitration called “last best offer, issue-by-issue,” to settle labor impasse.              Introduced under MERA in 1975 and under TNA in 1979, the process is based on parties submitting their last            best offers on each disputed issue to either a single arbitrator or to a tripartite panel (tripartite panels include a neutral arbitrator and one advocate arbitrator for each party). The general concept behind this type of binding arbitration is that it forces the parties to make “reasonable” offers on each issue under dispute because of the risk that the arbitrator(s), who can only choose from the parties’ offers, will not select an unreasonable one.

Many fiscally responsible elected officials consider this process to be extremely unfair
to taxpayers. As one state senator explains:

The problem is that the system guarantees municipal employees significant raises every time a contract is                  negotiated. Municipal employee unions are in the envious position of having an arbiter select between their              proposal and the town’s last best offer. At the very least, the union gets what the town believes is the absolute            most it can afford to pay.

Reforming binding arbitration has been a goal of both taxpayer activists and fiscally conservative local-government officials for many years. A consensus has formed around a set of meaningful reforms:

* Establish parity between the binding-arbitration rules for municipalities and those for the state government. At present, if a state legislative body rejects an arbitration award, state negotiators must go back to the negotiating table. But our cities and towns are not afforded this option. Municipal negotiators must go to a second-and-final arbitration panel, according to the law.

* Exempt municipal fund balances from the ability-to-pay formula used by arbitrators, up to a stated percent of operating expenditures as recommended by the bond-rating houses and the Government Finance Officers Association.

* Provide for arbitrators to pay particular attention to the local property tax burden.

* Support [former Governor John Rowland’s] proposal to enact a three-year moratorium on compulsory binding arbitration.

If Connecticut lawmakers insist on retaining the forced-unionism mandate on local government, the least they can do is establish a more level playing field in the arbitration process.

Control Construction Costs

Large construction projects undertaken by Connecticut’s municipalities are required to pay workers wages set by the state. This “prevailing wage” mandate is Connecticut’s version of the Depression-era Davis-Bacon Act, a federal law adopted, in part, because “white union workers were angry that black workers who were barred from unions were migrating to the North in search of jobs in the building trades and undercutting ‘white’ wages.”

The wage rates set by state labor bureaucrats for municipal construction projects are unnecessarily high. According to the Connecticut Conference of Municipalities, “the entry level rate for electricians is about the same statewide as it is in the City of Hartford ($18.50 and $16.80, respectively). However, the prevailing wage rate, set by the State is $29.30, or 58% higher.”

Research has consistently shown that prevailing-wage laws create unnecessary burdens for taxpayers:

A decade ago, the Connecticut Advisory Commission on Intergovernmental Relations concluded that prevailing wage rates increase construction costs to towns and cities upward of 21 percent annually. The Wharton School of Business has reported the figure to be up to 30 percent. In December 2001, the Kentucky Legislative Research Commission determined that the prevailing wage mandate resulted in a 24 percent increase in the wage cost of state and local projects.

Nine states never had — and since 1979, eight states have repealed — prevailing-wage laws. Connecticut should
become the 18th state to be free from this unreasonable mandate.

Alternatives for Disabled Students

Both state and federal laws “establish broad requirements that school districts identify children with disabilities that affect their educational performance and provide them with a ‘free and appropriate public education’ tailored to their individual needs.” These mandates are certainly well-intentioned, but municipal officials report that they are also extremely expensive. One Connecticut superintendent recently testified that a single autistic child in his district costs taxpayers $100,000 per year to educate.

The federal government has not met the pledge it made in the 1970s to cover 40 percent of schools’ special-education costs, and state reimbursement is provided only when a special-education student’s expenses “exceed 4.5 times his home district’s average per pupil expenditure for regular education for the previous year.”

