Despite all the unknowns and projections of draconian cuts to Newtown's intragovernmental revenues from the state that officials still believe will total around $3 million in the next fiscal cycle, the Legislative Council took action March 29 to begin finalizing a local spending plan that will lower spending incrementally - 0.6 percent below the current year.

According to Finance Director Robert Tait, when Wednesday's council meeting drew to a close the current local municipal budget increase stood at zero, and the school district's budget was reduced by 0.9 percent. If those spending plans sustain through final council deliberations on April 5, and are approved by voters at the April 25 referendum, the net tax increase will be 0.93 percent and will bump up the mill rate from 33.6 to 33.91.

A mill represents one dollar in taxation for every $1,000 in taxable property.

A couple of factors may permit an even greater reduction, but those numbers will become clear in the coming days as the local grand list is finalized, and negotiations for the annual town liability insurance premium are completed. Mr Tait said he expects any further reductions will be fractional, however.

In an attempt to explain the complex series of actions that further reduced spending projections in the face of possible major state cuts to Newtown, the finance director said that during the budget formulation process he was able to reduce intergovernmental revenues by $907,000 without any effect on the budget because of anticipated grand list revenue.

Council Chair Mary Ann Jacob said such action would not be possible without the success Newtown has seen increasing the grand list through economic development initiatives. The grand list represents the value of all taxable Newtown property.

Mr Tait added that the bulk of the reductions the council was able to endorse March 29 resulted from increases in state special education grants to Newtown, while other reductions enabled the council to reduce an estimate for Education Cost Sharing revenue by $1.5 million.

One of the most onerous actions threatened in Governor Dannel P. Malloy's proposed state budget - a mandate that would force municipalities to come up with one-third of state teacher pension contributions in the next fiscal cycle - was addressed in a resolution by Council Vice Chair Paul Lundquist. If that state mandate is passed, it would shift an added $3 million burden to Newtown taxpayers next year, and officials feared it could open the door for the state to eventually shift as much as 100 percent of teacher pension contributions to municipalities in the coming years.

Mr Lundquist's motion recognized that the mechanism for funding the teacher's retirement pension program since approximately 1937 has been set forth in state statute, which states that teacher pension funding "shall be exclusively by contributions by members, appropriations by the General Assembly, the proceeds of bonds and earnings of system."

The language also affirms that nowhere in the authorizing statutes is there a requirement for any funding from the various municipalities of the state. As a result, the council is unanimously and "strongly opposed to the Governor's proposed budget as regards the funding of the TRS by any municipality source or contribution whatsoever."

School Funding Pivot

The next order of business was a resolution drafted by Ms Jacob, and moved by Councilman Ryan Knapp.

The complex action recognized that the state announced a budget proposal that will redistribute revenues related to Education Funding and other intergovernmental revenues; and Newtown stands to lose a net of $3,814,563 in revenue.

As a result, the motion requested the council to reduce Education Cost Sharing Grant Revenue (Page 58 of BOS Budget Book) by $1,500,000; and to reduce the Board of Education Budget line item (Page 270 of the BOS Budget Book) by $1,031,481.

According to the motion, which passed 9-3, the $1,031,481 represents the net amount of an increase in special education grant of $2,408,508 and the elimination of the excess cost special education grant of $1,377,027.

The resolution also created a provision in the event that the final adopted state budget does not increase Newtown's special education grant by $1,031,481. If that increase does not occur, the resolution binds the council to make the Board of Education whole by using any resulting increase in the council's adopted estimated revenue - cost sharing grant (ECS) line item, and/or other budgetary means.

Mr Tait then presented a number of contingencies that detailed what officials could do if estimated intergovernmental revenues are greater, or less, after the local budget has been approved by referendum.

In the event revenues are greater, options include restoring spending on selected items by special appropriations. These items were important and necessary but due to the state crisis they were eliminated.

Items that were cut out of the budget that could be restored include local pension contributions, road renovation spending, and school district maintenance items.

However, if estimated intergovernmental revenues fall short after the budget has been approved by referendum, Mr tait offered options that included waiting for the state budget adoption, and then setting the mill rate higher to reflect the shortfall in revenues.

