At first glance, House Democrats would avert nearly $1 billion in grant reductions and other fiscal burdens that Gov. Dannel P. Malloy would impose on cities and towns in the next, two-year state budget.
But a closer look shows the caucus plan also would compel Malloy to cut nearly one-third as much from municipalities once the budget is in force.
That’s because the proposal House Democrats unveiled on Aug. 23 relies on an unprecedented level of municipal aid “lapses” — savings targets the governor must achieve.
In other words, the legislature would leave it up to the governor to target which grants to reduce, but he would have no choice about making reductions.
And while House Speaker Joe Aresimowicz, D-Berlin, said his caucus hopes to complement that savings target by developing options to help municipalities save money — repealing mandates, enabling regionalization of services — municipal advocates said communities would rather know specifically what aid they can expect.
“These significant lapses in state aid are disappointing, to say the least, and will result in de facto property tax hikes and additional cost-transfers to towns and cities,” said Kevin Maloney, spokesman for the Connecticut Conference of Municipalities.
Betsy Gara, executive director of the Connecticut Council of Small Towns, said the uncertainty of these lapses is as much of a problem as the eventual reductions in aid.
“You don’t know when they’re going to hit or which programs are going to be hit,” she said. “Towns are going to be left scrambling.”
Gara added that, with tens of millions of dollars in state grants in political limbo since Connecticut entered the new fiscal year on July 1 without a budget — and with hundreds of millions more at stake about a month from now — many small towns already are preparing to tap their fiscal reserves to pay their bills.
Malloy and his fellow Democrats in the slim House majority have been sparring for months over how much revenue to raise to balance state finances over this fiscal year and next — and what burdens to place on cities and towns.
The governor wants to reduce non-education grants to communities by about $300 million more annually than House Democrats want.
He also wants cities and towns to pay a total of $400 million yearly to the state to help cover surging teacher pension costs. Malloy would offset $212 million of that by allowing communities to tax the real property of nonprofit hospitals.
House Democrats’ counterproposal is to scrap the pension bills, restore much of the non-education aid, and pay for it by raising the sales tax from 6.35 to 6.85 percent. They also would impose tax surcharges on restaurant and hotel transactions and boost luxury sales tax rates.
But their latest budget also would direct the governor to cancel $142 million in town aid in the first year of the new budget and $150 million in the second — more than seven times the $20 million local aid lapse ordered in the last fiscal year.
The governor says House Democrats are relying too heavily on tax hikes and need to find more spending cuts. But with much of the budget — debt costs, retirement benefits, and Medicaid — fixed by contract or federal entitlement rules, there are few places to cut outside of local aid.
So are House Democrats giving Malloy more municipal aid cuts — but in a fashion that makes him appear solely responsible for them?
“The governor has said since early January and February that municipal funding wasn’t going to continue as it has in the past,” Aresimowicz said. “We have to get to an agreement not only with the Senate, but — at some point — with the governor.”
But the speaker also said his caucus is committed to lessening costly state mandates on communities and on finding new ways to help towns avoid duplication of services and otherwise deliver programs cost-efficiently.
“We hope our elected leaders of municipalities would come forward with ideas as we take away mandates,” Aresimowicz said. “We want to work with the governor and we want them working with us too.”
Malloy, who has never shied away from legislative cost-saving targets, did not say much about the unprecedented lapse targets.
“The particulars of this lapse proposal will be subject to further discussion with the leadership,” Chris McClure, spokesman for the governor’s budget office, said Friday.