Municipal and school-district officials have a predictable suggestion to deal with these costs: Lower the state’s excess-cost threshold. But there is another option available — one that would not drive up the cost of state government:

A choice-based model for policing special education would provide disabled students with vouchers that they            could use to pay the tuition at any school they wished, public or private. Thus, if parents were unhappy with the special-education services provided by their local public school, they could remove their child from the school and send him to another school that might better serve his needs. Vouchers would allow parents to express dissatisfaction for their public school and seek alternative services for their child without seeking the protection of the courts, which is burdensome and expensive for both parents and taxpayers.

In Florida, special-education vouchers have proven both successful and popular. A 2004 study by the Manhattan Institute found widespread parental satisfaction with the program, as well as less student mistreatment in voucher schools. “Perhaps the strongest evidence regarding the [voucher] program’s performance,” study authors noted, “is that over 90 percent of parents who have left the program believe that it should continue to be available for those who wish to use it.”

Connecticut lawmakers should enact legislation similar to Florida’s voucher program for special education. Repairing the special-education mandate through school choice would undoubtedly benefit local taxpayers, through the avoidance of costly legal battles between parents and school districts. In addition, since parents would now have a much wider range of choices — and new schools would surely be created to serve this new market — special-education expenses would be lowered, and the savings passed on to taxpayers.

Root Out Mandate Minutiae

Connecticut citizens are aware of the most visible state mandates on municipalities, such as the obligation to provide government schools, emergency services, and safe roads and bridges. But mandates that regulate even minor functions of these services often go far beyond what most would consider reasonable protocols. For example, the state requires that all municipal employees “having the care or custody of any book or record or registry … use only those loose-leaf binders approved by the public records administrator.”

In 2006, a commission appointed by Governor Rell studied a large number of less-visible mandates that
nonetheless incur costs for municipalities. The state’s requirement for notice of public meetings, for example, was found to be outdated and in need of modification:

While newspaper publication and posting near the Town Clerk’s office have been the sole means authorized by law … recent technological advances and changes in cultural lifestyles has [sic] led to decrease [sic] in the                  number of newspaper subscriptions per household and the increased use of and reliance upon other media such as municipally controlled or sponsored websites; the use of signage in publicly visible locations; mailing                    postcard type notices to every household or the use of municipal newsletters to let the public know of upcoming town meetings. Further, the cost of placing individual notices has gone up dramatically over the years.

By themselves, many of the mandates listed in the commission’s report are not significant. But their cumulative effect can be, and legislators should make every effort to strike obsolete and excessively bureaucratic mandates from the general statutes.

2) Pro-Taxpayer Mandates

In addition to mandate repeal and repair, Connecticut lawmakers should consider the adoption of “anti-mandates” — i.e., state requirements that would lower the cost of local government.

Personnel Reforms: A Return to Reality

Because such a huge share of municipal budgets is devoted to employee compensation, anti-mandates that reduce personnel costs hold the most promise to provide property-tax relief.

a) Contracts With Limits

The contracts Connecticut municipalities sign with their unions are typically dozens (if not hundreds) of pages long. We have seen how these agreements can be used by unions to undercut management authority. Lawmakers in Hartford, because they have complete discretion to modify municipal-union statutes, can reduce the costs that stem from unnecessarily detailed contracts.

Limits should be placed on what can and cannot be covered by a union contract. The state can require that labor agreements signed after a certain date may not contain provisions that impact any part of the management-employee relationship beyond  pay, benefits, and length of the work week. (For example, no longer would teacher union contracts be allowed to regulate evaluations, limit the length of after-school meetings, and control class sizes.) Management authority that in many cases has been gutted by contract language and “past practice” rulings by arbitrators would be restored, and taxpayers would benefit.

b) Equal Pay for Equal Work

The Bureau of Labor Statistics, a division of the U.S. Department of Labor, regularly analyzes wage and salary rates for every U.S. metropolitan statistical area (MSA). The Hartford region has its own MSA, much of southwestern Connecticut is included in the New York City MSA, and several towns in extreme eastern Connecticut are part of the Boston MSA.

