Fresh off sparring with the General Assembly, Gov. Ned Lamont now finds himself in a conflict with cities and towns.
The Connecticut Conference of Municipalities recently launched a campaign attacking the governor for allowing the state’s overreliance on property taxes to worsen and for seeking to slash summer work programs that assist the state’s troubled youths.
“There’s just this historical pattern of trying to balance the state budget within the [local] property tax,” said CCM Executive Director Joe DeLong.
Communities lose more than $400 million annually because Connecticut’s statutory education grants — including general aid, special education and funds for charter and magnet schools — haven’t kept pace with inflation, according to CCM.
Lamont, who has been governor since 2019, has done little to assist communities that have lost $19 billion in taxable property over the past decade, DeLong said. State law exempts property owned by the state and by nonprofit colleges and hospitals from local taxation.
The governor, a Greenwich Democrat and fiscal moderate, also has had both education and general government aid in his crosshairs in recent years, CCM charges.
He vetoed a 2023 measure that would have raised communities’ share of the video slot revenues Connecticut receives from tribal casinos from $51.5 million to $139.4 million. The latter roughly matches the level awarded to municipalities prior to legislative cuts in 2014.
The 2.5% increase in overall grants to municipalities Lamont proposed in the biennial budget he submitted to lawmakers in early February is “far outpaced by inflation,” and a $10 million allocation for successful summer work programs to youth would be cut in half, according to CCM.
More recently, Lamont vetoed a measure to boost $40 million in special education grants this fiscal year to local school districts because overall state spending was already on pace to exceed the constitutional cap that keeps overall appropriations in line with household income and inflation.
Facing a potential legislative override, Lamont relented and signed a second bill that awarded the funds this year after first circumventing the cap.
Still, education advocates say the $40 million is small compared with the $100 million-plus gap local schools face between special education costs and available resources and that the funding must continue and grow.
Fran Rabinowitz, executive director of the Connecticut Association of Public School Superintendents, said municipal boards of education statewide are wrapping their budget requests now for the next fiscal year and are assuming the state will continue providing the extra $40 million.
“Who would ever think they [state officials] would pull it out again?” she said.
“Districts and municipalities need consistent and predictable funding for special education in order to balance budgets and, most importantly, ensure all students with disabilities receive the supports and high-quality education they’re entitled to,” added Lisa Hammersley, executive director of the School and State Finance Project.
Still, it’s unclear whether Lamont will support a similar accounting gimmick in the next budget to again accommodate special education.
“We will consider any legislative proposals that fit within an honestly balanced framework and advance the governor’s goal of opportunity and affordability,” Chris Collibee, spokesman for the governor’s budget office, said this week.
If the governor won’t help legislators circumvent the spending cap for school aid, lawmakers must either cut other programs or force a second showdown.
The co-chairwomen of the Appropriations Committee, Rep. Toni Walker, D-New Haven, and Sen. Cathy Osten, D-Sprague, said lawmakers must find some way to maintain this extra aid to local schools in the next two fiscal years.
Losing it would have “a rollercoaster effect on the people we’re trying to help develop, which is the kids,” Walker said.
Majority Democratic legislators say the spending cap and other aggressive savings requirements need reform. These “fiscal guardrails,” as Lamont and other supporters call them, have diverted billions of dollars away from vital programs to reduce pension debt during Lamont’s tenure.
Much of the impact on education, human services and town aid has been mitigated with $2.8 billion in emergency federal COVID aid the state received in 2021, funds that could be spent outside budget cap constraints.
But that flexible pandemic relief has now been exhausted. And even before state officials began worrying about cuts in Medicaid and other federal assistance under President Donald J. Trump, they anticipated the “guardrails” would force cutbacks in core programs will still generating big surpluses to reduce pension debt.
Anticipating the battle, CCM’s Foundation for Youth recently launched an online ad urging voters to side with legislators and their communities.
The foundation is a coalition that includes: the Connecticut Business and Industry Association; the Connecticut Education Association; the United Way of Connecticut; the School and State Finance Project; and Domus Kids, a nonprofit youth development initiative.
“Despite objections from Gov. Lamont, the General Assembly courageously stood strong with a bipartisan effort, demanding a significant temporary education investment for our children with disabilities,” the commercial says. “Yet students continue facing [a] Lamont budget proposal aiming to reduce education spending across our cities and towns while cutting proven summer workforce programs for young people in half.”
CCM teamed up last fall with the Dalio Education philanthropic group to recommend dramatic new state investments — more than $950 million phased in over several years — in education, job training, mental health and other services for 119,000 disconnected or at-risk youth.
But Lamont administration officials counter that Connecticut is grappling with nearly $80 billion in long-term debt, involving not only borrowing for school construction and other capital initiatives but unfunded pension and retiree health care obligations. The retirement benefits involve a legacy of debt amassed largely over seven decades between 1939 and 2010.
Whittling that problem down requires adherence to budget controls and making difficult budget choices, they say.
Meanwhile, minority Republican legislators are putting confusing — and contradictory — pressure on Lamont.
Despite voting in overwhelming numbers for the extra special education funding despite spending cap challenges, they also recently urged the governor to stop working around the cap.
Lamont proposed another accounting maneuver in February to create a $300 million endowment next fiscal year, outside of the spending cap, to enhance early childhood development programs.
“This [endowment proposal] is an off-budget slush-fund,” Sen. Heather Somers of Groton, ranking Republican senator on the Appropriations Committee, and Senate Minority Leader Stephen Harding of Brookfield wrote in a joint statement. “It’s a fiscal guardrail-breaker and a future tax-hike-creator. … And this is now a troubling pattern for Gov. Lamont.”
But Rob Blanchard, the governor’s communications director, said “no governor has been a bigger champion for our children than Gov. Lamont.”
Administration officials also note frequently that Lamont has delivered some of the largest tax cuts in recent history:
- An income tax rate cut in 2023, the first since the mid-1990s, will deliver $370 million this fiscal year, about $300 to the typical middle class family.
- A state income tax credit for the working poor raised two years ago to one of the largest in the nation, delivering more than $200 extra, on average, to about 185,000 households each year.
- And another income tax credit, which offsets a portion of middle-income households’ property tax bills. Lamont boosted it from $200 to $300 in 2022, and proposed in February adding $50 more and broadening eligibility.
But DeLong said state officials ultimately must address the biggest fiscal problem facing state government: a system that pays for too many services and programs at the local level with municipal property taxes.
Not only is the property tax regressive — meaning rates aren’t higher on the wealthy and lower on the poor — but they also can easily be shifted. For example, a landlord can shift property tax burdens onto tenants via rent charges.
Connecticut’s last tax fairness study, issued late year, found the lowest-earning 10% of households effectively spent almost 40% of their income in 2020 to cover state or municipal tax burdens, more than five times the rate faced by Connecticut’s highest earners and two-and-a-half times the statewide average.
After a decade that has seen “billions of dollars of tax increases have been pushed down to the local level to end up going into the property tax,” DeLong added, a proposed $50 income tax cut is “insulting, it really is.”