Connecticut’s cities and towns were spared major funding cuts in this year’s state budget–as long as state employees accept a concession deal–but they face the potential of a more fundamental upheaval: an overall assessment of how nearly $2.9 billion in aid is distributed among the 169 municipalities.

Legislators and Gov. Dannel P. Malloy agreed just before the regular session ended on June 8 to launch a new, 10-member task force to analyze the state budget’s largest grant programs and report back by January. And the state’s chief lobbying agency for cities and towns announced this week it is forming a panel to bring its own recommendations to the task force.

“Sometimes it’s a good idea to have people take a second look and question things,” Malloy, who proposed the task force, said Thursday following an address at the Connecticut Conference of Municipalities’ annual meeting in Cromwell.

A former mayor of Stamford and past CCM president, Malloy said he understands the frustrations of municipal leaders who feel their communities don’t receive their fair share of dollars under grant distribution rules that are infrequently studied — and often changed to serve political needs rather than correct actual inequities.

“We should be in the business of checking these assumptions, or at least testing all of these assumptions” periodically, the governor said. “I have a feeling there’s been some jury-rigging (of distribution formulas) over the years.”

“It’s the right time to look at how we fund education and other services,” Simsbury First Selectwoman and CCM President Mary A. Glassman said Friday. “We know we can’t continue to expand increases in state aid.”

The task force, whose members must be appointed by Malloy and legislative leaders in time to begin meeting in early August, specifically is charged with examining the “equity, efficiency and continued viability” of four major grant programs.

  • Education Cost Sharing: The largest of all municipal grants, the program will distribute $1.9 billion to school districts to help fund public education from kindergarten through high school. Funds are distributed based upon a community’s wealth, its student enrollment, numbers of households receiving federal assistance, and past local spending on education.
  • PILOT: The Payment In Lieu Of Taxes program reimburses communities for a portion of the local property tax revenues they cannot collect on exempt property. This includes colleges, hospitals and state-owned land, buildings and equipment. PILOT will provide $193.5 million to municipalities in the coming fiscal year.
  • Mashantucket Pequot and Mohegan Sun: This grant provides communities with a portion of the state’s share of video slot revenues from the two Indian casinos in southeastern Connecticut. The $61.8 million allocated to the program next fiscal year is distributed based upon a community’s population, wealth and the value of its tax-exempt property.
  • School Transportation: About $29.4 million will be distributed to cities and towns to help offset the cost of transporting elementary and secondary school students, both public and private.

Glassman and other municipal leaders praised Malloy this week for carving our two new revenue streams for cities and towns in the new state budget–granting them a $56 million share of state sales tax revenues and $37 million from the state real estate conveyance tax.

But the Simsbury first selectwoman said despite this important step, Connecticut still relies too heavily on a regressive municipal property tax.

That burden is the underlying force, she said, behind problems that have developed with other grants.

For example, governors and legislatures have capped the PILOT program for much of the past decade, allocating less than the amount needed to meet the distribution formula and instead directing all grants to be proportionately reduced.

That, in turn, has led to charges that many communities inflate the value of tax-exempt properties within their borders in hopes of gaining a larger share of the limited PILOT account.

“We have such a reliance on the local property tax that cities and towns look for ways to manipulate the system whenever they can,” Glassman said.

Sen. Toni Boucher, R-Wilton, said Fairfield County communities have been treated inequitably for decades under grant distribution formulas altered almost annually by the Democrat-controlled majority to take care of its own districts.

“There is a feeling that it is just so out of balance enormously,” Boucher said, noting that the state’s southwestern corner pays nearly 50 percent of all income tax revenues–and that will increase this summer when a new top rate of 6.7 percent kicks in.  “A quarter of the state is paying nearly half of the revenues to support programs for everyone and the grants we get, the return on those funds, has been very poor.”

Boucher also said there is myth that Connecticut’s affluent communities don’t have poor, disabled and other residents with needs. “Bad things happen to everyone, no matter what their income level is,” she said.

But Sen. Toni R. Harp, D-New Haven, co-chairwoman of the budget-writing Appropriations Committee, said Democrats do recognize that wealthier towns have residents in need. “The problem is these towns don’t want to look at their ability to pay,” she said. “I’m worried some people will be trying to take funding away from the cities that really need the money.”

Harp added that she believes that communities have begun to look at Education Cost Sharing grants as a means to control property taxes, and not as a major tool to improve the quality of education.

“It’s getting to the point where it’s not really focused on education and education outcomes,” she said. “I think that’s the real problem.”

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Keith M. PhaneufState Budget Reporter

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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