If we don’t grow, there will be more Scotlands

A lot of ink has been spilled — digital and otherwise — on the dismal state of Hartford’s finances and the very real possibility of bankruptcy. Not so much about one of the state’s smallest towns, which is “teetering on the edge of insolvency,” and, relative to its size, is facing challenges almost as daunting as the capital city’s.

If you live in a small town as I do, the plight of tiny Scotland, Connecticut, gives you pause. The town has only about 1,700 residents and has a median family income of about $60,000, so it’s hardly the poorest town in the state, though it’s hardly Darien or Avon, either.

But Scotland’s financial situation is dire and it’s made far worse by the state’s own fiscal woes. Locked in a budget stalemate, the state’s finances are essentially being run by Gov. Dannel P. Malloy by executive order, which is one of the factors wreaking havoc on Scotland’s finances.

Scotland not only has small population but it has a tiny business community to match. The largest commercial taxpayer is Scotland Hardwoods, a lumber manufacturer. There is one farm left in the town, a general store, and several home businesses. The state owns almost 2,000 acres that is off the local property tax rolls.

Growth has been worse than sluggish. In the last six years, First Selectman Daniel Syme says there has been exactly one new home built and the grand list has actually declined because of a recent revaluation. Consequently, Scotland has a tax rate that more resembles a distressed city like Bridgeport. At almost 39 mills, Scotland has one of the 10 highest tax rates in the state.

But Malloy’s executive order budget has eliminated the state’s payments-in-lieu-of-taxes program that compensates towns for nontaxable property.

Education consumes 81 percent of Scotland’s $5.9 million budget, which was approved by taxpayers last month. Under Malloy’s executive order, Scotland’s Education Cost Sharing grant will be cut by 70 percent — from $1.42 million to $426,900.

To make matters worse, Regional School District 11, which includes Scotland, Chaplin and Hampton, is very expensive to run. Parish Hill school, a regional facility serving grades 7 to 12, has only 240 students, an enrollment that is absurdly small and steadily declining. There has been talk of dissolving the district.

The situation is dire, as Syme told The Mirror in an interview. The town has $463,000 in its reserve accounts, or about 9 percent of its annual operating budget. If the state’s budget isn’t resolved by April, the reserves will have to be spent.

There has even been talk in Scotland of dissolving the town itself, declaring bankruptcy, or raising taxes even higher. They all seem like acts of desperation. Syme is convinced taxpayers in town won’t accept anything more than a two-mill increase. That leaves bankruptcy or exiting the stage.

But if Scotland were to dissolve itself, who would take her in? In some parts of the country, municipalities can disappear and become unincorporated parts of their counties. For obvious reasons, that’s not an option in Connecticut. Indeed it’s not an option anywhere in New England with the exception of Maine, where more than 400 settlements known as the unorganized territories have no municipal government and so services are provided by the state and the county.

Could Scotland become a part of one or both of the two towns with which it shares a regional school district? Why would Hampton and Chaplin want to take on that liability and level of risk? How about neighboring Windham, which is home to the distressed small city of Willimantic and a school system so troubled that it was taken over the the state in 2011?

The reality is that if the state budget isn’t resolved in time for Scotland to pay its bills, then Scotland and towns like it will have no option other than raising taxes or declaring bankruptcy. If taxpayers refuse to pay more and Scotland goes broke, the town could be taken over by the state, which would surely have broad powers to inflict further injustices on Scotland taxpayers.

The bills are coming due all across the state. Unless Connecticut sees a significant increase in economic growth, state aid to municipalities will continue to be cut and local governments will have three options: bad, very bad, and preposterous.

Malloy’s horrifying proposal to have local boards of education pick up one-third of the tab for teachers’ pensions — once unthinkable — is just the beginning. If Connecticut doesn’t open for business soon, there will be more Scotlands ... and more Hartfords. Come to think of it, maybe those places aren’t so different.