Local officials told the Finance, Revenue, and Bonding Committee on Tuesday that they’re concerned the state won’t maintain its promise to share sales tax revenue with municipalities because it’s staring down a $900 million deficit in 2017.
“When the state is looking at a $900 million deficit, will the money be there to make sure we’re going to get paid?” South Windsor Town Manager Matthew Galligan, immediate past president of the Connecticut Conference of Municipalities, said.
The question didn’t sit well with Sen. John Fonfara, D-Hartford, who told Galligan that CCM had ample opportunity to participate in the drafting of last year’s bill, but they declined.
Since that time, “your organization has not ceased in its criticism of that legislation,” Fonfara said tersely.
The new law Galligan and Fonfara are referring to takes a half percent of state sales tax to lower the mill rate on motor vehicles in 32 communities, sets aside an additional $46 million to change the funding formula for tax exempt properties, and allocates $109 million to a grant program for municipalities.
Democratic legislative leaders have touted the law as “historic,” but their Republican colleagues continue to cast doubt on the Democratically-controlled General Assembly’s ability not to use it to close a budget deficit.
The committee debated new legislation Tuesday that seeks to clarify the intent of last year’s law and takes into consideration various property revaluation idiosyncrasies.
Galligan said there was an attempt by CCM’s executive director to have conversations about the drafting of last year’s bill, but Fonfara said there was no attempt to contact him, as co-chair of the Finance, Revenue, and Bonding Committee.
Galligan clarified that there were attempts to sit down with Senate President Martin Looney, D-New Haven, who spearheaded the effort. But that likely didn’t happen because of comments CCM’s new executive director, Joe DeLong, made about Connecticut lawmakers.
DeLong said Connecticut was “starving for leadership,” and legislative leaders, including Looney, responded swiftly by saying he destroyed the relationship lawmakers had built with the organization.
“In the short time that Mr. DeLong has been in Connecticut, he has obliterated the positive working relationship — built by former CCM executive directors — which CCM previously enjoyed with legislative leaders,” Looney said last June.
DeLong arrived in March 2015 after heading the West Virginia Regional Jail and Correctional Facility Authority.
Rep. Roland Lemar, D-New Haven, told Galligan that getting last year’s legislation raised and approved was a “Herculean” effort. He said there was pressure on lawmakers to divert the money and not give it to cities and towns, but they were able to restrain themselves.
Lemar said he hopes the legislation evolves so that lawmakers are on the same side as the organization representing cities and towns.
Striking a more conciliatory tone, Coventry Town Manager John Elsesser, who is also president of the Council of Small Towns, said municipalities are struggling with a perception that the state is trying to impose its will over the will of the residents of the local town.
Elsesser said that perception is related to the 2.5 percent spending cap.
Litchfield First Selectman Leo Paul explained that “In small towns where budgets are approved at town meetings or in budget referendums, the municipal spending cap undermines the ability of residents to approve local budgets that reflect the needs of their communities.”
Under last year’s bill, beginning in fiscal year 2018, the Office of Policy and Management must reduce revenue sharing grants for those towns whose spending, with limited exceptions, exceeds 2.5 percent or more or the rate of inflation, whichever is greater. The penalty for exceeding the cap is a reduction in the revenue sharing grant of 50 cents for every dollar the municipality spends over the cap.
“The law fails to include exemptions from the cap for costs associated with steep hikes in insurance, pension payments due to market losses and energy costs due to market volatility and/or state and federal requirements,” Elsesser said.
Fonfara said the idea behind the spending cap was to slow the growth of their mill rates, not to give municipalities an additional source of revenue.
New Haven Mayor Toni Harp said she’s counting on the state to share the half a percent of the sales tax revenue with her city.
She said if the state, for whatever reason, decides not to give the cities that money, then they have to give municipalities additional tools to raise revenue either locally or regionally.
Harp was one of three big city mayors who came to the Legislative Office Building last week to express her support for the law.
Harp, who as a state senator co-chaired the Appropriations Committee, said she knows “how falling state revenue figures confound the state budget process.” But cutting municipal aid programs “would simply shift that tax burden to city residents who already bear a heavy and regressive property tax load.”