Municipal leaders pushing for change in spending cap

Municipal leaders pushing for change in spending cap

Waterbury Republican-American, March 2, 2016

BY PAUL HUGHES

HARTFORD — Mayors and first selectmen are pushing for changes to a municipal spending cap that the legislature imposed last year over the objections of cities and towns.

The suggested revisions would add more exemptions, allow for waivers to spend more when unforeseen expenses occur and permit a local override of the cap. Local leaders say there is time to make changes because municipal spending cap is not due to take effect until the 2018 fiscal year.

The spending limit is tied to a new revenue sharing program, and the state government will dock the grants of municipalities that exceed the cap 50 cents for every dollar that is spent over it. Town and city leaders are always bristling over mandates and finger-waving coming from Hartford, so being told how much to spend and the threat of being penalized riles municipal sensibilities even more.

"Get your own house in order. We don't have deficits in our budgets," said Danbury Mayor Mark Boughton, president of the Connecticut Conference of Municipalities. The state ran a $113.1 million deficit last year, and two new estimates are projecting shortfalls of $220 million and $266 million this year.

Confusion over the municipal spending cap is compounding the frustrations of local officials because they are unsure how it is supposed to work. The spending limit is a feature of a new revenue sharing program that was enacted last year to provide relief from property taxes. Gov. Dannel P. Malloy and the legislature dedicated a share of the sales tax to fund it.

One component of the program places a limit on local property taxes on motor vehicles. It is intended to equalize car taxes that can differ widely from community to community for the same makes and models. Towns and cities that have tax rates that exceed the statutory limit will receive offsetting grants from the Municipal Revenue Sharing Account. No capped community will suffer a loss of revenue.

Other municipalities that have tax rates below will receive grants based on a distribution formula. Towns and cities are due to start receiving revenue sharing grants in the 2017 fiscal year that starts July 1. The municipal spending cap will take effect the following fiscal year.

Starting in FY 2017-18 back to top

Starting in 2018, the governor's budget will penalize municipalities that exceed the state-mandated spending cap.

The law does not give the Office of Policy and Management discretion in applying these grant reductions. The cap limits annual increases to 2.5 percent over the spending level for the previous fiscal year, or the rate of inflation if that is greater.

By law, the cap excludes expenditures for debt service, special education, court orders or arbitration awards. There is an exception for major disasters, provided there is a presidential or gubernatorial declaration of an emergency.

Boughton and other local leaders laid out the changes that the Connecticut Conference of Municipalities is recommending for reporters and legislators Wednesday. The statewide association is asking to exclude spending due to cuts to state aid, increased costs due to state actions, arbitration awards and new unfunded mandates. It also wants an exemption for municipalities with a town meeting form of government.

CCM is proposing municipalities be allowed to apply for waivers from OPM if unforeseen circumstances require an increase in spending. Additionally, local legislative bodies should be able to override the cap by a two-thirds majority vote without a reduction in funds.