One of the biggest surprises on the Governor´s budget last week was doing away with the motor vehicle property taxes, or to be more precise, on the taxes for vehicles worth less than $28, 500. In a state where towns rely a great deal on property taxes (a bad idea, by the way), axing one of their potential sources of revenue has been greeted by howls of protest by Mayors and First Selectmen all over the state.
Behind this change on property taxes, however, we should keep in mind two main issues. First the motor vehicle property tax is a fairly lousy way to collect money in the first place. Second, eliminating it without providing an alternative to municipalities is a terrible idea.
We will start with the tax itself. The car tax, by itself, is wildly inconsistent. The same car, owned by two people across municipal lines, can generate a tax bill four or five times larger, just from the huge mill rate disparities. Real state property taxes are similarly unfair, but at least you can´t move a house from New Haven to Greenwich and call it a day. Car taxes, however, make this big differences specially galling.
In addition, Municipal tax collectors really don´t like car taxes that much. For starters, it doesn´t raise that much money in the first place; 5.5% of local budgets, according to CCM, requiring a hefty amount of paperwork to do so. The problem, however, is that some towns barely get any money out of them as they rely more on taxing residential and commercial property (as is the case of Stamford, where it only accounts for 2% of the budget) while it is a big chunk of the taxable grant list in other places (Sprague, 20% of their income). This means that in some towns eliminating the tax could be compensated with a slight adjustment in the mill rates, while in others it will translate into a large tax increase elsewhere. The incidence of this change, as a result, greatly depends on the economic activity of each town. Opening a big hole on municipal budgets without offering any way to compensate for the loss is, by itself, a bad idea.
What are the alternatives? A good, workable alternative would be turning the car property tax into a state tax with a uniform mill rate, and increasing municipal aid from the general fund. After all, the state has to pay for its roads somehow, and with cars getting more efficient the gas tax really doesn´t have the revenue potential it used to. A state car tax would eliminate the regressive silliness of having the same car pay more taxes in Hartford than in Avon, and enable the state to plug the hole in municipal budgets at the same time. What does not make sense is have the Legislature mandating expenditures and cutting taxes to local governments, without putting more money on the table.
Applying for public benefits is hard. The Department of Social Services in Connecticut has an extraordinary amount of forms; just figuring out the right one takes some effort. Once the right application has been selected, the second hurdle always is the paperwork itself; with some applications running for 22 pages, completing the form is by itself a challenge. The third step is figuring out what additional documents are necessary to include with the application, which of course vary wildly from one benefit to the next. After getting all that right, it would be the time to figure out to what DSS office we need to send everything (harder than it seems, as it might not be the closest -and yes, the map on the DSS website is wrong) and then figuring out the interview process, making sure not to miss a single phone call.
It is not just a hard process - Connecticut actually has one of the most unwelcoming and convoluted benefit application systems in the nation, according to a recent study:
There are only eight states in the country that have no system in place whatsoever to apply for public benefits online - Connecticut is part of that undistinguished minority. Fortunately, and thanks in part to the Affordable Care Act, DSS is working to create an online web portal that will enable clients to apply directly from their computers. The system is (largely) on track, and will be operational late summer / early fall this year.
This won´t make applying for benefits exactly a breeze, in any case. The applications will remain long and confusing, paperwork complex and the process will be hard to navigate for many. CAHS has been working with more than 30 partner organizations to help clients get the benefits through our EarnBenefits Online (EBO) program, now in our fourth year of operation. Just in 2012 CAHS and our community partners screened close to 3,200 households for benefits using EBO, enrolling more than 1,500 households in public benefits. We work with organizations serving hard to reach populations, in neighborhoods underserved by DSS, and also provide the software to high traffic sites like Community Health Centers.
The EBO program has proved highly successful, as we work with community organizations and clients to make the challenging obstacle course to DSS much easier. Starting our fourth year, we will keep working with partners and DSS to make sure that access to benefits in Connecticut is available to all that need them, without barriers or roadblocks.
Of all the bizarre political celebrities of recent years, none was closer to the truth than Jimmy McMillan. In a memorable tirade in an otherwise unremarkable New York gubernatorial debate, McMillan ranted against the high cost of housing. Understandable, as he headed "The rent is too damm high party", even if it felt a bit out of place.
