Gov. kicks off budget season, punts on local aid

From The Beacon, February 2012

When Gov. Deval Patrick filed his $32.3 billion fiscal 2013 state budget proposal on Jan. 25, he officially kicked off the budget season in the State House and every city and town hall. The good news is that the overall atmosphere for this year’s budget debate, while very difficult and stressful, will be less dire and stark than the fiscal crisis mode that has prevailed for more than three years. The bad news is that many communities are still in serious fiscal distress, and painful decisions and choices will be the order of the day unless the local aid picture can be improved.

The administration’s budget submission (House 2) spends $1.2 billion in new or proposed tax revenues, but none of that increase is dedicated to municipal aid. In fact, the budget plan does not guarantee that communities would even receive the same amount of unrestricted general government aid (UGGA) as in fiscal 2012. This year, cities and towns received $834 million in UGGA funds in the main budget, and a supplemental distribution of $65 million in October, for a total of $899 million. House 2 guarantees local aid at only $834 million, and makes the $65 million contingent on the state certifying a year-end surplus in October. Thus, no city or town would be able to incorporate the $65 million into their fiscal 2013 budgets, and municipalities could not count on real level-funding of municipal aid until next fall.

It was surprising for many reasons that House 2 did not incorporate the $65 million into the local aid base. First, budgeting the full $899 million would merely represent level funding, and is not an extravagant request at all, especially in light of the significant increase in state revenues that is forecast. Second, state Lottery proceeds are projected to increase by at least $20 million next year and this money should go directly to cities and towns via the UGGA account, but that won’t happen if the $834 million number stays flat. Third, unrestricted local aid (Lottery and Additional Assistance) is still $480 million lower than it was in 2009 – that’s a 37 percent cut before factoring in the impact of inflation. And that leads to the final point: level-funding local aid would feel like a cut because of inflation, and thus House 2 local aid levels would be painful because communities would not be able to continue current levels of service.

Cities and towns use unrestricted municipal aid to pay for teachers, police officers, firefighters, public works and other key employees. If the $65 million is excluded from the local aid base, cities and towns will be forced to underfund key services and increase local reliance on the property tax when they set their budgets.

Thankfully, House 2 comes close to fully funding the Chapter 70 education aid formula, and would boost that major account by $146 million statewide. Yet, under the proposal nearly two-thirds of cities, towns and school districts would be level-funded. One-third would see an increase, mostly due to enrollment growth and other factors. Of concern is budget language that would change the formula to partially reduce aid levels devoted to the “target share” contribution by the state. This provision could impact a number of localities, and will require more scrutiny.

Also of concern is the proposal to level-fund the charter school reimbursement account. Because the number of charter schools is increasing, this account should grow. Otherwise, all cities and towns that rely on this line-item would receive a smaller reimbursement than promised in the formula enacted by the state just two years ago, putting greater pressure on school budgets.

Other key accounts, from special education funding, school transportation reimbursements, to payments-in-lieu-of-taxes, are all level-funded in House 2. Again, this is far superior to the cuts that have come in recent years, but the reality is that flat-lining local aid would feel like a reduction, and result in budget pressure and cuts.

Over the past five years, cities and towns have enjoyed a close and productive partnership with Governor Patrick and the Legislature. While the state fiscal crisis has been extraordinarily painful for cities and towns, the Patrick-Murray administration and lawmakers have stood out nationally as advocates for cities and towns. Our state leaders have enacted significant reforms and shored up aid accounts whenever possible. We are all grateful for this spirit of partnership and productivity during hard times.

Difficult and painful decisions will certainly confront every city and town in the days and months ahead. But one thing is clear – the only way Massachusetts can emerge from the recession in a position to compete and thrive is with a strong foundation that invites businesses and families to stay here and invest. Public safety, education, infrastructure and quality-of-life services in neighborhoods are all essential to our recovery, and are all delivered by cities and towns. Simply put, investment in local aid is critical to our state’s economic future.

During the next several months, the MMA and local officials look forward to working with Gov. Patrick and the members of the Legislature to protect and invest in local aid to the maximum extent possible, building on and improving House 2.

We’ve had the opening kick-off. There’s plenty of action to come.