Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Aaron Michlewitz, House Chair
The Honorable Michael J. Rodrigues, Senate Chair
The Honorable Ann-Margaret Ferrante, House Vice Chair
The Honorable Cindy F. Friedman, Senate Vice Chair
The Honorable Patricia A. Haddad, House Assistant Vice Chair
The Honorable Joanne M. Comerford, Senate Assistant Vice Chair
The Honorable Todd M. Smola, Ranking House Minority Member
The Honorable Patrick M. O’Connor, Ranking Senate Minority Member
Joint Committee on Ways and Means
State House, Boston
Delivered electronically
Dear Chair Michlewitz, Chair Rodrigues, and Distinguished Members of the House and Senate Committees on Ways and Means:
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association very much appreciates your strong support for local government. We look forward to working with you and your colleagues in the House and Senate in developing and finalizing a state spending plan for fiscal 2024 that reflects your continued commitment to a strong state and local government partnership.
In order to build a healthy and sustainable economic recovery in every region of Massachusetts, cities and towns rely on a powerful and supportive state-local relationship. With a tightly capped property tax that limits municipal revenues, cities and towns require predictable and adequate state revenue sharing in order to provide world-class education and municipal services, ensure safe streets and neighborhoods, and maintain local roads and vital infrastructure.
We are writing today to provide you with information on important funding priorities and investments in key municipal and school aid programs, and ask that you incorporate these requests into the fiscal 2024 state budget bill that you are preparing for House and Senate debate in April and May.
Unrestricted General Government Aid
Cities and towns across the state are asking the Legislature to provide a strong and effective commitment to revenue sharing by increasing Unrestricted General Government Aid (UGGA) by 6.13%, or $75.5 million, to bring the account up to $1.3 billion. As you know, during the prior Administration’s tenure, the practice was to link the percentage increase in UGGA to the forecasted increase in state tax collections. For many years, this model for revenue sharing was effective. Over the last several years, however, as the state realized significant revenue gains that far exceeded expectations, this model started to leave local governments behind. In recognition of this challenge, and because of the Legislature’s commitment to a strong state and local government partnership, the Legislature recognized that this method of calculating revenue growth was flawed and was generating an artificially low percentage. In response, the Legislature doubled the percentage increase of UGGA from 2.7% in House 2 to 5.4% in the final fiscal 2023 budget. This was a meaningful increase and was tremendously appreciated by all municipal officials.
Today, we respectfully request your consideration to increase UGGA at a rate that more closely reflects a true revenue sharing partnership between state and local government. Unrestricted General Government Aid (UGGA) provides essential funding for vital municipal and school services, allowing communities to deliver core services to residents and businesses, and mitigating further overreliance on the property tax. As you know, discretionary local aid suffered disproportionately large cuts during the Great Recession, and is still $84 million below fiscal 2008 levels, without adjusting for inflation, which has grown by 40% during the fiscal 2008-2023 time period. By contrast, state tax collections increased by $18.9 billion from 2008 to 2023.
House 1 proposes a too-small 2% increase in UGGA funding for fiscal 2024, an amount that is clearly below inflation, and would keep UGGA 4.5% below fiscal 2008 levels. The following chart shows the percentage change in state tax revenues and UGGA funding, compared to the fiscal 2008 base:
UGGA is the only source of discretionary local aid that cities and towns use to fund foundational services for the residents of Massachusetts, including public safety, public health, public works, senior, youth and veterans services, water and sewer services, solid waste disposal and recycling collection, park and recreation services, libraries, and much more. Local aid funding is needed more than ever, as communities are struggling to balance their budgets and maintain these services. Proposition 2½ places a tight cap on property tax revenues, and other municipal receipts are flat, as individuals and local businesses struggle to recover from the pandemic. We are experiencing high inflation and supply chain shortages, and communities are faced with costs that are rising much faster than local revenues.
The bottom line is that this is a very difficult budget year for communities, and cities and towns are depending on the Legislature’s strong commitment to revenue sharing to balance their budgets. The Governor’s budget proposal reflects a 2% increase in UGGA, or $24.6 million. While we appreciate that this is slightly higher than the consensus revenue forecast of 1.61%, it is simply not enough for cities and towns facing major budget pressures.
To avoid this problem in the fiscal 2024 budget cycle, the MMA strongly requests that the $1.23 billion UGGA account be increased using a stable measure of state revenue growth. Using a rolling three-year average of state revenue growth would anchor the framework with real data, even out large swings, and avoid the flaws that have kept revenue sharing increases below the actual growth in the state’s fiscal capacity. Instead of the below-inflation increase proposed in House 1, UGGA funding should be based on a more accurate calculation of the average growth in state revenues. Since fiscal 2021, state revenues have increased by 18.38%, or 6.13% per year. Indexing UGGA to this growth rate would yield $75.5 million, allowing cities and towns to keep pace with inflation. This would approximate the increase that the Legislature initiated last year and move communities forward with UGGA funding that is much closer to the actual need.
As you can see from the chart above, cities and towns are not asking the Legislature to close the entire gap between revenue growth and UGGA funding that has occurred since fiscal 2020. Our request today is designed to narrow the gap in a way that is affordable for the Commonwealth, and meaningful for cities and towns.
