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.

Library Supporters Urged to Contact Governor, Lawmakers

From Arthur Meyers

The state budget discussions continue, so we ask you to speak up.

Please urge Governor Rell, Lt. Governor Fedele ,and the key lawmakers to SUPPORT library programs and to reject the proposed cuts. Even if you have already contacted the budget negotiators, NOW is the time to contact them again.

Contact the key people below, and let them know that school is out, unemployment is high, and Russell Library is packed like never before.

On one day, this past Wednesday, July 22, in a city of 47,000:

• 1,797 people came into the Library
• 2,025 books and other materials were checked out
• 134 children participated in crafts programs in the morning
• 180 children attended the storytelling program in the evening
• 227 adults used the public computers
• 70 questions were asked in Information Services
• 8 adults attended the evening computer class on Microsoft Word

Ask them: "Please reject cuts to our library programs!"

Here's the list:
--Governor Jodi Rell: governor.rell@ct.gov
--Lt. Governor Mike Fedele: LTGovernor.Fedele@ct.gov
--OPM Secretary Robert Genuario: Robert.genuario@ct.gov
--House Speaker Christopher Donovan: Christopher.donovan@cga.ct.gov
--House Majority Leader Denise Merrill: denise.merrill@cga.ct.gov
--House Republican Leader Larry Cafero: Lawrence.cafero@housegop.ct.gov
--Senate President Don Williams: Williams@senatedems@cga.ct.gov
--Senate Majority Leader Martin Looney: looney@senatedems.ct.gov
--Senate Republican Leader John McKinney: john.mckinney@cga.ct.gov
--House Appropriations Committee Chair John Geragosian: john.geragosian@cga.ct.gov
--Senate Appropriations Committee Chair Toni Harp: harp@senatedems.ct.gov
--House Appropriations Committee Ranking Member Craig Miner: craig.miner@housegop.ct.gov
--Senate Appropriations Committee Ranking Member Dan Debicella: dan.debicella@cga.ct.gov

Rell proposes cuts to Middletown bonds

The Hartford Courant reported in its Saturday edition that Governor Rell has proposed canceling state and local bonds to fund projects that have already been authorized. In Middletown, these proposed cuts include the following:

• Kidcity Children's Museum. $1,000,000 from the Commission on Culture and Tourism for construction of a new building.
  
• South Fire District. $475,000 from Public Safety for renovation of fire stations.
• Crystal Lake. $50,000 from the Department of Environmental Protection for watershed management.

The money for Kidcity is for an expansion to create more space for the very popular Middletown destination. The founder of Kidcity, Jen Alexander, told me, "Since the start of the economic downturn last fall, the number of visitors to Kidcity has gone up, and we are seeing more families travel here from outside of Middletown. We have never been as crowded as we were during the schools' February break this year."

Alexander is disappointed to lose the funding, she said in these economic conditions the state and federal governments should be investing in local projects that have long-term benefits, "This is the best time to be making investments like this, so cutting this is short-sighted." She said that if the cut in funding is approved, she will go back to the legislature to apply again for money to accommodate more visitors to the museum.

Kidcity brings in 100,000 visitors per year to downtown Middletown. The legislature will consider these cuts as well as all of Rell's budget proposals as they work on the state budget in the coming months.

Representative Lesser calls Rell budget fiscally irresponsible

Representative Matt Lesser, representing almost half of Middletown in the state capitol, said that Governor Rell's budget was a reasonable first step, but that the legislative committees have much work to do before returning a reasonable budget for the state. Their work is likely to dramatically change the budget (possibly including municipal aid), in part because Rell used a combination of out-of-date numbers regarding tax revenue and to-be-approved-in-the-future (hopefully) numbers regarding the Federal Stimulus Package. In addition to the Federal Stimulus Package, Rell is using the rainy day fund to balance the budget during the next year, a short term fix that will only postpone future difficulties in balancing the budget. She achieved a budget that is balanced in only the most ephemeral manner. Lesser blasted Rell's budget proposal, saying, "She needs to put forth a budget that is balanced, .... it is not fiscally responsible to ignore the deficit."

Lesser serves on the Education Committee, the Energy and Technology Committee, and the Public Health Committee. He said that the Education Committee is looking at ways that the state could reduce mandates which might increase the cost of education in Middletown, such as delaying the implementation of a requirement that students suspended from school serve their suspensions within the school instead of on the streets.

Some of Rell's budget proposals are likely to impact life in Middletown in ways outside of the direct effects on the municipal funding. For example, in her budget Rell has proposed consolidations of state-funded institutions such as courthouses, schools, and treatment facilities. These consolidations may lead to larger state facilities in Middletown. Lesser is keeping a watchful eye on these parts of the budget proposal, and how they will impact our city.

Information about Representative Lesser's legislative activities, as well as his contact information, is available through his web site, and he told me he would be happy to hear from his Middletown constituents about issues of importance to us.

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."

The state budget and Middletown

Middletown officials are nervously awaiting the release today of Governor Rell's state budget. Municipal aid is a very large portion of the State's budget, in the current fiscal year approximately $2.3 billion is targeted towards municipalities. Middletown received nearly $31 million of this (perhaps not coincidentally, this is 1.3% of the total, and Middletown has 1.3% of the state's population). The money comes to Middletown in the form of grants for specific projects, the chart below shows the proportion of the Middletown $31 million allocated through specific programs.

(I prepared this chart from data available through the governor's office.)

Each of the categories of state funding is influenced by a formula approved by the legislature.

• Educational Cost Sharing grants are given on a sliding scale determined by the town grand list, population, and income.
• PILOT (payments in lieu of taxes) is determined by the value of state-owned land in town, and a specified percentage of the property tax that would be paid by a private sector owner (100% for state prisons, 65% for Connecticut Valley Hospital, 77% for private colleges and general hospitals, and 45% for all other state-owned property).
• Mashantucket Pequot and Mohegan money is a bonus to the towns based on numbers similar to those used above.
• Adult Education is determined on a similar sliding scale to the Educational Cost Sharing grants.
• Public School Transportation is based on local wealth and is determined by a percentage determined the ranking of town wealth (the wealthiest 17 towns get nothing).
• Local Capital Improvement grants are given to towns that apply for reimbursement for approved projects.
• Town Aid Road is determined by population and miles of road.

The budget to be released today will likely have significant cuts from the current year's budget, to make up for a shortfall in revenue. Middletown officials are bracing for a loss of as much as $6 million in state funding.

[NOTE ADDED, 2/4/09, 7:00AM: The Courant is reporting that Governor Rell will not be cutting the major education grant.]