After unveiling a diverse and potentially painful array of recommendations to revitalize Connecticut, the Commission on Fiscal Stability and Economic Growth challenged legislators and others to accept it en masse.
Connecticut’s cities and towns took that challenge to heart.
Despite a commission proposal that could jeopardize state aid in coming years, the Connecticut Conference of Municipalities endorsed the full report, arguing it offers more long-term benefits for the state and its communities.
Recommendations that centered on new revenue-raising options for cities and towns and collective bargaining changes are vital reforms that outweigh another commission proposal calling for a dramatic reduction in the state budget, said CCM Executive Director Joe DeLong.
“Connecticut has long been the land of steady habits, but the precarious fiscal condition that still plagues the state budget demands that Connecticut change key core public policies — now,” DeLong said, adding the commission report echoes many of the recommendations CCM delivered to legislators just one year ago. “We can wait no longer for substantive change that will set the state on a sustainable economic path that will benefit hard-pressed residents and businesses.”
The package works when it holds together,” said one of the commission’s co-chairs, Jim Smith of Middlebury, chairman and former CEO of Webster Bank. Municipal leaders “must have been appreciative of that, even if some recommendations made them a bit uncomfortable.”
“We very much appreciate CCM’s understanding that the package needs to be treated as a whole and not dismembered in the General Assembly,” added the other co-chair, Robert Patricelli of Simsbury, a retired heath care executive.
The 14-member commission — which was established in statute last October as part of the new state budget — was given the unenviable task of navigating Connecticut through one of its worst fiscal crises in modern history.
While Connecticut economic recovery since the last recession has lagged the nation’s, surging retirement benefit costs tied to more than 70 years of inadequate contributions are projected to place unprecedented pressure on state finances for the next 15 years or longer.
One of the many areas of state spending feeling the squeeze as retirement benefit costs expand is aid to cities and towns. With that perspective, the commission issued many recommendations which CCM asserts will help communities manage their own budgets and programs as the state struggles with its own debts.
Several recommendations involving local revenues include:
- Empowering municipal coalitions to add one-half of 1 percentage point to the sales tax rate to fund regional services and diversify local budgets that rely excessively on property taxes.
- Allowing regional coalitions of municipalities to raise supplemental taxes for capital projects by special referendum.
- Allowing communities, through regional councils of government, to charge fees on nonprofit colleges and hospitals, which currently are exempt from local property taxation.
- Permitting towns to increase fees for use of the public rights of way, storm water fees, hotels, car rentals, restaurants and other services.
- Urging the state to increase the grants it already provides to restore some of the funds communities lose because state property is exempt from local taxation.
The fiscal stability panel also proposed several changes to collective bargaining that earned praise from CCM, though the AFL-CIO and other labor groups called these an attack on working-class households. These include:
- Allowing communities to use non-union labor on rehabilitation projects costing less than $1 million.
- Providing communities with a single, neutral arbitrator for labor negotiations.
- And exempting a city or town’s emergency budget reserve from being used to pay for labor contract settlements.
“They realize with a more competitive environment we can find ways to take care of issues,” DeLong said of the fiscal stability commission. “Sometimes we have to take the good with the bad, but the absolute worst we can do is nothing at all.”
“The bad” for cities and towns may be a commission recommendation that legislators cut about $1 billion per year from the state’s nearly $20 billion annual operating budget.
Patricelli and Smith said that recommendation is not intended to target the nearly $3 billion Connecticut spends annually on major statutory grants to cities and towns.
The panel’s hope is that lawmakers can achieve this $1 billion reduction by privatizing more services, seeking other efficiencies, and trimming labor costs wherever possible.
“We have very good reason to believe that $1 billion (in savings) is there,” Smith said.
The recommendation “is about better management and efficiencies,” Patricelli added.
The Connecticut Business and Industry Association and other business leaders have been urging lawmakers to revisit six reports prepared in 2010 and 2011 by a business coalition known as The CT Institute for the 21st Century. The coalition outlined strategies to cut state spending by hundreds of millions of dollars in total spread across several areas, including reductions in public-sector benefits. These strategies, many of which would take several years, also involved prisons, long-term heath care, public-sector benefits, and use of technology to deliver public services.
Still, several legislators have questioned how a $1 billion reduction could occur — given that nearly two-thirds of the budget involves retirement obligations, payments on bonded debt, Medicaid, and other largely fixed costs — and not affect aid to cities and towns.
DeLong said the fear is understandable and that local leaders have concerns as well.
“I think what they weighed on the most is the idea that a rising tide lifts all ships,” he said. “There are a lot of very good components in that report.”