The following chart shows that overall UGGA amounts would still be 0.6% below the amount cities and towns received in fiscal 2008, underscoring our belief that this is a reasonable framework, and would allow future UGGA funding to grow in a way that reflects the state’s revenue capacity, while avoiding the volatility of the past.
This is a critical time for cities and towns, our residents, and our economy. Every region of the state is facing hardships and challenges. In terms of maintaining fiscal stability at the municipal level and ensuring adequate funding for essential local services, the critical first step will be a commitment to full revenue sharing in fiscal 2024, with a $75.5 million (6.13%) increase for Unrestricted General Government Aid.
Chapter 70 School Aid
We support funding for Chapter 70 school aid (7061-0008) that matches the promise of the Student Opportunity Act (SOA). Through the SOA, the state committed to investing an additional $1.5 billion in Chapter 70 education aid, reaching its goal in fiscal 2027. We applaud the Legislature’s commitment to funding the SOA on schedule in fiscal 2022 and 2023.
We support the recommendation in House 1 that funds three-sixths of the Student Opportunity Act schedule, increasing the Chapter 70 account by $586 million. However, 119 of 318 operating districts (37%) would remain “minimum aid” districts, and would receive new aid of only $30 per student. This means that these districts would receive below-inflation aid increases of about 0.7%, while serving 275,000 students, which is simply inadequate to maintain existing programs and services. These 119 districts would receive a combined increase of $7.7 million, and the remaining districts would receive $578 million.
Each school district will continue to rely on Chapter 70 school aid for existing annual operating expenses. As such, we respectfully request that minimum aid be set so that all districts receive a meaningful increase in fiscal 2024, which we believe should be at least $100 per student. Higher minimum aid is necessary to ensure that no school district or student falls behind. There are 133 districts receiving new aid of less than $100 per student in House 1. Bringing all districts up to the $100 per student threshold would require an additional $18.8 million.
Another aspect of Chapter 70 that calls for attention is the very high increase in mandated local contributions in the foundation budget formula. House 1 is based on a calculation that calls for a $400 million increase in required municipal spending on the school budget, a 5.6% increase. This is far above the growth in municipal revenues, which has averaged 3.7% over the past three years. This is putting a major strain on municipal budgets, regardless of whether they are large beneficiaries of the new SOA rates or minimum aid districts. Without addressing this aspect of the Student Opportunity Act funding challenge, districts with required increases in local contributions that exceed the percentage growth in their own local revenues would be forced to cut funding for essential municipal services, a harmful zero-sum process that would weaken their capacity to deliver critical non-school services to students and families outside the classroom.
House 1 would set aside $10 million for required local contribution relief for “disproportionately impacted” districts. Since the statewide increase in the required local contribution is $400 million for fiscal 2024, we are concerned that this set aside will not provide meaningful relief for municipal budgets. A preferable solution would be to limit the growth in required contributions to a community’s municipal revenue growth rate, or to provide significantly more “pothole” funding to prevent painful cuts in essential non-school programs.
Special Education “Circuit Breaker”
We support full funding for the special education circuit breaker program (7061-0012), through which the state provides a measure of support for services provided to high-cost special education students. This is an essential program that provides critical funding to assist all school districts with the increasingly burdensome and volatile cost of complex and expensive special education services. We ask for full funding of the state’s share of eligible educational costs with the schedule included in the Student Opportunity Act, which added transportation expenses as an eligible cost. House 1 would provide $503 million for this account. We ask you to confirm the full funding requirement using the most recent data available from DESE, and close any funding gap that may result from an updated analysis.
In addition, a decision by the Operational Services Division (OSD) in October 2022 allows private special education schools to increase their tuition rates by 14% in fiscal 2024, impacting every district that places students out of district to meet their students’ educational needs. While it is understandable that the private special education schools sought a rate increase, an immediate spike of 14% is unaffordable for school districts. The estimated cost of this increase, based on the current number of students statewide placed in private special education schools, is $92.8 million. Further, fully funding the Circuit Breaker will not provide relief in fiscal 2024, because the appropriation will be used to reimburse communities for a portion of their fiscal 2023 costs. We support the proposals offered by the Massachusetts Association of School Superintendents to change the reimbursement formula in two potential ways: increasing the reimbursement percentage from 75% to 90% of eligible costs, or lowering the threshold for eligible costs from four times the average foundation budget cost per student to three times the average cost. Each of these changes would come close to offsetting the $92.8 million increase, though we anticipate that additional one-time funds, perhaps with fiscal 2023 surplus revenues, will be needed as well.
Charter School Impact Mitigation Payments
As a start, we support funding the charter school impact mitigation account (7061-9010) to reimburse school districts at 100%, which fulfills the state’s statutory obligation under the Student Opportunity Act. We applaud the Legislature’s attention to this account and for taking action to accelerate the phase-in of years two and three during fiscal 2023, a full year ahead of schedule. Each impacted district should be reimbursed at 100% of the state’s obligation in accordance with the SOA, and this intent is reflected in the House 1 recommendation of $243 million.
