As state budget negotiations in Hartford drag on into their eighth month, New Haven is preparing to weather a possible incoming fiscal storm.

Several crucial, multimillion-dollar payments from the state to the city cannot be made until the state budget is finalized, said Michael Gormany, the city’s acting budget director. The state pays New Haven roughly $60 million each year, over 10 percent of the city’s annual budget, in payment in lieu of taxes funding. The loss of these payments, which reimburse the city for tax-exempt state properties, would open a huge gap in the city’s budget, he said.

“Until the state budget crisis is resolved, we have to take it one day at a time,” Gormany said.

New Haven, which receives millions of dollars through PILOT, is one of the largest recipients of such state aid payments because it hosts a high number of nontaxable institutions, including Yale and Yale New Haven Hospital.

City spokesman Laurence Grotheer told the News that PILOT payments usually begin in early September, so the city is already paying the price for the chaos in Hartford. If the crisis is not resolved soon, Grotheer said, the city will be in serious danger of not being able to meet payroll and pay its vendors.

“Once this issue gets up to 90 or 100 days, the city starts to run out of money,” Grotheer said.

He added that virtually all sectors of city spending — including education, social services and health care — will face deep cuts if legislators in Hartford do not soon reach an agreement.

Connecticut has now missed its July 1 budget deadline by more than two months, making it one of just two states without a budget for fiscal year 2018. Even with the ratification in late August of a $1.5 billion state-employee concessions deal negotiated by Gov. Dannel Malloy, the state faces projected deficits of $1.6 billion this fiscal year and $3.5 billion over the next two.

The Connecticut House of Representatives is scheduled to vote on a budget Thursday, though Republican Senate President pro tempore Len Fasano estimates there is about a 20 percent chance that the vote does not take place. Predicting which way the vote will go is another story, he added.

“That I don’t know,” Fasano said. “I hear too many things. … It’s certainly going to have some impact.”

While lawmakers debate in Hartford, the clock is ticking for the state’s municipalities. The real crunch will begin in October, said Chris McClure, public information officer for the Malloy administration’s Office of Policy and Management. At that point, municipalities will have to go without their regular state aid payments if the governor still has not received and signed a budget from the Legislature. For small towns that lean heavily on state funds, that could mean insolvency is just a few months out on the horizon.

Until lawmakers reach an agreement, the state will continue to be funded by executive order. On June 30, Malloy signed an order declaring a fiscal emergency and appropriating funds to support the “essential functions” of state government. The bare-bones interim plan relies on deep cuts to municipal aid and social services.

Jon Greenberg jonathan.greenberg@yale.edu | @JonGreenbergYDN 

Jacob Stern jacob.stern@yale.edu | @jdkstern13 

  • Patricia Kane

    The Payment in Lieu of Taxes (PILOT) that the State is supposed to pay the City of New Haven for hosting the Yale Corp. and YNH Hosptal has never been fully funded. The exemption to Yale, dating from the 1700s when there were no other colleges in CT and subsidy was instituted so the colonists wouldn’t have to send their sons to Europe to be educated.
    Now we have a system of state colleges and still Yale lobbies to protect its exemption and its $26 billion endowment.
    The residents of New Haven can no longer afford to subsidize a multi-national corporation and a hospital that is able to pay its head $2 million plus benefits per year.

    • Nancy Morris

      Arguing that Connecticut can improve its financial position by taxing Yale and/or its endowment and/or Yale-New Haven Hospital is insane, as is the idea that Yale imposes costs on New Haven or that New Haven “subsidizes” either Yale or YNHH. New Haven is a huge net beneficiary of having both the university and the hospital within its borders. That a major non-profit hospital Corporation must pay high market compensation to its CEO is obvious. Do you think YOU could run a huge hospital corporation? Why not apply for the job, but beware the gales of laughter to follow. Arguing that YNHH should be taxed because it must pay its CEO at market rates is as witless as arguing that it should be taxed because it has to pay a lot to buy natural gas at market rates to heat its structures in Connecticut’s wintry climate.

      Connecticut and New Haven are both doomed unless the state imposes massive cuts on public employee compensation and benefits, especially pensions. And there is no sign of that happening. Connecticut and New Haven have willed their own dooms. It is your brand of thinking that has led the state and city to this precipice, and you are clearly determined to have them pushed right over the edge. Enjoy your show.

  • Walter

    Buying groceries (daily operating needs) with debt always a bad idea. Reality begins when the money runs out.

  • Sol G

    One really shouldn’t get too excited. If Connecticut avoids default and financial chaos this year, it’s doomed to go pretty soon, taking New Haven and all of the state’s most vulnerable residents down the rat hole with it. That’s one inevitable consequence of the Democrat-controlled legislature decision to essentially give the state’s resources away to its employees, and the resignation of the state’s Republican governors to that fact. There is no indication that the state will effect the big budget cuts necessary to fix the situation, especially in employee compensation and benefits. Already major businesses and wealthy and/or productive individuals are heading for the door as fast as they can manage the move. Polls report that more than forty percent of the state’s residents want to leave as soon as possible,with excessive taxes the major cited reason. Fairfield County hedge funds, what the state Democrats see as their piggy bank, are in sharp decline, as are real estate prices in that County. The legislature has even entertained taxing Yale-New Haven Hospital in denial of its non-profit status, and debated attempting to impose a flatly unconstitutional tax on Yale’s endowment. Madness and panic are all that’s left under the Hartford dome. Hartford itself will soon be insolvent, perhaps entering Chapter 9.

    New Haven is doomed. It’s a fact, baked in by the state’s Democratic majority. Get used to it. Try to think of it as some kind of opportunity.

    • Nancy Morris

      Agreed. But the situation is far worse substantively than current deficit numbers suggest because THINGS WILL BE MUCH WORSE IN THE INEVITABLE RECESSION TO COME.

      Recall that Connecticut is falling into a financial rat hole of its own devise at a time the national economy is in recovery and expanding. That expansion is already long in the tooth by historical standards, it can’t last forever. Many signs point to extensive economic bubbles perhaps preparing to burst, ushering in a recession.

      Connecticut is foundering in fair weather. Imagine what will happen if the winds of November come early!