By Kevin McNabola
Orange Board of Finance
Kevin McNabola
As we begin another legislative session in Hartford, and as cities and towns prepare their budgets for the next fiscal year, the topic that consistently comes to the table is affordability within Connecticut and the need for policy changes and solutions.
Affordability has become a challenge, especially within three of the largest sections of our economy: housing, energy and health care. Connecticut’s tax and cost structure weighs heavily on residents and taxpayers, yet not enough is being done to remedy the affordability factor.
Even though Connecticut had a strong third quarter performance with 5.6 percent growth in gross domestic product driven primarily by strong output within the finance, insurance and manufacturing sectors, it is still considered one of the most tax-burdened states, ranking 44th for economic competitiveness in the conservative-leaning American Legislative Exchange Council’s Rich States, Poor States list.
Let’s look at what can be done on health care affordability. First, look to expand subsidies and cost‑sharing reductions strengthening state‑level subsidies for the Affordable Care Act and look to expand the marketplace so people can buy their own less expensive health insurance. This would reduce premiums and out‑of‑pocket costs for middle‑income families.
Focus on expanding investment within community health centers. Federally qualified health centers provide lower‑cost care and reduce emergency room dependence. Lastly, look at addressing social determinants of health: housing stability, energy security and environmental conditions, all of which directly affect health care costs.
Housing affordability is a bit more challenging, since Connecticut has had a long‑standing housing shortage. Recent passage of the state’s new housing bill has expanded zoning reforms, incentivized multifamily development and accelerated the permitting process. Connecticut municipalities are now faced with feeling the impact of increased population within their communities, driving up the cost of education, health care, utilities, police and fire protection, sewer, water and other city services.
The result of Connecticut’s current housing strategy is that there needs to be more local control since the city/town is required to pay for these additional services. There needs to be a unified, accountable statewide plan to address these major cost drivers.
Building permits issued in Connecticut included the largest share for multifamily homes in the Northeast at 67.3 percent, versus Maine which had the smallest share at 26.6 percent. Each New England state has made significant efforts to alleviate housing pressures. The Connecticut congressional delegation announced in May 2024 the appropriation of $42.4 million to build, renovate and modernize public housing.
Gov. Ned Lamont has forged ties with the private sector and made it a priority to create more taxpayers instead of burdening Connecticut with more taxes. The state needs to attract more corporations and millionaires to pay for the additional tax burden created by our housing strategy. It is important to understand the reality which Connecticut faces, particularly since the state’s tax revenues are heavily reliant on millionaires. These people account for only 0.7 percent of all state tax filers but 30 percent of all income tax receipts.
Lamont recently put forward a plan to be more competitive by including a research and development tax credit for biotech and pharmaceutical companies. The R&D tax credit will be instrumental in reducing the tax burden on small businesses and is definitely a great first step to having Connecticut become more competitive. This is important after the state lost huge companies to other states that created thousands of good-paying jobs, including General Electric, Aetna, United Technologies and Alexion. All of them have moved operations and headquarters to tax-friendly states, or states that gave them huge tax incentives.
Cities and towns throughout Connecticut are faced with growing challenges to properly fund services. Property values for a single-family home in Orange have increased 45 percent. Just to put the tax impact in perspective, take my house as an example. It is a 2,550 square-foot colonial four-bedroom with 2.5 baths. In 2022 for local taxes I paid $10,080. For 2025-26, taxes are $10,917, an 8.3 percent increase.
Property values in Orange are high based on high demand and short supply of homes. It is also no coincidence that the high demand for homes is a direct result of our high-performing school districts, both at the elementary and high school levels. That is the number one reason young families move to Orange.
As we begin our departmental budget reviews in the Board of Finance, I can assure you that the affordability factor will be front and center of our discussions. Compromise will lead to a solid budget that residents can afford during these challenging economic times.
Kevin McNabola is the chief financial officer for the city of Meriden and a member of the Orange Board of Finance.