Cities and towns could face $24M hit from minimum wage hike
Connecticut cities and towns could face as much as $24 million in increased costs by 2022 if lawmakers raise the minimum wage to $15 an hour, estimates from state analysts show.
The nonpartisan Office of Fiscal Analysis also warned that the wage hike could add nearly $7 million in expenses to child care providers who participate in the state’s Care4Kids program.
Meanwhile, municipal advocates cautioned that unless legislators are prepared to bolster state aid and carve out some new exceptions to the minimum wage standard, the increase would exacerbate problems for already lean local budgets.
“Municipalities only have a couple of options,” said Betsy Gara, executive director of the Connecticut Council of Small Towns. “They can increase taxes or cut services. There is no Door No. 3.”
The Labor and Public Employees Committee has approved two bills to raise the minimum wage gradually from $10.10 to $15 per hour over three years. Gov. Ned Lamont has a competing proposal to make the same jump over four years.
Nonpartisan analysts released four projections on how the minimum wage hike would affect Connecticut’s 169 cities and towns.
- Large cities, with populations greater than 100,000, would face $800,000 to $1 million in added costs.
- Medium-sized cities with populations between 50,000 and 80,000 would face $400,000 to $600,000 in additional expenses.
- Small cities with populations between 30,000 and 50,000 would face $100,000 to $300,000 in added costs.
- Small towns with less than 20,000 people would face $50,000 or less in increased expenses.
A CT Mirror analysis using OFA’s cost estimates, and population estimates from the state Office of Policy and Management found there will be an aggregate impact of the wage hike of up to $23.9 million. Connecticut has five large cities, 14 medium-sized cities, 36 small cities and 114 small towns.
All of the projections are based largely on mandated wage hikes. For example, a municipal employee earning $12 per hour would have to be paid $15.
OFA also acknowledged the “wage compression” factor, but its analysis does not attempt to quantify the impact.
“Wage compression,” in this case, involves employees currently earning $15 per hour or slightly more. If the minimum wage is raised to $15, employers might need to raise pay for workers already at or slightly above this threshold to avoid turnover.
“Municipalities only have a couple of options. They can increase taxes or cut services. There is no Door No. 3.”
Executive Director, Connecticut Council of Small Towns.
Joe DeLong, executive director of the Connecticut Conference of Municipalities, said the $15-per-hour minimum wage requirement could harm a wide range of municipal programs — if cities and towns aren’t granted additional state aid and provided exceptions to the wage limit for some jobs.
DeLong said many programs that serve local youth, particularly during the summer, are vulnerable. This is unfortunate, he said, because they not only provide youth development, but also serve as informal day-care for parents when children aren’t in school.
If cities and towns don’t receive help to cover the added costs, “they are going to price [these programs] at a level where the people who need them the most aren’t going to be able to afford them,” DeLong said.
Democratic leaders of the Labor and Public Employees Committee said the new estimates demonstrate the need to boost funding for municipalities.
“We have to look at this holistically,” said Sen. Julie Kushner, D-Danbury. “If we solve a problem here and create a problem there, that doesn’t work.”
Both Kushner and the committee’s other co-chairwoman, Rep. Robyn Porter, D-New Haven, said the legislature should consider raising more revenue to ensure a minimum wage hike doesn’t hurt groups in need.
Over time, Porter added, a minimum wage hike would stimulate the state’s economy. “We know that wage growth equals economic growth, and too many people are living paycheck-to-paycheck,” she said.
But the panel’s top House Republican noted that a minimum wage hike would translate into higher local property taxes and fewer services.
“This is going to be an enormous unfunded mandate on towns and cities across the state,” said Rep. Joe Polletta, R-Watertown. “It’s going to hit families.”
Polletta said many communities that rely on high school and college students to perform summer jobs at low wages may choose to scrap programs rather than raise taxes.
“We have to look at this holistically. If we solve a problem here and create a problem there, that doesn’t work.”
Sen. Julie Kushner, D-Danbury
Nonpartisan analysts also warned that the minimum wage hike could pose challenges for social services.
Family child care providers in the state’s network could face up to $6.9 million in extra costs by 2022.
And while the analysts cautioned that raising the minimum wage could reduce participation in assistance programs with income eligibility limits, they did not offer a specific change in enrollment.
Some lawmakers and social services advocates have expressed fears for months that a $15-per-hour minimum wage could push some parents off HUSKY A, the Medicaid-funded program that provides health insurance for working poor adults with children, out of the program.
Many of those who’ve expressed concerns have said the solution isn’t to block a minimum wage hike, but to increase state funding for HUSKY to broaden eligibility rules.
“Nobody will even speculate, which is kind of frustrating and scary, because I want everybody to know exactly what we do when we do it, and who are we affecting,” Rep. Toni Walker, D-New Haven, a longtime co-chairwoman of the Appropriations Committee, said of OFA analysis.
“Raising the minimum wage to $15 an hour still doesn’t give you a livable wage in Connecticut, which is so sad,” she added. “We’re arguing over something that we should figure out in favor of the people that need these services and need this income.”
Karen Siegel, a public health policy fellow at Connecticut Voices for Children, pointed to a recent change in Medicaid eligibility requirements that has left many without health insurance. She worried the minimum wage hike would do the same.
“Our position has been that we absolutely should raise the minimum wage and simultaneously need to consider the impact on families, especially the impact on child care subsidies and on HUSKY enrollment,” she said. “For low income families, there just isn’t another option that’s affordable.”
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