Gov. Dannel P. Malloy’s budget office says cities and towns stand to lose nearly $55 million in state aid this fiscal year – not the $34 million cut that state legislators were told shortly before voting to approve the bipartisan budget last week.
That $21 million in additional cuts lands almost entirely on many of the state’s most impoverished communities, the Office of Policy and Management has said. OPM calculates the cuts are also deeper in the second year of the two-year budget – $74.4 million vs. $54.9 million.
The difference stems from the fact that the new budget raises the car tax cap from 37 mills last year to 39 this year, and then to 45 mills next year. When the state capped how much towns could tax vehicles starting last fiscal year, it promised to offset losses in local revenue with state aid. However, as deficits haunt the state, legislators have backed away from that promise by raising the cap and cutting state aid.
Towns can make up for that by raising their own tax rate to the level of the new cap. In the figures the Office of Fiscal Analysis gave legislators, they assumed that many towns would do that, and didn’t count the state’s reduction in reimbursement money as a cut in state aid.
If Bridgeport elects not to raise taxes on cars and other motor vehicles, it stands to lose the most, with a cut of just over $6 million this year and an additional $1.6 million next year. The town-by-town aid numbers provided to legislators and the public shortly before the vote showed Bridgeport stood to lose no state aid.
Hamden, Hartford, New Haven, Torrington and Waterbury also would see much larger cuts than OFA previously reported. (See the town-by-town differences below.)
The Malloy budget office says the $21 million would amount to a 2.1 percent cut in local aid and the legislative analysts say it’s a 1.3 percent cut.
In raising the issue, the Malloy administration is resurrecting a criticism it first made back in September in reacting to the Republicans’ proposed budget.
Legislative leaders see the $21 million discrepancy differently.
“There is not an additional cut. The difference is the raising of the car mill rate cap. So, towns don’t lose money, they can collect it under the car tax. Thus there is no state reimbursement reflected for that margin,” said Larry Perosino, spokesman for House Speaker Joe Aresimowicz.
Senate Republican Leader Len Fasano said the governor is “scrambling for reasons” to justify what he believes is a looming veto of the budget that was overwhelmingly approved by both houses of the General Assembly. Malloy, a Democrat, was left out of the budget negotiations between Republican and Democratic legislative leaders.
“We are making all municipalities whole no matter what,” Fasano said. “For him to start picking apart this, that and the other thing — he had his chance. We tried to negotiate and he was unwilling and unbending… Anybody could point to something in this budget they don’t like.”
“If he wants to veto it, grab a pen and veto it. We are not going to battle this guy over the hospital tax, battle this guy over the municipal stuff. This is foolishness,” he said. “If he wants to start being picky, I am not going to start defending every aspect of it.”
But OPM said several towns are not made whole under the adopted budget, even if local tax rates are raised on vehicles to the new 39-mill cap. The OPM reports several still stand to collectively lose $5.1 million this year and $2.4 million next year.
“Using the OPM methodology reflects the actual outcomes for the towns during FY17, with many cities and towns coming out worse than originally portrayed in the documents given to legislators in advance of voting,” Chris McClure, spokesman for the governor’s budget office, wrote reporters, notifying them of the discrepancy.
In the fiscal year that ended June 30, towns were provided $127.9 million in reimbursements from the state’s sales tax to offset local revenue lost because of the vehicle tax cap and other general aid to municipalities. The figures compiled by OFA and provided to legislators reduced that grant – the Municipal Revenue Sharing Account grant – to $75.9 million. The governor’s budget first raised this issue over how to account for the car tax cap back in September when the discrepancy first arose in the Republican’s budget.