By: Richard Veilleux
Although Connecticut has the nation’s highest average per capita income at $41,300, the state is among the bottom four in the percentage of that income used to fund public services, according to a report in the latest edition of The Connecticut Economy, a University of Connecticut Quarterly Review.
In a study seeking to define the optimal amount of funding states should devote to public services without adversely affecting a state’s economy, Steven P. Lanza, executive editor of the magazine, collected 16 years (1993-2008) of personal income statistics for the 50 states from the U.S. Bureau of Economic Analysis, and government spending data for the same period from the U.S. Census of Governments. He found that Connecticut under-spends on most government activities, including education and infrastructure, while spending more than the optimal amount on health care.
“Public spending in the Nutmeg state averaged just 17.6 percent of income in the years surveyed, more than six points below the optimal share,” Lanza writes.
The right amount of spending on public services can actually benefit the economy, by helping the private sector grow, he says: “With such a lean public sector, Connecticut essentially forfeited an additional 1.2 percent in yearly income it would otherwise have earned, had it adopted the optimal mix.”
That optimal mix, Lanza says, is 24 percent. The national average is 22 percent, still significantly higher than Connecticut’s 17.6 percent.