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Connecticut Office of Policy and Management (OPM) Secretary Benjamin Barnes came to Newtown March 15 bringing a candid yet troubling perspective on the state’s financial landscape to members of the Legislative Council, and members of the Boards of Finance and Education.
The session also included School Superintendent Joseph V. Erardi, Jr, along with three of Newtown’s legislative delegation — Representatives Mitch Bolinsky (R-116) and J.P. Sredzinski (R-112), and Senator Tony Hwang (R-28) who arrived about 30 minutes into the OPM secretary’s 90-minute visit.
The current state budget proposal, if approved as presented by Governor Dannel P. Malloy, would reduce Newtown’s Education Cost Sharing (ECS) grants from $5,080,129 in 2017, to $969,688 the following year — a difference of $4,110,441, which would fall on local property owners to make up. That state budget proposal, if approved, would also reduce local tax revenue by about $900,000 through a proposed mill rate cap on motor vehicles.
The governor is also calling for all communities to contribute one-third of the expense related to fortify a statewide teacher pension fund. Locally, that impact would be $3.9 million in year one, with the likelihood that local liability would double in year two, according to Mr Barnes. All told, if the current state budget proposal passes, Newtown’s loss in combined state aid would approach $7 million in 2018.
While he did not deny it could happen, Mr Barnes, along with the three lawmakers present, reassured local officials and residents in attendance that the governor’s proposal was just a starting point, and Sen Hwang vowed that the shifting of teacher pension funding to towns and cities would not happen on his watch.
“It’s a starting position,” Mr Barnes said, adding that it is “a blessing and a curse to go first in a budget situation.”
“People take shots at it for a couple of months,” the OPM chief continued. “Some lawmakers believe these cuts are too harsh. You are one of the ones with a meaningful hit. I think things will improve, but I don’t know how much, and I don’t see how the state can get back to the same level of state aid.”
‘A Series Of Recurring Solutions’
Mr Barnes said although state revenues continued to grow by 2 to 2.5 percent annually, the bills for unfunded liabilities are outpacing those revenues further and further. So instead of continuing to propose unsustainable state spending plans that would do further financial damage, 2018 is the year Mr Barnes and state leaders are proposing “a series of recurring solutions.”
Those solutions include a $400 million reduction in state aid to municipalities, and as much as $700 million in labor savings that the OPM chief said were under negotiations now.
While Mr Barnes acknowledged that Newtown was facing a “meaningful hit,” he said the town’s 9.9 percent fund balance was enviable compared to the state’s, and reminded officials that a number of communities, both large cities and smaller towns, were facing near catastrophic financial challenges, including Hartford, which he said was near bankruptcy.
Part of the concern expressed by council Chair Mary Ann Jacob, along with colleagues Ryan Knapp and George Ferguson, is that communities like Newtown that work hard and spend conservatively in order to maintain appropriate fund balances are being asked to compromise those savings and possibly their municipal bond ratings by tapping fund balances to offset rollbacks in state aid, and/or to help make the one-third contributions to the teacher pension fund.
But Mr Barnes said, in effect, that Newtown and many other communities that have maintained good financial practices may need to sacrifice in order to assist others who have not managed their finances as well. He also suggested that certain state leaders believe those towns that have robust fund balances should sacrifice to free up money to assist other communities that are in trouble.
“Newtown appears less needy compared to data that comes from other towns,” Mr Barnes said. “So it’s necessary to redirect aid to communities that need it most.”
An Unhappy Path
The OPM chief said the state wants to continue to see growth and a vibrant economy, but “we don’t have a clear path that makes everybody happy — we’ve proposed a path that makes everyone unhappy.”
Mr Ferguson expressed frustration regarding a lack of transparency in the ECS formula, saying that the wide disparity that awards Newtown 47 percent of its allocation while extending the Town of Norfolk nearly 150 percent seemed more a result of back room political “horse trading” than a formula that has a basis in logical math.
This resulted in a nearly 15-minute dissertation about the three-pronged formula that results in annual ECS grants. Mr Barnes candidly admitted that a number of communities “have enough property wealth that they should get nothing — but we’ve held them harmless.” But over time, he said, school systems with the most need continue to fall further, citing Waterbury as one city that is “continuously shortchanging their students, and their student population is growing.”
Mr Barnes said that every year the legislature does not want to give anybody a cut, and that tension exists between crafting a formula that works and one that eliminates the turbulence that comes to lawmakers when towns they represent face proposed education grant reductions or other cuts.
Referring to comments made by Mr Barnes a week earlier in Hartford about softening the blow, Mr Knapp asked, “How does that work?”
The OPM chief replied that the proposed budget has set aside $75 million for municipal aid, money that Sen Hwang referred to later as a “slush fund for the governor to help assure his budget gets support.”
Closing his presentation, Mr Barnes said he wanted to “put out there” that “I’m a liberal Democrat who believes in government.”
He said, however that in 2018, Connecticut is “in downsizing mode.”
“I know, yes, we are putting part of our problem on local people,” Mr Barnes said, adding that ”we can only have the government that we are willing to pay for. We are not raising sufficient taxes to cover the cost of services we are called to fund. It’s a challenge.”
The OPM secretary said that even if the state finds a way to soften the bow by reducing Newtown taxpayers’ liabilities by $2 million, a significant budget increase will still be going to referendum and it may fail.
“So there is upset on the part of taxpayers,” he said, “one way or another.”