After years of turning a deaf ear to the increasingly desperate pleas of municipal officials, the Connecticut Legislature has started to talk about property tax relief. Earlier this month, the Democratic majority in Hartford unveiled a tax reform package that it claims will ease the property tax burden on Connecticut homeowners.

A key component of this plan is a so-called homestead exemption. The plan would exempt the first $75,000 of a home’s assessed value from the homeowners’ overall property tax liability. Towns that offer the homestead exemption would have to give up the annual state payments made to towns and cities under the circuit breaker program, which offers property tax relief to elderly and disabled homeowners. Newtown’s 2003-2004 circuit breaker payment from the state, according to the state Office of Policy and Management was $82,206.95. It benefited 159 local homeowners. The average tax savings was $517. Assuming the 24.9 mill tax rate in the 2004-2005 budget approved by the Board of Finance last week, the proposed homestead exemption would yield an average savings of $1,868 to those same homeowners – and to every other homeowner.

That’s great if you are the homeowner, and not so great if you are the town. All other property taxpayers — local businesses and industry — would by default pay the millions of dollars the town would not be collecting from homeowners. The plan will actually throw local budgets even more out of whack resulting in much higher tax rates. The plan’s author, Senate President Pro Tem Kevin Sullivan (D-West Hartford), says if enough towns participate in the homestead exemption program, the state could save $20 million in circuit breaker payments.

We don’t understand how this can be called property tax reform even if you believe Sen Sullivan’s assertion that the state would reinvest its circuit breaker savings in grants for local road projects and payments in lieu of property taxes for state facilities in municipalities. (The state has broken too many funding promises to towns and cities for anyone to believe that one.) Creating tax breaks is easy. Paying for them is the hard part, and as happens so often in the Byzantine world of state finance, the hard part is left up to the towns and cities.

Real property tax reform is spending reform. If the state really wants to help municipalities stabilize their tax rates, legislators should rewrite Connecticut’s binding arbitration laws, which have effectively removed the largest portion of local spending — salaries and benefits for public employees — from local control. Once the so-called “fixed” costs of negotiated contracts that guarantee public employee unions the most a town can afford to pay are put back on the table for local discussion and debate, real and lasting property tax relief may be possible.