Towns wary of a budget shell game by the state

Connecticut’s cities and towns made it clear Monday they’re guarding against the traditional shell game state government has employed in past fiscal crises – shielding assistance in high profile programs while stripping funding from lesser ones.

And this year’s game has a new wrinkle after many state officials campaigned this past fall on a pledge to expand communities’ powers to levy new local taxes and fees. While municipal leaders favor increasing local revenue-raising options, they also fear this also will lead to cutbacks matching amounts, or more, in state assistance. This would effectively transfer both a portion of the state budget deficit and the political heat that comes with tax hikes to the local level.

“Despite the state’s serious budget troubles in 2011, cuts in municipal aid will only shift the state budget deficit to already hard-pressed local governments and their property taxpayers,” James Finley, executive director of Connecticut Conference of Municipalities, said.

The chief lobbying agency for Connecticut’s 169 cities and towns, CCM unveiled a legislative agenda Monday aimed at preserving the $2.9 billion municipal aid package in the current state budget and expanding communities’ abilities to levy new taxes and fees.

Gov-elect Dan Malloy has pledged not to reduce the single-largest municipal grant, the $1.9 billion Education Cost Sharing program, even though nearly $271 million in emergency federal aid propping up the ECS program this year will vanish in 2011-12.

Preserving ECS funding at local levels topped the CCM legislative agenda released Monday.

But CCM spokesman Kevin Maloney said that shielding ECS while cutting non-education grants doesn’t necessarily guarantee local school systems won’t be harmed. “It all goes into one big (local) pot in the end and it’s going to be problematic,” he said.

One popular target for this game of give-and-take has been the state’s share of video slot revenues from Connecticut’s two Indian gaming casinos that is shared with cities and towns. Though state law calls for municipalities to receive about $130 million out of the $367 million state government is projected to receive this year, the current budget gives cities and towns less than $62 million.

With state government facing a $3.67 billion hole in 2011-12 that’s equal to nearly one-fifth of current spending, many candidates for state office campaigned this fall on a pledge to increase “local-option” taxes – another priority on the CCM agenda.

But municipal officials are worried that whatever added revenues towns are allowed to raise, that could be offset by matching or even larger reductions in state grants. That could create a combination of higher taxes and program cuts – all at the local level.

“There is a certain suspicion on the part of a number of our members that this is the shell game that could be played,” Bart Russell, executive director of the Connecticut Council of Small Towns. The council, which represents 120 towns with populations below 30,000, is scheduled to release its legislative agenda later this month.

“We’re all in this together,” Russell said. “We should all be the table, state and local government, and make these decisions jointly as much as possible.”

Other components of the CCM agenda released Monday include:

• Making permanent a temporary increase in the local real estate conveyance tax. That increase is scheduled to expire on June 30.
• Assigning a municipal ombudsman in each state agency to work with local governments, particularly to assist with economic development initiatives.
• Repealing unfunded state mandates on cities and towns.
• Increasing financial incentives for cities and towns to form joint purchasing and other cost-effective, regional government initiatives.