On Saturday, May 2, 2026, the Connecticut General Assembly passed a revised state budget for fiscal year 2027. In addition to adjusting appropriations, the adopted budget includes supplemental funding that will directly impact municipalities. These funds are being provided through a one-time exemption to the State’s spending cap that allows the State to use surplus revenues from the prior fiscal year (FY 2026) to address extraordinary financial conditions.
As a result, over $273 million will be distributed to towns in the form of supplemental education funding ($173 million) and municipal aid ($100 million). This budget snapshot provides a nonpartisan look at how the supplemental aid will be distributed and the potential implications for municipalities.
Key Municipal Aid Provisions in the Revised FY 2027 State Budget
- Provides $100 million in one-time supplemental funding to municipalities in FY 2027. These one-time payments to towns are intended to help stabilize local finances and reduce property tax burdens across the state.
- Includes over $173 million in supplemental education funding distributed directly to municipalities. This supplemental funding is intended to support local and regional school districts and help communities address the cumulative effects of inflation and rising education costs. The funding is to be used for educational purposes only and is provided via two new grants: the Supplemental Education Aid grant and the District Relief and Compensatory Use Learning Aid (DRACULA) grant.
- Allows municipalities to revise local budgets and adjust mill rates after receiving these supplemental funds. This provision is intended to support towns that already passed their local budgets prior to the passage of the revised FY 2027 state budget, allowing these municipalities to incorporate the additional funds into their planning.
How would these policies impact municipalities?
- The revised budget provides supplemental municipal aid to help reduce property tax burdens on residents but only for the upcoming fiscal year. This one-time funding supports municipalities in FY 2027 and potentially delays increases to mill rates or cuts to services. However, because the supplementary municipal aid is provided as a one-time grant, municipalities and taxpayers may continue to face rising fiscal pressures in future years.
- The supplemental education grants will help municipalities and school districts address the cumulative effects of inflation but are not guaranteed in future years. Because this funding sits outside the Education Cost Sharing (ECS) grant and will not count toward a town’s Minimum Budget Requirement (MBR) in future years, municipalities will likely have to revisit conversations related to increasing education funding needs in future years.
- Municipalities that adopted FY 2027 budgets prior to the passage of the revised state budget will have the ability to revise their budgets and potentially reduce mill rates. This will allow municipalities with adopted FY 2027 budgets to realize the benefits of supplemental funding and potentially provide property tax relief for its residents. However, if a town adjusts its previously approved FY 2027 budget, it must provide its local or regional board of education with, at a minimum, funding equal to what the town provided in FY 2026 plus the supplemental education funding allocated to the town under the revised state budget.
Citation
School and State Finance Project. (2026). Budget Snapshot: Supplemental Municipal Aid in Revised State Budget for FY 2027. Southington, CT: Author. Retrieved from https://files.schoolstatefinance.org/hubfs/Reports/Revised%20Budget%20FY%202027%20-%20Municipal%20Aid%20Snapshot.pdf.