With Connecticut’s new fiscal year less than two months old and state aid beginning to pour into cities and towns, local leaders are learning that dollars from the Capitol don’t buy as much as they once did.
The $3.2 billion in major statutory grants Connecticut will award this year, at first glance, is up a modest 21% from where they stood in 2016, the last year before lawmakers adopted a series of budget caps that have siphoned billions of dollars away from core programs.
But inflation has grown one-and-a-half times that pace, and once inflation is taken into account, municipalities are down almost $370 million, or 10%.
Even the state’s $221 million special education grant program, which received a $40 million bump last fiscal year and $30 million this year, is down $48 million from 2016 levels, based on inflation. And local school districts, though grateful for the extra funds, say they still face a gap in special education costs versus resources.
While legislators and Gov. Ned Lamont give with one hand — say, boosting grants for K-12 education — they take with the other, depriving one out of four communities its share of gaming revenues from tribal casinos.
The pressure to trim municipal aid is growing, with new federal budget cuts expected to cost Connecticut hundreds of millions annually and with billions of dollars in emergency pandemic aid nearly exhausted.
Legislators must soon decide whether to maintain savings programs that continue to generate historic surpluses or scale back and allow more dollars to trickle back to their home districts.
As cities and towns increasingly boost property taxes or watch property revaluations shift greater burdens from businesses to homeowners, legislators tout their accomplishments very selectively, said Joe DeLong, executive director of the Connecticut Conference of Municipalities.
CCM: ‘The gimmickry they do to get around the spending cap’
When legislators hear constituents complain about rising local property taxes, it’s easy to say, “That was the mayors. We’re still looking good over here, holding the line” with state income and sales taxes, DeLong said. “It’s all part of the gimmickry they do to get around the spending cap.”
Lawmakers will hail overall growth in town aid without mentioning how many communities lost out, he noted.
For example, the 1993 legislature dedicated most of Connecticut’s share of tribal casino revenues — about $88 million out of $113 million — to cities and towns. By 2002, the local share had risen to $135 million. Funds were distributed based partly on wealth and partly on how much tax-exempt property was within a community, but every community got something.
By 2013, municipalities were sharing just $62 million in casino revenues as state government fell on hard times.
And since the budget controls were adopted in 2017, $62 million has fallen to $52.5 million — but only 124 out of 169 towns share the funds.
Some of the towns that lost casino funds, like Westport and Greenwich in Fairfield County, are among Connecticut’s wealthiest. Others, such as Tolland and South Windsor — rural farm communities in northeastern and north-central Connecticut — are not. They simply lack an overabundance of tax-exempt property, one of the criteria set for distributing casino revenues decades ago.
“These are not towns don’t have a lot of resources to draw on when they’re faced with cuts,” said Betsy Gara, executive director of the Connecticut Council of Small Towns. “It doesn’t seem to make a lot of sense.”
The cutbacks in casino revenue sharing were taking place at the same time legislators were committing to a major expansion of the Education Cost Sharing system, the single-largest operating grant awarded local school districts.
Aid to cities and towns would be even more limited now if Lamont and the General Assembly hadn’t become more willing to use the state’s credit card.
Connecticut borrowed about $145 million nine years ago, chiefly to fund grants that support basic road maintenance and small-scale capital projects and equipment purchases. That borrowing now stands at $275 million.
Ultimately, it means state taxpayers must cover tens of millions of dollars of interest on a year’s worth of local aid.
State’s coffers swell as locals plead for more aid
At the same time towns say grants from the Capitol have been shrinking, the state’s coffers have swelled to record proportions.
Aggressive spending controls have generated more than $12 billion in budget surpluses since 2017. The annual average has been about $1.8 billion, which represents 8% of the General Fund.
And for the fiscal year that just ended June 30, the estimated black ink approaches $2.5 billion, or almost 11%.
Critics say these aren’t nonessential “surplus” dollars but represent hundreds of millions drained from municipal aid, education, health care, social services and other core programs to accelerate paying down Connecticut’s massive pension debt.
The state has dedicated $8.6 billion in surplus toward that effort since 2020, and most of the $2.5 billion windfall from last fiscal year will go toward pension debt as well.
