From: Susan Kniep, President
The Federation of Connecticut Taxpayer Organizations, Inc. (FCTO)
Website: http://ctact.org/
email: fctopresident@aol.com
860-524-6501
December 31, 2006
HELP TO
MAKE 2007
THE YEAR
OF THE
TAXPAYER
Property Taxes are
driven by State Mandates!
The 2007 Regular
Session of the State Legislature Convenes on January 3, 2007 and
Adjourns on June 6, 2007. Issues Anticipated
To Be Addressed by the State Legislature in 2007 can
be found at the following website: http://www.cga.ct.gov/2006/rpt/2006-R-0731.htm
.
Keep current on
what is transpiring in the legislature by visiting the Legislative Calendar
daily which can be found at the following website: http://www.cga.ct.gov/default.asp?NewDate=1/1/2007.
If you would be
willing to attend Legislative Sessions on Issues of Importance to you; i.e.
Eminent Domain, Binding Arbitration, Prevailing Wage, etc. ,
please contact me at fctopresident@aol.com
Find your State
Legislators at the following website: http://www.cga.ct.gov/maps/Townlist.asp
.
************
Unfunded Mandates!
The following are comments made by Susan Kniep,
President of The Federation of Connecticut Taxpayer Organizations, Inc. on
December 20, 2006 before the Governor’s Commission of Unfunded Mandates.
Thank you for extending the time to me to appear before your
Committee. I ask that you look at the
most impacting unfunded mandate in this state which is Binding Arbitration . Due to
Binding Arbitration , local officials cannot manage
their budgets and every year taxpayers are forced to pay for increased costs
born through union contracts.
From 1989 to 1993 I had served as the Mayor of East Hartford under a strong Mayor form of
government. I had previously served for
several years as East Hartford’s minority
leader on its town council. I am
currently the President of the Federation of Connecticut Taxpayer Organizations.
A few years ago, the Federation assessed towns to determine
the percentage of personnel costs to budgets.
Of the 169 Connecticut
towns, we determined that taxpayers were paying between 75% and 85% of their
property taxes to support government employee wages, pensions and
healthcare. Taxpayers, some of whom had
no health insurance, were paying 85% or more for government employee healthcare
costs.
Taxpayers are impacted by local budgets which are now
controlled by arbitrators passing judgment on union contracts. Not only on wage, pension
or healthcare issues, but grievances as well.
During my tenure as Mayor, the State was in a recession
resulting in layoffs in the private sector.
Some Connecticut
companies downsized, others went bankrupt.
Some left Connecticut
for states where taxes were less impacting.
The State and towns suffered economically, as did
taxpayers. Families were impacted by
lost jobs and wages. Yet, as Mayor, I
could see the obvious. Those in the public
sector were secure. In fact, not only
were they not losing their jobs, they expected to receive wage increases.
In talking with government officials from other towns, many
of us knew we had few budget choices as we were impacted by union
contracts. In an attempt to control the
finances of East Hartford as its Mayor, when
elected to office in 1989 I relinquished the taxpayer financed automobile I was
entitled to. Concurrently, I instructed
that the practice of town employees driving town owned vehicles home would
cease. This was done after a careful
review of their contracts which did not grant this entitlement.
I was subsequently grieved by the unions. I lost my case due to a seldom referenced
term called “past practice.” If the
union is doing something outside the realm of their contract, arbitrators have
ruled they have earned the right to do it.
In essence, an administrator may be allowing a practice by a union
member or members to occur over a period of time which is unbeknown to the
public or to other elected or appointed officials. Once discovered, there is no recourse to stop
the practice which may have a dramatic financial impact on the taxpayers forced
to support it.
More recently, the police chief of East
Hartford had assigned a work schedule which would have a positive
impact upon his budget. The union
grieved and they won, again creating a financial hardship on taxpayers.
The most egregious act by the government unions was when
they successfully took control of millions of dollars as a result of the Anthem
stock distribution. Rather than towns
being allowed to use this money to offset union healthcare costs paid for
through property taxes, the unions felt entitled to the money and filled
lawsuits to take possession of it. Many
towns acquiesced to the unions believing the costs to litigate might exceed the
benefits distributed by Anthem. As
you are aware, for years many government union members paid nothing for their
healthcare, while taxpayers absorbed 100% of the cost. Today, healthcare costs in the private
sector are soaring while taxpayers concurrently pay for the majority of the
costs of healthcare for government employees.
