Gov. Dannel P. Malloy unveiled his plan to close the state’s $3.2 billion deficit last week to half-hearted praise and widespread grumbling. The plan relies on $1.5 billion in tax increases, $1 billion in salary concessions from state employees and $750 million in spending reductions.
Amid the spending cuts and big tax hikes, one surprising initiative was new money for municipalities. Funded by a 0.1 percent increase in the sales tax and returned to the town of origin in an effort to diversify the revenue base of municipalities, the effort will redirect $85 million in new money to towns over the next year.
Towns with significant retail outlets like Manchester or Danbury will see a big influx of new money from the state. East Hampton’s estimated $212,219 in new revenue will have a modest impact on the town’s $38 million budget, or a .005 percent increase.
Other state aid coming into town will remain similar to last year. The state’s Payments-in-Lieu-of-Taxes (PILOT) for state-owned property are proposed to be reduced by $4,578 from $117,342 to $112,764, East Hampton’s share of state casino revenues is being reduced from $58,496 to $57,413, and aid for public school pupil transportation is being cut by 4 percent.
Looming on the horizon is the prospect of a new Education Cost Sharing formula, which Malloy promised for next year. ECS brought $7.1 million last year, or 27 percent of the total local education budget. Significant changes to the formula could bring more state aid into East Hampton, but it also could bring in less.
Like every town in the state, East Hampton faces a challenging budget environment locally and it is a welcome change for the state not to balance their budget by shifting burdens to the property tax payer at the local level. But that same property tax payer will pay significantly more in taxes and confront the same $1.5 billion brake on economic development, despite the rhetoric about Connecticut being “open for business.”
The likelihood of tax hikes also presents a challenge for local elected officials. With much more money flowing to Hartford, and some trickling out, property tax hikes would be incredibly challenging for Connecticut residents struggling to make ends meet.