Good morning. I am Betsy Paterson, Mayor of Mansfield and President of the Connecticut Conference of Municipalities. I thank you, on behalf of towns and cities across the state, for giving us this special opportunity to speak directly to you about the proposed state budget and its potential impacts on municipalities.

Each year this dialogue is critically important to the residents and businesses we both serve. As officials who have to balance our own budgets, we appreciate the difficult task before you.

Whether it’s growing school enrollments, unsatisfactory local bridges, rising energy and insurance costs or new state mandates, local governments in Connecticut face a daunting series of challenges and problems.

Local officials face such problems every day – the decisions we make affect businesses, homeowners and children and it becomes ever more difficult as costs and problems increase and state financial and technical assistance fail to keep pace.

Some call it whining. But to view local officials as another constituent group crying out for more money is to severely misunderstand the function of local government in delivering services that make a difference in our lives. Investments in the quality-of-life in Connecticut’s hometowns, schools and economic environment matter to the people who live here and the businesses that work here.

• State actions to help communities shouldn’t be viewed as being to the benefit of the elected leaders of those towns and cities, but as helping the entire state.

THE SECOND YEAR OF THE BIENNIAL BUDGET

Make no mistake: the second year of the biennial budget spells trouble for residential and business property taxpayers. Unfortunately, the levels of state aid to municipalities are insufficient to meet the growing costs to towns and cities.

Governor Rell has proposed virtually no changes in the levels of statutory formula grants. That simply won’t do the job. Municipal costs – for personnel, education, insurance and energy won’t stop rising because state funding is flat. While the Governor notes that her proposals contain no tax increase for Connecticut residents, failure to significantly increase municipal aid – both education and non-education aid – will result in statewide property tax hikes and cutbacks in local services.

The overall increase in municipal aid proposed by the Governor is only 3.6% ($98 million) statewide. Factoring in inflation, state aid would increase by only 1.4 percent ($96 million.) Again, adjusted for inflation, education grants would increase by only 2% ($95.3 million). And most non-education grant programs have no scheduled increase at all for the next fiscal year. In real dollar terms, the Governor would cut these grants by 2.1% (-$8.4 million).

RESIDENTS AND BUSINESSES NEED HELP NOW

We know there is concern about the state’s long-term financial picture. We know that comprehensive solutions to the property tax problem are complex and will have to be undertaken over time. But residents and businesses of Connecticut cannot wait for long-term solutions. They need help paying their property tax bills now – in 2008:

• Senior citizens, who have retired on fixed incomes after years of work and productivity, find that the value of their homes drives up their property tax bills -- making it impossible for them to stay in the same houses in which they raised their families and in the communities they helped nurture.
• Middle-class working people -- already pinched by high prices for gas and oil, college tuition, health insurance and more – find that their assessments and property taxes are rising faster than their incomes.
• Teachers, firefighters and other local government employees cannot afford to live in the communities in which they work. Housing prices are one factor; high property taxes are another.
• Children entering the workforce cannot afford to live in their hometowns or the state. Again, too high property taxes are an important factor contributing to this diaspora.
• Lower-income families, including thousands who have been victimized by sub-prime mortgage schemes, find themselves in towns and cities with high service demands and sky-high property taxes and a lack of affordable housing.
• Small business owners find that their biggest tax liability, the property tax, rises each year along with the other costs of doing business in Connecticut.

Although the 2008 General Assembly session is a "short" one, there is a need for immediate action to provide property tax relief. The short session should not be an excuse to postpone action for another year.

WHAT YOU CAN DO: CCM’S SEVEN-POINT PLAN

CCM has proposed a seven-point plan that can be enacted in 2008. It would keep pressure off of residential and business property taxpayers while Connecticut debates longer-term state-local tax reform. Our citizens and businesses are crying out for help – the time to act is today, not tomorrow.

Several aspects of that plan come under the purview of your Committee:

• Increase Aid for Pre K-12 Education

  Education costs are responsible, on average, for 67% of municipal budgets statewide.

  Build on the increases made last year to greatly increase the State’s share of education costs (through ECS, Special Education, categorical and other grants). The State’s share of such costs is scheduled to decline from 43.1% this year to 41% next year unless funding is increased.

  Specifically, implement the remainder of the recommendations of the Governor’s Task Force on Education Funding. Provide, and commit to, a clear timetable for fully funding the ECS grant for all municipalities, and reduce the special education excess cost reimbursement threshold from 4 1/2 times to 3 times each district’s average per-pupil expenditure.

• Increase Aid to Municipal General Governments

  Some grants, such as the Pequot-Mohegan grant and Town Aid Roads, have never fully recovered from the massive mid-year cuts in 2003. Funding should be returned to at least pre-2003 levels, adjusted for inflation.

  Several state programs reimburse municipalities for state-mandated property tax exemptions. But funding for these programs for payments-in-lieu-of-taxes (PILOTs) has not kept pace with the need nor the statutory commitment.

  • The PILOT for Private Colleges and Hospitals will, under the biennial budget, reimburse towns for just 52% of lost taxes. That’s down from 55% this year, and far off the statutory commitment of 77%.
  • The PILOT for State Property will reimburse affected municipalities for 33% of lost real estate taxes next year under the biennial budget, down from 35% this year, and well below the statutory commitment of 45%.
  • The PILOT and Tax Abatement programs for low-income housing were eliminated in the biennial budget and should be restored.