Thus, reliable pay scales are available for state labor officials who could be empowered to set wage rates that, with reasonable exceptions, do not exceed pay in the private sector.

c) Reasonable Premium Shares

Nationally, the portion of healthcare premiums private-sector employees are required to contribute is 27 percent for family coverage and 16 percent for individual coverage. In Connecticut local government, employees’ share of their health coverage is generally much lower — sometimes even zero.

State law should require that at a minimum, local-government employees pay 25 percent of their healthcare premiums for family coverage and 15 percent for individual coverage.

In addition, a health savings account (HSA) anti-mandate is worth consideration. Offering HSAs to employees (particularly younger employees) would also contribute to getting municipalities’ healthcare costs — which often see double-digit annual growth rates — under control.

d) Retirement-Income Fairness

Defined-benefit pensions — retirement agreements that guarantee beneficiaries a monthly income, and are based on years of service and final salary figures — remain commonplace in Connecticut local government. The trend in the private sector is to offer benefit programs with that are more predictable and affordable.

Retirement-income plans for Connecticut’s municipal employees should not be more expensive than what is generally found in the private sector. Connecticut law should bar local governments from offering defined-benefit plans to all new employees. (Current employees would retain their retirement benefits.)

In addition to serving as an important tool to reduce costs, widespread defined contribution plans would be a recognition of changes in employment choices. In the  past, most workers stayed with their employers for decades. Today, job-hopping is far more common. By adopting defined-contribution plans, the personnel dynamics of municipal government would change significantly. Private-sector workers with defined-contribution pensions would not be discouraged from working for local governments, out of fear that accepting a public-sector position later in their working lives would not provide adequate retirement income. And municipal workers would no longer receive strong incentives to remain at their jobs for decades, merely to maximize their monthly pension payments.

e) Comparable Vacation Policies

It is hardly unreasonable for municipalities to offer their employees time off for illnesses, vacations, and family emergencies. But many local-government contracts mandate paid leave that is far more generous than is common in the private sector. (By state law, teachers have 15 paid vacation days for a working “year” that lasts less than ten months.) Lawmakers should empower state labor officials to document standard paid-leave policies in Connecticut’s private sector, and then impose that finding on municipalities. In addition, “purchasing” unused paid leave upon the retirement of employees should be banned, and replaced with the use-it-or-lose-it policy that prevails in the private sector.

No Special Deals for Unions

Many Connecticut municipalities, particularly cities, agree to sign “project labor agreements” with unions. These deals essentially eliminate all but unionized firms from bidding on public-construction projects. Since the bulk of contractors in Connecticut are non-union, project labor agreements can dramatically raise the cost of public projects. A 2006 analysis prepared for Connecticut Associated Builders and Contractors found that “PLAs raise the cost of building schools [in Connecticut] by almost 18%.”

If Connecticut law banned any state funding of local-government construction projects conducted under a project labor agreement, fewer municipal officials would bow to union pressure to sign them.

Defund Downtown Boondoggles

American cities have been losing residents and business to suburbs and rural areas for decades. Connecticut’s urban centers are no exceptions. The Nutmeg State’s capital is a prime example:

Hartford has been losing its population to the surrounding towns for almost 100 years. In 1900, 72% of the                region’s residents lived in the city. In 2000, only 26% did… Hartford’s population peaked at almost 180,000              people during the 1950s. Since then it has dwindled to slightly more than 121,000. During the same period, the suburban population doubled. Today, almost three-quarters of the region’s residents are suburbanites; and, except for a handful of cultural and educational institutions, most  suburban residents find adequate                            employment, shopping, culture, and entertainment either within their own towns or in other suburban towns.

Adjusted for inflation, the value of Hartford’s grand list actually fell between 1999 and 2006, from $43.0 billion to $36.3 billion.

