Gov. Dannel P. Malloy (ctnewsjunkie)

HARTFORD, CT — As promised, Gov. Dannel P. Malloy unveiled a two-year budget that takes money from Connecticut’s wealthier communities and redistributes it to less affluent cities and towns.

“Here’s the simple truth I know you all agree with: education is economic development,” Malloy said Wednesday during his joint budget address.

Malloy’s $41.51 billion, two-year budget, gives 31 towns in the state more state aid than they currently receive, according to Office of Policy and Management Secretary Ben Barnes.

That means there are 138 towns getting less municipal aid under the governor’s plan than their current allotment.

The winners — at least in terms of state funding — are mostly the big cities. Hartford is slated to receive $47 million more in state aid next year than this year; Waterbury, $43 million; New Britain, $28 million; Bridgeport, $19 million; and New Haven, $16 million.

The big losers are: Groton, which is slated to receive nearly $13 million less; Milford, $11 million less; Wallingford, $8 million less; Glastonbury, $8 million less; and Fairfield, $7.6 million less.

“The truth is that, for too long, we’ve allowed certain communities to be disproportionately impacted by the state’s fiscal challenges,” Malloy said.  “While we’ve made advancements in recent years to address this inequity, I don’t believe that we’ve gone far enough.”

In what could be his last two-year budget address, Malloy said those disparities in funding have created large pockets of concentrated poverty due to a lack of adequate education resources.

“It’s a vicious cycle that began decades ago, one that hinders poorer, urban communities, leaving them with the highest tax burdens, troubled educational systems, and substantially fewer city services . . . causing them to be even poorer still. In turn, suburban towns feel as though they’re shouldering too much of the burden of neighboring cities. And all the while, rural communities feel forgotten altogether.

“The result is a broken, disparate system where towns are pitted against one another, constantly fighting for limited state dollars,” Malloy said.

“Bold” was the word Bridgeport Mayor Joseph Ganim used to describe Malloy’s budget.

“It is an attempt to right the wrongs of the past,” Ganim, who was in Hartford Wednesday for the address, said. “It is the governor’s effort to help the big cities who have financial shortcomings, such as Bridgeport, Hartford, New Haven, and Waterbury.”

Hartford Mayor Luke Bronin watches Malloy’s budget speech with Senate Majority Leader Bob Duff (ctnewsjunkie)

Also happy with the budget was Hartford Mayor Luke Bronin.

“In a real challenging budget environment this proposal tries to put priorities in the right place,” Bronin said. Bronin said the budget proposal recognizes that the state’s big cities are job centers that need to be “healthier to be competitive.”

New Haven Mayor Toni Harp agreed.

“I was pleased to hear the governor describe inextricable links among public education, job placement, and future economic vitality, and I remain hopeful the final budget preserves many of the governor’s initiatives, particularly with regard to the state’s Education Cost Sharing grant program, upon which urban school districts depend mightily,” Harp said.

Not as happy with the governor’s budget was Sen. Heather Somers, R-Groton, whose town stands to lose millions in aid if Malloy’s budget passes.

“This has happened before,” Somers said, adding that Groton is unfairly penalized because it has the Naval Submarine Base, which is property the town cannot tax.

She said she’s hopeful that once the budget gets a closer look that Groton will get a fairer shake.

In a briefing on the budget Wednesday morning in the Legislative Office Building, Barnes said Malloy’s budget “re-stacks the deck on municipal aid.” He called it a “fairer, more transparent distribution” of state funds to Connecticut towns.

Senate President Martin Looney, D-New Haven, applauded Malloy for his focus on the neediest communities. However, he said it will be challenging to put together the votes on a package that benefits only 31 communities, while disadvantaging 138.

“The equity argument is on the side of providing greater relief to those communities that are currently underfunded and have the greatest need,” Looney said.

Barnes said the state, which faces a $3.6 billion deficit over the next two years, can no longer afford to budget by “spreading out money to everybody.”

Betsy Gara, executive director of the Connecticut Council of Small Towns, said the governor’s budget will tie towns’ hands.

“Towns will not have any other option under this budget but to increase taxes on already overburdened local property owners,” Gara said.

Connecticut Conference of Municipalities Executive Director Joe DeLong took a cautious approach to the governor’s budget.

“I believe the governor has opened the door to a vital conversation in the days ahead. While we obviously have concerns, we remain committed to sustainable change,” DeLong said.

Malloy shifted about $407 million in teacher retirement costs to municipalities in the first year of the budget and $420.9 million in the second year.

That cost goes up to $420.9 million in the second year of the budget.

Currently the state is responsible for funding 100 percent of the Connecticut State Teachers’ Retirement System — the fund responsible for maintaining retirement benefits for over 36,000 retired and 50,000 active teachers, school administrators, and their beneficiaries.

Malloy said this year, the state is expected to pay $1.2 billion toward teachers’ pensions — representing over one-third of the state’s total educational aid and close to one-quarter of total municipal aid.

“Cutting education funding and shifting one-third of the costs for funding teacher pensions onto towns without providing towns with the tools to achieve savings on the local level is a disaster for the property taxpayers in our small towns,” COST President Leo Paul, who is also first selectman of Litchfield, said.

The governor tried to put a little silver lining in his teacher retirement initiative by saying he is proposing to preserve the state income tax exemption for the pensions of teachers who continue to live in the state, which was enacted into law in 2014.

Beginning in 2017 and annually thereafter, this exemption is scheduled to be 50 percent. Malloy said his budget package preserves the exemption.

The governor’s budget proposal included a $10-million increase in the state’s contribution to the Retired Teachers’ Healthcare Fund in fiscal year 2018 and then an additional $3.7 million increase in fiscal year 2019. Additionally, the budget plan calls for the state’s contribution to the fund to be raised to 25 percent of total healthcare costs from its current funding level of approximately 18 percent.

Mark Waxenberg, executive director of the Connecticut Education Association, said the governor’s budget threatens the quality of education by dividing schools, parents, and communities into winners and losers.

“The state currently underfunds public education by more than $700 million per year,” Waxenberg said. “The state needs to focus on a sustainable revenue stream that allows Connecticut to fulfill its constitutional obligation to fully fund public education to provide all children with the funding and resources they need to achieve.”

Christine Stuart contributed to this story.