City Takes $2 Million Hit In State Budget

At Wednesday's Finance and Governance meeting, city Finance Director Carl Erlacher offered a sobering analyis of the effects of the state budget, passed this week, on the city of Middletown.

In almost every category, according to a chart released by the Connecticut Commission of Municipalities, Middletown received less than anticipated in this year's city budget. On the Education side, the city received an amount equal to the ECS grant ($16,652,386) but substantially less in every other category, including transportation and adult education.

On the municipal side, the city actually received more than anticipated in LOCIP (Local Capital Improvement) grants (budgeted: $333,584 - adopted: $410,720) but in all other categories received substantially less including the Pequot-Mohegan Grant, and PILOT (Payment in Lieu of Taxes) for college, hospital and state-owned property despite the promise of state representatives to fight for equitable PILOT reimbursement.

In total, the Board of Education received $64,695 less than anticipated, and on the municipal side the city received $1,973,685 less than anticipated.

State cuts will hurt Middletown

Governor Rell's budget proposed no decrease in the Educational Cost Sharing grant to Middletown, which provides over half of the money from the state to Middletown ($16.6M, a quarter of Middletown's education budget). However, Rell was not so generous with other components which Middletown depends on. The city stands to lose $981,000 of PILOT (payments in lieu of taxes) funding for tax-exempt colleges and hospital property, $385,000 of PILOT funding for state-owned property, $147,000 from the Mashantucket, Pequot and Mohegan fund, and a total of $146,000 from the other state funding sources. The biggest cut by percentage was in the road aid fund, although this represents a very small portion of Middletown's state aid.


COMMENTARY:
Governor Rell stated that she "flat-funded" state education funds so that municipalities would not be forced to raise property taxes. This is a little misleading, for two reasons. First, the Middletown education budget (like that of all other munipalities) faces large and unavoidable increases in costs of health insurance, transportation, and contracted wages. Thus, a flat contribution from the state requires cuts in services or increases in taxes (or both). Second, PILOT funds go into the city's general fund, in the same way as taxes from private sector property owners. This in turn funds the schools and everything else the city provides. Thus, although the schools and the city can celebrate the lack of cuts in state funds targeted to education, Governor Rell's cuts to PILOT funding are just as likely to force cuts in education or increases in property taxes (or both) as if she had taken the same amount of money from the education grants.

(All graphs from readily available Municipal Aid numbers in Governor Rell's budget)

Giuliano Reacts to Rell's Budget Address

"It's not great news, but it's not as bad as it could've been," Mayor Sebastian Giuliano said after hearing Govenor Jodi Rell's budget address today.

The mayor expects to receive $1.6 million less in PILOT (Payment In Lieu Of Taxes), from the state, but other programs like LoCIP, and especially the education grants (see previous posting), will receive the same level of funding.

"I heard word that the schools were expecting to have up to $2,000,000 cut, so this is a relief," Giuliano explained. "Just keeping the operation level. Not doing anything different, the school budget is about $4,000,000 higher this year. If the state had proposed cuts, it would have been a disaster."

On the city side, the mayor was not so sanguine. The cuts in PILOT reimbursements will take the city from a $4,000,000 gap, to a $5.6 million gap.

"The state traditionally underfunds PILOT," Giuliano said. "This year they're just going to underfund it more.

"What we are going to have to do in terms of process is to cover everything that is mandated first, and then look at every other program we've funded before, and see what we can put back in," the mayor said.

In her speech, the Governor urged the legislature to create a moratorium on unfunded mandates. They mayor said that if the legislature concurs, it will help close some of the gaps.

"Especially on the school side. If the legislature decides to put things like in-school suspension on hold, that will help the schools close some of the gap. And not having all those mandates will help on the city side too."

Giuliano has some doubts about how much help the stimulus package will have for the cities.

"The goal is to create jobs," Giuliano said. "Initially we proposed things that were already bonded because they were the only things that we could actually begin work on in 120 days. Now they're talking about accepting projects that will begin next year, or two years down the road. How is that going to help?"

Giuliano sees the need for cooperation, and the need for extraordinary action for the city to weather the economic hard times.

"I've met with the unions, staff and managers, and everybody understands that we need to be proactive. However, approvals are made by the Common Council, and so far they seem to want to be proactive."

Giuliano was disappointed that Democratic members of the Common Council snubbed his invitation to a discussion with unions and city staff about economic issues, and he still felt stung by criticisms directed him at Monday's Common Council meeting for presenting a union agreement with a two and a quarter per cent increase.

"That pay raise really amounts to less than one per cent," Giuliano explained. "When you understand that they agreed to freeze steps. And this is the working class union - the janitors, and the clerks, the school cooks, the sanitation workers. These are the people who need it. These are the city employees who live in town. It seemed like a no-brainer to me.

"They talk about being proactive, about not taking precipitous action, but they want me to create a proposal that they can criticize, that they don't have to take ownership of. That's the definition of reactive."

"If we're going to get this solved, we've all got to help out." Giuliano said. "We all need to be able to take unprecedented action."