Local leaders said Gov. Dannel P. Malloy's proposed two-year, 2013-15 budget would stabilize overall funding to the region's cities and towns. But some expressed concerns that increases in some programs merely offset other cuts.

State Rep. Edward "Ted" Moukawsher, D-Groton, at first glance compared the municipal aid numbers to a "shell game."

"It's really just shifting things around, taking it from local government and putting it into education," Moukawsher said. "I'm not sure it's going to add up very well."

The governor promised to keep municipal aid at current or increased levels. While his plan increases education and capital grants, it cuts funding from longstanding grants such as payments in lieu of taxes for state-owned property, colleges and hospitals.

Statewide, Malloy added about $75 million to the Education Cost Sharing grant program by taking money from grants paid to towns that host state property, hospitals and colleges.

The state Office of Policy and Management published detailed spreadsheets breaking down the specific grants to cities and towns Wednesday (http://www.ct.gov/opm).

State budget director Benjamin Barnes said towns are not obligated to use the entire education grant increase for their school budgets. But, Barnes said, towns still could not reduce local school budgets below state-required minimum levels that are based on spending formulas.

"The increase that they get because of the state property PILOT will not result in a mandate for higher school spending," Barnes said.

City and town leaders spent most of Wednesday afternoon absorbing Malloy's budget proposals, trying to determine the impact to their own upcoming budgets.

The governor had promised no overall cuts to municipal funding and had created a "Hold Harmless" grant to make up for any losses in state grant funding.

According to OPM, Norwich would need $189,014 in Hold Harmless money to compensate for other losses next year. In the second year of Malloy's budget, the city would receive an $838,304 increase in state grants, with no Hold Harmless money.

Norwich Comptroller Joseph Ruffo and City Manager Alan Bergren got a sneak preview of the governor's proposal during a meeting Tuesday with OPM officials.

Norwich would lose the entire $666,628 it received this year in reimbursment for state-owned property. A second PILOT fund for hosting private colleges and hospitals would decrease slightly, by $29,082. But the city's ECS grant would increase by nearly $1.7 million in the coming year, to $35.03 million.

"We have to kind of dissect this to explain this to the City Council and the voters," Bergren said. "There has been some shifting and reductions. The education numbers contain some PILOT money for state property that is being phased out to give us more education money."

Preston's ECS grant would increase by only $10,879, but the town was slated to lose $24,776 in the combination of other grants, so Preston would receive $24,776 in Hold Harmless money next year.

The governor's proposed budget shows no change in funding to Groton but has major shifts in where the money is going.

Groton would lose three state grants, a total of $3.2 million, including a manufacturing equipment grant. Groton would receive $1.4 million in Hold Harmless funds to offset the losses.

Moukawsher said the loss of $984,717 for the tax-exempt manufacturing equipment was especially disappointing. He said the state handed out property tax breaks to companies like Pfizer, and the grant money had made up a portion of those losses to the town.

"You wonder why we have a property tax problem," he said.

Waterford First Selectman Daniel Steward echoed Moukawsher, saying the proposed $2.4 million in municipal aid is just "moved around to different places."

Under the proposed budget, the town would lose $373,493 in PILOT funds for state-owned property, including the former Seaside Sanitarium and the state Department of Transportation garage.

"We lose funding from there, but then he's putting funding back into education and back into Town Aid Road, which are both good programs, which also helps us in our day-to-day," Steward said.

Waterford would not receive an increase in municipal funding under Malloy's proposed two-year budget, but is slated for a $397,062 increase in ECS funds.

"It's the same amount of money," he said. "The bottom line is, we're still at the same number."

New London would get $973,541 more in ECS funds next year. Currently, the district receives $23.7 million in ECS funding for its $39.8 million 2012-13 budget.

In 2014-15, the city would receive a $1.9 million increase in state funding. Over the two fiscal years, the percentage increase would total 8.2 percent.

Steven Adamowski, the school district's special master, said Wednesday that the ECS increase is a "big shot in the arm," and should be dedicated to the school budget.

"It's almost a lifeline for a district that has not had an increase in funding for five consecutive years," he said, adding that he is cautious but optimistic that the governor's proposed funding will remain intact after passing through the legislature.

"It may be premature to speculate on the importance of this, but it's a wonderful sign," he said. "It's a sign of strong leadership to support school reform in Connecticut, but we'll have to wait until the budget is approved. The City of New London still has a responsibility to its schools and to provide adequate resources to its students, and ECS is not designed to take the place of local responsibility. There are lots of caveats, but certainly reason for hope."

East Lyme First Selectman Paul Formica said Wednesday that he supported the governor's overall message not to decrease funding to municipalities.

Formica, who is chairman of the Southeastern Connecticut Council of Governments, also supported the governor's call for increased regional cooperation. He said the council's role is to get town officials to communicate and collaborate.

Conversations on ways to reduce redundancies are ongoing, Formica said.

"We are always looking at ways to regionalize and work together as communities," Formica said.

c.bessette@theday.com

j.hanckel@theday.com