Malloy's office asks Darien, all state municipalities for financial information
The state continues to go without a budget, as legislators work on proposals following the acceptance of labor concessions in last week’s SEBAC deal. Earlier this week, towns across the state received a letter from the office of Secretary Ben Barnes, of the Office of Policy and Management, seeking a great deal of financial information. Barnes was asked in a letter from Governor Dan Malloy to gather information and analysis regarding, “municipal aid, local tax levels, expenditure trends, fund balances, and any other criteria that could better inform our decisions.”
The wording of Malloy’s letter to Barnes deals primarily with municipal aid, saying that “how we fund our single largest expenditure must be on the table.”
“In recent years, I have made it a priority to protect aid to municipalities. In contrast, we have made drastic changes to how we fund other areas of state government — both in total funding and in our rationale for how limited dollars are allocated. We've reduced state services; we've cut funding to private providers; we’ve asked state employees to come to the table with concessions; and we’ve raised revenues. Throughout all of this, we've held town aid harmless. In fact, it could be said that we have sacrificed state services and raised revenues in order to shield town government from facing difficult choices required of state leaders and implementing reforms,” Malloy’s letter reads. It is worth noting that Darien, and many other more affluent towns in the state, have seen reductions in town aid in recent years.
The purpose of the information gathering is not explicitly stated, but later the letter does make it clear that Malloy is looking closely at aid to cities and towns and the way it is distributed.
Malloy goes on, “If we fail to recalibrate aid based on shifting local demographics, economies, and need, we risk perpetuating an inequitable distribution of burden among our communities. We risk not investing in the communities that should be our assets in attracting economic development, young professionals, and families.”
Simply, it appears Malloy has asked Barnes to gather information on the financial standing of towns across the state to assess how much aid to send, or not send. The information requested is meant to include historical data and current conditions, and is meant to be made public as well.
Stevenson has received a letter from Malloy and Barnes, and said it asked for information on the current town budget as well as the general fund unrestricted fund balance, which Stevenson called, “the town safety net.”
Stevenson acknowledged that while the state currently does have the ability to monitor municipal budgets and spending, further oversight would, “fly in the face of local control.”
“Fiscal oversight makes good sense for distressed communities who are heavily reliant on state aid but not for well-managed towns like Darien.”
Malloy has already put forth an executive order cutting $500 million in education funding across the state, including dropping Darien’s ECS money to zero, in the event a budget is not in place by Oct. 1, when the first ECS funds are dispersed. Darien in fact budgeted to receive no ECS money in anticipation of this cut, but does still have special education money budgeted in the form of excess cost reimbursement funds. Stevenson is fighting for that money to stay in place, saying, “I continue to urge our legislative delegation to support the preservation of special education reimbursements to all towns. Our most vulnerable students deserve to receive state support regardless of “wealth metrics” or zip code.”
Further, a recent Moody’s report suggested that local government ratings in Connecticut could be impacted in a negative way if the state continues to operate without a budget.
Stevenson responded to this news as well, saying, “I am always concerned about any change in fiscal condition or policy change that might jeopardize our bond ratings. Our ratings are a direct savings to taxpayers in lower borrowing costs for bonded projects.”
One factor looked at by rating agencies is general fund reserves, and Darien has a policy of reserving an amount not less than 10% of the annual budget. This balance is one of the pieces of information requested by Malloy and Barnes.
“In addition to the amount of the reserve fund, rating agencies want to see prudent policies on how we spend it. Using general fund monies for ongoing operating expenses is considered bad fiscal policy. Using fund balance for capital expenses is all right,” Stevenson added.
A looming budget issue is still teacher pensions, and the efforts of some in the legislature to push as much as $400 million in pension payments onto municipalities. If Darien were forced to used general reserve funds to cover those pension payments, it would be be considered bad policy.
“If Teacher Pension Sharing is pushed onto cities and towns, there may be no other remedy for municipalities than to raise local property taxes. Raising local taxes is a remedy of last resort for Darien. Likely we would utilize a variety of measures to stabilize our town budget…cut spending (and services), utilize more of our fund balance for capital and consider issuing a supplemental mid-year tax bill. Any necessary solutions are directly dependent on the magnitude of impacts,” said Stevenson.
Board of Finance Chairman Jon Zagrodzky agreed with with Stevenson’s comments. “I would add that we plan to be extremely transparent with Darien taxpayers as Hartford’s budget comes into focus. Once we see an approved budget, we will be able to determine the impact on town finances and develop appropriate options,” said Zagrodzky. The board chairman concurred with Stevenson’s outlook, saying, “This is likely to include a variety of measure to stabilize our budget. It will also include strict guidance for the upcoming Fiscal 2018-2019 budget process, which starts this winter. We will keep open lines of communication as these challenges unfold.”
The coming months look fairly grim. Zagrodzky urged local taxpayers to be realistic and as prepared as possible for the coming fiscal challenges, saying, “Taxpayers should have no illusions. The prospect of Harford imposing significant costs, either directly or through the loss of grants, is considerable. The financial hole they have dug is impossibly large, and filling it will painful. It is ironic that the best-managed towns are likely to take the biggest hit.”
Stevenson added that she and Zagrodzky, are currently deliberating their response to the letter, which is due Aug. 16. Stevenson did say, “we will send something.”