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9/11/2017 - Latest COST Analysis on Impact of Proposed Municipal Aid Cuts

PRESS RELEASE
For Immediate Release
September 7, 2017

COST Releases Analysis: MUNICIPAL AID CUTS WILL DRIVE PROPERTY TAX INCREASES AND DROP IN HOME VALUES IN CT'S SMALL TOWNS

"For residents in Connecticut's small towns, proposed cuts to education funding and overall municipal aid are a guaranteed property tax increase," said Betsy Gara, Executive Director of the Connecticut Council of Small Towns (COST).

COST prepared an analysis outlining how the proposed cuts in education and municipal aid funding would impact property tax levels in Connecticut's towns and cities. The data, which is based on a comparison of municipal aid funding levels included in the Governor's May 15 budget proposal and the Governor's August Resource Allocation Plan, confirm that the cuts to education funding and municipal aid under consideration would overwhelm property taxpayers in Connecticut's small towns.

"Although Governor Malloy has announced that he will be releasing a revised budget proposal, COST believes that this analysis will help provide lawmakers with a clear picture of how cuts to education funding and overall municipal aid may impact property taxpayers in Connecticut's small towns," said Gara.

"This analysis demonstrates that a considerable number of small towns stand to face significant economic hardship if proposed cuts in education funding and overall municipal aid are enacted. Moreover, in many cases, the cuts would hurt many small towns that have already had to increase property taxes to provide critical services."

Under Governor Malloy's May 2017 budget:

  • In total, cuts in Education Cost Sharing (ECS) grants from Fiscal Year 2017 levels amount to $437.6 million, equating a 22% drop in funding;
  • Based on cuts in ECS funding, property taxes will increase by more than $500 per year for homeowners in more than 50 small towns.
  • The proposed cuts in ECS grants have the potential to trigger double digit increases in more than 40 towns in Connecticut.

Under Governor Malloy's Resource Allocation Plan:

  • In total, cuts in Education Cost Sharing (ECS) grants from Fiscal Year 2017 levels amount to $557 million, equating a 27% drop in funding;
  • Based on cuts in ECS funding and overall municipal aid levels, property taxes will increase by more than $500 per year for homeowners in more than 90 small towns;
  • In 28 towns, property taxes will increase by more than $1000 per year and in 64 towns by more than $750 per year;
  • The proposed cuts in ECS funding and overall municipal aid levels have the potential to trigger double digit increases in more than 80 towns in Connecticut.

Under both scenarios, property taxes may increase by 20-30% in some of Connecticut's smaller communities, causing undue hardship for many struggling households.

"Any attempt to balance the state budget at the expense of education grants would damage an already fragile housing recovery," said Don Klepper-Smith, an economist with DataCore Partners. "This will place tremendous pressure on local property taxes and significantly increase the cost of home ownership."

"According to this analysis, proposed cuts in ECS and municipal aid funding will clearly overwhelm property taxpayers in many small towns," said Gara. "What's even more disturbing, however, is the impact that these property taxes will have on housing values."

"Based on input from local realtors, increasing property taxes by more than $500 or $1000 per year translates into lower sales prices, significantly diminishing housing values across the board," explained Gara.

"COST is providing this analysis to lawmakers to guide them in making decisions about education and municipal aid funding. There has been a lot of discussion about adjusting the ECS formula, but this analysis raises questions as to whether the adjusted formula makes sense," Gara added.

"In addition, the governor continues to call for shifting a large portion of teachers' pension costs to towns and cities. This will also shift a greater burden onto already overburdened property taxpayers," Gara said.

"What we need to be talking about is how towns can control local education costs, which make up 70-80% of a town's budget. Otherwise, towns will have no choice but to increase property tax levels, undermining Connecticut's economic vitality," said Gara.

"Unfortunately, many property taxpayers are at a tipping point and will not tolerate additional increases in property taxes. COST is very concerned that deep cuts in municipal aid will force steep increases in property taxes, discouraging home ownership and real estate investment," said Gara.

COST is an advocacy organization committed to giving small towns a strong voice in the legislative process. Its members are Connecticut towns with populations of less than 30,000. COST champions the major policy needs and concerns of Connecticut’s suburban and rural towns.