Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
Dear Legislator,
City and town officials are on the front lines of our economy, and know firsthand that the fiscal crisis that has gripped the United States is having a seriously negative impact on state and local government here in Massachusetts, and most economic indicators signal that our nation will ultimately experience the worst economic downturn since the 1930s.
Today’s deep recession comes on the heels of the 2001 recession during which local aid was cut up to 20 percent for most cities and towns. The impact of those cuts is still felt by many communities as local aid and education funding for dozens of municipalities is still below fiscal 2002 levels. In fact, when adjusting for inflation, local aid in fiscal 2009 is $566 million below fiscal 2002 levels. Cities and towns have been experiencing fiscal distress for the past seven years, curtailing services and increasing reliance on the regressive property tax to balance their budgets. The latest economic downturn promises to make a bad situation much worse.
The grim outlook for the state’s fiscal 2009 and 2010 budgets will translate into drastic cuts in municipal services and severe reductions in municipal employees, if the state’s budget deficit is so large that you make the decision to impose local aid reductions. Unabated, this would inflict further harm on the Massachusetts economy. Leading economists are calling on Congress and the President-elect to increase investment in local governments for a reason – cities and towns deliver the essential services that are vital to our economic competitiveness, business growth, and the state’s long-term prosperity. We support your leadership efforts to secure major federal relief, and it is imperative that state and local governments work together as partners to help Massachusetts withstand the coming economic storm.
Cities and towns need powerful tools and resources to reduce the recession’s impact on municipal services, ensure that municipal personnel levels are adequate to deliver these services, and protect local taxpayers from increases in the overburdened property tax.
Before acting on any legislation that would expand 9C budget-cutting powers to Section 3 of the General Appropriations Act, the MMA calls on the state government to first enact into law strong and effective reforms that will be meaningful enough to protect services, minimize layoffs, and avoid greater pressure on the property tax.
THE ASSOCIATION IS CALLING FOR LEGISLATIVE ACTION TO ENACT ALL FOUR OF THESE MAJOR REFORMS BEFORE ANY ACTION THAT WOULD IMPACT LOCAL AID: 1) allowing local option taxes; 2) closing the telecommunications tax loopholes; 3) empowering cities and towns to modernize their health insurance plans outside of collective bargaining; and 4) fixing the flaws in charter school funding that harm school districts all across the state.
1. Local Option Taxes. Given the universally dire predictions for the Commonwealth’s fiscal condition for the coming year, it is essential that cities and towns be given additional taxing authority in order to continue to provide essential municipal services and avoid damaging increases in the property tax. Massachusetts ranks among the lowest of states in terms of local tax diversification. This has forced a higher than average reliance on the property tax as the primary means of paying for local services. For several years, the MMA has been recommending a local-option meals tax of up to 3%. This would net cities and towns approximately $120 million per penny. The MMA also recommends an increase in the local-option room occupancy excise (commonly known as the hotel-motel tax) of up to 2% that would raise approximately $20 million per penny, and we further ask that the Legislature reform the definition of occupancies subject to taxation to prevent tax avoidance by those who use vacation rentals in resort areas.
2. Closing the Telecommunications Property Tax Loopholes. Last year the Appellate Tax Board (ATB) ruled that telecommunications companies are subject to local taxation on poles and wires over public ways. Cities and towns are collecting these funds beginning this year but have been directed by the Department of Revenue to place at least half of the amount collected in the municipal overlay account pending an expected appeal and delay tactics by the companies. The MMA asks the Legislature to act immediately to codify the ATB ruling, so that cities and towns can immediately access and use the full $26 million that rightfully belongs in local treasuries. Further, it is imperative that the Legislature act to eliminate the remaining obsolete and unwarranted exemption of telecommunications equipment from the personal property tax, which would provide up to $50 million in local revenues that the telecommunications companies are avoiding under the current scheme. Failure to close these telecommunications tax loopholes would harm cities and towns and local taxpayers, and provide unwarranted benefits to the telephone industry.
