I needed an attention grabber for a title, but this piece focuses on the implications of publicly available data and is not intended to be provocative. It is a summary of how your tax dollars are being spent locally and what needs to be done to change it if we are going to start being fiscally responsible and have the best shot at maintaining, or I dare say, growing property values over time. Although the topic may seem boring, bear with me, because the numbers are enthralling…unfortunately in a bad way currently. First, a caveat in anticipation of some nasty and/or ignorant responses that will likely come my way for discussing the fiscal reality behind the veneer: we have excellent schools, a beautiful town and everyone I know, including myself, wants to keep it that way. I have gone to Hartford to give public testimony multiple times this year to fight against forced school regionalization as well as statewide car and property taxes that will exacerbate negative trends facing all residents. Second, my experience with every town representative I have talked to is that they are well intended people. They are representing us on a voluntary basis and have spent many hours in town meetings, along with work outside of meetings. OK, with that out of the way, onto some data and analysis.
Some context that sets the framework: New Canaan has the highest debt per resident and second highest spending per resident out of 169 towns and cities in the State. For comparative purposes, our debt per resident is almost double that of Darien and spending per resident is roughly 10 percent more according to the Connecticut Economic Resource Center, a non-partisan arm of the Connecticut government focused on research and economic development. One should think of our town debt as deferred spending. All of it will be borne by taxpayers at some point. The totality of our current and deferred spending far exceeds that of any the 169 towns and cities in Connecticut. According to a Yankee Institute comparative town analysis, in a sixteen year period between 1996 – 2012 New Canaan raised property tax rates by about 150 percent to support an approximately 160 percent increase in spending, or about 10 percent on average a year excluding the effect of compounding! Would anyone reading this manage their household or business expenses this way?
Excessive spending begets excessive leverage. Our town debt is about 75 percent higher than the average of our District Reference Group of neighboring towns. Our debt service costs – our annual costs to pay back our debt – is roughly 12 percent of our total budget. One goal of the Board of Finance is to lower our debt service cost to under 10 percent in the next five years. To do that our newly issued debt would have to be zero over this timeframe. There is a greater likelihood of the Sun rising in the West. One of the primary reasons we need to issue new debt is to pay off maturing debt. In addition, there are non-discretionary maintenance expenses that are typically bonded to keep our public stock from falling into disrepair. We are caught in a pickle of our own creation and have little flexibility to change things without making some fiscally conservative decisions. That brings us to BOE spending, which consumes roughly 60 percent of the town’s budget.
Here is some summary data from a roughly 20-year look back at BOE spending I recently did:
- In an 8-year period between 2001-2009 spending per pupil went up by close to 60 percent. At that point our spending per pupil was about $16,900. Our increases since 2009 have come off of a much larger base created by a period of extremely large increases in the previous decade.
- Our total elementary school enrollment has declined by over 10 percent in the last 17 years while our spending per student has more than double during this period! Birth rates have declined steadily from 210 in 2005 to ~138 currently. We are likely to see an increase in kindergarten enrollment this year but the longer term trends continue to be down and are the basis for the New England School Development Council—an organization BOEs use for enrollment projections, among other uses—projecting an enrollment decline of about 15 percent over the next 10 years in our public schools.
- From 2007-2017 our total school enrollment was up about 2 percent according to NESDEC data while FTE count was up about 16 percent according to CT Department of Education data! “Other non-instructional staff” FTE count was up about 40 percent. We could have 81 less FTEs, probably save several million a year—I am not saying we should—and be at the FTE/student same ratio as Darien, who has better academic outcomes than us from 8th grade on when the cumulative impact of one’s academic experience is more fully realized.
- If one uses FY 2018 BOE debt expense the proposed BOE budget implies spending roughly $24,500 per student. This is roughly 10 percent higher than the average current spending of our DRG making conservative assumptions about their BOE debt levels.
Finally, there is no correlation between per pupil spending and academic outcomes, as measured by standardized test scores, according to the State’s Office of Legislative Research. About 80 percent of the variance between standardized test scores among students is attributable to parental educational attainment and whether or not the student is coming from a single family home. A core group of generally excellent staff and administrators—which we have and certainly pay for—is important. What is more important in determining academic outcomes is the family the students are coming from and their deep involvement in the students’ lives.
So, what to do about all of the above?
To be clear on what I believe should happen: we should hold our BOE spending flat this year and our overall town budget flat, at most, for the next few years, until we work off some excess home inventory and our local property tax rates start to become more predictably contained. We have 18 months of home inventory, the most in Fairfield County. That much supply will lead to lower prices, and presumably higher tax rates down the road to offset them unless we start producing fiscally conservative budgets. We should eliminate all non-maintenance capital expenditures over this time period. A flat town budget will entail some staff reductions at the BOE – something none of us want – but my concern is that unless we take serious steps to address our fiscal situation now the staff reductions will become much greater in the future, especially if we face a recession. Westport is cutting 17 FTEs in the BOE this year, a decision I am sure they did not make lightly.
In terms of what readers can do, my hope is that more people start getting involved in local government, either through writing to our town representatives [email addresses for different town bodies are bos, bof, and firstname.lastname@example.org], showing up at town meetings, and/or running for local office. We have local elections in November. Ask every representative what their opinion is of the issues mentioned above and how they would change the status quo going forward? The status quo this year is a property tax rate that will be up about 7-8 percent this year and property tax burden that will be up over 10 percent for around a quarter of our residents, many of whom are seniors living on fixed incomes. At one end of the spectrum, some residents saw a 5-year revaluation on their homes up 30 percent-plus, meaning a tax burden increase of 37-38 percent, even in the midst of an overall town revaluation down 7.2 percent. This compares to 5-year town revaluations in Darien and Wilton down about 1 percent and 2 percent, respectively. Why are we performing worse? At the other end of the spectrum, many have seen large double digit declines in their home assessment in the revaluation. Whether one is facing a much higher tax burden, much lower home valuation, or something in between, no one is a winner.
With all of this said, there are little steps of progress in our budget this year but it is not even close to enough in my view in the context of over spending for decades. We have some representatives—such as Town Councilman Mike Mauro and Council Chairman John Engel, for example—that are consistent in advocating and pushing for a more fiscally conservative agenda, but they and others face an uphill battle. There are a number of other representatives on both sides of the aisle that are fine with inexorable increases in spending and property tax rates to fund that spending. I am asking readers to be vocal, do some digging on town fiscal matters, and if you are concerned with what I wrote only vote for representatives that can clearly define a pathway to flat or lower local tax burdens and stabilizing real estate values.
Please email me at email@example.com with any questions or follow up you have if you want to be part of the change.