The Federation recognizes that Binding Arbitration will not
be abolished in the immediate future although other States have done so. However, there must be reform. Taxpayers do not elect those who arbitrate a
contract. The elected officials
taxpayers elect however have no control over their budgets or the taxpayers
dollars when 75% to 85% of their budget pay for personnel expenses and are
under the control of arbitrators who have no accountability to the voter. This is an affront to the democratic
process.
We urge your committee to propose to the legislature that
local municipalities be given the following authority by statute:
Give local elected officials the same powers that State
elected officials have. Make it
mandatory that local arbitration awards be ratified by a majority vote of the
town council. If, as in state
government, these awards are rejected, then require the process to begin again.
Next, take the fund balance off the table when negotiating
contracts. Allow towns to build a fund
balance without the threat of union’s being able access this money for their
members. Failure to do so will continue
to force towns to bond projects because they cannot now save their money to pay
for future projects.
Next, give towns the right to suspend Binding Arbitration
for up to three years when impacted by negative economic conditions. I had begged the legislature to allow for
this suspension when I was Mayor, but my requests were ignored.
Next, take the negotiation table out from behind the closed
doors of secrecy and into the light of public debate. The taxpayers fund union contracts and
should have every right to follow negotiations and comment on terms being
negotiated before contracts are agreed to.
In fact, taxpayers should be allowed to vote on union contracts through
referendum.
In conclusion, I question why the CEO’s of municipalities
are forced by our State legislators to adhere to laws which prevent them from
controlling their labor costs which are ultimately passed on to property owners
through property tax increases.
The majority of Connecticut
residents work in the private sector under “at-will” conditions wherein they
can be terminated at any time, for any legal reason, or for no reason at all by
their employer. They work in a state
of flux knowing that their employer on any given day can demand that they pay a
greater share of their health care premium, take on a greater workload, receive
a minimal salary increase, no salary increase or have their pay cut. There will be no debate, no bargaining, no
arbitration, and no elected official waiting to defend them. The words “out-sourcing” and “visas” have
become a part of the Connecticut
worker’s vocabulary as the agenda of many corporations is to put their stock at
the top of the portfolios of Wall Street analysts.
The “at-will” employee is an unprotected class. They are losing their jobs, their homes and
their health insurance. They are being
forced into jobs which are below their educational and skill levels and at
salaries which are a fraction of what their previous jobs paid.
Yet, the American dream is alive and well for those whom the
“at-will” employee is forced by elected government officials to financially
support. They are the state and
municipal government workers. In
contrast to the “at–will” employee, government workers don’t have to accept
what their employer tells them.
Taxpayers are their employer.
Whether it is working conditions or salary, healthcare or pension issues
they exercise their State given right to force negotiations and push their
agendas, behind closed doors, under state Binding Arbitration laws, which leave taxpayers powerless. Unions vote to accept or reject their
contracts. Taxpayers do not. Instead, taxpayers are simply presented with
the bill for these lucrative union contracts, through their property taxes.
Thank you again for your time. Taxpayers in the 169 towns and the State need
property tax relief. Reforming Binding
Arbitration will provide that relief.
*************
Theresa McGrath
West Hartford Taxpayers
Association
FACE0203@comcast.net
Subject:
Presentation Before West
Hartford Town Council on Proposition 2 ½ (See attached)
Hello, my name is Theresa McGrath. I would first like to thank the council for
permitting me this time to speak.
I am a volunteer member of the West Hartford
Taxpayers Association, and I am currently working with members of our
association to propose a tax reform concept to the Town of West Hartford which would
provide property tax relief, that I believe you will be interested in.
On November 25, the New York Times published a
report that discussed the issue of property taxes and the problems that
different states are having with high property tax rates. According to this
report, New Jersey has the highest median
property tax bill in the country, followed by New
Hampshire, Connecticut and New York. The report also contained a detailed analysis
of property tax rates among cities and towns in New York,
New Jersey and Connecticut.
In order to allow comparisons among the different tax systems, the Times
calculated property tax rates for each municipality as a percentage of market
value, and not as a comparison of “mill rates.”
