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Advocacy Letters to State Leaders MMA testimony submitted to Special Municipal Relief Commission
Hon. Stanley Rosenberg, Senate Chair
Hon. Paul Donato, House Chair
Special Municipal Relief Commission
State House Boston, MA 02133
Dear Senator Rosenberg, Representative Donato, and Members of the Commission:
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 2010 budget could very well result in drastic cuts in municipal services and severe reductions in municipal employees, if the state’s budget deficit is so large that the Governor and Legislature 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. 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.
The MMA urges this committee to focus on what matters most – embracing 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 four major reforms: 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 percent. 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 percent, which 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. Close 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 it is urgently overdue.
The overwhelming majority of municipalities participate in large regional or statewide insurance pools and buying groups, and they 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 fiscal 2010, the savings would be at least as much, 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.
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.
Additional Measures and Action Steps. In addition to the four major reforms above, there are many smaller, yet important, improvements and action steps that the Legislature can take to provide relief to cities and towns. Given the fiscal and economic conditions that all communities will face, the MMA recommends that the commission embrace all of the following:
(a) Abolish the civil service system: Modernize the personnel system by eliminating the antiquated and duplicative civil service system, allowing municipalities to manage their hiring and personnel decisions without the inefficient burden of an outdated and inefficient system that was put in place at the turn of the last century, with a local option provision that would allow cities and towns to retain the testing system for the selection and promotion of police and firefighters at their discretion.
(b) Reform the disability retirement system: Work with the Special Commission to Study the Massachusetts Contributory Retirement Systems to eliminate the pervasive abuses that have been documented in the area of disability retirement.
(c) Enact overall pension reform: Work with the Special Commission to Study the Massachusetts Contributory Retirement Systems to modernize the current system and ensure that benefits are in line with service.
(d) Reform Chapter 111F: Fix the injured-on-duty statute to eliminate financial incentives that encourage delays to returning to work and generate very high overtime costs for replacement personnel.
(e) Drug and alcohol testing: Grant municipal managers the ability to require drug and alcohol testing for public safety personnel outside of collective bargaining.
(f) Regionalization: Eliminate obstacles to the regionalization of services by removing decisions to regionalize from collective bargaining.
(g) Regionalization: Eliminate obstacles to the regionalization of services by eliminating state rules and maintenance-of-effort requirements that cut funding and make regional projects uneconomical.
(h) Pension funding: Extend the current pension funding schedules by up to three years (up to 2031) as a management decision of the municipal executive.
(i) Procurement reform: Raise the threshold in Chapter 149 requiring three written quotes for procuring goods and services from $1 to $5,000, with sound business practices for procurements under $5,000, and raise the threshold in Chapters 149 and 30 requiring payment bonds for repair and construction projects from $2,000 to $50,000.
(j) Red light cameras: Enact H. 3512, which would allow communities to use traffic control signal violation monitoring system devices to supplement their public safety activities.
(k) Taxation of for-profit businesses on state property: Expand the Chapter 38 provisions that allow communities to collect personal property taxes from businesses leasing land from the Massachusetts Turnpike Authority to all for-profit businesses leasing property owned by state agencies and authorities.
(l) Local-option early retirement incentives: Allow the executive authority in cities and towns to shape early retirement incentives as a means of reducing layoffs.
The above-mentioned reforms are not intended to be an exhaustive list. In particular, we highlight the four major reforms that are necessary to provide true relief to struggling cities and towns. In addition to these four top priorities, we commend the additional list of next-level actions as important steps that are long overdue.
Thank you very much for the opportunity to offer input and ideas 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.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director
Advocacy Letters to State Leaders MMA testimony submitted to Special Municipal Relief Commission
MMA testimony submitted to Special Municipal Relief Commission
Hon. Stanley Rosenberg, Senate Chair
Hon. Paul Donato, House Chair
Special Municipal Relief Commission
State House Boston, MA 02133
Dear Senator Rosenberg, Representative Donato, and Members of the Commission:
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 2010 budget could very well result in drastic cuts in municipal services and severe reductions in municipal employees, if the state’s budget deficit is so large that the Governor and Legislature 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. 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.
The MMA urges this committee to focus on what matters most – embracing 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 four major reforms: 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 percent. 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 percent, which 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. Close 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 it is urgently overdue.
The overwhelming majority of municipalities participate in large regional or statewide insurance pools and buying groups, and they 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 fiscal 2010, the savings would be at least as much, 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.
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.
Additional Measures and Action Steps. In addition to the four major reforms above, there are many smaller, yet important, improvements and action steps that the Legislature can take to provide relief to cities and towns. Given the fiscal and economic conditions that all communities will face, the MMA recommends that the commission embrace all of the following:
(a) Abolish the civil service system: Modernize the personnel system by eliminating the antiquated and duplicative civil service system, allowing municipalities to manage their hiring and personnel decisions without the inefficient burden of an outdated and inefficient system that was put in place at the turn of the last century, with a local option provision that would allow cities and towns to retain the testing system for the selection and promotion of police and firefighters at their discretion.
(b) Reform the disability retirement system: Work with the Special Commission to Study the Massachusetts Contributory Retirement Systems to eliminate the pervasive abuses that have been documented in the area of disability retirement.
(c) Enact overall pension reform: Work with the Special Commission to Study the Massachusetts Contributory Retirement Systems to modernize the current system and ensure that benefits are in line with service.
(d) Reform Chapter 111F: Fix the injured-on-duty statute to eliminate financial incentives that encourage delays to returning to work and generate very high overtime costs for replacement personnel.
(e) Drug and alcohol testing: Grant municipal managers the ability to require drug and alcohol testing for public safety personnel outside of collective bargaining.
(f) Regionalization: Eliminate obstacles to the regionalization of services by removing decisions to regionalize from collective bargaining.
(g) Regionalization: Eliminate obstacles to the regionalization of services by eliminating state rules and maintenance-of-effort requirements that cut funding and make regional projects uneconomical.
(h) Pension funding: Extend the current pension funding schedules by up to three years (up to 2031) as a management decision of the municipal executive.
(i) Procurement reform: Raise the threshold in Chapter 149 requiring three written quotes for procuring goods and services from $1 to $5,000, with sound business practices for procurements under $5,000, and raise the threshold in Chapters 149 and 30 requiring payment bonds for repair and construction projects from $2,000 to $50,000.
(j) Red light cameras: Enact H. 3512, which would allow communities to use traffic control signal violation monitoring system devices to supplement their public safety activities.
(k) Taxation of for-profit businesses on state property: Expand the Chapter 38 provisions that allow communities to collect personal property taxes from businesses leasing land from the Massachusetts Turnpike Authority to all for-profit businesses leasing property owned by state agencies and authorities.
(l) Local-option early retirement incentives: Allow the executive authority in cities and towns to shape early retirement incentives as a means of reducing layoffs.
The above-mentioned reforms are not intended to be an exhaustive list. In particular, we highlight the four major reforms that are necessary to provide true relief to struggling cities and towns. In addition to these four top priorities, we commend the additional list of next-level actions as important steps that are long overdue.
Thank you very much for the opportunity to offer input and ideas 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.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director