Urban decline has spawned the “redevelopment” craze, a costly and often fruitless attempt to boost cities’ sagging downtowns. The New London Development Corporation’s seizure of homes — which produced the U.S. Supreme Court’s notorious 2005 Kelo decision — is now an internationally known example of redevelopment run amok. But many other Connecticut municipalities, both large and small, are engaged in starry-eyed attempts to reclaim the past.

These efforts typically involve the creation of a redevelopment “corporation” funded by taxpayers. State subsidies are usually very generous to these projects, and many local officials cannot resist the temptation of “free” money.

In too many cases, downtown projects become white elephants that taxpayers must subsidize for years — in many cases, until the next “downtown revitalization” scheme in launched. Space does not permit a full listing of Connecticut’s many troubled redevelopment projects, but several stand out:

* The Connecticut Supreme Court recently ordered Bridgeport to pay C.R. Klewin Northeast $7.8 million ($3 million in interest). The city continues to contend that it is right to withhold payments, because the company fraudulently obtained its contract to build the Arena at Harbor Yard.

* In April 2007, state authorities “expressed concern” that the $230 million Gateway Project, a plan to bring Gateway Community College to downtown New Haven, has “fallen badly behind schedule” and said they would “review their $140 million funding to cover increases in the cost of preparing the site for new construction.” (Taxpayers will continue to service the debt of the bonds issued to finance the New Haven Coliseum, which was imploded in 2006 to make room for the Gateway Project, until 2009.)

* Hartford’s “Adriaen’s Landing” development has been plagued with serious troubles since its inception in the 1990s. Recently, the cost of the long-delayed “Front Street” retail portion of the project was revised upward by $13.5 million.

* In March 2005, Bristol politicians purchased a 17- acre property containing an ailing shopping mall. In October 2006, The Bristol Press reported, “A year and a half after the city bought the downtown mall, it still has no plan for the 17-acre property and no organization in place to oversee its redevelopment.

But it has shelled out $7 million of taxpayers’ money already and is going to need to spend at least $2 million more to raze the mall itself.”76 The city is locked in a legal battle over its intention to evict the mall’s last tenant. In May 2007, the newly created “Bristol Downtown Development Corporation” asked for $350,000 to fund its activities for the 2008 fiscal year.

* Five years after Torrington announced its $100 million “master plan” project, not much has been accomplished. Frustrated downtown retailer Cheryl Rossi recently complained: “I’m just tired of it. It’s all talk and nothing is happening. I’m tired of reading about all the stuff they’re doing when they’re not doing anything.”

* It was recently reported that Derby’s redevelopment project has “a $45 million gap that the city’s preferred developer says needs to be filled before ground can be broken on an ambitious proposal to rebuild the south side of Main Street.”

State law should ban the use of any bond funds for these costly, ineffective, and occasionally corrupt attempts to return Connecticut’s cities to vibrancy. Doing so would surely discourage local politicians from launching them in the first place.

End Double Dipping

State employees are barred from serving in the Connecticut General Assembly.80 But state law permits municipal employees to serve as elected officials at the local level. And it is common for local-government workers, and their spouses, to serve as municipal politicians:

* In 2005, four city employees served on New Britain’s Common Council.

* In August 2005, a deputy fire chief in Danbury joined the Common Council.

* In November 2005, Stamford’s Board of Representatives voted to allow elected municipal employees and their spouses to vote on fiscal decisions provided their families’ “benefit is ‘insubstantial compared to the budget or appropriation being considered.’”

* Earlier this year, a West Haven teacher who is also a town councilman cast the sole vote against the city’s budget because it increased school-district expenditures by only 3.6 percent. (“Children will suffer under this budget,” he told the New Haven Register.)

* Also this year, the wife of Cromwell’s police chief, who serves on the town’s board of selectmen, recently voted in favor of a budget that raised her husband’s salary from $104,433 to $107,827.

