Greenwich could be made to give more to state
GREENWICH — For Greenwich, Gov. Dannel P. Malloy’s recent budget proposal could spell a future of difficult decisions and higher taxes.
Greenwich taxpayers could face an additional net burden of $6.6 million in fiscal year 2017-18 under the proposal that Malloy outlined in his budget address to the state House and Senate Wednesday.
Revamping Connecticut’s school funding formula was a major focus of Malloy’s 27-minute speech; the Democrat called for lawmakers to enlist in a regional effort to help the state’s troubled city schools, giving them more state funding at the expense of wealthier towns.
The education proposal is two-pronged: more grant money would shift to urban schools, while municipalities across Connecticut would pick up one third — approximately $400 million — of teachers’ pensions costs. The full cost of teachers’ pensions has traditionally been borne by the state.
In presenting his plan, Malloy singled out Greenwich, making local legislators’ eyebrows leap.
“In the current fiscal year, the state is spending $24 million to cover pension costs of teachers and administrators in our most-affluent community, Greenwich, a school district that enrolls 8,800 students,” Malloy said.
In the town that provided 10 percent of the state’s total income tax revenue last year, the comment chafed.
“Once again, he’s asking municipalities that have been footing most of the bill to pay even more,” said veteran state Rep. Fred Camillo, R-Greenwich.
Jim Lash, former first selectman and current chair of the town’s Budget Committee, called Malloy’s finger pointing at Greenwich “bizarre.”
“Greenwich is not ‘lucky,’ which is what people like to say about it,” he said. “Greenwich has processes and plans, and it doesn’t spend money it doesn’t have.”
He called this proposal a way for the state to steal from towns’ piggy banks.
“I think that was very deceptive,” he said. “It’s hard to trust a government that deceives you and thinks so little of you.”
But Chris McClure, a spokesman for the state Office of Policy and Management, said no single municipality was targeted by Malloy’s plan.
“The municipal aid calculations were based on the municipalities’ ability to pay based on ... an analysis of fund balances, debt per capita, and share of teacher pension obligations,” he said. “This analysis was objective and the outcomes are without prejudice.”
The new school funding formula would hit Greenwich’s state education grants hard.
The town’s largest funding source from the state, the Education Cost Sharing Grant, was already slashed in fiscal year 2016-17 from an anticipated $1.4 million to $136,859. For fiscal years 2017-18 and 2018-19, the grant amount is to drop to zero.
Greenwich’s second stream of state education funding is the Special Education Excess Cost Grant, which helps towns pay to educate high-need students.
In 2014-15 and 2015-16, Greenwich received $1.4 million and $727,097 in Excess Cost grants, respectively. The school district does not yet know how much it will be awarded in the current fiscal year.
Malloy’s new budget proposal replaces the Excess Cost grant with a new special education grant in 2017-18. Under his plan, Greenwich would receive nothing in that year or 2018-19.
“Revenue reductions were anticipated,” said Jim Hricay, managing director of Operations for Greenwich Public Schools. “I don’t think they were anticipated at this level.”
Malloy’s proposal for the sharing of teachers’ pension costs would land Greenwich with a $10.1 million bill in 2017-18; $10.4 million the following year.
Town officials and legislators panned the idea of municipalities paying for part of a retirement plan that they would not negotiate or control.
“The whole notion of shifting the pension burden back to the cities and the towns is one that I find completely unacceptable,” said state Sen. L. Scott Frantz, R-Greenwich. “What the state is doing or proposing here is, because of their incompetent management of the retirement system in general — not just the teachers’ pension plan but also the state employees’ retirement plan ... they’re shifting that burden back to the municipalities.”
The state has failed in its duty to fund the teachers’ pensions, said First Selectman Peter Tesei, and should make changes similar to ones many towns have made to save on retirement benefits.
“Before the state saddles municipalities with this epic unfunded liability, it should cap the existing defined benefit pension fund and create a defined contribution fund for our teachers,” he said.
Tesei advocated for the state to pass House Bill 5552, proposed by the Greenwich delegation, that would exclude retirement benefits from collective bargaining.
“The bill would give municipalities control over pension funding challenges that are being passed on to us by the state,” he said.
Lash worries that Greenwich’s pension contributions might grow over time if the proposal passes.
If the state’s financial straits prevent it from fully funding its two-thirds share of the pension cost, Lash said the pension fund will not earn the rate of return it is expected to and the total financial obligation — including towns’ one-third share — will grow.
Like a cancer, “It will metastasize,” he said. “It will become a bigger and bigger problem for all municipalities. ... I don’t want the town to be in a situation where from year to year we have no idea what our obligations are going to be.”
Carol Sutton, president of the Greenwich Education Association, worried about the effect of the proposal on teachers’ ability to access retirement money. In Connecticut, teachers do not receive Social Security.
“Suddenly the pension we have been counting on, the only pension we have, could be thrown into question,” she said. “The potential for a shortfall or a default grows exponentially. At least if the state is not funding the teachers’ retirement fund properly, the state is the target. If it’s all municipalities, it’s a little more complex.”
Impact on Greenwich
Total state funding to Greenwich is actually due to tick up slightly in 2017-18, and the town for the first time under Malloy’s proposal would be able to assess property taxes to Greenwich Hospital, an estimated $2.8 million. But many officials abhor the hospital idea, and even with the small gains, the loss of education funding and the teachers’ pension payment would add up to a net loss of $6.6 million to Greenwich taxpayers.
The town will have two choices if Malloy’s proposal passes, officials said: cut services — like the number of police officers, teachers or snow plow operators — or raise property taxes.
Making up for the net loss to Greenwich could mean up to a 4.5 percent property tax increase, if the town were to attempt to compensate solely through tax revenue, Lash said.
“That’s not what’s going to happen,” he said. “We will look at all of our options.”
Though the losses are in the education category, Lash said the town will not make the school district make up for them alone.
“In the end, the school system will surely bear some of the burden for these very large cost increases, but I don’t think the town is going to put the problems of the state Legislature on the children of Greenwich,” he said.
Board of Education Chairman Peter Sherr called Malloy’s proposals “incendiary.”
“We need to all be careful. Robin Hood economics is a cynical and dangerous game,” he said. “It may have the impact of actually undermining public schools, which is contrary to everything the governor has supported over the years.”
Malloy, in his speech, characterized the economics of the state and the economics of his proposal in a very different way than did Sherr and other representatives of Greenwich.
“You see, we are a small state and our towns are interconnected,” the governor said. “We can rise together or we can fall together. We can lift one another up, or we can drag one another down. Our future depends on the decisions we make today. This session. This year.”