Municipal aid hit will multiply as big grants are cut this week
The toll Connecticut’s budget standoff has taken on cities and towns will nearly quadruple this week as key education and general government grants will be reduced or withheld.
Municipal advocates repeated their warnings Sunday that the huge drop in assistance would force some communities to tap emergency reserves, lay off workers and order supplemental tax hikes in the coming weeks unless state government reverses its present course.
“Our members have been saying they have three choices, none of them good,” said Betsy Gara, executive director of the Connecticut Council of Small Towns.
Those choices, she said, are:
- Draining budget reserves;
- Laying off workers;
- And issuing supplemental property tax bills.
“I think that you’re looking at everything from students losing the teacher they started the school year with to public safety concerns, further downgrading of bond ratings and — in some cases — issuing supplemental tax bills, which is only going to drive more people and businesses out of the state,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities. “And some of these are catastrophic choices that are not far around the corner.”
By this point one year ago, municipalities already had received $117.3 million in assistance more than they received over the past three months.
In July 2016, the state issued the first $30 million installment of a $60 million Town Aid Road grant. The infrastructure repair program is financed with bonding, but no new bond package has been enacted to date this year.
In August 2016, communities received $127.8 million in state sales tax receipts — $75.9 million in general aid shared by all municipalities and another $51.9 million sent to nearly 20 communities with high property tax rates to cap local taxes on motor vehicles. This August, with no adopted budget, Gov. Dannel P. Malloy will release just $40.6 million to 19 communities to cap vehicle taxes.
But the tally of lost revenue for municipalities approaches $425 million as Connecticut begins its fourth month of the new fiscal year without an approved state budget.
Why has the problem nearly quadrupled?
For one thing, communities received almost $182 million in property tax relief grants on Sept. 30 last year. But the PILOT (Payment In Lieu Of Taxes) programs stipulate funding is disbursed only within “available appropriations.”
So if there is no new state budget, there are no available appropriations, which means cities and towns get nothing this week.
[Monday marks the first business day after Sept. 30, which fell on a Saturday this year.]
These grants are crucial for the City of Hartford to avoid insolvency, which Mayor Luke Bronin has warned could occur by early November.
Roughly 51 percent of the city’s property is exempt from municipal taxation because it is owned by the state or by private colleges, hospitals or other nonprofit entities.
The capital city received $37.2 million in PILOT funds in late September 2016.
The other big hit municipalities face this week involves the Education Cost Sharing (ECS) grant — the single-largest municipal aid program.
Through October last year, school districts had received just under $500 million in ECS payments.
Most communities receive one-quarter of their ECS funds in October, another quarter in January and the final 50 percent in April.
But Malloy has said he has no choice but to reduce total October ECS payments compared with last autumn. Analysts say state finances, unless adjusted, will run $1.6 billion in deficit this fiscal year. Much of that potential gap is caused by surging retirement benefit and debt costs and by declining state income tax receipts.
The administration expects to issue $365 million in ECS payments this week — $135 million less than what had been paid out by this time one year ago.
Further complicating matters, Malloy also has said he plans to redistribute ECS aid to place higher priority on the most impoverished school districts. The administration plans to eliminate ECS payments entirely for 85 of Connecticut’s 169 cities and towns while another 54 communities will see their payment reduced by 10 to 60 percent.
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