Connecticut, the richest state, is in financial trouble

Connecticut is the richest state per-capita in the nation, yet is in huge financial trouble, with massive public pension under-funding and a serious budget deficit. It is heavily reliant on state tax income from the ultra-wealthy who mostly work in the financial sector. When hedge fund income wobbles due to the economy, Connecticut revenues drop. And the state doesn’t really have a backup plan.

Hartford CT is a desperate doughnut hole surrounded by prosperous suburbs. I grew up in West Hartford. The numbers tell the tale. As of 2010, per capita income in Hartford was $13,428. West Hartford, was $45,453. At one time, Hartford had major manufacturing, like Colt Industries. Yes, the Colt 45, “the gun that won the West”, was made in Hartford. During the Vietnam War, my mother went to the Colt plant to buy a special part that was unavailable to her career military brother stationed in Vietnam. Hartford had big department stores and lots of insurance companies. The big manufacturing and department stores are long-gone. Several insurance companies have moved.

Many cities in Connecticut are like Hartford. Just trying to hang on. This is made worse by Connecticut having counties that are geographical only. If an insurance company moves from Hartford to nearby Bloomfield, there’s no mechanism to help Hartford. And the suburbs often don’t much care what happens to the cities.

This is short-sighted and to their detriment. Without vibrant city cores, things start to erode everywhere. Compounding the problem are high state income taxes and nosebleed level property taxes. High paying jobs are being replaced by low paying jobs. Young people are leaving the state.

Bring back the cities, make them attractive to live in, and the whole state will benefit.

PS. West Hartford has a really nice downtown area that has been carefully built and nurtured over the decades. However, most suburbs can’t afford what West Hartford has done. 

Connecticut was a manufacturing state, which became a finance hub, which is now bleeding both manufacturing and finance, as bankers have moved to New York or shut down their operations in the wake of the Great Recession. The fastest-growing job opportunities are mostly for low-wage workers in health care, leisure, and retail, whose income and sales taxes cannot fund the state’s expensive promises to teachers and pensioners. Connecticut is losing rich companies (and their tax revenues) while it’s adding low-wage workers, like personal-care aides and retail salespeople. Yet it remains a high-tax state. That’s a recipe for a budget crisis.

In the biggest picture, Connecticut is a victim of two huge trends—first, the revitalization of America’s great rich cities and second, the long-term rise of hot, cheap suburbs. But Connecticut’s cities are not rich or great; its weather is not hot year-round; and its cost-of-living is not low. The state once benefited from the migration of corporations and their employees from grim and dangerous nearby metros, but now that wave is receding. To get rich, Connecticut offered a leafy haven where America’s titans of finance could move. To stay rich, it will have to build cities where middle-class Americans actually want to stay.