State funds in flux, aldermen eye cuts

As New Haven aldermen discussed the details of the mayor’s budget proposal Monday evening, a possible $10 million shortfall was at the back of their minds — as was a proposal to allow New Haven to implement a so-called “penny tax.”

Several aldermen have said in recent weeks that a 1-percent increase in the sales tax would likely eliminate the gap in the mayor’s $466 million budget, which had counted on $10 million in Payment In Lieu Of Taxes, or PILOT, funding from the state that legislators declined to include in the state budget last week.

Because it is doubtful that the city will receive the $10 million, which Mayor John DeStefano Jr. requested from the state, aldermen spent last night’s Finance Committee workshop on the lookout for budget items to parse and eliminate in order to avoid running a deficit in fiscal 2009.

Ward 25 Alderwoman Ina Silverman, the committee’s vice president, said that although the sales tax could fill the hole, a proposal for such a tax is not a cure-all.

“I’m not sure it’s a good idea,” she said after the meeting. “I’m not sure I want to let the state off the hook that easily. The sales tax is a regressive tax, and [the funding] comes out of pockets of the people who can least afford it.”

She said she would rather see the state fulfill its obligation by providing PILOT funds, which reimburse cities for property taxes lost to nonprofit entities not subject to such taxes. But state legislators made it clear during the appropriations hearings last week that that money is unlikely to be forthcoming.

Still, Silverman said, there is an expectation at the city level that the sales-tax proposal — which, if passed by the state legislature, would permit individual municipalities to levy their own sales taxes — will solve the city’s immediate problems. Currently, all sales taxes are levied and collected by the state.

State Finance, Revenue and Bonding Committee co-Chair Cameron Staples said Sunday evening that the Committee will decide Wednesday whether the penny-tax proposal will move forward. It is impossible to know ahead of time how such a change would affect New Haven’s budget, he said.

“The revenue [from the tax] would depend on the total sales generated in New Haven,” he said, “but the bigger question is whether there is enough support [among legislators]. … We’re trying gauge whether there is.”

Staples has also said he would rather increase PILOT funding but that the political will to do so is unlikely to materialize.

In the meantime, aldermen pored over small-ticket items in DeStefano’s proposed city budget that might be able to be eliminated without prompting too much discussion. Among those items were small payments, often no more than a few thousand dollars, to local community groups. At the workshop the aldermen discussed cutting funding, but will not decide on the final budget for several weeks.

Ward 13 Alderman Alex Rhodeen said that although these items do not make a large dent in the $10 million hole, they are easy targets that are easy for aldermen to agree on.

“The small stuff is identifiable, and you can make a quick decision,” he said.

But he cautioned that the city needs to avoid panicking and reducing funding wherever the opportunity arises.

“A dollar spent is not always a dollar wasted. You can’t fall into the belief that cutting $1 million is always a good thing,” he said, invoking memories of growing up in New Haven, when he said the city’s financial support of downtown declined and crime rose. “[In] the early ’90s, when they cut everything … it was like putting up a giant sign that New Haven was closed. It was a mess, and we can’t afford to go out of business right now just because money is tight.”

Since last fall, alderman have also discussed how to save money on healthcare and pension programs for city workers, but those issues involve contractual negotiations and cannot be modified unilaterally, or by one level of legislation.

An analysis presented at the meeting by members of the city’s Finance Department showed that between 2000 and 2007, the percentage of city’s overall benefits that comprise medical benefits has fallen from 96.01 percent to 88.52 percent.

Still, over the same time period, the raw figures spent on medical benefits have increased dramatically, to over $49 million from around $24 million.

Without state aid, cutting services may be the only way to go, Silverman said.

The committee will hold another workshop Wednesday to continue its debriefing on the budget by various city departments.

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