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Rell Plan's Hidden Costs

Legislators Find Some Snags In Education Proposal

March 25, 2007
By CHRISTOPHER KEATING, Capitol Bureau Chief

It all sounded so good on Feb. 7.

But then state lawmakers and town officials started to read the fine print in Gov. M. Jodi Rell's landmark education proposal and discovered what she failed to mention in her annual budget speech:

• When Rell introduced her massive $3.4 billion education plan, many legislators reflexively believed that all the money would be earmarked for education. But Rell's administration is seeking to repeal the law that requires towns to actually spend state education money on education. If the law is overturned, those billions of dollars in new tax money could be spent on whatever town officials want - from repairing roads to cutting property taxes.
• Rell proposed a 10 percent increase in the state income tax over two years. That increase was thought to be aimed at covering the education money that would be pouring into public schools. But a good part of the increase in the first two years would fill holes in the state budget for non-education expenses.
• Many local officials are now figuring out that their residents will be paying much more in state income taxes than the towns will get back in additional state aid. "There's the perception out there that the whole increase in the income tax is going to education," said Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities, which represents the cities and towns. "In reality, it's less than half [going to the towns]."

Under Rell's plan, Greenwich taxpayers, at the high end, would give $60 million more to the state and receive $2.5 million back. Hartford, on the other hand, would pay $2 million more and get back $8.5 million, one of the best deals in the state.

• Although the increases in education money would set a record in school funding, at the same time, Rell is seeking to cut about $60 million in other grants for cities and towns.

As the initial euphoria over Rell's plans fades, Democrats are warning towns not to count their money before they receive it.

"I've told my mayor, `Take what we gave you last year and add a dollar,'" said House Speaker James Amann, a Milford Democrat. "Don't go spending that money because it's not real money."

Rell's spokesman, Christopher Cooper, said Saturday that the Connecticut Conference of Municipalities supports Rell's total proposal. He noted that, "The governor did say her budget is a complete package - income tax increases and decreases in the estate tax and car tax. She wants the legislature to debate it and make it their own. They have a right to debate those four points. As long as the investments are made in education, that is her primary concern."

"Of course it's not going to be that they agree with everything," he said.

Cooper pointed out that property tax reform and education reform are "the two biggest issues of the last 25 years." Immediate consensus on such highly complicated issues is going to be difficult, he said.

"You will be hard-pressed to find any benchmarking expert, economist or educator who doesn't agree with the governor's proposal. It's got to get done," he said. "There has always been consensus on doing it. Now that the governor is proposing it, they're hesitant. I don't know why."

Cooper also said that Rell's budget office has been working behind the scenes for weeks on proposals for providing safeguards for the new education money. He said the administration wants to ensure that the additional money leads to education improvements and property tax relief. The full details were not ready when the plan was released in February.

"The governor's goal is that education aid would be linked to real property tax reductions," Cooper said. "If the whole plan was property tax reduction, she would have proposed it that way."

Like other governors who have hyped the good news and downplayed the bad, Rell, in her Feb. 7 speech, talked extensively about the education plan and barely mentioned the tax increase, not to mention these other caveats.

In her 78-page introduction to her budget summary, only two sentences are devoted to the income tax increase. In her 39-minute budget address to the legislature last month, Rell never mentioned that her administration was seeking to change the law requiring education money to be spent on education.

"Today, I am proposing the single largest investment in education in Connecticut history," she announced then, "3.4 billion new dollars over the next five years. ... Today, I sound a clarion call on behalf of our children."

The Democrat-dominated education committee intends to begin rewriting Rell's education plan on Monday.

Referring to Rell's plan to repeal the provision mandating the use of education money for education, state Sen. Thomas Gaffey said, "We're definitely going to change that. We have to." The Meriden Democrat co-wrote the law placing the restrictions on the spending of state school money about eight years ago.

"The way the governor has written it, none of it has to be used for education," Gaffey said. "I like nice paved sidewalks, but not with this money."

Rell spelled out staggering increases in the education cost-sharing grant, the state's main funding mechanism for cities and towns. The grant would increase by 14 percent in the first year and 8.3 percent in the second year, compared with increases over the past four years of 0.5 percent, 2.6 percent, 3.6 percent and 0.5 percent, according to the conference of municipalities.

Rell's proposed 10 percent increase in the income tax would raise $1.2 billion over the next two years, less than half going back to cities and towns for public education. The rest would go "to feed the monster," said one legislator, referring to increases in the state budget.

Rell's budget director, Robert Genuario, did point out that the money going to the towns is, in fact, just part of Rell's comprehensive, five-year education plan. It does not include scholarships for college students and money for early childhood and special education.

He also said increases in the state income tax money will be "phased in" to the towns. About half would go to education in the first year, and about two-thirds in the second year.

"By the third year, all of it is going to education," Genuario said.

The details of the Democrats' response to the rest of the governor's total $17.5 billion budget plan are still taking shape.

The budget-writing appropriations committee's line-by-line response is due by April 19. The tax-writing finance committee will then make separate decisions on Rell's plans to raise the income tax, phase out the car and estate taxes and increase the cigarette tax by 49 cents a pack to $2 a pack, among others.

Even with the education committee's vote this week, the overall package will likely not be settled until early June when the final compromises are negotiated.

Amann is highly critical of Rell's budget proposal, saying she has neglected other important issues to pour the lion's share of the money into education.

"She puts all the money into the engine without taking care of the brakes," Amann said. "The upholstery is falling apart. ... The more you give, the more they want. If you give them $3.4 billion in five years, they're going to want more. How do you pay for roads? How do you pay for health care?"

Saying that Rell is guilty of "double talk" for trying to raise taxes at the same time she is warning of future state budget deficits, Amann said he is amazed by Rell's high poll ratings.

"It's fascinating that she's still at 72 percent," Amann said. "That's fascinating. ... She's like a squirrel with a car heading at you. You dodge to the left. You dodge to the right."

Cooper said, "It's not just the governor who is at 72 percent. Seventy-three percent agree with the education plan. That's the number that counts. What's fascinating is 73 percent of the people who elected the legislature agree with the education plan," he said.

But Democrats are cautioning the mayors and first selectmen about assuming that Rell's education proposals will be approved.

"That's very dangerous for any of them to be doing," Gaffey said. "We've got to bring everybody down to reality a bit."

The education committee is crafting a minimum education spending requirement that would allow towns to use some of the new money for property tax relief on a sliding-scale basis. For example, Ansonia is the lowest-spending district in the state at $7,529 a student and would be required to spend at least 60 percent of the new money for education, Gaffey said. The other 40 percent could be used for property tax relief.

In Greenwich, which spends more than double Ansonia's rate at $15,493 a student, the town would be required to spend 5 percent of the new money from Rell's plan for education. The other 95 percent could be used for property tax relief, but town officials would have the flexibility to spend more on education if they choose.

Though supporting Rell on many issues, no Republican legislators have stepped forward to publicly announce that they will be voting for her budget plan. That includes the 12 Republican senators and 44 House Republicans, who call themselves the Fighting 44.

"Her budget sounded great, but as you look into it, it's not everything it was cracked up to be," said Rep. Christopher Caruso, a Bridgeport Democrat. "We're going to rely on the Democratic majority to save the budget because every Republican I know has rejected it out of hand."