Yesterday, I highlighted the failing narratives that try to explain what’s happening in Connecticut’s cities. In proposing another narrative, I offered the Boston Federal Reserve report that analyzed the financial issues of the state’s towns and cities. Here’s a bit more information about that report below and you can read it yourself here.
First, the report written by the Boston Federal Reserve (bank) and NE Public Policy Center intended to measure, “the non-school fiscal health of Connecticut municipalities using a “municipal gap.” Municipal gap is the difference between the uncontrollable costs associated with providing public services and the economic resources available to a municipality to pay for those services.” In other words, the report analyzed the difference between what services Connecticut’s towns and cities must pay to have a functional local government and compared that to their ability to pay for these resources.
The report made several key findings, but the most important was this one: “Our results show large nonschool fiscal disparities across cities and towns in Connecticut. These disparities are driven primarily by differences in revenue-raising capacity.” In other words, there were large differences in the ability of some towns and cities to pay for the needs in those communities. In particular, the high needs of some towns and cities to maintain fire, police, roads, and other services exceeds their ability to raise funds to pay for those services.
In short, towns and cities in Connecticut are limited to raising funds through local property taxes and fees, which are both regressive. Add in high costs of places with more roads, more police, people living in poverty or unemployed, more firefighters, etc. and there is a “gap” between necessary costs and ability to pay.
In Connecticut, there are some ways that the State helps mitigate this gap. The major one for municipal government is the PILOT grant to towns and cities. but the report found that this grant is too small currently to make a huge difference. For schools, the State offers the ECS grant. But this report excluded school spending from the analysis. And in other States, cities and towns can raise revenue through a local sales tax or other means besides property taxes and fees.
A critical point in the report was that the authors found this problem existed independent of individual decisions by local policymakers. It reads, “Importantly, our measures of costs and capacity, and therefore gap, do not represent actual spending or revenues, but instead are based on factors that are outside the direct control of local officials.” In addition, the report stated, “The disparities that stem from these underlying factors, which fall largely outside the control of local officials, are widely regarded as inequitable.” In other words, the authors found that measures of cost and capacity were not easily influenced by local politicians, and they instead favored a structural or systematic explanation.
Last year, Scott Gaul at the Hartford Foundation for Public Giving and Michelle Riordan-Nold from the CT Data Collaborative wrote a summary of this report. In their essay, “Why is Hartford Broke?”, they had had roughly the same reading of the report as I did. You can read their summary here.
Again, why does this matter?
Depending on your narrative about Hartford, and other cities in Connecticut, you get different ideas about a solution. If you believe that local politicians made poor decisions, then there should be more heavy-handed oversight by the State, such as an State-appointed, unelected fiscal control board, or junta de control fiscal for cities like Hartford, CT. Nevermind that by this logic, the financially struggling State Legislature and all other towns and cities in the state that are financially struggling should also get an unelected fiscal control board.
But if you look at the numbers and policies and agree with the Federal Reserve narrative of mismatch between inability to pay and high costs, then you might think that Connecticut’s towns and cities need new ways of generating revenue to fund the basic services needed to run a city or town. This narrative doesn’t match well with the dominant, racialized stories about the cities’ demise or local political ineptitude or indiscretion. And that’s probably why this story of financial mismatch doesn’t get much attention.