Town aid too popular to cut, too big to ignore

After being rebuffed during her late November attempt to cut town aid, Gov. M. Jodi Rell steered clear of that public relations minefield in February, proposing no reductions to major grants in her budget plan for the coming fiscal year.

But less than four weeks later, despite virtually no change in an already dismal deficit forecast, the governor reversed herself, suggesting that towns take a $45 million hit starting July 1.

Why the back-and-forth?

Perhaps it’s for the same reason legislators from both parties are pledging at the Capitol to keep their hands off town aid while warning constituents back home to brace for a dramatic hit very soon.

Municipal grants are too politically-sensitive to cut, but too big to leave alone. And the monster deficit looming over state finances 16 months from now is almost one-and-a-half times the size of all town aid combined.

Trying to fix the deficit without squeezing local dollars, officials say, can’t be done.

“I’ve been telling the truth. We’re going to face some real pain here,” Sen. Tony Guglielmo, R-Stafford, said, summarizing the message he’s delivered in recent visits to the 13 communities he represents in Tolland and Windham counties. “What we’re looking at is unprecedented so you’ve got to assume everything is on the table.”

That “unprecedented” obstacle Guglielmo is watching, according to the legislature’s nonpartisan Office of Fiscal Analysis, is a $3.9 billion deficit built into the 2011-12 budget, the first spending plan that Connecticut’s next governor and legislature must craft.

To put that deficit forecast into perspective, it equals 21 percent of the entire state budget for this fiscal year, 60 percent of annual state income tax receipts, and 144 percent of this year’s $2.7 billion municipal grant package.

“Zero promises, that’s what I’m making,” in the district, House Minority Leader Lawrence F. Cafero, R-Norwalk said, adding he still believes state government shouldn’t cut town aid in 2010-11, which has its own built-in deficit of $726 million, according to OFA. The preliminary budget for the next year kept grant levels flat and communities are counting on them.

But after that, what should towns expect? “I’d say I can’t give them any expectations,” Cafero added.

Rep. John Geragosian, D-New Britain, co-chairman of the Appropriations Committee, also predicted any effort to renege on  municipal aid already in the budget for this year and next could force local tax hikes, and therefore has no chance at the Capitol, especially with legislators heading to re-election this fall. “That’s not budgeting, that’s dreaming,” he said.

As far as what happens after that, though, “I can’t tell you right now,” he said. “I can’t guarantee anything.”

Towns have given state officials good reason to be wary of proposing any grant reductions.

Within days of Rell’s Nov. 24 deficit-mitigation plan for the current fiscal year, which included an $84 million mid-year cut in town aid, the Connecticut Conference of Municipalities launched a radio ad campaign proclaiming the governor’s proposal would drive up local property taxes statewide.

The administration was talking tough when that cut first was proposed. Rell’s budget director, Office of Policy and Management Secretary Robert L. Genuario, said towns had to start bearing their share of the state deficit burden. “There cannot be any more sacred cows,” he said at that time.

But a panel largely comprised of town leaders and formed at Rell’s direction to find a way to slice $84 million out of the grant package balked at the task, and recommended it be disbanded after two meetings.

“I’m not going to put my head out and say, ‘Chop it off,'” East Hartford Mayor Melody Currey, who served on the panel, said at the group’s final meeting on Dec. 9. Shortly thereafter legislators offered an alternative deficit-mitigation plan, without touching town aid.

And by the time Rell proposed her revised, $18.91 billion budget for the 2010-11 fiscal year on Feb. 3, she only nicked municipal aid, taking $12 million largely from a school transportation grant.

Genuario abruptly summed up the administration’s revised position at his initial budget presentation: “Nobody likes to cut town aid.”

But as bad as the state’s deficit forecasts are, the red ink really hasn’t shifted since early February.

OFA’s shortfall projections of $3.9 billion for 2011-12 and $726 million for 2010-11 are exactly the same. State Comptroller Nancy Wyman, who develops the principle budget assessment for the current year, expanded her deficit forecast marginally from $515 million to $518.4 million.

But when Rell came back with her next deficit-mitigation plan this past Monday, she suggested a $45 million cut to town grants.

While Rell talked this week about making tough choices that are necessary, if neither pleasant nor politically popular, one of the people campaigning for her job, former Stamford Mayor Dannel P. Malloy, said the writing is on the wall and town leaders know how to read.

“It is an absolute time bomb,” Malloy said, adding Rell and others can try to forget about it, but it keeps coming back. “This is going to hit communities between the eyes.”

Malloy said that during recent stops in several towns he has been asked what will happen to the aid that is one of two major revenue sources for communities, alongside local property taxes. “I tell people we’re not going to do damage to the people most reliant on government, but then everything else is on the table,” he added. “In our discussions with local communities I don’t make hard and fast promises.”

Even the chief lobbying municipal agency, the Connecticut Conference of Municipalities, is warning its members that the grants they count on are viewed as low-hanging fiscal fruit by many revenue-starved state officials.

The single-largest municipal grant, the $1.88 billion Education Cost Sharing program, is being propped up this fiscal year and next by $271 million in annual emergency federal stimulus aid. Once the stimulus aid expires in 2011-12, state officials have to either reduce the grant, or order what would amount to the largest increase in state funding for ECS in the program’s history.

“We know that’s not going to happen,” CCM Executive Director James Finley said. “We’re going over a cliff.”