September 7, 2016

What is the Municipal Spending Cap?

Connecticut’s municipal spending cap is a feature of its new municipal revenue sharing grant program.  Municipalities will receive these grants beginning in FY 17, but the cap applies beginning only in FY 18. 

The cap is the greater of the inflation rate or 2.5% or more of the prior fiscal year’s adopted budget expenditures, including expenditures from a municipality's general fund and any nonbudgeted funds.  Municipalities that increase their adopted budget expenditures over the previous fiscal year by an amount that exceeds this cap receive a reduced revenue sharing grant.  The reduction is equal to 50 cents for every dollar the municipality spends over the cap.  But grants will not be reduced in any year in which a municipality’s adopted budget expenditures exceed the cap by an amount proportionate to its population increase over the previous fiscal year.

Municipalities must annually certify to the Office of Policy and Management (OPM) secretary, on an OPM-prescribed form, whether they have exceeded the spending cap and if so, the excess amount.

The spending cap does not apply to expenditures:

1.   for debt service, special education, implementing court orders or arbitration awards, budgeting for an audited deficit, nonrecurring grants, nonrecurring capital expenditures of at least $100,000, or payments on unfunded pension liabilities;
2.   associated with a major disaster or emergency declaration by the president or disaster emergency declaration issued by the governor under the civil preparedness law; or
3.   for motor vehicle property tax grants or municipal revenue sharing grants disbursed to special taxing districts (CGS § 4-66l(h), as amended by PA 16-3, MSS (§ 189)).