Gov. Dannel P. Malloy would reduce grants to school districts by 28 percent in October — if no state budget has been adopted —  and would dramatically shift funding away from wealthy and middle-income communities and into poorer ones.

Absent a new two-year budget, the governor’s plan would eliminate Education Cost Sharing funding entirely for 85 school districts and reduce funding somewhat for another 54. Grants to the 30 lowest-performing school systems, also known as Alliance Districts, would remain unchanged.

The governor, who released an updated plan Friday for running state finances by executive order, also announced he is in the process of restoring $40 million out of $100 million in reductions made since July 1 to private, nonprofit social services.

Malloy affirmed an earlier warning that hundreds of millions of dollars in non-education grants won’t be released this fall unless the General Assembly adopts a new budget for this fiscal year and next.

But the governor added he would issue education grants on Oct 1 — 24 days earlier than last year — to help Hartford, West Haven and other communities struggling to avoid fiscal insolvency.

Shifting funds to the lowest-performing schools

“In the absence of an adopted budget from the General Assembly, my administration is reallocating resources to pay for basic human services, education in our most challenged school districts, and the basic operation of government,” Malloy said. “The municipal aid that is funded as part of this executive order reflects the nearly impossible decisions Connecticut must make in the absence of a budget. It will force some of our municipalities — both large and small — to make similarly difficult choices of their own.”

Of the 54 districts that would face a reduction in ECS aid in October, but not lose it entirely, the cuts would range from 40 to 90 percent.

Faced with these cuts in state education aid, the Malloy administration said districts will be able to cut their spending beyond what they historically have been allowed to. State law in the past has required districts to spend at least as much from year to year on education, however, districts have been able to cut spending if they are granted a waiver from the state because they enroll fewer students or are able to prove they would be able to realize savings without harming instruction. But towns have been capped in how much they could cut. With no state budget in place, the administration says, it will not be holding town to minimum spending requirements.

The governor has been pressing for the past year to redistribute how Connecticut distributes its education aid.

Hartford Superior Court Judge Thomas G. Moukawsher ruled last September that Connecticut’s method of distributing local education aid is irrational and violates the state Constitution.

The state Supreme Court is scheduled to hear an appeal of that decision on Sept. 28.

“I am concentrating on our constitutional obligations,” Malloy, a democrat, told reporters, pointing out that the towns that will receive nothing or will receive much less are in a better fiscal position to makeup for those cuts.

“The deep cuts in state aid called for today by the governor would have a severe impact on towns – but they are not unexpected,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities. “Local governments would not be in this position if the General Assembly had done their job earlier and put forth a state budget that protected the interests of cities and towns and their property taxpayers.”

The state’s largest teachers’ union – the Connecticut Education Assocation – called the cuts “draconian”

“This plan would be devastating for students and emphasizes the critical need for legislators to pass a state budget that protects and invests in public education,” said Sheila Cohen, the president of the union. “These draconian cuts would undermine the ability of our schools to provide quality educational opportunities for all children, and our ability as a state to remain a leader in education.”

The president of one of the other major teachers’ union said “There are always better choices than the governor’s failed austerity policies which would further gut local public education resources.”

AFT-CT President Jan Hochadel added that “public education is the great equalizer” and that state leaders “need to recognize that only by generating new revenues and investing them in our communities’ shared assets — like our public schools — can we protect Connecticut’s quality of life.”

The Democratic governor’s plan drew mixed reactions from legislative leaders.

“While we appreciate the Governor’s focus on our neediest municipalities, his proposed cuts would have a devastating effect on many school districts across Connecticut,” said Senate President Pro Tem Martin M. Looney, D-New Haven.

“Our priority is making sure that our schools are provided with the necessary resources to deliver a high-quality education for Connecticut students,” House Speaker Joe Aresimowicz, D-Berlin, said.

“Instead of adopting a fair education funding formula, Governor Malloy’s executive order exacerbates the very same education funding system deemed unconstitutional by the Connecticut Superior Court,” Senate Republican leader Len Fasano of North Haven said, adding Malloy“ is continuing to follow a system that is unpredictable and based entirely on the decisions of those in power, and not on the true need in towns and cities across the state.”

