There is still no state budget, meaning fiscal uncertainty continues to hang over Connecticut’s towns and cities.

Some communities will face substantial cuts in state aid, initially as Gov. Dannel P. Malloy operates the state without a budget, eventually due to whatever budget the legislature finally produces.

Faced with a projected $5 billion spending gap over the next two fiscal years, the legislature narrowly approved a labor concession deal negotiated by the governor, closing that fiscal hole by about $1.6 billion.

There appears no path to finding the additional $3.4 billion without municipal aid reduction. Funding to cities and towns accounts for $5.1 billion of the state’s $20 billion budget, $4.1 billion of that for education.

The Democratic leadership in the House of Representatives floated the idea of a boost in the sales tax from 6.35 percent to 6.99 percent, raising enough revenues to help maintain municipal funding. That proposed tax increase, or anything close to it, has no prospects of approval in the 18-18 split Senate. In fact, it would have trouble getting out of the House.

Without a big boost in tax revenues, which in any event would be a drag on Connecticut's economy, cuts must come in local aid. But accompanying those reductions should be changes that will allow mayors, councils and selectmen to find savings at the local level.

“Forms of municipal relief are part of what needs to be reflected in the budget,” agreed Malloy when he met with our editorial board Monday. “Not only do I support it, I had it in my initial budget, but not a single item of the relief structure that I proposed got out of committee.”

For example, it is long past time to adjust the prevailing wage law, which requires any new municipal project costing more than $400,000 and any renovations estimated at $100,000 or more, which means almost every project, to be restricted to bidders that meet wage levels set by the state. This means a contractor bidding a project will factor in paying a bricklayer or concrete finisher $64 per hour in pay and benefits, $50 for a laborer, $36 for a traffic-control person.

The legislature last adjusted the limits in 1991. It should raise them significantly. The Connecticut Conference of Municipalities has suggested thresholds of $1 million for new projects, $400,000 for renovations, then linking the number to inflation moving forward.

Malloy has proposed simplifying and lowering the cost of the arbitration process for labor matters, using a single arbitrator rather than three.

Municipalities need the ability to assess some fee on large, tax-exempt nonprofits to cover police and fire protection costs.

Provide towns and cities the means to assess a 1 percent real estate conveyance tax on the sale price. The legislature now caps the fee at 0.25 percent for most communities in Connecticut.

For years mayors and first selectmen have been pleading for relief from the many mandates the state imposes on how they operate, often without providing any funding to pay for the cost of the mandates. The state needs to remove impediments to regional cooperation. Past panels, such as the MORE Commission (Municipal Opportunities and Regional Efficiencies), have examined what mandates are needlessly burdensome and probed ideas for regional services. It is time to implement relief.

A primary argument against reducing municipal aid is that it is a hidden tax increase, because with less state funding towns and cities are forced to raise property taxes to maintain services. It’s a valid argument. But communities can mitigate those property tax increases if provided opportunities to raise new revenues and operate more efficiently.

Some of these things will be difficult to do in a special session, but that is where Connecticut finds itself due to the failure of the General Assembly to do its job in a timely fashion. The political path is difficult. While Republicans have traditionally supported such changes at the local level, the GOP leadership could well conclude that it has little to gain politically by signing on to any budget. But without Republican votes, it is hard to imagine Democrats holding their slim majority together in the House and Senate to provide reforms that weaken labor’s position at the local level or that eliminate favored mandates.

Those political realities are among the reasons why Connecticut remains at a budget impasse six weeks into the fiscal year.

The Day editorial board meets with political, business and community leaders to formulate editorial viewpoints. It is composed of President and Publisher Timothy Dwyer, Executive Editor Izaskun E. Larraneta, Owen Poole, copy editor, and Lisa McGinley, retired deputy managing editor. The board operates independently from The Day newsroom.