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06/20/2018 08:45 AMWhen the General Assembly managed to pass the state budget for the coming fiscal year by the close of session in early May, towns like Madison were both surprised and pleased to see significantly more state aid coming their way than originally anticipated. However, while the budget and pending legislation aimed to protect part of that state aid, Governor Dannel Malloy recently knocked off one level of protection with a veto.
Before the bipartisan budget was set and approved by the General Assembly, legislators put forward a bill that would have prevented Malloy or any future governor from having the ability to cut Education Cost Sharing (ECS)—the primary grant the state uses to help municipalities run their schools—funding in the middle of the fiscal year. Legislators have said the mid-year cuts can leave towns and boards of education scrambling to cover cost mid-year within their fixed municipal budgets and this legislation would prevent that problem.
Malloy, on the other hand, vetoed the bill on June 1, claiming that because the legislature relies on “lapses,” savings that have to be found by the executive branch within an approved budget, he only has so many places to go.
“If the legislature wishes to provide additional stability and predictability to cities and towns in formulating their budgets, the best way to do so is to pass a state budget that identifies specific savings or additional revenue to pay for the level of assistance it wishes to provide,” Malloy wrote in the veto message.
The legislature passed the ECS protection bill with veto-proof majorities, meaning two-thirds of both the House and the Senate approved the bill, and could go back into session to override the governor’s veto, but the General Assembly is not going back in and will let the veto stand. Why? Language in the budget passed by the legislature and signed by the governor has the same protections built in for ECS funding that the protection bill tried to provide, but the protections in the budget only last for the coming fiscal year.
“Obviously most of us were disappointed by the governor’s veto,” said State Representative Noreen Kokoruda (R-101). “Our boards of education need predictability and our towns need stability. This legislation would have protected our education funds from any shortsighted, mid-year cuts. Fortunately we included as part of our adjusted budget, language that also protects our towns and our students’ for this year. Next session I’m sure providing this protection long term will be a top priority in the new biennial budget for many of us.”
The Madison Element
Some have questioned why this matters to Madison, a town that has seen a dramatic decline in ECS funding over the past two years to the point where now the town does not count on any ECS dollars coming in.
When the Board of Finance (BOF) built the town budget, the only numbers it had to work with regarding state aid came from Malloy’s budget proposal, which cut Madison’s state aid by more than 90 percent, and the historical knowledge that Madison has seen a dramatic decline in all state aid over the last few years.
In the approved state budget, Madison ended up receiving about $417,000 in ECS dollars, as well at roughly $295,000 in PILOT funds and roughly $176,000 for the Municipal Stabilization Grant.
Since the town wasn’t counting on any of that money to offset expenditures, the BOF began thinking about creative ways to use all of the state aid money to help the town in the long term. At a BOF meeting in May, BOF Chair Jean Fitzgerald said she would like to see the ECS funds used to help prepare the town for potential costly problems down the road.
“My suggestion to the board is that we have a lot of unknowns coming from the Board of Education,” she said. “It might be in our best interest to create a town line reserve account and put that money in there. There are some things, for example the pensions, that we are unclear of what is going to happen with that and it could have a huge impact on the town if the responsibility is put back on the towns.
“It would be in our best interest to create an account that would be solely for the purpose of protecting us from anything that might come from the state,” she continued. “Since the money is earmarked for education, I think that $417,000 could nicely fit into the beginning of that account.”
In Connecticut, the state handles teacher pensions, not the municipalities. However, as the state struggles with a deficit and other financial problems, the governor suggested in a prior year that towns should have to start carrying part of the pension burden. While the governor’s suggestion didn’t pan out, if Madison were to have to suddenly assume part of the pension, the hit could be roughly $3 million in a single year.
Fitzgerald said while there would have to be a lot of conversations before municipalities had to start paying a portion of the pensions, since the state is unprepared to pay the pensions those conversations might not be far away.
“I think it’s in our best interest because I really do believe it’s inevitable,” she said. “We want to be looking forward and forecasting our needs and this is a great example of how we can do that with the Board of Education.”
The BOF was expected to take up more formal discussions of what to do with the money this month, but is now unlikely to make any formal decisions until the town sees those ECS dollars sitting in its bank account.
“The state has promised funds in the past and then created hold-backs mid-year,” said Fitzgerald. “In the face of the current economic state of Connecticut, the BOF believes it is in the best interest of the town to wait until we actually receive the funds before we plan on how to use them…In addition to our past experience with the state, the governor recently vetoed a bill that would, in the future, protect ECS funds from mid-year hold-backs. This veto validated for us that our approach to state funds is appropriate and fiscally responsible.”