The Times determined that in the tri-state
region as a whole, the median property tax rate on a single family home was
1.5% of market value. In West Hartford, the rate was 1.8% of market value, well
above the regional average. And among Connecticut’s 169 cities and towns, West
Hartford has the 24th highest property tax rate. The Times report makes it clear that
Connecticut has among the highest property tax rates in the country, and West
Hartford has among the highest rates in the state.
* It must be noted that these calculations do
not consider the effects of the current revaluation process, and the
significant forecasted budget increases.
Based on the information provided by the town in connection with
revaluation, it appears that many or most West Hartford
taxpayers will soon have property tax rates of 2% or more of market value,
placing us even higher on the list of towns with the highest property tax rates
in the entire region.
Everyone seems to agree that property tax
rates are too high and are having a detrimental effect on our economy and
competitiveness. However, I did not come
here tonight to just demand a decrease to the forecasted town budget. I feel the need to suggest to you a more
permanent and consistent solution to our current situation.
Although I am not an expert in Property Tax
policy, I have been trained in the fields of public policy and research to find
solutions to issues which affect the general public. Recently, Ana Lachlier,
a fellow member of the West Hartford Taxpayers
Association, showed me a report discussing Proposition 2 ½. In researching this further, I became more
confident that our town would see this as a legitimate and realistic solution.
Proposition 2 ½ is a property tax reform plan
which is not new by any means. In the
1970’s, Massachusetts
had the highest property tax rates in the country. Taxpayers were demanding some form of
relief. Proposition 2 ½ was adopted in
1982 and fazed in over a few years.
Since its implementation, many independent studies have analyzed its
impact and compared its effects on Massachusetts’
property tax system compared to tax systems used in other states and
municipalities throughout the United
States.
Ellen Guest and I previously provided you with
a copy of one study, done by Americans for Tax Reform, a non-partisan lobby
group at the Federal level. This study
compares New Jersey's property tax system vs. Massachusetts’s tax
system under Proposition 2 ½. The comparative results are incredible.
In the 1970’s, New Jersey
and Massachusetts
had the 2 highest property tax rates in the nation and were both struggling to
come up with a solution. New Jersey
thought it could solve the problem by adopting a state income tax, thinking
that the increased income tax revenue would lead to less demand on the property
tax system. That theory should sound
quite familiar to people in Connecticut. Massachusetts tried a different approach, a
system that would cap increases in property tax rates, tied in with other
reforms designed to alleviate the financial demands on the property tax
system. To date, the results are
clear….New Jersey is still the highest taxed state in the Nation while
Massachusetts has done a much better job of controlling its property
taxes. Since the implementation of
Proposition 2 ½, Massachusetts
now ranks 32nd, among the states for highest property taxes. Had New
Jersey implemented Proposition 2½ back then, it has
been estimated that their property taxes would be 36% lower and they wouldn’t
be struggling to deal with a property tax system that is seen to be in
crisis.
How does Proposition 2 ½ work?
A plan modeled on Massachusetts’ Proposition 2 ½ would:
1. Limit
increases in town property taxes at 2.5% annually.
2. Limit the Board of Education’s fiscal
autonomy and compulsory binding arbitration for public employees.
3. Prohibit
unfunded State mandates.
4. Limits
tax on vehicles to 2.5%.
5. Renters could be allowed a rental deduction
against state income taxes. (This could
be negotiated).
Implementation of this type of plan would
require adoption of State legislation, since local government currently has no
control over many of these issues. I am
currently working with groups at the state level to see that this issue is
addressed this upcoming legislative session.
From the council’s perspective there are a few
pros and cons to this proposition, but ultimately we all win. To lay out a few items you may need to know:
Pros:
·
Annual
Tax Increases above 2½% must go to an automatic budget referendum, to be
approved by the residents of West Hartford. This would require a Charter revision.
·
Local
governments will be provided with local control over State Mandates.
·
Automatic
expectations of restraints on spending by all sectors of our Local Government.
·
Automatic
2.5% increase over current year's budget.
·
Unused
tax increases from prior years can be added automatically to current year's tax
increase without a referendum to override levy limit.
Cons
·
Places
significant restraints on revenue, however, the override provisions, which I
will explain further, allow for such increases to be approved through a
town-wide referendum.
·
Seeking State Government legislation to allow local control
over State Mandates and Binding Arbitration.
