The Governor’s budget announced yesterday confirms her earlier commitment to include a local property tax cap among her priorities for the 2008 legislative session. Raised unsuccessfully last year, such a measure would statutorily limit the ability of cities and towns to raise revenues for essential municipal services, including of course, public schools. The proposed cap of 4% beginning July 1, 2009 would drop to 3.5% in 2010 before settling at 3% in 2111.

Even before the budget announcement, the concept had begun to draw fire from local officials. The Connecticut Conference of Municipalities (CCM) has posted some of this reaction on its website. More on the initial response of these groups to the announcement can be found on the CCM website.

The Center on Policy and Budget Priorities in Washington, DC, in a recent study titled The Problems with Property Tax Revenue Caps listed several concerns about the efficacy of local property tax caps. The 5 bullet points below are the key findings of the study.

• Property tax revenue caps do nothing to change the rising costs facing localities; they only make it harder for localities to provide the services residents demand and need.

• Increased state aid may help localities avoid cutting services in the short run, but such aid is often unreliable over time.

• Localities may pass overrides or increase other local sources of revenue, but such actions can increase funding inequities among localities and make the revenue system more regressive.

• When localities have not been able to replace lost property tax revenue, the quantity and quality of services such as schools, public safety, and infrastructure has declined.

• Homestead exemption and circuit breaker programs offer ways to lower property taxes without jeopardizing public services.

All these points warrant consideration; but for me, the second issue is the most troublesome. Nothing in the 2008-09 state budget or in the economic outlook for the next biennium suggests to me that the state will be in a position to step up local support in the short term—let alone over the long haul. Remember when the state share of school costs during the 1990’s recession dropped by more than 6%? As difficult as it was for local taxpayers to fill that gap, it is hard to imagine how cities and towns could have maintained quality school programs during that period and provided other essential municipal services under a tax cap structure.

With municipalities’ major funding partner heading into a period of economic uncertainty, this seems like a bad time to tie local hands.