The estimated $303,708 Newtown would lose in its current year spending plan if Governor Dannel P. Malloy's proposed elimination of Pequot grant funding holds true will not affect Newtown's operations budget, nor will it cause any reduction in local services before June 30, according to Town Finance Director Robert Tait.The Newtown Bee May 11, Mr Tait said he anticipates a combination of smaller surpluses already anticipated in various departments across the current year's budget will likely offset the unanticipated reduction in current year state grants. If those combined surpluses do not offset the loss in grants, the town will be forced to take any remaining shortfall from the current $11 million fund balance.Connecticut Mirror content by Keith M. Phaneuf and Jacqueline Rabe Thomas was used in this report. 

The governor is asking the legislature to cancel a $19.4 million payment owed to towns, which represents a share of the casino proceeds Connecticut distributes to municipalities. That grant was slated to provide towns with $58 million this year, with aid ranging from $8,178 in Cornwall to $6.2 million in Hartford.

Newtown's hit would be almost exactly in between.

Speaking to

"We were anticipating some level of surplus, but now we'll be close to breaking even," the finance director said.

This latest development comes just days after Mr Tait told the newspaper he was looking forward to using anticipated payroll surpluses to fortify the fund balance, an emergency or rainy day backup account favored by bond rating services that has been recognized by those agencies as Newtown's bond rating has trended up to AAA with Standard & Poor's (S&P), and AA1 with Moody's Investors Service in recent years.

"The plan for Newtown is that we budget to break even, but suddenly we're negative $300,000. When you close the books that is offset by the fund balance," Mr Tait said. "There is no other way to make up for it. If you have a revenue shortfall in the current budget, it would decrease the fund balance."

The finance director explained that contributions to the fund balance are not budgeted, but occur as a result of "naturally occurring favorable balances you see in salary accounts due to Public Works people out on worker's comp or disability, or fully funded positions that remain open for months as we work to fill them. We may get some extra monies in tax revenues because we get more than we budgeted for tax collections."

He said the governor's latest action will likely wipe out all of these incremental surpluses, and possibly trigger the need to balance the current year budget with some money from that $11.4 million fund balance account.

The Connecticut Mirror reported that on May 10, Gov Malloy unveiled a plan that relies on one-time revenue sweeps, withholding $19 million in municipal aid, dozens of small agency cuts, and draining the state's reserves to close the roughly $390 million gap in current state finances.

Gov Malloy's plan, which was prompted by a huge drop in anticipated state income tax receipts in April, effectively concedes Connecticut will close its third successive fiscal year in deficit. It also means the state probably will enter the upcoming two-year budget on July 1 with little or nothing in its rainy day fund.

The proposal "requires actions we would all prefer to avoid," Gov Malloy wrote in a letter to legislative leaders, the legislature's nonpartisan Office of Fiscal Analysis and Comptroller Kevin Lembo. "However, I believe we all can agree that our constituents, our taxpayers, our creditors, and our employees all expect that we will decisively address our current-year problem and turn our attention to the greater challenges we face in the upcoming biennium."

The challenges for this fiscal year, which ends on June 30, became huge in late April when fiscal analysts reported that General Fund revenues should be $403 million below anticipated levels. And most of that shortfall is tied to April's poor income tax performance.

The move was quickly labeled as a move that would further burden state taxpayers and property owners by Connecticut Conference of Municipalities (CCM) Executive Director Joe DeLong.

"The General Assembly rescinding Pequot payments to cities and towns is just more of the same," Mr DeLong said. "It's time our state policymakers stop shoving their problems onto property taxpayers and start doing things a different way."

This situation is yet another of what has become a constant reminder of the need for comprehensive reforms, Mr DeLong lamented.

"It is only through serious actions on cost containment, local revenue diversification, and service sharing that Connecticut will see its way out of this mess and into a brighter future," he added. "CCM's cities and towns [including Newtown] have been outlining these serious reforms since the beginning of the legislative session but with only a few weeks left to adjournment the General Assembly remains locked into these same tired approaches that only continue to exacerbate the burdens placed on local taxpayers."

Newtown officials recently saw a 2017-18 spending plan approved by local voters that makes accommodations for an anticipated $3 million in projected state revenue shortfalls in the operating budgets for the town and school district that goes into effect July 1. But news of the current year shortfall was not expected.

Compounding that problem, Gov Malloy and the General Assembly have very few options to close the gap before June 30.

The Connecticut Mirror reports, the bulk of agency spending occurs during the first three quarters of the fiscal year. Departments and agencies received their funding for the fourth quarter in early April, several weeks before the negative income tax revenue trend had been confirmed.

Traditionally,

The governor is required by law to issue a deficit-mitigation plan whenever the comptroller certifies a shortfall in excess of one percent of the General Fund, which would mean something greater than $181 million this fiscal year.

That is not really an issue, though, since Mr Lembo, the Malloy administration, and nonpartisan analysts all reported very similar deficits of just over two percent of the General Fund. Those deficit estimates vary: $379.5 million by the Office of Fiscal Analysis; $389.8 million by the Malloy administration; and $393.4 million by the comptroller.

Gov Malloy offered a plan to whittle $155.6 million off of the deficit using a combination of spending cuts and revenue sweeps. The governor has limited authority to reduce spending unilaterally, and Gov Malloy ordered a series of small rescissions totaling $33.5 million.

"Unfortunately, additional cuts in municipal aid at this time will add to the uncertainty that towns face in crafting and adopting local budgets and setting mill rates," said Betsy Gara, executive director of the Connecticut Council of Small Towns.

"While we recognize that the state needs to take action to address the budget deficit, we are concerned that cuts in municipal aid will force increases in property taxes and/or cuts in core programs, such as education, public safety, and transportation," she added. "Property tax increases and cuts in critical programs negatively impact our state and local economies and overburden homeowners."

Gov Malloy also would cancel $750,000 in grants to regional councils of government and $4.8 million in transportation spending on maintenance and planning. He would cut $2 million in payments to hospitals and would order further reductions to social services, including programs for the homeless, those with developmental disabilities and mental illnesses, and anti-recidivism programs.

The top leaders in the House of Representatives reacted cautiously to the governor's plan Wednesday, saying they would evaluate it and have a more detailed assessment forthcoming.