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08/16/2017 08:00 AMWhen first selectmen across the shoreline came into work on Aug. 7, they were greeted by a letter from the state that has put selectmen and local legislators on high alert. The letter, sent by Secretary Benjamin Barnes of the Office of Policy Management, asked for the dollar amounts in town reserve funds, feeding for many the fear that municipalities like Guilford, which have kept recommended levels of reserves, will be targeted as the state struggles to pass a budget.
The state entered the new fiscal year on July 1 with no budget. A recent employee concessions deal is expected to save approximately $1.57 billion over the next fiscal year, but the state is still addressing a projected budget deficit of $5.1 billion over the next two years. Under Governor Dannel Malloy’s February budget proposal, Guilford and many other municipalities would see a reduction in state aid and would be asked to contribute to the teachers pension plan.
The letter sent to First Selectman Joe Mazza on Aug. 7 asked the town to submit the municipality’s estimated total fund balance and unassigned fund balance for Fiscal Year 2017 and the projected total fund balance and unassigned fund balance for Fiscal Year 2018. Mazza said he read the letter as a sign that the state is looking to cut town aid substantially and said he is quite annoyed with the whole situation.
“I think it is really ridiculous that towns like Guilford who have worked very hard to obtain a position of financial strength and are now, I feel, being attacked by the State of Connecticut because we have made the hard choices,” he said. “We have negotiated very hard and very fair with our labor unions. We have changed our pension plans and put new hires on the 401K defined contribution plans.”
More to the point, Mazza said the numbers the state requested are not the easiest to produce because the town is currently going through an audit and in order to project the fund balance for the next fiscal year, the town needs to know how deep the state cuts are going to be.
“We don’t budget for surplus so if the state is going to hit us pretty hard we are probably going to have a reduction in our fund balance,” he said.
Upon receiving the letter, Mazza said he immediately reached out to State Representative Sean Scanlon (D-98), State Representative Vinny Candelora (R-86), and State Senator Ted Kennedy Jr. (D-12), imploring them to work for Guilford and move the budget process along.
“What annoys all of us is nothing has been done in Hartford,” said Mazza. “There is a stalemate and the longer that we do not have a state budget and the longer the governor can do what he wants to do, the more the municipalities are in jeopardy financially.”
The Financial Picture
How much aid Guilford could stand to lose is still unclear. In fiscal year 2016-’17, Guilford received a total of $4,817,046 in statutory formula aid, combining grant monies from programs such as the Town Aid Road Grant, Local Capital Improvement (LoCIP), Special Education, and Education Cost Sharing (ECS). According to the governor’s February budget proposal, in fiscal year 2018, Guilford would only receive $2,612,893 (a $2,204,153 difference), with the state taking from some grants and adding to others.
In the February proposal, Guilford’s ECS grant, which serves as the state’s primary financial resource to help municipalities run their schools, has been completely zeroed out, taking the town’s total ECS grant from $2.7 million this fiscal year to nothing in the next.
Scanlon said if the letter means that well-managed towns like Guilford will be punished for being well-managed, he finds that idea very troubling. However, Scanlon said the state has faced massive deficits all three years he has been in office and the Guilford delegation has always worked to reduce the initial proposed cuts.
“Last year we as a delegation were able to reverse 95 percent of those cuts and this year we are once again fighting that battle to try and ensure that we are not punished or targeted simply because of the socio-economic background of our town,” he said.
Scanlon said there is also a perception issue when it comes to how aid is given to Guilford.
“The reason for this is because up at the capitol there is this sense that our streets are paved with gold in Guilford and that is just not the case,” he said. “The town has done a good job of managing their finances and building up a healthy rainy day fund, but that doesn’t mean that we are somehow less deserving of state aid than another community.”
Candelora said he fears that the governor is try to ascertain how much money towns have in fund balance to identify those who could take a big hit.
“The governor is running the state by executive order and he is implementing his vision for the State of Connecticut as a result and one of those visions is shifting money away from our towns and to the cities,” he said. “Many of our communities he has slated to pretty much zero out the education funding and so I think that he is essentially trying to see what towns can absorb as cuts.”
The Pension Problem
The possibility of municipalities having to pay a portion of the teachers’ pensions, initially considered a non-starter by local legislators, seems to have picked up speed again.
For years, teachers have contributed six percent of their salary to their pension and the state has picked up the rest of the tab. However, with contribution rates on the rise and the system notoriously underfunded, the governor is looking to push one-third or $400 million of the contribution onto municipalities. For Guilford, that means $2,865,342 that would need to be worked into the budget.
The need to slash aid and keep the teacher pension proposal viable is a result of the recently struck labor concessions deal according to Candelora, who said the deal shut the door on a variety of saving opportunities.
“There is money out there to be had, but it is a matter of prioritizing and unfortunately what has happened right now in this state is we have prioritized 45,000 state employees above 3.5 million residents in Connecticut,” he said. “We have no budget, but the state unions have their contracts in place, they have job security in place, and our towns and cities are left to wonder where they are going to be when schools open.”
Scanlon, however, said the concessions deal was an important step in closing the deficit and hopes to see a vote on a budget brought up as soon as possible. Regardless of party affiliation, frustrated in the common adjective used by legislators these days.
“I am frustrated by this process and I think we need to pass a budget as soon as possible and I think the time for people to be posturing about what they want to have in the budget or what they don’t want to have has passed,” said Scanlon. “We have to get to the job of actually doing something, because the longer this goes on, the more uncertainty and difficulty there is for municipalities or those who get services from the state.”
Candelora said he is frustrated by having to wait for the Democrats to put a budget on the table and by the lack of cooperation shown by the governor.
“He wants the teacher retirements shifted onto the towns, he wants up to $250 million of cuts to municipalities, and he drew that line in the sand,” he said. “I understand that we all draw lines in the sand, but it doesn’t mean that you don’t come in the room and try and build consensus.”
With no clear consensus on when there will be a vote or a budget, Mazza said people should be very clear about what deep cuts to the municipality will mean.
“It could lead to layoffs,” he said. “That will be the next step.”