The Massachusetts Municipal Association, knowing that local aid cuts are right around the corner, has sent Governor Patrick a letter asking for action on a series of reforms to help cities and towns weather the coming storm. I have talked about these many times before on this blog, but real reform needs to happen now. Without it we will see some localities simply unable to provide basic services. These reforms are politically difficult but absolutely necessary. Tough calls, and even tougher coming in to a state election cycle. Will the Governor and Legislature step up?
October 15, 2009
His Excellency Deval Patrick
Governor of the Commonwealth
State House, Room 360
Boston, MA 02133Dear Governor Patrick,
City and town officials are on the front lines of our economy, and know first-hand that the fiscal crisis that grips Massachusetts and the United States has had a profoundly negative impact. This is the worst economic downturn since the 1930s, and the impact on local budgets and services has been staggering.
This year’s local aid was slashed by $724 million below original fiscal 2009 levels, including a $516 million
reduction in vital Cherry Sheet aid programs (these cuts have hit municipal aid, Chapter 70, school
transportation, police career incentive payments and other major accounts), and another $208 million from key reimbursement and grant initiatives (cutting education, public safety, environmental and other
programs). After adjusting for inflation, local aid in fiscal 2010 is $1.3 billion below fiscal 2002 levels.
Cities and towns are experiencing extreme fiscal distress. Out of necessity, communities have been forced to drain what was left of their reserves, eliminate thousands of employees through widespread layoffs and attrition, shelve vital maintenance and infrastructure improvement projects, and impose deep cuts in the essential services that the people of Massachusetts depend on, including education, police and fire protection, public works, libraries and many other quality-of-life programs. The property tax has spiked higher and higher, and now makes up the largest share of municipal budgets since the implementation of Prop. 2½.
If the state’s fiscal 2010 revenue shortfall is so large that you make the decision to impose further fiscal 2010 local aid reductions, this will undoubtedly translate into more drastic cuts in municipal services and severe reductions in the municipal workforce. Unabated, this would inflict further harm on the Massachusetts economy, because cities and towns deliver the essential services that are vital to our economic competitiveness, business growth, and the state’s long-term prosperity.
The MMA and local officials are deeply grateful to you for delivering two important measures – the new
local-option meals and expanded lodging taxes, and the closure of the telecom tax loophole on poles and wires. On average statewide, local governments will be able to use these tools to offset up to 20% of the already-passed $724 million local aid cut. But these measures will not soften the blow of further local aid cuts this year or next. Localities have no way to offset further cuts except by imposing deeper reductions in direct services to their residents and businesses.
Cities and towns need additional powerful tools, reforms 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 further increases in the overburdened property tax.
LOCAL OFFICIALS ARE CALLING FOR ACTION TO ENACT THESE FIVE MAJOR
REFORMS BEFORE ANY ACTION THAT WOULD IMPACT LOCAL AID: 1) Empowering cities
and towns to modernize their health insurance plans outside of collective bargaining; 2) Reforming and
fixing the Quinn Bill to stop a major new unfunded mandate on communities; 3) Ending the $25 million
telecom tax loophole on equipment; 4) Fixing the flaws in charter school funding that harm school districts all across the state; and 5) Extending pension funding schedules to avoid an unaffordable spike in pension costs due to the recession-driven decline in system assets.
1) Provide Real Savings to Cities and Towns by Giving Local Government the Same PLAN DESIGN
Authority the State has to Set Health Insurance Plans. Pass the MMA’s plan to give cities and towns the power to update municipal health insurance plans outside of collective bargaining, which is what state government does, and would save tens of millions of dollars statewide. 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 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 you and 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. (Please note that local officials and the MMA do not see the health insurance language offered in the companion to House 1 or in the report of the Special Commission on Municipal Relief as reform – those proposals have been universally rejected in public hearings by city and town officials as unworkable, unacceptable and a step backward.) The one sure way to ensure real and appropriate health insurance savings for cities and towns is to grant municipalities the same basic management authority that the state now enjoys.
2) Reform and Fix the Quinn Bill. Fix the Quinn Bill mess by passing legislation to clarify that cities and
towns are NOT responsible for paying the state’s share of the police career incentive program – police
unions are in court trying to force cities and towns to make up the $48 million that the state cut from its share, which would represent an outrageous new unfunded mandate on municipalities.
3) Close the Telecommunications Property Tax Loophole on Equipment. We applaud you for passing
legislation codifying the Appellate Tax Board ruling that telecommunications companies are subject to local taxation on poles and wires over public ways, which is generating $26 million for cities and towns. The MMA asks you to enact the second half of telecom tax reform by eliminating the remaining obsolete and unwarranted exemption of telecommunications equipment from the personal property tax, which would provide up to $25 million in local revenues that the telecommunications companies are avoiding under the current scheme. Failure to close this telecom tax equipment loophole would harm cities and towns and local taxpayers, and provide unwarranted benefits to the telephone industry.
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 2010, Chapter 70 school aid deductions from municipal and regional school districts to pay tuition to charter schools are expected to total $280 million. This is only partially offset by reimbursements that total $80 million, resulting in a net loss of $200 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. We do support legislation allowing for in-district charters as a workable alternative. 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 than what a city or town now receives.
5) Pass Pension Funding Relief. Pass legislation allowing cities and towns to extend their pension funding schedules by 10 years, to 2040, to protect local taxpayers from unnecessarily high assessments during this time of fiscal crisis – unless the funding schedules are extended, market losses due to the recession will trigger steep increases in annual pension payments and force budget cuts to key municipal and school services.
ALL FIVE REFORMS ARE NECESSARY. The five 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
Executive Director
Bill Manzi.com 