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