But Connecticut’s pension debt, which stood at $35 billion entering last fiscal year, was amassed over more than seven decades prior to 2011. And even with the extra spending, analysts project the unfunded liability won’t be wiped out until the mid-2040s.
In other words, critics say, this pace will do great damage to cities and towns, and to many state programs, long before it pension debt is wiped out 20 years from now.
Lamont and legislators were able to mask the pain of this savings program between 2021 and 2025 thanks to billions of dollars in emergency pandemic grants from Washington. Those dollars could be used, outside of budget cap rules, to bolster various programs that lost more traditional state funds due to savings programs.
But that aid largely was exhausted last fiscal year, and President Donald Trump and Congress have ordered cuts expected to shrink Medicaid and other federal funding for Connecticut by hundreds of millions of dollars annually.
Osten: The problem can be fixed
The co-chairwoman of the legislature’s Appropriations Committee, Sen. Cathy Osten, D-Sprague, says there’s an easy solution, and it doesn’t involve raising state taxes.
“What we took away from the towns, we now have a capacity to replenish,” she said.
Rather than insisting on saving close to an average of $2 billion per year, and channeling those funds into the pensions, Connecticut could agree to save less at the state level, share more with towns, and help ease local property tax rates, she said.
Osten, who district includes many southeastern Connecticut communities near the Foxwoods Resorts and Mohegan Sun casinos, says many of her towns receive less gaming revenues than they did in 2017.
“I see this as an inequity,” she said. “We took money away from the towns when we were having hard fiscal times. And we say to them, ‘We don’t understand why you’re having a hard time’?”
CCM launched an ad campaign last March attacking Lamont, one of the chief defenders of the current package of state budget controls, arguing it effectively has shifted hundreds of millions of dollars in state tax burdens onto municipal budgets.
Senate President Pro Tem Martin M. Looney of New Haven says it’s unfortunate when grants to any community are eliminated or don’t keep pace with inflation. But if aid must be cut because officials won’t allow more spending, then it is better to take from wealthy communities than from poor ones.
Looney, a progressive Democrat, has lobbied throughout his career for a more graduated state income tax system that imposes higher rates on Connecticut’s wealthiest households. He also favors restoring a pre-2017 spending cap rule that exempts aid to the poorest communities from cap limits.
Moderate Democrats, including Lamont, and nearly all Republicans in the legislature’s minority have opposed major changes to budget caps and to a more progressive income tax system. Looney notes CCM also has pushed for more aid but not for fairer income tax rates.
“What we’ve heard is, ‘Give us more [town aid]. Take it away from someone else,’” Looney said.
Could CT boost town aid by trimming spending elsewhere?
But others counter that both municipalities and state government need to do a better job trimming spending.
If towns were to regionalize services more, they might be able to survive with fewer grant dollars as the state tries to pay off its huge legacy pension debt.
“Gov. Lamont has introduced legislation to enable regional collective bargaining and continues to encourage towns to collaborate and, where appropriate, share services to bring down costs and save taxpayers money,” said Chris Collibee, the governor’s budget spokesman.
DeLong says towns have tried to do so but cannot make much progress because Lamont and the Democratic-controlled legislature are reluctant to ease collective bargaining rules to make such mergers cost-efficient.
Republican legislative leaders say before there are any talks of raising state taxes or easing budget controls, state officials first must try to cut costs in other areas and re-direct those dollars to cities and towns.
In recent years, House Minority Leader Vincent J. Candelora, R-North Branford, has pushed for lawmakers to explore cuts to Medicaid, higher education, transportation, and raises and overtime for state employees.
Democrats, Candelora said, only want to discuss impending cuts in federal aid, with no talk of reducing a state budget that exceeds $27 billion per year.
“You can’t keep overspending and talking about the pressures on the horizon,” he said.
Rep. Tammy Nuccio of Tolland, ranking House Republican on the Appropriations Committee, said lawmakers need to reconsider millions of dollars of “earmarks,” small pools of nondescript funds in the budget for pet projects in majority Democrats’ home districts.
“Why is there not a process?” Nuccio said, adding that if funds are given to communities, there should be rules, transparency and accountability. “It is irresponsible use of taxpayer money.”
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
