Report cites local aid as critical to state's economic health
The MMA’s 2006 Annual Business Meeting on Jan. 14 featured the presentation of a major economic study concluding that increasing the fiscal capacity of cities and towns is central to economic success in Massachusetts.The report, authored by economists at Northeastern University’s Center for Urban and Regional Policy and published by the MMA, concludes that communities must be provided with major local aid increases in order for Massachusetts to attract businesses and economic development, compete for jobs, and retain young workers and families.
• “Revenue Sharing and the Future of the Massachusetts Economy” (PDF file, 4.5M)
“Massachusetts needs to renew and rebuild a state-local economic partnership,” said CURP Director Barry Bluestone, who presented the findings of “Revenue Sharing and the Future of the Massachusetts Economy.” “It is clear that local aid is essential for our economic success.”
The report documents a number of disturbing demographic and economic trends in Massachusetts, including a substantial loss of jobs and population – particularly young workers – and an alarming reliance on the local property tax to support local services.
“Intuitively, we know that cities and towns are vitally important to our prosperity and economic future,” said MMA Executive Director Geoff Beckwith. “It is imperative that state leaders address these vital issues today, otherwise our communities will continue to struggle, property taxes will be too high, and our economy will suffer.”
The MMA engaged Bluestone and his colleagues Alan Clayton-Matthews and David Soule at Northeastern University to conduct an independent, comprehensive study of key economic trends and principles regarding attracting and retaining jobs and people, as well as a detailed look at the treatment of local aid over the past 25 years and the tax shift that has caused today’s record over-reliance on the property tax.
The report concludes that:
• The state must renew its fiscal partnership with cities and towns, which is now at its lowest ebb in decades.
• Businesses decide to locate, expand and invest based on the level of local services in cities and towns and on the reputation of the quality of life in the community.
• Current local aid is insufficient to ensure the level of vital local services necessary to attract businesses and people to Massachusetts.
• Local property taxes are too high, because local aid is too low, and this is hurting our economy.
• The state needs to invest in all aspects of municipal services, including education, public safety, culture and recreation, and infrastructure in order to attract and retain jobs.
• The state should commit to revenue sharing by dedicating a fixed share of state tax revenues to local aid.
• The state should allow cities and towns to boost local revenue sources by allowing local-option meals taxes and eliminating state-set telecommunications tax loopholes.
• The state should loosen its imposition of unfunded mandates, and give cities and towns greater local management authority in key areas such as employee benefits and regionalization efforts.
Following the presentation of the report, MMA members unanimously endorsed a campaign to recast the debate over local aid, citing support for local services as critical to the overall future health of the state’s economy.
Members adopted a resolution that calls for a bold new state-local partnership to ensure that cities and towns have the right combination of responsibilities and resources to provide residents and businesses with the services they need in order to prosper.
The MMA Resolution on a New Partnership Between Cities and Towns and State Government, drafted jointly by the MMA’s Fiscal Policy Committee and Revenue Sharing Task Force, calls for a balanced and stable portfolio of revenues adequate to fund municipal services and updated management tools needed to administer local government in the new century.
The resolution recognizes the substantial needs of cities and towns emerging from the recession and calls for local aid increases of more than $1 billion over the next five years. It calls for a fixed share of state tax collections to be distributed annually to local governments.
Written by MMA Publications/Web Director John Ouellette
