Distributing Non-Education State Aid to Municipalities through a Needs-Capacity Formula

The State of Connecticut contains 169 towns with a wide range of wealth and resident needs. Currently, the State of Connecticut provides financial aid to towns through a variety of statutory and non-statutory grant programs. The current structure for non-education town aid does not sufficiently address the underlying municipal fiscal disparities that are caused by the unequal costs of delivering services and the low revenue raising capacity of towns in Connecticut.

Using a needs-capacity formula to distribute funds to Connecticut’s towns is one method of addressing fiscal disparities and creating a more equitable distribution of non-education state aid. A needs-capacity formula allocates funding to municipalities based on their projected costs of providing a common level of government service, and their capacity to raise revenue through local property taxes. The purpose of this policy briefing is to introduce and examine how Connecticut can address municipal fiscal disparities by using a needs-capacity formula to distribute non-education town aid.

Originally published in March 2019, and revised in February 2021, this report has been updated to reflect new grant and spending information, as well as up-to-date municipal data and new modeling.