HARTFORD, Conn. – A two-year state budget proposed Wednesday by Gov. Dannel Malloy would see $400 million in teacher retirement costs shifted to towns and cities, and state aid to municipalities would be redistributed so that more affluent communities receive less funding while those with greater need receive more.
Malloy presented his biennium budget to the Connecticut General Assembly Wednesday afternoon. The $40.6 billion budget proposed for the 2018 and 2019 fiscal years includes expenditure cuts of $1.36 billion in the first year and $1.63 billion in the second year, and anticipates revenue increases of $320 million in the first year and $287 in the second.
In order to reduce costs, Malloy has proposed that towns and cities shoulder one-third of the costs that the state pays for teacher pension and retirement benefits, a total of about $400 million.
“It isn’t just about saving the state money, I believe this is a sensible policy for other reasons as well,” Malloy said. “After all, this funding is not distributed based on student need or relative town wealth. Rather, it is based entirely on local decisions about how much towns decide to pay their local educators, and how many teachers and administrators they employ.”
Malloy compared the amount of state aid Greenwich and New Britain receive to cover teacher pension costs. He said that Greenwich, the state’s wealthiest town, received $24 million in pension costs this year for a district that enrolls 8,800 students, while New Britain, which has a higher concentration of poverty, received $18 million for a district that enrolls 10,000 students.
“That’s 25 percent less funding for a system with 14 percent more students. I’m not blaming wealthy towns for this inequality. It’s not their fault. We need to do a better job. We need to make the system more reasonable.”
In a similar vein, Malloy has proposed a new formula for how the state distributes aid to towns and cities. The majority of state aid comes in the form of Educational Cost Sharing for schools. Under the proposed budget, wealthier towns would receive less ECS funds from the state, while towns with greater needs would receive more.
“I believe that the updated ECS formula in my budget is more equitable, more transparent, and more fair,” Malloy said. “By considering a given community’s ability to pay, we can adjust to what taxpayers can actually afford.”
In a briefing before Malloy’s budget address, Office of Policy and Management Secretary Ben Barnes said that the 20 towns with the lowest level of budget reserves have an average of 3 percent of their annual budgets in reserve, while the top 20 towns have 25 percent of their annual budgets in reserve.
“So clearly there’s a disparity,” Barnes said. “It’s a story of communities that are in good financial shape – some of them in extraordinarily good financial shape – and some that are in extraordinarily poor financial shape. We’ve tried to restack our municipal aid program to reflect that.”
In previous years, the state has combined special education funding into ECS grants, but Malloy said that in the proposed budget those funds would be separate. The state will increase special education funding by $10 million for a total of nearly $600 million that will be distributed to municipalities.
Malloy said that the state will continue to meet with labor union leaders and renegotiate contracts for state employees. The proposed budget assumes about $700 million in employee labor cost savings.
The budget also proposes a change to how hospitals are taxed at the local level. Malloy proposes eliminating the current tax exemption on real property taxes for hospital land and buildings. Barnes said this would create an option for towns and cities where the hospitals are located to tax those properties. He said this could bring in $212 million in revenue to local governments, and the state is proposing a $250 million supplemental payment to hospitals to offset that cost.
The budget also includes other measures to increase revenues, such as increasing fees on pistol permits, raising cigarette taxes to New York state levels, and criminal justice initiatives that would allow the state to close a prison facility.
The state legislature will have until the legislative session ends in June to debate the budget, propose changes, and ultimately vote on it.