The downside to that scenario would be voters not getting the budget they voted on, which stated the estimated mill rate with its corresponding tax increase amount. It would put in question future referendums and the reliability of the mill rate and stated tax increase.

Such action could also result in tax bills going out late, creating a cash flow problem. Mr Tait said the town spends around $9 million in July, and revenue would be delayed because it takes a town vendor two to three weeks to mail out tax bills, and the due date of those bills is 30 days from the mailing date.

The town could also set the mill rate to the rate stated in the adopted budget because it is what voters endorsed. Then if a shortfall occurs, officials could take steps to make the effect on the fund balance as minimal as possible; reduce spending where possible; delay hiring; reduce operations in areas that would have the least impact; increase user fees; delay any new programs; and/or delay capital projects.

The Board of Selectmen could also endorse sending out a supplemental tax bill. Mr Tait said this action would increase estimated current year taxes and decrease estimated intergovernmental taxes.

This would not affect appropriations, but the finance director suspects that it would not be well received by the voters.

Officials could also leave the budget and spending as approved. The town fund balance will naturally be decreased by the budget shortfall during the accounting closing process, but no appropriation is involved.

Or the town could take a hybrid approach by combining elements of the first two approaches. That budget spending approach would be more realistic or provide less of an impact, because supplemental bill would be smaller and maybe accepted.

Committee Recommendations

Armed with that information, the council moved to vote on recommendations from its budget committees. Finance and Administration Committee Chairman Anthony Filiato moved a total of $395,066 in reductions - $133,030 from pension contributions and $63,630 from the Medical Self Insurance contribution, which passed 10-2. Also, $188,406 from debt service; and $10,000 from the Outside Agency Contribution line, which would affect the Edmond Town Hall allocation. Those reductions passed unanimously.

First Selectman Pat Llodra reminded the council that the action did not result in Newtown underfunding its pension contribution.

"We are not taking the recommendations from the new [pension] consultant," she said. The town was poised to begin make recommended contribution changes over the next three years, but the council's action simply delayed the implementation of those changes by one year.

Next, Municipal Operations Chairman Dan Wiedemann moved a $250,000 reduction to the Highway Department Roads request, and reduced police contractual services by $20,000. That motion passed 11-1.

Finally, Education Committee Chairman Neil Chaudhary moved a single school budget reduction of $800,000.

Although the council has no line item authority over the school district spending plan, during deliberations that included Superintendent of School Joseph V. Erardi, Jr, school board Chairman Keith Alexander, and other school officials, it was determined that savings could be targeted in specific areas including: taking $265,000 from an anticipated $400,000 district surplus; $272,000 by delaying repairs that would not affect the safety or security of students or staff; $35,000 from the pay-to-play allocation; $133,000 from the self-insurance line due to anticipated lower claims; and $55,000 from a pension contribution.

Following discussions with the council committee, Dr Erardi issued a memo that read, in part, "My takeaway last evening was collaboration and partnership with the end-of-the-evening recommendation being one that preserves class size, programs, and staffing. As you know the LC does not have line item discretion (by statute) to the BOE's spending plan. There are calculated risks with this recommendation; however, with the unknowns in Hartford, I plan to inform the school board that I endorse the work by Dr Chaudhary and his committee."

During the full council meeting, Dr Erardi said, "In the world we are in, the school board is not happy and the council is unhappy - when you hit that sweet spot of unhappiness, it means were doing a good job."

He added that the $800,000 reduction "does not impact teaching, learning, or potentially staffing."

Councilman Ryan Knapp added that the reductions being taken overall, "mitigates the blow to taxpayers faced with this reduction in state aid. Next year we'll have time to plan and will have time to pivot to the challenge."

During the meeting, the first selectman also acknowledged that because of the uncertainty in Hartford, the town, school district, and officials are being forced to consider ignoring or delaying best practices and recommendations. And she concurred with Mr Knapp that once this year's local budget actions are complete, there will be time to analyze and plan for future contingencies as the state's own financial future plays out.