Executive Summary of Governor’s Proposed State Budget: Impact on Towns and Cities FY 07-08 & FY 08-09

The Good News for Towns & Cities

1. Major new investments in pre-K–12 public education
   1. $1.1 billion (over 5 years) for the ECS grant: +$228 million in FY 07-08 (14%).
   2. Full-funding of the Special Education Excess Cost – student based grant: +$18 million in FY 07-08 (17%).
   3. Increases in per student magnet school grants each year over 5 years: +$12 million in FY 07-08 (14%).
   4. Increases in OPEN Choice grants each year over five years: +$3 million in FY 07-08 (28%).
   5. Increase in funding for priority school districts: +$5 million in FY 07-08 (4%).
   6. Increase in funding for Vocational Agriculture program: +$697,000 in FY 07-08 (31%).
   7. Universal pre-school for children from low-income families: +$17 million in FY 07-08 (dna).
   8. New money for textbooks and deferred maintenance of schools: +$50 million in FY 07-08 (dna).
2. Proposed elimination of the property tax on most cars
   • Phase-in of elimination of the local property tax on most cars (over 5 years)
   • Reimbursement from special state fund using the State’s casino payments
   • All privately owned passenger vehicles, including pick-up trucks would be included
   • Towns would submit reimbursement forms to the State, rather than receive a reimbursement based on a complex formula (as proposed last year).
3. Enhanced Planning Capacity at the State and Regional Levels a. More money for RPOs and more money for GIS systems: +$3 million in FY 07-08.
4. New general obligation bonding for the Clean Water Fund: +$70 million in FY 07-08.
5. Increased general obligation bonding for the purchase of open space: +$10 million in FY 07-08.
6. PILOT for manufacturing machinery and equipment (MME) would increase by $30.6 million in FY 07-08 (60.5%); all of the increase would replace property taxes that would otherwise be collected.

The Bad News for Towns & Cities

1. Over $60 million in cuts to many non-education grant programs in FY 07-08
   1. PILOT for Private Colleges and Hospitals would decrease by $5.3 million in FY 07-08 (-4%).
   2. PILOT for State-owned Property would decrease by $5.3 million in FY 07-08 (-6.5%).
   3. Mashantucket Pequot-Mohegan grant would decrease by $4.8 million in FY 07-08 (-5.3%).
   4. Town Aid Road grant would decrease by $8 million (26.7%) in FY 07-08.
   5. Property Tax Relief grant would be eliminated: -$33 million (-100%). This grant was intended as a one-time grant in anticipation of the State increasing non-education aid to municipalities in FY 08 and beyond.
   6. DECD Housing PILOT and Tax Abatement Programs would be eliminated in FY 07-08: $3.9 million in FY 08 (-100%).
   7. New Casino Assistance Revenue (CAR) grant would deliver $99.9 million in new aid, but all of the new aid would replace property taxes that would otherwise be collected on privately owned passenger vehicles in FY 07-08.
2. Proposed Elimination of the property tax on most cars
   1. The first reimbursement payment would occur in November 2007, presenting cash-flow problems for some municipalities. Eventually, reimbursements would be made in November, the following January, the following April, and the following June. The cash-flow problem with respect to reimbursement would remain.
   2. In year-five of the phase-in, the State would replace the existing Mashantucket Pequot-Mohegan grant with a “Supplemental Municipal Assistance” grant and might still have to transfer money from the general fund to finance the entire reimbursement.
3. The Governor would phase-out the property tax credit against personal income taxes to help pay for the car-tax plan, with an exception for qualifying seniors.
4. School Construction reimbursements would fall from the current range (20% - 80%, 95% for magnet schools) to (15% - 65%, 80% for magnet schools).
5. Reductions in authorizations for the following bonded grant programs: Urban Act ($-25 million), STEAP (-$10 million). In addition, such bonding used for economic development projects would now have to meet the criteria established by the State’s Responsible Growth Task Force. Although the $70 million in g.o. bonding for Clean Water is a big step forward, estimates are that it falls far short of the $157 million identified by DEP as needed for 07-08.
6. The Special Education Excess Cost – Equity grant would be eliminated in FY 07-08: -$4 million in FY 07-08 (-100%). The grant reimburses municipalities that have special education costs that exceed the state average.

Related Story: Detailed analysis of proposed muncipal grants