City designates $3 million in state aid for education and reallocates $8 million in municipal grants for capital projects

NEW HAVEN — City budget officials told the finance committee they received $3 million in additional state aid and recommended assigning that money to the general fund balance for educational purposes as a contingency, and separately reallocating $8 million in new municipal grant aid for capital projects in 2026 and 2027. Budget Director Shannon McHugh and Board of Education business director Christine Gordon explained the two proposals. McHugh said the $3 million assignment is a transparency tool to signal that the city has a contingency available if the Board of Education ends the fiscal year with a deficit. “If there is no deficit, we don't use those funds. They would stay within the general fund balance,” she said. On capital aid, staff said the state added $8 million for 2026 and another $8 million for 2027 for eligible municipal projects. McHugh described how the administration reallocated that new municipal grant aid to reduce reliance on bond proceeds: examples cited in the committee discussion included using state aid for public works ($2 million), parks capital ($2 million), engineering ($1.6 million) and economic development ($4.4 million) and adding $2 million to rolling stock per the mayor's recommendation. City staff said the state rules limit eligible uses to certain infrastructure and durable assets and that the municipal aid can be an effective match for other grants. Board members pressed staff on accountability and past education deficits. Alderman Smith urged a forensic audit of the Board of Education’s finances before adding recurring assignments, saying, “I think the board of education needs forensic water [audit] done on their books so that we don't have to go back through these deficits all over again.” Staff replied that the assignment is a contingency and that end-of-year transfers would be used only if a deficit materializes; they noted an internal auditor is now working in the city. Committee action: The committee moved both items favorably to the full board. Vote discussion included at least one formal negative vote on the $3 million assignment; the item nonetheless carried on committee recommendation. What to watch: Staff said any draw on assigned fund balance would require a formal transfer and that unused assigned funds could be revisited at year end. City officials also noted that using state municipal aid to fund capital reduces near-term bond proceeds but that deferred capital can increase long-term costs.