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New Mid-Year Cuts in State Aid Hurt

On Dec. 29, 2016, Governor Dannel Malloy announced new mid-fiscal year cuts to the promised state aid grants, even though towns had already built the original grant amounts into their budgets. The new cuts reflect a budget, adopted by the State Legislature in 2016, that was brought into balance by millions of dollars in reductions that were unspecified at the time. Now town leaders have learned exactly where the governor plans to make those cuts in order to make the state budget whole.

The overall magnitude of local aid cuts was not entirely unexpected. The 2016 state budget reflected $20 million in unspecified cuts to municipal education grants and $30 million in unidentified cuts in state aid for local construction projects.

According to the letter announcing the cuts, Office of Policy and Management (OPM) Director Ben Barnes explained that the state allocated the aid cuts among the 169 towns based on an estimate of the towns’ ability to raise funds through property tax. The state used each town’s Equalized Net Grand List Per Capita ranking—essentially the overall amount of taxable property in town divided by the number of residents—”as a proxy for community wealth and financial capacity.”

The two state aid programs cut by Malloy are the Education Cost-Sharing (ECS) grants and the Local Capital Improvement Program (LOCIP) grants. Both of those grant programs distribute grant funding to the town government.

This is the second time in less than one year that towns have faced significant cuts in state aid grants. A spring 2016 debate in the Legislature and then the adopted budget resulted in the first round of reductions in towns’ ECS grants for this fiscal year. Now towns face added ECS and LOCIP grant cuts at a point half-way through the fiscal year in adopted town budgets that did not reflect these cuts. Now each town must either defer planned road re-paving projects (for LOCIP grant-funded work), or find ways to cut other planned and budgeted spending by the amount of the state aid cut before the fiscal year ends on June 30.

Each of the local towns in the Harbor News area sustained new state aid cuts as a result of Gov. Malloy’s announcement.

In August 2016, Westbrook expected its current year’s ECS grant, after the Legislature’s cuts, would be $130,117. With Malloy’s new round of cuts, that amount will drop by $59,734, a 45.9 percent cut that leaves the town with $70,393 in ECS aid.

Similarly, Westbrook’s Local Capital Improvement Grant, funding that pays for road paving and improvement projects, with this mid-year cut, will now drop by $42,120.

That means that the Town of Westbrook must now absorb a total of $141,844 in state aid cuts before June 30, the end of this fiscal year.

“We have fought [these cuts] as hard as we can. But we just have to assume [there will be] no state aid,” said Westbrook First Selectman Noel Bishop.

Old Saybrook is in a similar spot.

“One year ago we received $1.2 million in town aid from the state. Now, we will receive $589,000,” said Old Saybrook First Selectman Carl Fortuna, Jr. “This is about the state vowing not to raise state taxes, but forcing towns to raise town taxes [instead]. This cut will not be reversed.”

Fortuna said that the proposed town budget for next year will reflect the new state aid reality.

Old Saybrook had expected, after last year’s first round of town aid cuts, to receive $225,000 in Education Cost Sharing grant monies; with the new mid-year cuts the governor announced, the town will receive just $123,000. Similarly, the town’s Local Capital Improvement Program grant was cut by $67,000 to zero. That means that, midway through the current fiscal year, the Town of Old Saybrook now must absorb $169,000 in cuts in ECS and LOCIP grant aid it had expected to receive from the state.

“The bad news is that Old Saybrook will receive less state aid. The good news is that the town never receives a large amount of state aid,” said Fortuna.

Clinton does receive a substantial portion of its schools budget from the state, so though it’s seeing a similar ECS reduction to Westbrook and Old Saybrook, it’s proportionately less of a hit.

Following the legislature’s cut last year, Clinton expected to receive a $6,416,984 ECS grant for its schools. With an $89,986 mid-year cut to ECS and an $84,125 reduction in LOCIP funding, Clinton will need to make up for a $174,11 gap in funding.

With state budget deficits looming even larger for the next fiscal year, shoreline towns likely won’t see any reversal of these mid-year state aid cuts the governor announced.