This analysis summarizes several major proposals affecting towns and cities announced today by Governor Rell as part of her proposed FY 09 state budget revisions.

Please note that this is an overview of the proposals. Details and statutory language are not yet available. CCM will be scrutinizing those details in the coming days and will keep members apprised of new information.

1. Change in State Formula Aid

   Governor Rell did not propose any significant changes in state formula aid from the levels appropriated for next year (FY 09) in the biennial budget that was enacted in 2007.

   Note that this does not mean that what each municipality will receive will not change - changes in formula factors may results in shifts of funds from one municipality to another (for example, in the PILOT programs, the value of newly added property in one community may mean a reduced grant total for the other recipients).

   Municipal General Government		FY 09
   Town Aid Roads	-- No change from FY 07-08	$30,000,000
   Local Capital Improvement	-- No change from FY 07-8	$30,000,000
   PILOT - State Property	-- Slight change from FY 07-08	$82,932,785
   PILOT - Colleges&Hospitals	-- Slight change from FY 07-08	$122,204,518
   PILOT - Manufacturing	-- Reduction Due To Change in Amount Needed For Reimbursements	$80,000,000
   Pequot - Mohegan	-- No change from FY 07-08	$92,998,519
   DECD PILOT/Tax Abatement	-- Not restored ($3.9 million had been eliminated this year)	-
   Education
   ECS	-- $80 Million increase over FY 07-08	$1,889,187,936
   Special Education (Excess Cost, Student based)	-- No change from FY 07-08	$133,891,451
   Special Education (Excess Cost - Equity)	-- Not restored ($4 million had been eliminated this year)	-
   Priority School Districts	-- $1.8 million reduction	$122,446,970

2. Mandates Reform

   The Governor has proposed a multi-pronged mandates reform package that includes:

   • Enacting a statutory prohibition against new unfunded mandates unless there is a 2/3 vote of the General Assembly. This has been a long-standing CCM Priority for 2008.
   • Increase prevailing wage thresholds to $1 million for new construction, $500,000 for repairs or alterations.
   • Amend the Teacher Negotiation Act so that stipulated agreements go to legislative body for approval.
   • Eliminate municipal responsibility to remove and store possessions of evicted tenants.
   • Allow municipalities with websites to post certain notices on-line rather than in papers.

3. Property Tax Cap As she had announced in late December, the Governor has proposed a limitation on municipal property tax increases.

   Effective 7/1/09 – municipal property tax levies would be limited to an increase of no more than 4% of what was levied the prior year.

   Effective 7/1/10 – the limit would be lowered to 3.5%

   Effective 7/1/11 – the limit would be lowered to 3% (for that year and thereafter)

   The proposal allows for certain exceptions from the cap:

   • Employee health increases of more than 8% for the same or similar benefits.
   • Utility cost increases of more than 8%.
   • Increases of more than 8% needed to fund actuarially recommended contributions to pensions or other post retirement benefits for the same or similar benefits.
   • The amount by which certain state formula aid decreased.
   • Debt service increases for capital projects over FY 08-09.
   • Expenses related to an emergency.
   • One-time costs associated with regional service initiatives (“which would not be built into the levy base”).
   • General override by a 2/3 vote of the legislative body, with a local vote to reverse or sustain that action.

   Municipalities would be allowed to opt-out of the cap for two-year periods. This would require a 2/3 vote of the legislative body and a simple majority vote of the public – by the last day of September in even-numbered years.

   Arbitrators would have an irrebuttable presumption that their decisions cannot exceed the cap, notwithstanding the ability to seek exceptions. Also, arbitrators would not be able to consider a budget reserve fund of up to 10% as available to pay arbitration awards.

4. Responsible Growth

   The Governor's budget adjustments contain several responsible or smart growth proposals, including:

   • $5 million in FY 09 for the Regional Incentive Performance Grant, which is currently funded at $8.6 million.
   • Provide that local zoning regulations be consistent with local plans of conservation & development (local option).
   • Permit municipalities to enter into voluntary Community Benefit Agreements.
   • Include funding for a model "Connecticut Responsible Growth Zoning Code".
   • Establish a Responsible Growth Cabinet to advise the Governor.
   • Establish a "Walk the Walk" program that requires at least 2% of the project total for all state-funded development projects contain provisions for "pedestrian and other non-motorized transportation improvements".
   • Statutorily define "Responsible Growth".

5. Real Estate Conveyance Tax

   The Governor was silent on extension of the present rates of the Municipal Real Estate Conveyance Tax, which are scheduled to sunset on 6/30/08, placing up to $40 million in non-property tax revenue at risk.

6. Other Significant Proposals

   The Governor proposes several other funding and other initiatives concerning municipalities:

   • State auditors would be required to review the budgets of municipalities in which total state grants exceed 35% of their budgets.
   • OPM would be required to issue best practices guidelines to assist towns in developing a five-year energy conservation and procurement plan.
   • Funding would be available for health cost containment plans, developed with bargaining units (amounts not clear).
   • A new $500,000 Municipal Operational Efficiency Study grant. Municipalities would apply to OPM for the grants, and would enter into “assistance agreements” with OPM for operational efficiency studies and audits of operations, including a five-year health care cost containment plan.
   • Municipalities would be allowed to establish property tax credits of up to $750 for volunteers 65 years of age and older (in community activities as approved by the municipalities).
   • The state’s Municipal Finance Advisory Council and OPM would provide technical assistance to municipalities and issue best practice guidelines relative to financial reporting and management.
   • Make improvements to the Municipal Auditing Act to improve the quality and timeliness of annual municipal audits.
   • Clarify and strengthen the requirements for municipalities that have cumulative general fund balance deficits.
   • Multi-year authorizations for the local school construction program.
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   CCM will keep you apprised as new information comes to light.