Provisions Granting Local Governments Flexibility to increase
Tax limits to maintain local services:
·
Increase
tax limits on new construction, structural additions and improvements that
increase property values, by multiplying the prior year's tax by the value of
the new property.
·
If West Hartford residents are unhappy with the plan, the
entire system could be eliminated permanently, by Referendum approval of West Hartford Residents.
·
Budget Referendum Override: This tax
limit can be temporarily overridden by referendum for special purposes, but not
general operating expenses.
o
Special purposes include:
§
payments on specific debt issues
§
certain capital outlay expenditures
§
elimination of required cuts (mandates)
· Budget Referendum Underride: This underride provision allows local governments to
reduce their annual levy limits to less than 2.5% of market value. A
majority vote by referendum of the citizens of the town would be required for
this to happen.
* In general, Massachusetts’ local
government’s experience has been that override referendum votes to permit new
debt issues have been successful, while override referendum votes to raise the
limit for general operating purposes have not.
How will Proposition 2 ½ work in our town?
While certain aspects of Proposition 2½, like
rejecting unfunded state mandates, require action by the General Assembly,
there are ways that the town could phase in those aspects of the plan that do
not require action by the General Assembly.
My professional feeling is that the state government is under such
public pressure to do something about the property tax crisis that it will
eventually have to adopt some type of reform in these areas. If this town is ahead of the curve in
addressing these issues, our reforms could pave the way for adoption of true
property tax reform state-wide and would blend nicely with changes implemented
at the state level.
I ask the council to consider this proposition
and the studies and materials I have provided you, to see how our town might
adopt a concept such as this and advocate for it in the General Assembly. I believe that a pan such as this will
alleviate the pressures that increasing property tax rates are having on
homeowners, who in some cases are forced to sell their homes because they can
no longer afford the property taxes.
I want to assure you that I don’t expect to
simply drop this proposition in your lap and expect that you implement this
into our town’s practices. I have every
intention of being a partner with you to see this through, with the help of
experts in tax policy and supporters throughout the state who are willing to
help out with this as well.
Concurrently, I will be working with people
such as Susan Kniep, President of the Federation of Connecticut Taxpayers
Associations, our state-wide umbrella Taxpayers Association, who lobbies at the
state government level for property tax reform and Taxpayers' Rights. Sue, along with many municipal lobby groups
will be calling attention to Proposition 2½ at the Legislature to see that true
property tax reform does get passed by the General Assembly in the upcoming
session. Thank you for your time.
************
From Robert Green, rgreen619@snet.net
FCTO Board Member
Salem, CT
December 29,
2006
Governor Rell Announces January Tax Reductions
Lower Tax Burden Will Mean a Brighter Financial Outlook for
2007
Governor M. Jodi Rell today said a lowering of the
tax burden for business and individual taxpayers that begins January 1 could brighten
taxpayers’ financial picture for 2007.
For businesses, January brings the elimination of the
surcharge on the corporation business tax. During 2006, the corporation
business tax contained a 20 percent surcharge in addition to the tax of 7.5
percent. The surcharge was to be reduced to 15 percent for 2007, but
legislation signed by Governor Rell eliminates the
surcharge entirely. “Higher inflation and increased energy
costs made 2006 a costly year for Connecticut
businesses and residents,” Governor Rell said. “With
reduced tax responsibilities taking effect January 1, we are starting 2007 off
on the right foot.
“We must continue to do all we can to help taxpayers keep
more of their hard-earned money in their pockets. That starts with
reducing the state tax burden on businesses and creating a more attractive
environment for corporations to locate here and grow jobs. When we make Connecticut more
business-friendly, we send a strong message to companies already here and those
considering expanding here.”
Individual taxpayers will see an increase in the single filer exemption and
single filer credit used to calculate personal income tax liability starting
January 1. This means taxpayers who are single filers and have
withholding done by their employer will see an increase in their
paychecks.
To ensure that Connecticut’s
manufacturing industry remains competitive, the Governor also signed into law
this year the phase-out of the burdensome property tax on manufacturing
equipment and machinery. Also in 2006, the Governor proposed, and the
General Assembly enacted, tax credits for companies filming movies or other
productions in Connecticut.
The credit is equal to 30 percent of the qualified production costs incurred by
the company – the most generous in the nation. The new tax incentives
took effect July 1.
For more information about Connecticut
tax changes, contact the Department of Revenue Services at (860) 297-5962.