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02/20/2017 11:00 PMHow the town might handle any level of proposed cuts in state funding was the topic of conversation at the Board of Finance (BOF) meeting on Feb. 15. Much like last year when cuts came down from the state weeks before referendum, board members and town officials seemed to agree at some point the town will have to make an educated guess at how much state aid Madison will actually lose.
When Governor Dannel P. Malloy announced his two-year budget proposal to the General Assembly on Feb. 8, Madison officials and legislators expressed a mixture of shock and anger over the proposed cuts to municipalities. While the governor’s budget proposal is just the first step in the budget process and will likely change, the legislature votes on the budget in June and Madison goes to referendum for its 2017-’18 budget in May, leaving the town in a state of financial limbo.
While the governor’s budget is a proposal, the budget includes labor concessions, redistribution of financial aid to municipalities, and a plan to have cities and towns cover one-third of the state’s teacher pensions in an effort to account for a projected $3.6 billion budget deficit in the next two years.
Before the midyear cuts in state aid of $269,102, in fiscal year 2016-’17, Madison expected to receive a total of $2,647,112 in state aid, combining grant monies from programs such as the Town Aid Road Grant, the Municipal Revenue Sharing Grant, Special Education, and Education Cost Sharing. According to the governor’s budget proposal, in fiscal year 2018, Madison would receive $2,275,237, with the state taking from some grants and adding to others.
The hit to revenue would be problematic, but it’s the governor’s proposal to shift one-third ($400 million statewide) of teacher pensions onto municipalities that could prove catastrophic, according to First Selectman Tom Banisch. For Madison, that would mean $2,602,739 would need to be worked into the Board of Education (BOE) budget.
For years, teachers have contributed six percent of their salary to their pensions and the state has picked up the rest of the tab. Municipalities do not have any control over the pension plans and Banisch said the town cannot take on this expense.
“If we ever agreed to this, we would be committing suicide,” he said.
Teacher pensions are notoriously underfunded, a stark comparison to the town’s pension plan, according to BOF Chair Joe MacDougald, who said the town has the ability to control and fund its pensions at a healthy level. He said if the teacher pensions were pushed over to municipalities, it would be almost impossible to control costs.
“We have every reason to believe that this number that was passed on to us should skyrocket over time,” he said.
Netting out what the town is projected to receive in state aid in the next fiscal year from the proposed new contribution to teacher pensions, the town would end up sending a check to Hartford for $327,502.
Looking at the budget a different way, considering the monies originally budgeted in state aid for fiscal year 2017 versus what has been proposed for fiscal year 2018, including the teacher pensions contributions, the town would have a $2,974,614 hole, according to numbers put together by Finance Director Stacy Nobitz.
So what happens next? Banisch said he is expecting a big pushback from municipalities and even suggested all municipalities losing funds (close to 138 in total) all sue the state at the same time to make a statement. Looking at all the components of the budget, Banisch said this budget proposal couldn’t stand.
The governor “is proposing things that are not going to happen, so this can’t happen,” he said. “There has to be a whole different conversation. I am hoping that the legislature comes up with a different plan.”
Even if the proposal doesn’t stand, considering the state’s fiscal crisis, Madison is likely to see some level of cuts based on prior years’ experience. With the town budget going to referendum before the state budget is finalized, the trick is estimating the level of the cut.
“We are going to have to call the ball on setting a proposed budget number because clearly if we looked at this and even assumed a drop of $500,000 in the current budget, we are going to have to create a budget assumption,” said MacDougald.
MacDougald said he thinks the town will need to come up with the revenue shortfall number by about the third week of March. While he said all boards will work together to handle any reductions, dealing with the issue of the teacher pension contributions would be a challenge.
“We don’t have $2.97 million,” he said. “We could dip into our immediate funds, but we have to tax that back next year. We would have to drop into our reserves.”
The first budget public hearing is Thursday, March 9 at 7:30 p.m. at Walter C. Polson Middle School.