State law would supplement local property taxes

A state law encouraging towns to keep their municipal spending increases in check, in return for increased state aid, may not have any practical application.
Beginning July 2017, Wilton and all other towns in Connecticut must keep increases to their “general budget expenditures” under 2.5% or the rate of inflation or lose funds from a new state aid program, according to a new state law that became effective June 30, 2015.
Areas of town spending that are exempt from the new cap include special education, capital budget items, expenditures related to a major disaster or emergency declaration by the federal government or the governor, and debt service. Other exemptions include expenditures for implementing court orders, arbitration awards, etc.
Town operations and regular education costs would be impacted by the cap.
First Selectman Lynne Vanderslice said she has a number of concerns with the program.
“It is another example of the state using a one-size-fits-all approach when something targeted would be more effective,” she told The Bulletin. “Towns understand the nuances and the needs of their individual budgets. The state does not nor can the state be expected to understand.
“The structure of the program creates some perverse incentives,” she continued. “For example, because debt service is excluded from the formula, towns are encouraged to bond items which previously had been funded through operating expenses.”

Disappearing funds

The new law is a small piece of the budget bill passed in early June. According to Connecticut State Senate President Martin M. Looney (D-11), who introduced the bill, it supplements local property taxes by designating 0.5% of the state sales tax revenue to towns and cities. Those funds are to be diverted to the Municipal Revenue Sharing Account, which has been in place for some time, before being redistributed to towns.
Wilton is slated to receive $547,000, but state Rep. Gail Lavielle (R-143) said taxpayers should not hold their breath anticipating delivery of funds.
“Whenever the state decides to put some money into a fund and redistribute it, very often the money disappears to close gaps in the general fund,” she said, offering the Special Transportation Fund as an example of the state’s propensity to dip into reserved funds to fill budget gaps.
“There’s no guarantee,” she said, that the money will ever reach the towns, especially given the state’s deficit-ridden fiscal condition.
Lavielle likes the intent of the bill — to offer towns a source of revenue in addition to property taxes, but said, “I don’t think it is the state’s business to tell the towns what to spend. … Our towns are for the most part, certainly around here, substantially better managed than the state is.”
Vanderslice agreed. “In Wilton, we are all focused on keeping spending under 2.5%, so I’m not concerned about the cap. What I am concerned about is whether the state can even afford such a program when they are forecasting revenue shortfalls and deficits.”
Lavielle voted against the budget bill that contains this item, saying it was “designed to run the state into the ground by going immediately into deficit and that’s exactly what happened.” Had the item been voted on separately, she said, she still would have voted against it.
According to the law, if a municipality exceeds the cap, a penalty of 50 cents for every dollar spent over the limit will be assessed by reducing the new state funding by that amount.
For example, if Wilton’s general expenditure spending were to increase $1 million more than 2.5% from the previous year’s budget, 50 cents on the dollar means that $500,000 would be subject to be withheld by the state from its new aid program for Wilton.
Wilton’s other legislators are not enamored with the plan either.
Rep. Tom O’Dea (R-125) said, “While caps sound great, I do not believe we need the state telling us how to budget.” He echoed Lavielle, saying local towns “do a better job … than the state does.”
Sen. Toni Boucher (R-26) said the cap “intrudes into our local control of municipalities.”

Tax bill statement

The new state law requires municipalities to include the following statement on tax bills: The state will reduce grants to your town if local spending increases by more than 2.5 percent from the previous fiscal year.
—Rich Durazzo Jr. contributed to this report