The Hartford Courant objects to these arrangements:

Proponents [of municipal employees serving in municipal government] say it allows employees to fully participate in the democratic process. That’s hardly compelling. They can vote, contribute money to candidates and otherwise take part in the process. But when their participation reaches the point of conflict of interest, common sense dictates that it be limited. No one is forced take a municipal job or to run for office.

State law should be changed to bar municipal employees — and their spouses — from serving as elected officials in local government. (Lawmakers should also explore a ban on parents with children attending government schools serving on boards of education — a clear conflict of interest that threatens sound fiscal management of the largest share of municipalities’ budgets.)

Sunlight for Contract Negotiations

Private citizens are usually excluded from observing negotiations between union officials and local-government authorities when the parties negotiate a new labor contract. Such confidentiality “is neither state nor federal law, but it’s the first thing the unions ask for at the first negotiating session.”

In 2005, despite union grumbling, a representative of a taxpayer group was allowed to serve as an “advisory member” of the team negotiating a new teacher contract for the Watertown Board of Education. It was a promising development, but other municipalities have not followed suit. Lawmakers should require that all contract negotiations between local governments and union officials be held in public, at a time that is convenient for most taxpayers to attend. The meetings should be recorded, transcribed, and posted on municipal websites, and public comments should be allowed before, during, and after the negotiation process.

3) Better Local Decision Making

Mandates from Hartford, municipal officials aver, are the primary cause of runaway property taxes. But while this claim contains much truth, there is another key contributor to the cost of local government in Connecticut: Municipal leaders who make fiscally unsound choices all on their own.

From the pursuit of costly education fads to “municipal mission creep” — i.e., supplying services that can hardly be considered core public-sector obligations — Connecticut’s cities and towns cannot escape blame for much of the state’s property tax crisis.

Even the Connecticut Conference of Municipalities admits that only half of local government expenditures are driven by state mandates. Excessive discretionary spending is a lesser-known but very important aspect of municipal finance in the Nutmeg State.

Core Skills, Not Fluff and Fads

The Constitution of the State of Connecticut states: “There shall always be free public elementary and secondary schools in the state. The general assembly shall implement this principle by appropriate legislation.”

Connecticut’s lawmakers have delegated this requirement to local governments, and mandated that municipalities meet a “minimum expenditure requirement” for every student in their school districts. (State aid is provided through a complicated formula based on a communities’ socioeconomic conditions.)

But while some municipal politicians and employees work diligently to provide well run and relatively low-cost schools, too many embrace a deeply flawed vision of education — one that pursues trendy (but usually ineffectual) “reforms,” teacher union self-interest, and above all, higher spending.

School administrators can be particularly militant when it comes to defending districts’ budgets. For example, in 2005 the state’s Elections Enforcement Commission ruled that East Windsor’s superintendent improperly “sent a letter to parents who have school-aged children in the East Windsor system, describing cuts made to school programs and staff by the Board of Education in response to a reduced budget.” The superintendent was ordered to “reimburse the Town of East Windsor … for the cost of mailing the letter.”

“More spending = better schools” remains the mantra, and the policy, of the Nutmeg State’s education establishment. Between 1981 and 2001, inflation-adjusted expenditures on Connecticut’s K-12 government schools doubled, despite enrollment growth of less than 10 percent.

It is difficult to determine if Connecticut’s taxpayers got much return for their education “investment.” Assessments persistently show that Connecticut’s government schools are not performing well. For example, the percentage of students meeting the “proficiency” standard on the Connecticut Mastery Test can be as much as 41 percentage points lower when those same students take the more demanding National Assessment of Educational Progress exam. A recent report by the American Legislative Exchange Council that rated states’ school systems based on performance on standardized tests such as the SAT ranked 16 states ahead of Connecticut. And only 16 percent of respondents to a 2005 poll of manufacturing executives conducted by the Connecticut Business & Industry Association thought recent hires with high-school diplomas had “good or excellent” job-readiness skills.