Remarkably, he had a point: housing in NYC is indeed really expensive, to the point of being unaffordable for most low income families. This problem, however, is not limited to New York; Connecticut, in fact, faces a similar challenge. According to a data analysis from the Working Poor Families Project (generated by Population Reference Bureau from the American Community Survey) , Connecticut has, indeed, very expensive rents and housing:
- 47% of renters in the state pay more than 30% of their income to cover rent and utilities - with the state being the 8th most expensive in the country in this regard.
- For poor and low income families, the situation is even worse. 90.3% of poor families pay more than a third of they household income in shelter expenses. 76.4% of low income families face the same challenge. Only New Jersey is even less affordable than Connecticut in this regard.
The economic effects of these numbers go beyond the hardship they inflict on low income families. Matthew Yglesias has pointed out that high housing costs work as an entry barrier for economic development, as they tend to increase the cost of doing business in the state. They are also sign, as well, that the demand for housing in Connecticut is extraordinarily high: a lot of people want to live in the state, and they are willing to pay a premium to enjoy living in quaint New England towns with excellent services, access to high paying jobs and top higher education research centers.
The takeaway, however, when thinking about this issue, is that we have the technology and resources to solve our housing crisis. It will take some effort, by we can have immediate progress in 2-3 years if we start acting now, improving access to housing for needy families, lowering the cost of doing business and attracting young professionals and families that are now being priced out of the state. We can just build more houses where there is demand for them, instead of zoning them out - not just low income housing on the inner cities, but mixed income housing on the suburbs and the nice neighborhoods of our cities as well, like East Rock or Black Rock.
Admittedly, anyone that has dealt with a zoning board knows it is not that easy, but in any case housing policy in Connecticut needs to start taking into account both the hardship it generates and the bottleneck for growth it has become. People want to live in the state; that´s why housing is expensive. We need to have more of it.
Economist like to talk about negative externalities; actions by individuals or organizations that create costs for those that are not directly involved. Air pollution is usually the best example; the smog created by a coal plant creates a health cost in the community surrounding it that the owners of the plant do not pay.
Crime is also the source of negative externalities. A robbery or assault have negative effects beyond the the people directly involved: it affects property values, increase policing costs, and has a real effect in everyone else´s taxes. Gun violence is a big part of those costs, obviously, although they are sometimes hard to quantify.
What we can say for sure, however, is that they are not at all trivial: David Hemenway, on a recent book on the subject, points out that gun shot wounds in the leading uninsured expense for hospitals in the US. Most uninsured expenses end up paid by the states, so gun wounds end up costing money to taxpayers.
High crime rates have real social costs - costs that go beyond the cities where most of those crimes are committed. Putting an end to gun violence, consequently, it is not just a matter of safety; it is also a way to save money. As Hemenway points out, it is not just a matter of 2nd amendment rights; the same way regulations and public policy have dramatically reduced traffic fatalities without infringing on the right to operate motor vehicles, gun regulation should be tackled as a matter of public health, not just prohibition or clumsy weapon bans.
What should be clear by now is that gun ownership has a social cost that goes well beyond the cost of buying a weapon. It is the time to take them into account and work to reduce the price for all us.
A big headline fronts a great article on the Connecticut Healty-I-Team website today : "Childhood Hunger Rises Even In Wealthy, Rural Towns".
This is the sad reality in many communities in Connecticut in the past few years. The long recession, followed by years of sluggish, anemic growth, has dramatically increased the number of kids that go to bed hungry every day in the state. The numbers are downright shocking:
Thirty-four percent of all students in Connecticut’s public school districts were eligible for free or reduced-price lunch during the 2010-11 school year, up from 26.4 percent during the 2004-05 school year, according to Connecticut Department of Education statistics.
Urban areas account for a large proportion of those in need. In Bridgeport, for example, 98.8 percent of the student body is eligible for free and reduced-priced meals. But rural and suburban communities are impacted, too. The number of eligible students from affluent towns such as Glastonbury (498) and Westport (173), for instance, has more than doubled. Other towns, such as Avon (190), have seen a threefold increase, the state numbers show.
Where we Live, on WNPR, talked with Magaly Olivero, the author of the article, extensively today, as well as with Lucy Nollan, Susan Maffee and Stephanie Ettinger de Cuba. Subsidized lunch and free school breakfast programs have proven effective to at least partially address childhood hunger in the state, but they are only a partial solution. Only families below 185% of the Federal Poverty Level ( less than $34,350 a year for a family of three) are eligible for this programs.