3. Provide Real Savings to Cities and Towns by Giving Local Government the Same Authority the State has to Design Health Insurance Plans. Cities and towns have worked hard to control health insurance costs as best they can, but they operate under a state law that reflects a double standard. Municipalities are required to negotiate and receive union approval to implement significant changes in their health insurance plans, while the state has exempted itself from this requirement, and implements basic decisions on health insurance outside of collective bargaining. It is far past time that this double standard end, and we strongly urge the Legislature to give cities and towns the same authority as the state in designing health insurance plans for employees. This one reform is the most effective way to bring immediate fiscal relief to all cities and towns, and is urgently overdue.
The overwhelming majority of municipalities participate in large regional or statewide insurance pools and buying groups, and have been able to achieve the full amount of savings that come from bulk purchasing. The real issue in terms of cost and savings opportunities comes in the area of “plan design.” This is because health insurance plans range in price based on the basic benefits that are offered. Plans that are designed with lower co-pays and deductibles for visits to the doctor, the emergency room, and for in-patient and out-patient procedures are more expensive than plans that have higher co-pays and deductibles. Unfortunately, state law requires cities and towns to collectively bargain changes that would modernize their health insurance plan designs. On the other hand, the state has exempted itself from this, and plan design for state employees is determined by the Group Insurance Commission. If cities and towns had the same authority as the state, they could quickly modernize their health plans to incorporate realistic co-pays, deductibles, and tiered networks (as the state has done) and reduce the cost of municipal health insurance throughout the Commonwealth. Keeping the status quo means leaving this important cost containment measure to the agonizingly slow and ineffective collective bargaining process that requires the agreement of all unions before affecting any change. Further, this change is far superior to the current option of having cities and towns consider joining the state plan, as there are many communities for whom the state plan would not work nearly as well, due to offsetting costs that depend on many complex factors, including the number of retirees, the percentage participation in indemnity plans, and other considerations. The MMA’s analysis shows that if cities and towns are able to update their health insurance plan designs to reflect the corresponding benefits that the state offers, many more municipalities would achieve immediate savings beginning in the last quarter of fiscal 2009, the savings would be greater, and there would be less of a cost shift onto employees.
The one sure way to ensure appropriate health insurance savings for cities and towns is to grant municipalities the basic management authority that the state now enjoys.
4. Fix Charter School Funding. Charter schools are an increasing burden on municipal finances, and the current funding system drains resources from public school districts. For fiscal 2009, Chapter 70 school aid deductions from municipal and regional school districts to pay tuition to charter schools are expected to total $273 million. This is only partially offset by reimbursements that total $80 million, resulting in a net loss of $193 million. School aid losses due to charter schools affect 199 municipal and regional school districts. The state and localities are struggling to spend an adequate amount on public education, and the charter school finance scheme is eroding the local capacity to deliver quality education. The MMA is not opposed to charter schools in principle, yet we strongly object to this funding system. Until the system is fixed, we support a moratorium on new charter school openings next year and on any expansion of existing schools. The MMA also supports the Massachusetts Association of School Superintendents (MASS) plan to cap the local contribution at $5,000 (the school choice cap) with any additional payments to charter schools made from other sources. In the short-term, the state should at least provide a circuit-breaker to ensure that future losses to charter schools will not consume a greater percentage of the Chapter 70 aid that a city or town now receives.
ALL FOUR REFORMS ARE NECESSARY. The four major reforms identified above are all essential to protect cities and towns during the extraordinarily difficult days ahead. There is no one-size-fits-all solution, which is why all of these reforms are necessary to give municipalities the management authority and resources they need to navigate through the recession. Without these reforms, communities will experience greater hardship, municipal services will suffer, the reliance on property taxes will increase even more, and our overall economy will be weaker.
Now is the time to bring reform and change to Massachusetts, reform that is necessary to protect cities and towns and local taxpayers from great harm during the hard times that loom ahead. If you have any questions on these items please do not hesitate to contact us at your earliest convenience. Thank you very much for your consideration and your action on these priorities.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director