Despite the steady stream of evidence that Connecticut government schools are not fulfilling their mission to produce competent graduates, the state’s government schools continue to offer:

an ever-expanding menu of services, hobbies, and recreation activities … . These include low cost forms of day care, both before and after school, expensive and eclectic sports programs, holiday “socials,” low-cost summer camps run out of public school buildings, and a variety of school-day distractions for students, such as pottery and ballet lessons, cafeteria pasta bars, media centers with state-of-the-art video equipment, and comfortably furnished rooms overflowing with shiny computer work stations.

In addition to manifestly superfluous expenditures that are not mandated by the state, Connecticut’s school lobby also endorses most of the trendy “reform” ideas pushed by teacher unions — policies that inevitably produce more school staff, and thus more dues revenue for organized-labor officials. Class-size reduction and preschool are examples of expensive policies that have a superficial appeal, but are not backed by reliable research that decisively demonstrates their ability to boost student achievement.

Perhaps most maddening for Connecticut taxpayers is the lack of awareness — if not downright hostility — so many municipal leaders and school administrators exhibit toward the growth of education-choice alternatives. From charter schools to tuition tax credits to voucher programs, school-choice options are proliferating across the nation. Yet Connecticut’s local-government officials remain obtusely committed to the state’s education status quo. (In 2006, Norwich’s superintendent wrote the state education commissioner to urge her not to renew the Integrated Day Charter School. State support of the school, she claimed, “has come at the expense of the public schools.”) Few municipal leaders pursue bold, choice-driven alternatives, or pressure legislators to enact educational-freedom reforms that have shown promise in other states, but might undercut the existing government-school structure in Connecticut.

School Corruption: No More Denial

Armand Fusco, Ed.D., a retired Connecticut school superintendent and expert on school corruption, believes mismanagement and fraud exist, to some degree, in every Connecticut school district.

Fusco has spoken to civic groups across the state about his concerns, and outlined the ten steps he believes must be taken to ensure school resources are used appropriately. But the Nutmeg State’s education establishment has chosen to ignore his concerns — and attack the messenger. The Connecticut Association of Boards of Education and the Connecticut Association of Public School Superintendents have denounced Fusco for making “widely inaccurate and unfair comments about corruption in schools,” and school-board members have been unwilling to listen to his presentations.

Each year Connecticut taxpayers send billions of dollars in property-tax revenue to the state’s government schools. Given the lack of financial experience on the part of most members of boards of education, Fusco’s warnings should be heeded. His anti-corruption strategies, which do not require the passage of enabling legislation by state lawmakers, should be adopted by every Connecticut municipality.

Municipal Mission Creep

Connecticut’s cities and towns operate many facilities that do not provide essential services to the public, such as:
* golf courses
* ice rinks
* parking garages
* skateboard parks
* nursing homes
* airports
* marinas

This municipal mission creep extends to services as well — Stamford’s “Leisure Services Administration” recently allowed residents to “hire the department to run birthday parties.”

Facilities and services that are inherently private in nature should not be owned or offered by local governments in Connecticut. Since the enterprises usually fail to cover their costs with fees, they require subsidies from taxpayers. Eliminating them would put a halt to the subsidized competition they inflict on private-sector operators. It would also avoid the potential for any legal woes that might result. (In August 2006, a woman assaulted in a city-owned parking garage filed suit against Stamford, claiming the contractor hired to run the facility was negligent for failing to hire enough security guards.) In addition, privatizing facilities that do not provide core public-sector services places them back on the list of taxable property.

The Value of Competition

Rising costs, unmet state revenue promises, and taxpayer resistance to higher property-tax bills have caused Connecticut’s municipal leaders considerable stress. But viewed another way, this predicament presents an opportunity for officials who are willing to think boldly about remaking city and town governments. Stephen Goldsmith is a leading advocate for competitive contracting at all levels of government. His pro-taxpayer accomplishments as mayor of Indianapolis were impressive:

From 1992 to 1997 our efforts to move city services into the competitive marketplace saved $230 million. During that period we cut the city budget each year. We did not just cut the rate of growth, we actually spent less. Our budget in 1997 was 7 percent lower than the budget when I took office. We reduced the nonpublic safety work force (everybody but police officers and firefighters) by more than 40 percent.

