Attorney General George Jepsen offered a legal opinion Tuesday that questioned the legality of Gov. Dannel P. Malloy’s plan to administer municipal aid in the absence of a state budget.
But while Jepsen raised concerns about the governor’s plans to reduce special education and sales tax revenue-sharing grants, he offered Malloy and the legislature just one alternative — write a new state budget.
And Senate Republican leader Len Fasano of North Haven, who requested the opinion and has argued the governor’s plan would overstep his authority, also conceded there may be no plan the governor could craft — absent a new budget — that would pass legal muster.
“We acknowledge the formidable task the governor faces, in the exercise of his constitutional obligation to take care that the laws are faithfully executed, to maintain the effective operations of state government in the absence of a legislatively enacted budget,” Jepsen wrote.
Analysts say state finances, unless adjusted, would run $1.6 billion in deficit this fiscal year. Much of that potential gap is due to surging retirement benefit and other debt costs coupled with declining income tax receipts.
The legislature and governor have struggled since February to craft a new budget that closes this shortfall without imposing major income and sales tax hikes. And that struggle continues now, with Connecticut nearly 14 weeks into the new fiscal year without an enacted plan.
One of the key areas of dispute between Fasano and Malloy involves the governor’s plans to handle a program adopted two years ago and designed to share sales tax receipts with cities and towns.
A portion of those funds would go only to communities with high property tax rates to offset revenues they would lose under a related plan to cap taxes on motor vehicles.
The state imposed a cap of 37 mills last fiscal year and statutes call for that cap to fall to 32 mills this fiscal year.
Another portion of those sales tax receipts would be sent as property tax relief to a broader group of cities and towns.
But the special revenue account set up to hold sales tax receipts for this sharing program has not accrued sufficient funds to cover all of these payments to the towns.
As part of his larger effort to avert a state budget shortfall, Malloy said he would keep the vehicle tax cap at 37 mills, issue offsetting grants to qualifying communities, and cancel the other sales tax revenue-sharing.
This could all be restored, he said, if these programs are funded in a new, balanced, adopted budget.
“The governor’s approach may be a reasonable and prudent policy decision, and one that the legislature might make under the circumstances,” Jepsen wrote. “However it does not appear to be an option that the statute on its face authorizes the governor to make on his own. … A court could conclude that this is not an outcome that the statute permits.”
Similarly, Malloy also said, absent a budget, he would reduce special education grants to school districts to last fiscal years’ levels, even though they would grow under a statutorily prescribed formula.
“In the absence of existing statutory authority to reduce the amount of the grants to their fiscal year 2017 levels, a court could conclude that the full amount as calculated under [state law] must be paid,” Jepsen wrote.
The law also calls for these special education payments to be issued in February and May. So even if the governor’s plan would violate the law regarding special education grants, that component hasn’t been implemented yet.
“How a court would resolve this issue cannot be predicted with certainty,” Jepsen added.
“We are grateful for the attorney general’s attention to these questions, and we will take these findings under consideration,” Malloy spokeswoman Kelly Donnelly responded Tuesday.
So what can the governor — who cannot unilaterally increase taxes — do to cover all statutorily required expenditures when there isn’t enough money coming into the state’s coffers?
Jepsen wasn’t asked that question, but he did note that the attorney general’s office has consistently offered one solution to governors and legislatures in the past: adopt a new budget.
It could be a new two-year budget or a provisional plan covering a shorter period, but the state Constitution clearly places the budget-writing authority in the legislature’s hands, the office consistently has noted in opinions going back several decades.
Fasano said he believes the governor’s executive order would short-change special education and revenue-sharing programs by about $248 million this fiscal year.
“He’s very restricted, so he’s got to be aware of that,” the Senate Republican leader said. “So whether it’s good policy or not, that would be up to the legislature.”
Fasano is not the only one to question the legality of Malloy’s blueprint for running state finances absent an adopted budget.
One of the state’s largest teachers’ unions, the Connecticut Education Association, announced this week it was seeking a state court injunction to block the governor’s distribution of Education Cost Sharing grants in October.
Those payments, which were sent out this week, not only provide districts — in total — about $134 million less than they received last October, but also dramatically redistribute aid.
Malloy’s plan would eliminate ECS payments to 85 communities and reduce them for 54 more while keeping payments to the 30 most impoverished school districts flat.
“The governor’s ECS cuts are dangerous and would be devastating for students, parents, teachers, and communities across the state,” said CEA President Sheila Cohen. “They violate state statutes and the state’s constitutional obligation to provide adequate education to public school students. Now that severe cuts are being implemented, we must take action to prevent the potential downward spiral that could further push our schools into chaos.”