Childhood poverty is getting worse in Connecticut. Although our safety net has been effective protecting those in need, we need to do more to avoid having more and more people fall through the cracks.
The Innovations on Social Finance Conference was a fascinating overview on new methods and formulas to rethink how Connecticut funds its social services. The focus is on being more effective, and being able to use smart, targeted investments to make every single count. You can watch the full conference below, as covered by CT-N:
As state budgets shrink and the demand for social services grows, a group of Connecticut nonprofit organizations are searching for ways to serve an increasing demand with fewer and fewer funding sources.
Things look bleak, but Liz Dupont-Diehl, policy director for the Connecticut Association for Human Services, sees a possible light at the end of the tunnel.
The sustained economic recession is forcing nonprofits and other social service organizations, including the state, to think outside the box when it comes to funding mechanisms. One of those outside-the-box ideas is called “social impact bonds.”
With a social impact bond, a private investor puts money toward preventative services and gets money back when and if outcomes are produced. Financial returns to investors are made by the public sector on the basis of improved outcomes. The bonds have been the subject of experiment in the United Kingdom as well as New York and Massachusetts.
With all the talk and worry about the state's dire fiscal situation one important discussion has gone unnoticed this month: the Education Cost Sharing (ECS) formula task force.
The ECS formula is one of those crucially forgotten but incredibly important portions of the state budget that is usually ignored in most debates. Following several court rulings that stated that funding education solely using property taxes did not guarantee equal access and opportunity to all students, the legislature was forced to step in providing assistance to municipalities. The initial promise, dating back to the seventies, was that the state would cover half of all education costs, distributing the money in a way that provided more resources to the poorest school districts. Decades later, the ECS formula is the latest incarnation of this promise. The big issue is, however, that the formula is broken beyond repair.
Truth is, Connecticut is actually not really even applying the ECS formula now.The state barely covers 40% of education budgets, and the money is distributed close to a completely random manner. CAHS has recently released a policy brief (PDF) delving on this subject, and explaining why fixing the ECS formula is a must if we want to close the achievement gap in the state.
Connecticut is exceptional in its overreliance on the property tax to fund public education. This tax is eminently regressive, as poorer towns with smaller tax bases are forced to charge higher mill rates than wealthier suburbs to offer the same services. This, paired with the higher educational needs in poor districts and a state cost sharing system that neither provides enough resources nor assigns them to the districts that need them the most makes the work of the task force vitally important for the state.
The task force will release its final report in the coming weeks, with a first draft on how money will be distributed to be made available in their next meeting.We will follow up with the details as soon as they become available.
CAHS is always interested in the potential for CT to improve outcomes, and to better offer services that advance our mission of ending poverty by empowering, equipping and engaging people to build a secure future.
Given the ever-increasing state budget shortfall, one area we are looking at is innovative financing methods such as Social Impact Bonds, or SIBs.
SIBs are generating a lot of enthusiasm for their ability to generate private investment in public services, and to bring a new emphasis to both accountability and population-level results. They were piloted in England where they have been in use for a couple of years to fund services to reduce prisoner recidivism.
The concept is that private investors fund programming that will save society money, and they get back their money, and a profit, if and when their services produce the agreed-upon result – say, reduction in prisoners going back to jail. This offers the opportunity to offer needed services, gauge results based on population-level impact, break down the silos that divide and fracture programming, and allow funding to be combined over multiple years.
In the US, New York City has recently begun a program, funded by Mayor Bloomberg, and Massachusetts has just awarded two grants for SIBs to address chronic homelessness and juvenile recidivism. In CT, the Department of Correction applied to the US Department of Justice to use SIBs for programming to reduce prisoner recidivism in Bridgeport and Waterbury. That grant was not awarded, but interest remains.
There are other new and innovative ways of financing generating similar interest. One intriguing model model is Human Capital Performance Bonds in Minnesota.
CAHS is working with the Capital Region Council of Governments and Community Impact Strategies to host informational conference December 4. These and other models will be explored and you'll have the opportunity to ask questions of the people using these models in Massachusetts.
Some are concerned, and say these new financing methods would lead to undue profit for the private sector, or letting the state walk away from its obligation to fund human services.
Certainly, caution and oversight is warranted and needed. The incentives need to be carefully crafted and reflect the public interest.
But they offer the chance for our systems to recognize the value added by preventative services - the return on investment when we provide effective preventative services that prevent future increased costs to the state.