A Canadian think tank reports that competitive contracting of government services is neither new nor untried. Indeed, it has many successes in countries around the world, reducing costs, improving the quality of services provision, making subject expertise more broadly available, and permitting a growing number of smaller municipalities to offer their residents a greater number of quality services.

Network-oriented public-service provision, a concept developed by Goldsmith and William D. Eggers, a senior fellow at the Manhattan Institute, focuses on “maximizing public value” through a “range of potential solutions” that include “the private and nonprofit sectors.” Goldsmith and Eggers believe the benefits of this approach go beyond cost savings:

 A greater focus on public value also will gradually change the way government is conceptualized; the idea of            government based on programs and agencies will give way to government based on goals and networks.                  Instead of seeing their jobs mostly as managing public employees, public executives will view their role as                  working out how to add maximum public value by deploying and orchestrating a network of assets.

Connecticut municipalities’ fiscal woes have created conditions very conducive to network-based government. For example, in 2005 a revenue shortfall prompted New London to eliminate its social-service department. Since that time, “more than 20 organizations have stepped up to provide some of the services the city used to offer.” Councilors have asked the city manager to explore ways to contract out the work of matching needy residents with the nonprofit groups seeking to serve them.

State roadblocks and aggressive public-employee unions should not deter Connecticut’s municipal officials from pursuing competitive contracting and network based provision of public services. And local governments should press legislators for clear statutory language that empowers them to offer more innovative and accountable public services at a lower cost.

An Honest Debate, A Path to True Reform

During a February 2007 informational forum on property taxes, Senator Edith Prague offered a curious comment about her concerns regarding Connecticut’s property-tax crisis: “I don’t want the teachers to be cheated. I don’t want us to be in a situation where the towns are fighting over the education budget.”

Several months later, Governor Rell echoed Prague’s lament: “Every day you pick up the paper and you read about another town budget failing, or another one that is going to referendum, or another where a town has simply said, ‘Enough already, we’re not even going to have a town meeting this year, we’re going directly to referendum.’”

Comments like Prague’s and Rell’s — in addition to the complaints of local officials irked by their inability to easily obtain budget approvals — suggest that Connecticut voters’ increasing reluctance to accept higher property taxes makes the state’s risk averse political establishment very uncomfortable. Many Nutmeg State politicians seem to view the defeat of local budgets not as a manifestation of well-informed voters exercising their right to make fiscal decisions for their communities, but as a threat to the state’s political and public-policy status quo.

That perspective is possibly an explanation for why discussions of excessive municipal spending are so rarely included in public hearings, press conferences, and mainstream-media examinations of Connecticut’s property-tax woes. Given the lobbying, campaign-finance, and public-relations strength of Big Labor in Connecticut’s public sector, the state’s political class would rather discuss ways to raise more revenue for cities and towns than explore the role unneeded municipal spending plays.

But as long as the facts about soaring local-government expenditures are excluded from discussions of the Nutmeg State’s property-tax crisis, citizens will continue to receive an incomplete picture of municipal finance. Only when tough — and politically inconvenient — questions are asked about how the state’s cities and towns spend their revenue will Connecticut receive a full and honest debate about effective methods to reduce its property-tax burden.

Yankee Staff

Yankee Institute is a 501(c)(3) research and citizen education organization that does not accept government funding. Yankee Institute develops and advances free-market, limited-government solutions in Connecticut. As one of America’s oldest state-based think tanks, Yankee is a leading advocate for smart, limited government; fairness for taxpayers; and an open road to opportunity.

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