A school funding case is winding through the Connecticut courts, piling yet another layer of financial uncertainty on the beleaguered state.
In his Sept. 7 ruling in the 11-year-old case Connecticut Coalition for Justice in Education Funding v. Rell, state Superior Court Judge Thomas Moukawsher in Hartford ordered the state to rework its aid-distribution blueprint to be "influenced only by school needs and good practices" and better serve students in lower-income communities.
Connecticut's Supreme Court will hear an appeal by Attorney General George Jepsen, as well as arguments by the nonprofit plaintiff, which objected to some of Moukawsher's findings. The top court stayed Moukawsher's order for the state to produce a new formula within 180 days.
In a far-reaching commentary, Moukawsher lambasted the state for what he called a legacy of poor educational practices ranging from high-school illiteracy to "uselessly perfect" teacher evaluations. He essentially labeled unconstitutional the state educational system's underpinning.
"Many of our most important policies are so befuddled or misdirected as to be irrational," Moukawsher wrote.
"For instance, the state spends billions of dollars on schools without any binding principle guaranteeing that education aid goes where it's needed. During the recent budget crisis, this left rich schools robbing millions of dollars from poor schools."
State and local budgetary struggles provide a backdrop. Connecticut officials already project a $316 million withdrawal from the state government's rainy-day fund. That would leave Connecticut with $90 million in that account, or 0.5% of its fiscal 2016 general fund expenditures.
Connecticut this year received three general obligation downgrades from bond rating agencies, all of which cited the dwindling reserves. S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency assign AA-minus ratings to state GOs while Moody's Investors Service assigns an equivalent Aa3 rating.
Its larger cities -- notably capital Hartford, which received a four-notch downgrade Thursday night from S&P Global Ratings to BBB -- are struggling. Mayor Luke Bronin, who Hartford could run out of cash by year's end, has asked the state legislature to establish a fiscal oversight board and is seeking other initiatives, such as regional taxes, to prop up the city.
More than half of Hartford's property is tax-exempt.
"You can't run a city based on the property tax when you've got less taxable property than Glastonbury or Manchester or West Hartford," Bronin told reporters after speaking before the state Municipal Finance Advisory Commission.
"The system is broken and we need to fix it, and if we do fix it, we have a chance to have a city that is an engine of growth for the entire region."
A new school funding mechanism could redirect money from more affluent communities to the likes of Hartford, New Haven and Bridgeport, or simply boost state spending. Both are politically and economically difficult right now.
"They could rob Peter to pay Paul, with less for the wealthier districts and more distributed to the inner cities," said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia. "Or, they could keep the wealthy districts the same and increase the funding. The latter might be more difficult given the state's problems with structural balance."
Since fiscal 2014, the state has issued state aid through block grants, which don't necessarily factor municipal or family demographics.
Beyond the weak reserves, Connecticut faces high fixed costs and a lagging economy aggravated by unfavorable demographic trends, according to Moody's.
"The state has limited financial flexibility given its high fixed costs; pension contributions, retiree health contributions and debt service payments comprised more than 25% of the state's own source governmental revenue in fiscal 2014," said Moody's.
"Implementation of a well-defined, transparent and consistent state education funding formula would benefit cities and towns by providing greater visibility into their budgeting and long-term planning."
State Sen. Scott Frantz, R-Greenwich, whose Fairfield County communities stand to lose under any funding aid redistribution, called Moukawsher's ruling open-ended.
"People are really confused over it. The decision hit all the bases plus home plate, everything from the funding formula to high standards for teachers," he said.
Reduced funding could trigger property tax increases in some communities, according to Frantz, who called regionalism a tall order.
"In places like Bridgeport and Hartford, the neighboring communities would put up one big fight," he said. "It's a pie-in-the-sky concept and not realistic."
School funding formulas are on the table in several states.
Kansas lawmakers held a special session in June and passed a bill to avoid a shutdown of state schools. Gov. Sam Brownback is soliciting proposals to tweak the system as lawmakers prepare for lengthy debate on the subject in 2017.
According to the Kansas Association of School Boards, any new plan should fund adequately overall, distribute aid equitably across all 286 school districts; and enable local districts to raise additional money through local taxes to fund programs that exceed minimum state requirements.
New Jersey Gov. Chris Christie has asked the state Supreme Court for permission to eclipse teacher contract rules in the state's low-income districts, and to freeze funding levels pending a new formula that would not give more money to poorer districts.
"We've tried it for 30 years," Christie said in a statement. "What we know now is, more money alone does not translate into a better education. It would be criminal to allow this situation to continue."
Senate President Stephen Sweeney, D-Gloucester, wants to create a six-member, bipartisan panel that would recommend revisions.
Schankel said state education departments must govern and budget wisely.
"You can't just throw money at something. Yet, we have large cities with poor levels of funding," he said. "With budgets and schools, we know how finite the role of a district is in attracting people to a community.
"We see how it hurts in [Philadelphia] with a schools district behind the 8-ball. I think you can say the same for Bridgeport, New Haven and Hartford."