Funding towns like it’s 1999

When it comes to the state’s funding of schools and towns, in Connecticut it is still 1999.

Our funding formulas are out-of-date and do not reflect changes in personal income since 1999. State laws require that income data in grant formulas come from the decennial census long form. Census 2000 data is currently being used and it is based on 1999 income. The recent 2010 census did not include a long form, and therefore did not collect more current income data. Consequently, we will forever be stuck with data from the 2000 census unless the state’s statutes are updated to use another source for personal income data.

Income data play a major role in determining how much aid goes to municipalities for K-12 education, adult education, general operating expenses, and other services. For example, census income data are used a total of twelve times in the Education Cost Sharing (ECS) Grant, the Mashantucket Pequot & Mohegan Grant, and the Adult Education Grant.

There are only two alternative sources of data that provide income for towns. The American Community Survey (ACS) is the replacement for the Census Bureau’s decennial census long-form. Data from ACS are updated yearly, but the data can have large margins of error, as the National Research Council (NRC) reported in 2007: “A weakness of the ACS compared with the long form sample is the significantly larger margins of error in ACS estimates…”

This is because the ACS surveys a relatively small number of residents in each city or town.
 Consider Stamford: ACS data from 2008 show total personal income in Stamford to have been anywhere from $4.8 billion to $5.9 billion, which is an error range of more than $1 billion.

Connecticut’s less populous towns (less than 20,000 residents) are the most adversely affected by the inaccuracy of ACS data. As the NRC reports, “The larger ACS sampling errors are a particular problem for small cities, counties, and other governmental jurisdictions…” Over half of Connecticut towns have low populations that will result in margins-of-error that could be as high as 25 percent. Can we accurately allocate funding among towns using ACS data?

There is another source of town income data that is more accurate than the ACS. It is the Adjusted Gross Income (AGI) from the state’s personal income tax returns. For 2008, tax return data show total personal income in Stamford was $5.9 billion, which is at the high-end of the ACS estimate. State tax return data show total personal income in Connecticut in 2008 at $143 billion, which is $13.5 billion more than the high end estimate from the ACS. Using income tax data as a benchmark, ACS understated personal income in 2008 in Connecticut by nearly $4,000 per resident.

Tax return data provide a more accurate, complete, and reliable picture of personal income for towns than the ACS. There are criminal penalties for filing false income tax returns and most households file tax returns. In contrast, the ACS is based on a small sample of the state’s population and the data are not verified.

Connecticut residents have a vested interest in the accuracy of the income data that the state uses for calculating grants. Consider the measure of town wealth, Adjusted Equalized Net Grand List per Capita (AENGLC), calculated by the State Department of Education. A town’s ranking on this wealth measure directly affects the level of state funding for adult education, school construction, pupil transportation, and health services. Currently, the department’s calculations for 2010-2011 use $82,049 as the highest per capita income for towns — based on 1999 data. However, 2008 income tax data from the Department of Revenue Services (DRS) results in $261,641 as the highest per capita income for towns. When 2008 income tax data are substituted for 1999 income data, the AENGLC rankings of 151 towns change – sometimes significantly. The town of Colebrook drops 75 positions from 54th wealthiest to 129th (1 is wealthiest). Mansfield jumps 37 positions from 155th to 118th.

The next session of the General Assembly must make it a priority to amend statutes to specify that Connecticut AGI, and other income data from state income tax returns, be used in state funding formulas. Using ACS income data is unacceptable when a more accurate alternative is available — personal income tax data from the DRS. Or, we can continue to fund towns as if it were 1999 – forever.

Orlando Rodriguez is a Senior Policy Fellow at Connecticut Voices for Children based in New Haven.