The Minnesota pilot identifies these goals:
"....using bonds to finance social services is an implicit recognition by the state that benefits often accrue over a number of years. (emphasis mine)
"For example, we don’t educate 5-year-olds because we hope they’ll be contributing members of society by the time they are 7. Currently the state tends to underinvest in social services, because budgeting rules recognize payback periods of only two to four years.
"Second, budgeting tends to take place inside strict silos, carefully guarded by state agencies. But as the work-force training example showed, costs and benefits are spread over many agencies. The Department of Employment and Economic Development pays for the services. The Departments of Human Services and Corrections see reductions in spending as a result. And the state’s coffers grow from increased tax revenue.
"Human Capital Performance Bonds provide a way of accounting for these costs and benefits. For the first time, the budgets of disparate state agencies will be considered from a single point of view — service providers’ impact on those budgets — and adjusted accordingly. This will help public agencies see and act upon the bigger-picture impact of human services.
"Finally, the focus shifts from activity to outcomes. How can we identify and fund those services that contribute to the health of our communities over the long run? Government budgets are notorious for funding activities (i.e., seat time for school children) rather than outcomes (how much they learned)."
Stay tuned for more news about the December 4 informational conference.
Jonathan Cohn, in the New Republic, has a fascinating article comparing how states compare regarding anti-poverty programs and its results. On one side, Cohn puts all "blue states" the ones that have voted reliably democrat since 2000. On the other column he has the red states, those than went for Bush and McCain in the past three election cycles. The results are not surprising, but still worth looking at:
No surprise here: blue states offer better coverage on all their anti-poverty programs, offering a more generous safety nets than red states. Some Federal programs have fairly strict guidelines (SNAP, S-CHIP), so the difference is fairly minor in those cases. In others, like unemployment insurance, coverage is up to 50% more generous (unemployment).
So far, so good - democrats spend much more. The important question, however, is how big a program is, but how well does it work for poverty reduction. Luckily, Cohn also has some interesting numbers there:
By nearly every measure, people who live in the blue states are healthier, wealthier, and generally better off than people in the red states. It’s impossible to prove that this is the direct result of government spending. But the correlation is hard to dismiss. The four states with the highest poverty rates are all red: Mississippi, Louisiana, Alabama, and Texas. (The fifth is New Mexico, which has turned blue.) And the five states with the lowest poverty rates are all blue: New Hampshire, New Jersey, Vermont, Minnesota, and Hawaii. The numbers on infant mortality, life expectancy, teen pregnancy, and obesity break down in similar ways. A recent study by researchers at the American Institute for Physics evaluated how well-prepared high schoolers were for careers in math and science. Massachusetts was best, followed closely by Minnesota and New Jersey. Mississippi was worst, along with Louisiana and West Virginia. In fact, it is difficult to find any indicator of well-being in which red states consistently do better than blue states.
Mr. Cohn is wrong about one specific point: we do know that government spending can and does reduce poverty when done right. Ezra Klein points out that looking at total spending, blue and red states are not that far off. Blue state benefits, however, are far more generous than red state ones. As a result, they are also more effective reducing poverty, and in turn probably reducing the total cost in the medium term. A less generous, cheaper welfare state is much less effective moving people out of poverty, so it really never comes down.
Maybe the best way to reduce dependency on government is by making government work well.
1. According to the Every Child Matters Education Fund, 6 million Americans did not vote in 2008 because they didn't know how to register or missed the deadline. National Voter Registration Day, September 25, was created to make sure no American is left out in 2012. Click here for information about how to plan events and use the effort to increase turnout and voter registration.
2. In Connecticut, fewer than 50% of those eligible to vote do so, according to Secretary of State Denise Merrill's first-ever Civic Health Index.
3. Why does it matter? Our colleague Orlando Rodriguez at Connecticut Voices for Children blogged yesterday about a new National Bureau of Economic Research study showing that investing in children would return $2.6 billion to our economy.
The study found that "...the state could reap benefits equivalent to 1.28 percent of total disposable income (consumer spending) if families with children who live in poverty received additional support, as more of their children would reach the earnings capacity of the typical child. Furthermore, this increase would be 'in perpetuity,' which translates into more private sector jobs and additional tax revenues for state government -- forever."
How critical is this? We learned this week that Connecticut showed the fifth highest increase in child poverty in the country.
Vote, vote, vote!