Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Brian S. Dempsey, Chair, House Committee on Ways and Means
The Honorable Stephen M. Brewer, Chair, Senate Committee on Ways and Means
State House, Boston
Dear Chairman Dempsey, Chairman Brewer, and Distinguished Committee Members,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association would like to offer testimony on House 2, the fiscal 2013 state budget recommendation filed by Governor Patrick on January 25, 2012.
We offer these comments recognizing that cities and towns face a fifth year of serious fiscal challenges and adversity, due primarily to the frustratingly slow recovery from the global recession that began in 2008, and the dramatic reduction in important local aid and state revenue sources that have been the result.
The property tax and other local revenues have been stagnant, at best, even after accounting for the welcomed new local-option sales tax on meals and the expanded room occupancy excise enacted by the Legislature in 2009. It is particularly important to emphasize that city and town leaders deeply appreciate the sweeping municipal health insurance reform law enacted by you and your colleagues in the Legislature last year. Communities across the state are using and leveraging the new law to hold down the growth in health insurance expenditures for their municipalities and employees, preserving jobs and protecting services. Overall, though, these local revenue growth and savings options have been more than offset by a series of extraordinary cuts to municipal and school aid programs in the state budget since the beginning of fiscal 2009. In fiscal 2012, the cuts to key local aid accounts now total $665 million on a year-over-year basis, and $2.03 billion in the aggregate since the beginning of fiscal 2009.
These reductions have translated into an over-reliance on the property tax and deep cuts in core services to residents and businesses. According to a recent analysis by the Massachusetts Taxpayers Foundation, “property taxes now account for 56.8 percent of all local revenue, up from 55 percent in fiscal 2010 and the highest share since Proposition 2½ was passed.”
The Governor’s proposal to increase the state appropriation in fiscal 2013 for Chapter 70 education aid would help to stabilize school-side finances for approximately one-third of municipal and regional districts. But the recommendation in House 2 to level-fund the main municipal aid account – Unrestricted General Government Aid – at $834 million would leave this vital account almost half a billion dollars below fiscal 2009 levels, a cut of nearly 40 percent. Simply put, the municipal side of local government has been hit far harder by state budget cuts than almost any other large state budget account. The result has been deep cuts in municipal services and the highest reliance on the regressive property tax in over 30 years.
Cities and towns deliver the bedrock services that are essential to our economic prosperity – police and fire protection, emergency medical response, the education of nearly 1 million schoolchildren, maintenance of 90 percent of our public roadways, drinking water and wastewater treatment, and much more – which means that local aid is an investment in our economic future. Our state will not fully recover from the recession until communities have the resources necessary to attract and keep families and businesses in Massachusetts.
Early Notice of Aid Amounts
We urgently and respectfully ask that the House and Senate adopt a Local Aid Resolution following the end of budget hearings in early March to send an early signal to cities, towns and school districts of the minimum amount of aid that can be expected next year. Last year, the House and Senate reached agreement on the main municipal and school aid accounts at the time that the House Committee on Ways and Means budget recommendation was released. These aid amounts were included in a Senate Local Aid Resolution. This pre-budget agreement was very much appreciated at the local level.
Consensus Cherry Sheets would be a major help to cities and towns as they work to craft their own budgets over the next several months, a budget season that will again be dominated by very challenging and painful decisions on municipal and school services and programs, personnel and employment levels, and even higher reliance on the property tax.
Unrestricted General Government Aid
Unrestricted General Government Aid (UGGA), the primary municipal Cherry Sheet account, has been cut by $481 million – nearly half a billion dollars – since the beginning of fiscal 2009, a 37 percent reduction. This consolidated account includes the formerly separate Cherry Sheet accounts for Additional Assistance and Lottery distributions. Cuts of this magnitude unavoidably result in reduced police, fire, public works and other municipal services, and in less funding for schools as well.
The MMA strongly requests that the House and Senate increase the Governor’s $834 million appropriation for the UGGA account by $65 million [in line-item 1233-2350 and section 3] to account for the supplemental aid distributed last October. The Governor included a provision in his budget bill [section 17] that would provide a $65 million supplemental distribution in October 2012 if the year-end fiscal 2012 state “consolidated net surplus” reaches $90 million. The problem with the Administration’s approach in House 2 is that there is no way for cities and towns to incorporate the $65 million into the budgets they must vote on this spring and enact by July 1. Special October payments cannot be used in the local budget process, and thus those funds cannot be used to support ongoing municipal and school services and town and school workforces. This is particularly true for school districts that need to have revenue and spending plans in place by the time schools open around Labor Day. Special payments are generally restricted to one-time uses.
With state tax revenues increasing by nearly $1 billion, cities and towns are merely asking that Unrestricted General Government Aid remain steady. It is important to note that state Lottery proceeds are projected to rise by tens of millions of dollars, and those funds should flow directly to cities and towns without waiting for an end-of-the year state budget wrap-up in October. The clear solution is to fund the UGGA account at an up-front level of at least $899 million, guaranteeing cities and towns that they will receive at least as much discretionary municipal aid in fiscal 2013 as they received in total in fiscal 2012.
Payment-In-Lieu-of-Taxes (PILOT)
We also support at least level-funding and no further cuts to the Cherry Sheet Payment-in-Lieu-of-Taxes (PILOT) account [1233-2400]. This program is particularly important to smaller and medium-sized communities across the state, and municipal officials know that the members of the Legislature have historically worked with the goal of fully funding the account, although the current appropriation falls short of that aspiration.
