In announcing restrictions on FY 08 state spending, Governor Rell explained, “Connecticut’s government will live within its means.” But a comparison of Connecticut’s state and local revenues as a share of personal income (a standard measure in public finance that takes into account the fiscal capacity of a state to raise revenues) suggests that Connecticut is living well “below” its means, relative to other states.
Compared to other states, Connecticut’s combined state and local revenue is a relatively small share of the state’s personal income. Connecticut ranks third lowest (48th) among all states in its “own source” revenue (combined state and local taxes, fees, charges and other miscellaneous revenues) as a share of its total personal income. That is, only two states have a smaller share of their total personal income going to the taxes, fees and other charges needed to pay for publicly-funded services and programs — from education and health care to transportation, economic development, and environmental protection.
Connecticut’s relative frugality is not new. Over the past three decades, Connecticut consistently has ranked in the bottom ten among states in total state and local “own source” revenue as a share of total state personal income. If Connecticut’s own source revenues as a share of its personal income were increased to the 50-state average, Connecticut would have had $3.8 billion (close to 16%) more in state and local revenues in FY 2005-06. Rather than living “beyond” its means, Connecticut is living well “below” its means.