Governor’s executive orders could decimate municipal aid

By Michael B. Guarco,
Chair, Board of Finance

As the new state fiscal year opened on July 1, high drama intensified in Hartford. Governor Malloy took aim at changing the overall municipal aid categories given to towns while simultaneously looking to prod the legislature to do its job in passing a budget. In late June, an executive order came down from the Governor’s office and is still in place that reduced state aid to Granby by $3.1 million from the $5.5 million budgeted in April. The $5.5 million built into our local budget was based upon the executive budget proposal put out by the Governor back in February. Then in mid-August, the Governor threatened to impose a new executive order that would essentially reduce our overall state aid to ZERO! Brinkmanship at its best—or worst—as Malloy endeavors to force the Democrat-run legislature to finally pass a budget. These actions and words signaled his intent of forcing a balanced budget partly by shifting major money away from the towns to the cities and help close the budget gap.

The impact of a revenue loss of this magnitude is severe to say the least, and follows the already built-into-the-budget reduction in state aid of nearly $1 million based on the February executive order. It is the equivalent of roughly a 15 percent increase in property tax if we only deal with this part of the budget. This has prompted sharp criticism from municipalities across Connecticut. These midstream revenue cuts have come months after local budgets were approved and set in place statewide. They have also prompted local governments to develop contingency plans to offset the proposed loss of money from the state. While the $5.5 million cut seems unfathomable, and even the $3.1  million beyond the pale, we still need to be prepared for how much the state ends up shorting the town compared to the already reduced amount built into the local FY18 budget.
Both the Town Manager and Superintendent have put into place spending freeze initiatives. Depending on the final numbers, some or all of these may be unfrozen when we know we have covered any loss of state money. Deeper freezes may be needed, as well as a greater use of General Fund balance or accumulated surplus than was built into the budget. The last resort alternatives would be: A) issuing adjusted motor vehicle tax bills at the full mill rate in lieu of those previously sent out at the mill rate of 32 as required under current state law (The state may now renege on its commitment to provide the difference back to the town from state coffers), and B) issuing supplemental property tax bills at a higher mill rate to cover the remaining budget gap. Obviously, these last two fixes are something the boards are reluctant to do and therefore are working with the administrations to avoid. Once a final approved state budget is in place and the second year of the state biennial budget is approved, the boards and the administrators can determine what course of action to take.
Within days of the Governor’s renewed revenue threat in August both the Democrat and Republican  caucuses came forward with revised budget plans that  held state aid essentially the same from last year to this year for Granby. While these both give the boards some comfort that the damage may not end up as severe as in the Governor’s executive orders, we still aren’t out of the woods until the final budget package is negotiated and approved at the state legislative level and signed onto by the Governor. Word is that the legislature will reconvene in special session in mid-September looking to have a budget in place prior to Oct. 1 when major components of revenue are scheduled to flow to the towns. Once we see the final result, we will make our final adjustments, hopefully all within the current budgets and, if need be, with existing reserves, to avoid going to the taxpayers with another billing. However, if the end state budget is more in line with the Governor’s threatened revenue cuts rather than those contemplated in the legislative Republican and Democrat proposals, then it may potentially take more than deep freezes and reserve use to cover the gap.