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Local Aid and Finance Fiscal 2010 outlook appears bleak
In the face of mounting bad economic and fiscal news, budget officials at both the state and local levels have started the daunting task of putting together drafts of next year’s budget plans.
The increasingly tough starting point for almost every budget writer this winter is trying to figure out just how big the revenue-spending gap is going to be next year and what revenue and cost-cutting means are available to fill it.
Gov. Deval Patrick is required to file his fiscal 2010 budget recommendation – including his proposals for municipal and school aid – with the Legislature by Jan. 28.
In late August, the governor’s budget office was working on models showing a revenue-spending gap of $1 billion or more for fiscal 2010, based on economic conditions and projections at that time. The deterioration of the economy and state finances since then, including a $1.1 billion cut in the state tax forecast on Oct. 15, has only made the state’s gap larger and the job of balancing the budget more difficult.
State finance officials are expected to convene their annual revenue hearing in mid-December at the State House to hear from economists and financial experts on prospects for the economy and state finances next year. The hearing should provide a mid-year update on the revised fiscal 2009 revenue projections and the possibility of further downward revisions. The hearing should also provide a tentative first look at state tax collections for fiscal 2010 and give some measure of the size of the gap facing the governor’s budget staff.
Local officials, meanwhile, are also preparing budgets for local review and public hearings, which start early next year.
With about one quarter of city and town spending statewide supported by municipal and school aid payments, the fiscal health of state government, and decisions made about local aid in the state budget, will have a major impact on municipal and school spending plans. Municipal reliance on local aid ranges from nearly 70 percent in some communities to less than 10 percent, mainly in towns where school aid is paid directly to regional school districts.
This year, the three main municipal and school aid programs (Lottery, Additional Assistance and Chapter 70 education aid) total $5.3 billion, or about three-quarters of all local aid.
With the two main municipal aid accounts level-funded at $1.3 billion this year (including at least $124 million from the state’s General Fund to cover the shortfall in Lottery revenues), the main worries are about the prospects for any growth in Lottery revenues next year and the ability of the state to cover any shortfall. The Lottery has already announced that net revenues are expected to fall $17 million short of the target for fiscal 2009, which will require adding to the current state subsidy. No projections have been announced yet for fiscal 2010.
The Chapter 70 education aid program is scheduled to grow by $300 million next year to almost $4.25 billion to cover growth in the “foundation” budget spending floor and year four of the “target share” reforms approved in 2006. The revenue hearing in mid-December will provide some indication of the amount of new tax revenue available to fund any growth in this program.
Municipal revenues are also slowing this year and the trend is expected to continue into fiscal 2010. At the Nov. 10 meeting of the Local Government Advisory Commission, Bob Nunes, deputy commissioner of the Division for Local Services, told municipal and school officials that levy growth for the 152 cities and towns with approved values is about 4 percent lower than last year. He added that motor vehicle excise receipts are expected to drop, as the average age of vehicles reached 10.1 years in fiscal 2008, up considerably from 8.8 years in fiscal 2006.
Another troubling sign: sales tax collections from motor vehicles for the first four months of this year are 11 percent lower than a year ago.
Local Aid and Finance Fiscal 2010 outlook appears bleak
Fiscal 2010 outlook appears bleak
In the face of mounting bad economic and fiscal news, budget officials at both the state and local levels have started the daunting task of putting together drafts of next year’s budget plans.
The increasingly tough starting point for almost every budget writer this winter is trying to figure out just how big the revenue-spending gap is going to be next year and what revenue and cost-cutting means are available to fill it.
Gov. Deval Patrick is required to file his fiscal 2010 budget recommendation – including his proposals for municipal and school aid – with the Legislature by Jan. 28.
In late August, the governor’s budget office was working on models showing a revenue-spending gap of $1 billion or more for fiscal 2010, based on economic conditions and projections at that time. The deterioration of the economy and state finances since then, including a $1.1 billion cut in the state tax forecast on Oct. 15, has only made the state’s gap larger and the job of balancing the budget more difficult.
State finance officials are expected to convene their annual revenue hearing in mid-December at the State House to hear from economists and financial experts on prospects for the economy and state finances next year. The hearing should provide a mid-year update on the revised fiscal 2009 revenue projections and the possibility of further downward revisions. The hearing should also provide a tentative first look at state tax collections for fiscal 2010 and give some measure of the size of the gap facing the governor’s budget staff.
Local officials, meanwhile, are also preparing budgets for local review and public hearings, which start early next year.
With about one quarter of city and town spending statewide supported by municipal and school aid payments, the fiscal health of state government, and decisions made about local aid in the state budget, will have a major impact on municipal and school spending plans. Municipal reliance on local aid ranges from nearly 70 percent in some communities to less than 10 percent, mainly in towns where school aid is paid directly to regional school districts.
This year, the three main municipal and school aid programs (Lottery, Additional Assistance and Chapter 70 education aid) total $5.3 billion, or about three-quarters of all local aid.
With the two main municipal aid accounts level-funded at $1.3 billion this year (including at least $124 million from the state’s General Fund to cover the shortfall in Lottery revenues), the main worries are about the prospects for any growth in Lottery revenues next year and the ability of the state to cover any shortfall. The Lottery has already announced that net revenues are expected to fall $17 million short of the target for fiscal 2009, which will require adding to the current state subsidy. No projections have been announced yet for fiscal 2010.
The Chapter 70 education aid program is scheduled to grow by $300 million next year to almost $4.25 billion to cover growth in the “foundation” budget spending floor and year four of the “target share” reforms approved in 2006. The revenue hearing in mid-December will provide some indication of the amount of new tax revenue available to fund any growth in this program.
Municipal revenues are also slowing this year and the trend is expected to continue into fiscal 2010. At the Nov. 10 meeting of the Local Government Advisory Commission, Bob Nunes, deputy commissioner of the Division for Local Services, told municipal and school officials that levy growth for the 152 cities and towns with approved values is about 4 percent lower than last year. He added that motor vehicle excise receipts are expected to drop, as the average age of vehicles reached 10.1 years in fiscal 2008, up considerably from 8.8 years in fiscal 2006.
Another troubling sign: sales tax collections from motor vehicles for the first four months of this year are 11 percent lower than a year ago.
Written by MMA Legislative Director John Robertson
