O’Neill Would Create Trust Fund for K-12 Education

By Robert Rothman — February 15, 1989 3 min read

Proclaiming his support for education in the face of a mounting budget deficit, Gov. William A. O’Neill of Connecticut last week urged creation of a trust fund to finance school programs.

To help pay for the fund, Mr. O’Neill called for the largest tax increase in state history.

School groups hailed the proposals, included in the Governor’s address on the 1990 budget, as a way of ensuring stable support for education programs and shielding them from cuts in overall state spending.

Only a ‘Cloak?’

But the proposal came under heavy fire from many lawmakers, who made clear their strong objection to the new taxes. These legislators accused Mr. O’Neill of using the fund as a “cloak” to make a tax increase more politically palatable.

Such objections set the stage for a bruising battle over ways to close an $882-million deficit for this year. The shortfall could jeopardize school funding, warned Representative Naomi Cohen, House chairman of the joint education committee.

“I would like to think there will always be a dedicated fund for education,” she said. “But the problem with the trust fund is that it relies on the creation of revenue raisers.”

The proposal calls for the establishment of an Educational Excellence Fund, separate from the general budget, to finance aid to local districts and other school programs. In 1990, the fund would receive an estimated $1.12 billion.

“We owe it to our children and our future,” Governor O’Neill said, “to establish a fund that is stable and that will distribute money fairly in the years ahead to the towns of Connecticut without putting an undue burden on the local taxpayer.”

The Governor recommended that the fund be financed with revenues from the lottery and other gaming, 0.5 percent of the state sales tax, the real-estate conveyance tax, and four new taxes.

Four New Taxes

The proposed levies, which are expected to raise $688 million, include a 7.5 percent sales tax on utility bills; elimination of the exemption in the sales tax for services to businesses; an increase in the capital-gains tax; and a corporate-tax surcharge.

Commissioner of Education Gerald N. Tirozzi said the proposal would enable state officials to “implement our agenda.”

“When all is said and done,” he said, “the commitment is there.”

He added, however, that the tight fiscal situation might force curtailment or a delay until next year of his forthcoming plan for achieving racial balance in the schools.

Representative Cohen pointed out, moreover, that Governor O’Neill recommended some cuts in education programs. Although the total school-aid budget would rise by 5.5 percent, she noted, Mr. O’Neill proposed elimination of grants to districts for professional development and a $21-million reduction in the projected increase in aid to cities and towns.

Such cuts may force districts to hike local taxes, she said, since officials have already negotiated teacher contracts based on the expected increase.

But the reductions under Governor O’Neill’s plan would fall more heavily on relatively wealthy towns, which are better able to absorb them, noted Mark Waxenberg, president of the Connecticut Education Association.

‘Laid Down the Gauntlet’

The union leader added, however, that he was concerned that the proposed fund would rely on tax revenues, which tend to “rise and fall.”

“Should revenues fall,” he continued, “there should be a mechanism to make sure resources are available” to education.

Mr. Tirozzi predicted that the legislature would eventually find the needed revenues.

Governor O’Neill “has laid down the gauntlet,” he said. “I am hoping the General Assembly will rally behind him.”

A version of this article appeared in the February 15, 1989 edition of Education Week as O’Neill Would Create Trust Fund for K-12 Education