Chapter 70 School Aid
The MMA supports the Governor’s recommendation to increase the state appropriation for Chapter 70 school aid [7061-0008] by $146 million to $4.14 billion and ensure that all cities and towns can reach the “foundation” level of spending. While the state appropriation would increase under House 2, only 114 municipal and regional school districts would receive an increase. The remaining 213 districts [about two-thirds] would be level funded at the fiscal 2012 level. It is important to point out that cities and towns use their Unrestricted General Government Aid to support school budgets, and incorporating the $65 million fiscal 2012 supplemental aid amount into the base for fiscal 2013 is an effective way to support essential municipal services and local school budgets in every corner of the state.
Student Transportation Reimbursements
The MMA supports at least level funding for student transportation in regional school districts [7035-0006]. At the fiscal 2012 level, funding would cover about half of the state’s share of local costs. Over time, adequate funding of this account will be vital if the Commonwealth wishes to encourage other school districts to consider whether regionalization offers long-term benefits. Because of increased fuel and operational costs, level funding would actually increase the amount by which this account is underfunded.
In addition to the standard regional school transportation account, State Auditor Suzanne Bump has issued an unfunded mandate ruling in the case of state-mandated transportation of certain homeless students by local municipal and regional school districts. Specifically, Auditor Bump’s determination is that the state plan to implement the federal McKinney-Vento Act has resulted in a costly $11.3 million unfunded mandate on cities and towns during the current fiscal year. The MMA strongly supports Auditor Bump’s recommendation that the Legislature and Governor provide full funding for this mandated cost, consistent with the Local Mandate Law.
Because of expected increases in fuel and transportation costs, this would require a new budget line item of $11.3 million plus inflation (which has run close to 8.5 percent in recent years, according to the Auditor’s analysis), or approximately $12.25 million.
Special Education “Circuit Breaker”
The MMA asks that the state fully fund its statutory obligation for the special education “circuit breaker” program [7061-0012] at a level above the $213 million proposed by the Governor. At the level in House 2, the state would fall short of the 75 percent reimbursement of eligible costs above four-time “foundation” provided in the special education statute, and funding would sag to only 60 to 65 percent of the state’s obligation.
Reimbursements for Charter School-Related Losses
The MMA asks that the state fully fund its statutory obligation to cover a portion of Chapter 70 school aid deducted from local public school districts and paid to charter schools. The Governor’s recommendation for this account [7061-9010] would need to be increased by an estimated $7 million to be fully funded. The state revamped the charter school reimbursement formula just 25 months ago, and communities are surprised that the account would be underfunded so quickly. Shortchanging the reimbursement would slash education budgets in affected communities.
Special Education Private School Placement Cost Cap
The MMA also asks that a section be added to the fiscal 2013 budget bill that would freeze state-set special education rates charged by private providers for residential and day placements. This is a necessary step as municipalities and school districts simply cannot afford higher rates at this time.
Chapter 90 Local Road Funds
Although funding for Chapter 90 road projects is not provided directly through the state budget, it is a very important program that the Governor addressed when he released his budget recommendation last month. He announced that he would recommend that Chapter 90 allocations for fiscal 2013 total $200 million, the same level as in fiscal 2012.
The Governor is expected to file a transportation bond bill very soon that includes a Chapter 90 component. Because current Chapter 90 authorizations will soon be exhausted, unless a Chapter 90 bill is expedited within the next five weeks, the state will be unable to meet the statutory April 1 notification date, and communities will be in danger of losing critical planning time and much of the upcoming construction season.
Further, while we appreciate the $200 million amount that communities are currently receiving, it is absolutely clear that this level is far below what is actually needed to keep local roads and bridges from deteriorating further. We will soon be submitting testimony to your committee and the Joint Committee on Transportation requesting a multi-year Chapter 90 program that includes authorizations of at least $300 million a year.
In anticipation of the need to act quickly because the Chapter 90 bill is being submitted so late, we respectfully request that the House and Senate Ways and Means Committees be poised to report an accelerated Chapter 90 bill in March consistent with the process that was successfully used last spring.
Reforms to Aid Cities, Towns and Taxpayers
While a timely Local Aid Resolution would be extremely helpful, cities and towns continue to need changes and reforms in state law to address immediate and long-term structural cost factors that are unsustainable and pose a threat to local revenue stability.
We strongly support: 1) reforming the state and local room occupancy excise [section 9] as the Governor proposed in his budget recommendation to end the gaping loophole through which Internet re-sellers of rooms avoid paying the full room occupancy excise due to the state and to cities and towns; 2) updating the room occupancy law as proposed in separate Home Rule legislation to bring consistency to the law and end the exemption for summer and other similar rentals; and 3) closing the telecommunications property tax loophole to end the obsolete “equipment” exemption for telecommunication companies, a proposal that was not included in House 2 but has been filed separately and is now before the Committee on Revenue. In all three cases, these are straightforward reforms to update the law to account for changes in business practices and technology that have created unanticipated loopholes, so that our tax laws maintain their integrity and original intent.
Summary
This is a critical time for our economy, and for cities, towns and local taxpayers. We respectfully ask that you adopt the local aid investments and targeted funding and reforms that are detailed above. After four long years of cuts and cutbacks, of increased reliance on the property tax and diminished local services, Massachusetts is on the verge of a comeback. But that comeback will only happen if cities and towns have the resources to adequately serve the residents and businesses of the Commonwealth.
Please do not hesitate to contact us at any time if you have any questions or need additional information. Your office can contact me or John Robertson, the MMA’s Legislative Director, at (617) 426-7272, ext. 122, or jrobertson@mma.org.
Thank you very much for your support, dedication and commitment to the cities and towns of Massachusetts.
Sincerely,
Geoffrey C. Beckwith
Executive Director, MMA