  Funding for PILOT programs should be restored at least to their statutory levels this legislative session, with the goal of full funding by FY 11.

• Enact Mandates Reform

  Governor Rell has proposed a strong and much-needed mandates reform package that could help reduce many of the cost drivers at the local level – and only one of them would have any cost to the State. They can all be enacted this year. Her proposals would:

  • Enact a statutory prohibition against new unfunded mandates unless there is a 2/3 vote of the General Assembly.
  • Increase prevailing wage thresholds from $400,000 to $1 million for new construction, and from $100,000 to $500,000 for repairs or alterations, with the amounts indexed to inflation and adjusted annually.
  • Amend the Teacher Negotiation Act so that stipulated agreements (agreements voluntarily reached between school boards and teachers union within the arbitration process) go to local legislative bodies where they can be rejected by a 2/3 vote. In regional school districts it would be by a 2/3 vote of the legislative bodies in each town.
  • Eliminate municipal responsibility to remove and store possessions of evicted tenants – this responsibility would be shifted to state marshals.
  • Allow municipalities and their boards and commissions with websites to post certain notices on-line rather than in newspapers.
• Increase Financial and Technical Incentives for Regional Cooperation and Coordination

  Long-term efforts at property tax relief and reform must include ways to make government more efficient and harness the strength of regions to solve problems rather than leaving each municipality to their own devices. In 2008 the State could:

  • Increase staffing and other resources to the new state Office of Responsible Growth so that it can fulfill its mission to (a) provide needed technical and financial assistance to towns and cities and regions, and (b) facilitate smarter land use decision-making in our state.
  • Create incentives for the voluntary establishment of newly empowered councils of government (COGs) in each of the 15 planning regions so that municipal CEOs in each region meet, on a regular basis, to discuss and act on issues of mutual concern – including economic development, land-use planning and joint service delivery.
  • Enable such COGs to (a) more easily share the property tax benefits of economic development in order to encourage cooperation and responsible growth, (b) share a portion of state sales tax and other revenues collected within a region, and (c) exercise other powers that encourage intermunicipal cooperation, decision-making and regional success.
  • Create a state incentive program to help pay for one-time capital expenditures for equipment for joint municipal undertakings.
  • Continue and increase funding for the Regional Incentive Performance Grant. Governor Rell has proposed $5 million in new funding for this popular program.

  Authorize COGs to (a) bond for capital projects that would benefit the entire region, (b) work jointly on planning and zoning issues, and make regional land-use decisions, and (c) negotiate master contracts for the teachers and municipal employees within the regions with local approval.

The remaining items in the seven-point plan are:

• Make Permanent the Present Rates of the Real Estate Conveyance Tax Unless legislation is passed, municipalities stand to lose up to $40 million in revenue now being raised by the real estate conveyance tax – the only non-property tax towns and cities can levy.
• Direct Aid to Homeowners

  Establish PILOT programs in our most-distressed towns and cities that provide direct relief to low- and moderate-income homeowners. This could be done, for example, through a Homestead Exemption or Property Tax Circuit –Breaker.

  Such direct aid could be expanded statewide to eligible homeowners by FY 11.

• Improve Connecticut’s Policy Development Capabilities

  The State this year should (i) work to improve government efficiency by creating a State Data Council to integrate state and municipal information databases for policy development and other purposes, and (ii) implement a Tax Incidence Study so that policymakers can learn the impacts on communities, individuals and businesses of proposed changes to the state-local tax system.

All too often there are some state-level officials who say that all local officials do is whine and complain. They call CCM the "Conference of Crying Mayors".

When members of the public think about the public services that affect their lives, they are generally thinking of services provided by local governments: public safety (police and fire, code enforcement), health, education, roads, solid waste and recycling collection, and more. When polled they say that they trust and appreciate local government more than the State and federal governments.

That’s not surprising. In addition to providing the services with which the public comes in contact on a daily basis, citizens feel a stronger sense of control over local government – it’s closer to them, their councilmembers, mayor or selectmen are people they may know. If there’s a problem, they call or drive down the street to town hall. Further, they understand the smaller numbers of a municipal government budget much better than they do those of the larger levels of government. They often vote directly on their town budgets, which reflect the priorities of the electorate (an overwhelming number of towns, at least 134, have referenda either automatically or by petition or a vote of the legislative body).

That is not to disparage the difficult jobs of state and federal leaders. They deserve respect and appreciation for the jobs they do. But it is to point out that when town and city leaders go to Hartford to point out local needs, it isn’t to get someone else to bail them out – it’s because the needs are real and have a direct impact on the people of the state and the quality of life in Connecticut’s hometowns.

The state of Connecticut’s towns and cities hang in the balance. They face an array of problems and growing expenses, with a limited ability to pay for them. The way in which the state responds is crucial to determining how well local leaders can respond to what their citizens and businesses want and need.

Mayors, first selectmen, town/city managers and other local officials view themselves as partners in the governance of our state. It isn’t whining when we point out they need help. It’s pointing the way to a better Connecticut.