Governor Dannel Malloy's proposed $40.1 billion, two-year state budget closes a projected $3.6 billion deficit without the broad, job-killing tax increases used to plug huge gaps in 2011 and 2015.

One of the budget proposal's initiatives attracting a lot of commentary is the change to municipal aid.

Connecticut municipal aid
The Governor's proposed budget shifts more than $820 million in teachers' retirement fund payments to cities and towns. Source: Office of Policy and Management.

The budget proposes shifting 30% of the cost of pensions and healthcare benefits for retired educators onto cities and towns—roughly $407 million in fiscal 2018 and $421 million the following year.

It also revises the state’s education formula, in most cases leaving poorer cities with more state aid, and wealthier towns with less.

This raises concerns that many towns will raise property taxes to make up the difference—and that property owners, including Connecticut’s small businesses, will be forced to pay more.

CBIA has said that the potential for property tax increases may pose competitive problems for many small and family-owned businesses across the state, but given the fiscal challenges facing state and many of its cities and towns, we need the debate about how to fund state and local obligations going forward.

The hope is that the legislature will take a bipartisan approach in analyzing the impact of the municipal aid changes and determine the best way for the state to balance its budget and allow municipalities, and the businesses located within them, to thrive.

CBIA will closely monitor the proposed budget as it moves through the legislative process and fight for a final bill that strengthens Connecticut's economic competitiveness and doers not hamper our members ability to succeed and grow here.

For more information about the budget and state spending, contact CBIA’s Pete Gioia (860.244.1945) | @CTEconomist

For more information about state tax policy, contact CBIA’s Louise DiCocco (203.589.6515) | @LouiseDiCocco

Filed Under: State Spending, Taxes

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