Spared from cuts last year, town leaders hope to do better in 2012

Municipal leaders rarely miss a chance these days to thank the governor and the legislature for sparing the entire $2.8 billion town aid package from the budget axe last spring.

But in between accolades, town leaders also will point out that, with few exceptions, education aid has been flat for the past three years, and general government funding has seen just one notable increase in more than a decade.

Whether that translates into any expansion of municipal aid during the new legislative session, which starts Wednesday, is unclear.

On the one hand, red ink is again seeping into some state budget forecasts. But on the other, these potential shortfalls are only a fraction of the fiscal gap that loomed large one year ago — and cities and towns managed to escape that fight unscathed.

“First and foremost we want the legislature to respect Governor Malloy’s commitment that he will not propose any cuts in municipal aid again this year,” said James Finley, executive director of the Connecticut Conference of Municipalities. “Of course, if the state’s fiscal condition brightens, we would like them to look at both education and non-education funding and see if something more can be done.”

“Towns really have had nowhere else to go but back to the property tax” whenever state aid is insufficient, added Simsbury First Selectwoman Mary Glassman, president of CCM. “We know what the state budget looks like, but our budget in Simsbury has been flat for three years in a row.”

Flat funding is a recurring them when it comes to municipal aid.

The single-largest state grant, the education cost sharing program, has provided the same $1.9 billion to municipal school districts each of the past three years, and would do so again in 2012-13 under the preliminary state budget adopted last spring.

There has been virtually no change in major non-education grants that share state casino revenues with communities, or that reimburse towns for a portion of property taxes they lose on colleges, hospitals, state-owned land and buildings and other tax-exempt sites.

The town aid road grant was launched with $13 million in 1967, and as much as $35 million was given to communities annually in the early 2000s. But the $30 million total provided in each of the past few years matches the amount given to cities and towns 25 years ago.

According to the U.S. Bureau of Labor Statistics’ consumer price index inflation calculator, the state would have needed to allocate $60.3 million for town aid road grants this year to give towns the same purchasing power they had with $30 million in 1986.

And it would take $85.7 million to match the fiscal clout of the $13 million authorized in 1967.

“There’s no question that over the last decade, municipal governments have shrunk in size,” Finley said, adding that while state aid remained level, inflationary cost increases took their toll.

Further complicating matters, communities give education programs top fiscal priority, routinely robbing resources from general government programs when state aid for schools isn’t sufficient. “That’s been a kind of double-whammy on these programs,” Finley said.

And after a decade of this approach, communities can’t afford to take much more from their public works, police and fire, and other non-education departments, Glassman said. “Any cut in education funding these days translates into a direct property tax increase at the local level,”she said.

Both Glassman and Finley noted that Malloy and the legislature took a huge first step last spring to reverse the fiscal neglect heaped on non-education services at the municipal level.

State officials gave communities a $100 million share of state receipts from sales, hotel and car rental taxes. This was offset somewhat by the cancelation of one state program that reimburses communities for lost revenue from tax-exempt manufacturing equipment, but towns still wound up with about $50 million extra this year.

This was all accomplished last spring while Malloy and the legislature closed a projected deficit for the 2011-12 fiscal year once projected as high as $3.67 billion.

State finances aren’t perfect right now, but the outlook for this year’s $20.14 billion budget is nowhere close to the gloom and doom of one year ago.

Nonpartisan legislative analysts reported a $145 million deficit last month, while the Malloy administration insisted that a microscopic $1.4 million operating surplus exists.

Projected surpluses for the next two years have been largely eliminated due to a sluggish economic recovery and costs associated with a new Malloy plan to fix the state pension system.

“We’re just going to have to see what happens,” Sen. Toni N. Harp, D-New Haven, co-chairwoman of the Appropriations Committee, said of the prospect of any further increases in town aid. Harp said if Malloy recommends no additional funding in his budget proposal, which is due Wednesday, it’s unlikely that lawmakers will recommend any extra.

“Obviously I understand how difficult it is to have any source of revenue frozen for any period of time,” said Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, a former chief financial officer for the city of Stamford. “I think we get extra points for difficulty for what we did for municipalities last year given the size of the deficit that we closed.”

Barnes said, “we certainly are not looking to balance the budget on the backs of municipalities,” but he added that increased state funding isn’t the only way to help communities.

The administration is continuing to study state mandates placed on school systems and on non-education programs at the municipal level, Barnes said, adding that it might be possible to ease some of them this year.

“I understand them wanting more,” Harp said. “The need is real, and you don’t get anything if you don’t ask for it.”