Gov. Dannel P. Malloy told a group of municipal leaders Tuesday that he doesn’t intend to raise taxes in the two-year budget he will unveil next February.
As a former mayor, Malloy said he appreciates the difficulties local elected officials face to keep property taxes under control, but he’s said he was unable to make any promises to the state’s largest municipal lobby which has asked him to remain steadfast in his approach to municipal aid.
“I don’t intend to raise taxes,” Malloy said in acknowledging CCM Executive Director Jim Finley’s letter last week asking him to protect and expand municipal aid.
“This is a work in progress. We can’t make any promises, but you are in my thoughts,” Malloy told the hundreds of municipal officials attending their annual meeting at the Connecticut Convention Center.
Malloy’s comment on taxes was followed by disclaimers about the $3.6 billion deficit he was handed when he took office in January 2011 and the sluggish national economic recovery. He also was quick to point out that he maintained and even expanded municipal aid as he was staring down a deficit, which was widely appreciated by the local elected officials in attendance Tuesday.
When Malloy first took office in 2011 his first two-year budget held towns harmless for the loss of federal stimulus funds which helped prop up the state’s share of the Education Cost Sharing grant. The ECS grant is the largest portion of most local budgets. Last year, Malloy added $50 million to the grant and formed a task force to come up with a better way of calculating how much municipalities receive from the state for education funding. The report isn’t due until Nov. 13, but it’s fair to say it will be one of the more closely watched portion’s of the governor’s budget proposal.
Last year, under Malloy’s budget 130 municipalities saw their ECS grants increase, while 39 towns saw theirs remain the same and no municipality saw their funding decrease. Malloy also held them harmless for other types of municipal aid.
Hartford Mayor Pedro Segarra said his biggest challenges at the local level have been trying to control health care and pension costs, so even when he tries not to increase the budget those expenses continue to go up. He said increased municipal aid would be appreciated especially since 52 percent of the city’s Grand List is exempt from taxation. However, he would settle for eliminating some of the unfunded mandates.
Level funding “just puts more pressure on us to manage in a fiscally accountable way,” Segarra said. “Our lifelines are pretty much gone at this point . . . We’re hoping that we don’t get any reductions, but for us to work on level funding is still a challenge.”
Canton First Selectman Richard Barlow said he’s optimistic Malloy will be able to maintain level funding. It’s what his town is assuming as it prepares its budget for next year.
“We look forward to continued support from the governor and the legislature,” Barlow said.
However, it’s possible that even if Malloy put Connecticut back on the right financial footing with the second largest tax increase in history, $1.6 billion in state employee concessions, and spending reductions, the state could be in trouble.
On Monday, Malloy’s budget director reported that the fiscal year 2013 budget is running about $60.1 million in the red. It’s a budget contingent on policies at the national level, including Medicaid.
“I don’t know what’s going to happen in the national election, so I don’t know what’s going to happen to Medicaid,” Malloy said.
If Republican Gov. Mitt Romney gets elected it’s possible the state will receive fewer Medicaid reimbursement dollars than what has been promised. Currently, the federal government offers a match in funding for the state’s low-income adults and children on the program.
“If Romney wins and they slash Medicaid reimbursement by 20 percent, then we’re going to have some hard choices to make,” Malloy said.
The economy is showing some positive signs, but “it’s just really too early to tell,” Malloy said.
Malloy said he will begin making decisions about the two-year budget after the November election, which is the normal schedule.
“I certainly don’t have a read on what any national administration would do, but I’ll tell you I’d feel a lot better if the president got re-elected,” Malloy added.