Fasano’s comment drew a sharp response from Malloy spokeswoman Kelly Donnelly.

“Senator Fasano seems to forget that he holds an equal number of votes in the Senate and that, to date, the governor has not received a single budget on his desk,” she said. “Despite his big talk over these many months about co-leadership and a new dynamic in his chamber, the senator is showing that he remains much more comfortable taking cheap shots from the cheap seats.”

Democrats hold a 79-72 edge in the House while the Senate is divided 18-18 along partisan lines.

“Municipalities that have exhibited fiscal restraint, have relied less on state aid than others, and have built up relatively large fund balances pay for that responsible financial approach under the governor’s plan,’’ House Minority Leader Themis Klarides, R-Derby, said.

The Connecticut Council of Small Towns, which represents about 110 communities with populations under 30,000, wrote the governor a letter this week questioning whether towns were being unfairly penalized for managing their finances better than the state has.

But Malloy responded that many cities and towns have grown local spending and public-sector employment in recent years faster than the state has, adding that some of these communities get as much as 40 percent of their budget revenue from state grants.

‘None of these (changes) are permanent’

“None of these (changes) are permanent because we still have to get to a budget,” Malloy reminder Capitol reporters, urging legislators to reach consensus on a new spending plan that does not rely predominantly on tax hikes to balance the books.

Malloy’s challenge is to operate state finances which, if unadjusted, would run massively in deficit.

The administration originally projected the General Fund would run $2.3 billion in the red in 2017-18 without revisions, which presumably would be made through a new state budget adopted before the fiscal year began on July 1.

That new budget hasn’t arrived yet, but the legislature did ratify a union concessions deal Malloy struck with state employees. That plan is expected to whittle the potential deficit down by $700 million from $2.3 billion to $1.6 billion.

That still means, however, that Connecticut doesn’t have nearly enough resources to fund all of its existing programs. And large, contractually mandated increases in spending for retirement benefits and debt service, coupled with shrinking revenue projections, leave the governor with little flexibility.

Malloy already has been forced to withhold aid to cities and towns. A $30 million road repair grant normally paid in July and a sales tax revenue-sharing grant that was worth $78 million to communities in August last year both didn’t happen this summer.

And if no budget is in place, property tax relief grants that provided communities with $303 million in aid last September and October would provide just $40.6 million this fall.

The Education Cost Sharing grant, the state’s largest program for funding local school districts, releases aid to communities in three installments, provided in October, January and April.

That grant will be released on Oct. 1, but it will involve significantly less money if no new budget is in place.

The governor’s October ECS payment plan provides $365 million in aid.

This plan is based on the assumption that $1.46 billion would be available for ECS if Connecticut were to operate for the entire 2017-18 fiscal year without an approved budget. Last fiscal year communities received just over $2 billion through the program.

Scaling back cuts to nonprofits

The governor also acknowledged that private, nonprofit social services have been under particular strain since the new fiscal year began more than seven weeks ago without a new budget in place.

Connecticut spent about $1.3 billion last fiscal year hiring community-based nonprofits to provide the majority of social services offered to the disabled, the mentally ill, abused children, the poor and others.

And while administration officials have called this work critical, they also note that funding for many programs are limited by available resources.

“We talk about municipalities having fragile finances,” the governor said. “The vast majority of the not-for-profits we’re dealing with have far less ability to respond” to the financial crisis.

Malloy said that while resources for nonprofits were reduced by $100 million shortly after July 1, his administration is restoring $40 million of those funds.

“If we don’t make these adjustments a number of them will go out of business or cease to perform” services for those most in need, he added.

The administration found the $40 million for nonprofits, and another $60 million to show up a variety of other programs and accounts in the budget, by redirecting funds from education and special education grants for school districts.

Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance, said the social services safety net has been under-funded for more than a decade, “causing layoffs and directly impacting people with developmental disabilities, mental health problems, substance abuse issues, people returning to their communities from prison, and others. But while the restored funds will help buffer or delay some of the most devastating impacts of the budget stalemate, it is not a substitute for a biennial budget. … Connecticut’s residents are in this together and we all need a budget that fully addresses the state’s budgetary needs, including human services and education.”