Gov. Dannel P. Malloy: Let Trump kill the "carried interest" loophole. mark pazniokas /
Gov. Dannel P. Malloy (file photo) mark pazniokas /

Gov. Dannel P. Malloy is urging critics of his plan to shift $400 million in teacher pension costs onto municipalities to reserve judgment until they see his entire biennial budget proposal.

That shift is part of a much larger plan not only to close a significant projected state deficit, but also to address long-ignored inequities in municipal funding — inequities that have failed public school students in Connecticut’s poorest communities, Malloy said Friday.

And while the governor will present his full, two-year budget to legislators on Wednesday, he is expected to release more details today involving aid to communities.

“This is part of a larger budget with direct implications on how we fund a number of state services as well as how we support our local communities,” the governor told Capitol reporters during a Friday briefing. “This is a budget that is unlike any other budget that has been proposed in recent times. … We’ll present other opportunities, including on Wednesday, to understand the budget in its full context.”

Despite keeping some of his budget cards close to the chest, the Democratic governor has been emphasizing several principles since November that would drive his next state spending plan:

  • No major increases in state taxes, though some added tax revenue would be sought; (Malloy said Friday he would seek to eliminate the $200 property tax credit within the income tax, costing middle-income households $105 million per year.)
  • A municipal aid system that corrects longstanding inequities, particularly involving funding for urban schools;
  • Placing Hartford and any other municipality at risk of insolvency on better fiscal footing;
  • And greater cost-sharing of surging retirement benefit costs stemming from nearly eight decades of insufficient state contributions.

Malloy said he is taking very seriously the September decision of Hartford Superior Court Judge Thomas P. Moukawsher, who found the state’s method of distributing education funding to be irrational and unconstitutional.

Connecticut has too many students in “large pockets of poverty,” and “we are failing a substantial portion of that population,” Malloy said. “We’ve been told. We’ve been warned. I agree with that warning. I’m trying to do something about it.”

Superior Court Judge Thomas Moukawsher File Photo

The administration is recommending that cities and towns cover nearly one-third of Connecticut’s annual contribution to the pension fund for municipal school teachers.

This would amount to $407 million of the $1.29 billion contribution in the upcoming fiscal year. Currently, cities and towns pay nothing toward this benefit.

And while the state spends far more proportionately on teacher pensions in affluent communities — which can afford to hire more instructors at better pay — the governor’s plan still would bill all municipalities for one-third of pension costs.

Sen. Len Fasano of North Haven, the GOP leader, said the most regressive tax is the property tax, and Malloy’s proposed shift probably would lead to higher local taxes. “He’s talking now about putting more burden on the towns,” Fasano said.

“The unintended consequence could be that cities and towns cut their education spending to pay for this cut from the state,” said Mark Waxenburg, the executive director of the Connecticut Education Association, the state’s largest teachers’ union. “We worry this will find its way into cuts in the classroom.”

“Such a colossal cost transfer – even given the current fiscal realities and the need to look at all areas of state and local spending — only reinforces the urgency to address the structural changes needed to give municipalities new tools for revenue diversification to keep in line with the overwhelming number of other states,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities.

But Malloy hinted strongly Friday that his budget would do more than bill communities for $407 million.

While some of those resources are expected to be used to close an anticipated deficit topping $1.4 billion in state finances next fiscal year, another portion presumably would be funneled back into enhanced aid for poor communities.

In other words, after pension billing and new municipal aid systems are weighed together, some communities would come out ahead and others would lose ground.

We’re not failing wealthy people in our state, we’re failing poor people in our state,” Malloy said. “ … More sacrifice is going to be required of many.”

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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