Why Is Hartford Struggling?
It’s Not Just Untaxed Property
Every struggling place has a story about why they’re struggling; about how they got screwed over. Given that struggling places are sort of my thing, I’m familiar with those stories, and generally sympathetic to them. Usually, people who feel screwed over have actually been screwed over. The problem is, getting unscrewed is never as simple as changing that One Weird Thing that messed up the future for you way back in 1973. You can’t undo the past; it goes beside you into the future.
With that in mind, the Wall Street Journal had an interesting piece yesterday discussing the serious financial troubles of Hartford, Connecticut. They ably laid out key issues facing the city, not least among them the high density of untaxed property in the city thanks to many government, educational, or religious institutions. My suspicion is that every state capital faces similar problems, as does the District of Columbia. Yet not every state capital is facing critically poor finances. Even DC is doing well these days, well enough that they’ve been cutting taxes. So why is Hartford struggling?
The answer is a topic only briefly touched on by the WSJ: population decline!
Here’s the population of Hartford vs. DC, indexed to their peak populations:
Notice anything? Because I do!
I notice that Hartford’s decline has been less severe than DC’s, which corresponds to DC in the 1990s being probably a worse place to live than Hartford today. Meanwhile, DC has recently posted dramatic population growth, while Hartford continues to experience population declines. Declining population makes it harder to sustain any given fiscal burden. This isn’t just a story about lots of untaxed property (every major government hub has that), it’s a story of demographic decline, and that decline is likely to spread.
Here’s population for several municipalities in Hartford County. WSJ discusses a few of them, suggesting they are healthier.
As you can see, many municipalities have experienced low growth, or even decline, in recent years. The “rest of county” segment has risen pretty strongly in most years, but in 2016, even that declined. This “rest of county” designation does indeed reflect growth outside of the biggest towns and cities, by the way. The fastest growth from 2010–2016 was in Simsbury (24k), Burlington (9.6k), Berlin (20k), and Rocky Hill (20k). The slowest growth was in East Hartford (50k), Wethersfield (26k), Hartford City (123k), New Britain (72k), Suffield (15k), and West Hartford (62k).
Of course, none of this is a terribly great surprise. Hartford County is losing people. After slow growth from 1970 to the peak population in 2013 of 898,000, the county has declined to 892,000 residents. No surprise, then, that there’s population loss in lots of big places, and no surprise that some localities are experiencing financial trouble. That’s as you’d expect.
But with population declining in numerous localities, this trend won’t slow. Hartford’s economic engine, its government, is not going to be a bigger driver in the future because, well…
See that dip at the end there? That’s a 19,000 person statewide population decline. There’s not really any reason to think that’s going to make a huge turnaround in the near future either. The best they might eke out is population stability, but continued decline is likely. That means that Connecticut’s government is unlikely to face the need or ability to hire lots more people: indeed, if this trend continues, Connecticut could show as much as a 30,000 person population decline from the 2010 to 2020 Census. By 2026, 10 years from the most recent data, population could be 3.51 million, or about 65,000 people less than the 2016 estimate.
Now, the impact on state finances is more ambiguous. If population decline is among children, then it could help state finances: less educational spending compared to more earners. But as the workforce shrinks, the state budget will start to feel the hit. In other words, Hartford’s local finance problems are likely just the foretaste of what will eventually become statewide finance problems, especially as more and more localities come under pressure and seek state support.
Conclusion
Connecticut is a rich state, and many places are doing quite well. Rapidly-growing suburbs are not facing major financial difficulty. But in time, growth will fade; and in Connecticut, lost growth is going to come sooner rather than later. The places with large legacy costs and small tax bases, like Hartford, will fall first. But the blight of decline will spread like a contagious disease; each suburb, built by wealthier and wealthier generations, will have costlier and costlier infrastructure investments attached to it, and as decline sets in, it will flip into financial distress more and more quickly. There are really just two ways to manage this problem: per capita income growth, or population growth. But as population declines, per capita growth must accelerate even more.
That is, assume we have a hypothetical state with a hypothetical real economic output of $230 billion, and we want it to grow at, say, 1.33% in order to sustain government services. If population grows at 0.45%, then output-per-person only needs to grown at 0.88% to maintain this growth path. If population is flat, so 0%, then we need output-per-person to grow the full 1.33%, which is a 50% higher rate of per capita output growth. But if population declines at, say, 0.2% per year (as it currently is), then our needed output-per-person increase becomes 1.53%.
Surprise, I’m using actual Connecticut data for this hypothetical. To maintain its 1997–2013 real GDP growth rate with declining population, Connecticut must obtain 1.53% average yearly real GDP per capita growth. Thus far, they’ve averaged 1.04% during the decline period: which means they actually have had stronger-than-historical-growth! But not strong enough to maintain their prior growth path. It is eminently plausible that they will fail to obtain that growth path, and thus that deeper, wider financial difficulties lie in Connecticut’s future. This is especially worrying given Connecticut’s already-emptying rainy day fund.
I would be remiss if I didn’t note that the only solution here is to make more Nutmeggers. Either in the maternity ward or the customs clearance counter, the state needs to be adding people, and fast. Immigration or domestic migration may be a useful stopgap for a decade or so, but that birth rate has got to go upwards or else the state has serious questions to ask about its long-term future.
Check out my Podcast about the history of American migration.
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I’m a native of Wilmore, Kentucky, a graduate of Transylvania University, and also the George Washington University’s Elliott School. My real job is as an economist at USDA’s Foreign Agricultural Service, where I analyze and forecast cotton market conditions. I’m married to a kickass Kentucky woman named Ruth.
My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research.