The sharp increase in assessments levied on local school districts to pay tuition to charter schools has imposed a major financial burden on cities and towns, a problem made more acute as the state grants more charters and existing charter schools expand. Rising charter school assessments are forcing local public schools to cut programs and services to make up the difference. In fiscal 2024 alone, preliminary Cherry Sheets based on House 1 show that overall charter school tuition assessments on cities and towns would grow by $52.8 million, or 5.7%, while the impact mitigation account would be level-funded.
Because the great majority of K-12 students attend local public schools, this means that the diversion of Chapter 70 funds to charter schools ($974.8 million in House 1) has a directly negative impact on the vast majority of schoolchildren. Even fully funded, the charter school impact mitigation account is still insufficient to address the deep cuts facing many districts. After receiving mitigation payments, many communities and school districts may still see their charter assessments increase more than their total new Chapter 70 aid. For this reason, we ask that you implement a “circuit breaker” system to prevent any “net negative” situations, so that each community or school district receives a minimum aid increase, after charter payments, based on the number of students remaining in the traditional, non-charter, public school system.
Student Transportation Reimbursements
Funding to assist cities, towns and school districts with the cost of transporting schoolchildren is another critical priority, and we respectfully urge full funding of the state’s reimbursement obligations.
Regional Schools: We respectfully urge full funding for transportation reimbursements to regional school districts (7035-0006). House 1 proposes $97 million for fiscal 2024 and, according to the Administration, that amount reflects a 90% reimbursement rate. These reimbursements are vital to all regional districts and their member cities and towns, particularly in smaller communities and in more rural parts of the state. We respectfully ask that you increase funding for this key account to reflect higher transportation costs for communities and to move the state to its full reimbursement commitment.
Homeless Students: The State Auditor has ruled that the McKinney-Vento program (7035-0008) is an unfunded mandate on cities and towns. Under the program, municipalities and school districts are providing costly transportation services to bus homeless students to schools outside of the local school district. House 1 would allocate $28.7 million to this program, reflecting full funding of this account. We ask you to confirm the full funding requirement using the most recent data available from DESE, and close any funding gap that may exist.
Vocational Schools: In addition, we support funds to reimburse communities for a portion of the cost of transporting students to out-of-district placements in vocational schools (7035-0007), as mandated by state law. This account recognizes the significant expense of providing transportation services for out-of-district placements, as these students must travel long distances to participate in vocational programs that are not offered locally. House 1 provides a significant increase to this line item, which has been funded for many years at just $250,000. The governor’s proposal increases the account to $5.2 million, which represents a 90% reimbursement rate. We respectfully ask that the House and Senate support full funding of this account.
Rural School Finance
The Student Opportunity Act established a special commission to study the long-term fiscal health of rural districts, as the special financial and operational challenges facing rural districts were not addressed in the legislation. The Commission on the Fiscal Health of Rural School Districts issued its report, “A Sustainable Future for Rural Schools,” in July 2022. We support the recommendation in the report to fund the rural schools assistance program (7061-9813) at $60 million. Rural districts have been struggling due to declining enrollments and the economics of operating districts that cannot increase their geographic size. We respectfully ask that you fulfill the recommendation in the Commission’s excellent report.
Payments In Lieu Of Taxes (PILOT)
We support full funding of the Commonwealth’s obligations and commitments to the program for payments in lieu of taxes for state-owned land (PILOT) (1233-2400). The House 1 proposal funds this account at $51.5 million. According to the Administration, this amount holds municipalities harmless from recent valuations. In fiscal 2023, the Legislature increased this account by 29% over the prior year. We appreciate the progress that has been made on PILOT in the last two years and ask that you continue to support this important funding for municipalities.
Municipal Regionalization and Efficiencies Reserve
Local officials across the state strongly support the $20.5 million appropriation in House 1 (1599-0026) to advance a number of key initiatives that assist cities and towns with the implementation of best practices and innovations at the local level. This reserve would provide $8 million to the Community Compact Program, a very popular initiative that delivers great results at the local level, providing small but critical grants to cities and towns to implement otherwise unaffordable improvements in government finance and operations. The reserve would also support $5 million in public safety staffing grants, $3 million for technical assistance through regional planning agencies, $2 million for regionalization and efficiency programs, $2 million to assist communities in identifying and applying for new federal grants, and $500,000 for the Local Finance Commonwealth Fellowship Program.
Summary
This is a critical time for cities, towns and local taxpayers. We know that you and your
colleagues in the House and Senate continue to be outstanding partners for communities across the Commonwealth, and we look forward to working with you on these key municipal priorities. The critical investments highlighted above will alleviate the local budget pressures being felt in every corner of the state, and protect the essential local services that build our economy and ensure a high quality of life for our residents.
If you have any questions, please do not hesitate to have your office contact me or MMA Senior Legislative Analyst Jackie Lavender Bird at jlavenderbird@mma.org at any time.
Thank you very much for your support, dedication and commitment to the cities and towns of Massachusetts.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director & CEO
CC:
The Honorable Ronald J. Mariano, Speaker of the House
The Honorable Karen E. Spilka, Senate President