The Honorable Aaron M. Michlewitz
The Honorable Michael J. Rodrigues
The Honorable Ann-Margaret Ferrante
The Honorable Cindy F. Friedman
The Honorable Todd M. Smola
The Honorable Patrick M. O’Connor
State House, Boston

Delivered electronically

Dear Chair Michlewitz, Chair Rodrigues, and Distinguished Members of the Fiscal 2024 State Budget Conference Committee,

On behalf of cities and towns across the Commonwealth, we are writing to express our appreciation for the many provisions in the fiscal 2024 budget bills approved by the House (H. 3901) and the Senate (S. 2400) that benefit communities throughout the state. Both bills reflect a commitment to a strong fiscal partnership with municipalities.

We thank the House and Senate for advancing a state budget framework that continues to value a strong state-local government partnership through the support of several key local aid accounts. While there are a number of areas where the House and Senate agree on funding levels for municipal and school aid accounts, there are several areas where the two branches will have to resolve differences. In this letter, we offer municipal government’s position on important funding and policy proposals that would impact communities, and we respectfully ask for your favorable consideration on these matters.

Municipalities are very grateful for the significant pandemic-related funding from our federal and state government partners in past years. Despite this, municipalities across the Commonwealth are facing very tight operating budgets for fiscal 2024. Property taxes, the primary source of municipal revenue, are capped at below-inflation levels by Proposition 2½, and local receipts remain stagnant and have not returned to pre-public-health-emergency levels. Following responsible fiscal practices, municipalities have used their one-time federal aid to support one-time capital and non-operating budget investments, since using ARPA funds to support operations would create a damaging and unsolvable fiscal cliff in future years — this is the same wise approach that you have taken with state ARPA dollars.

The bottom line is that the cost of delivering core municipal services has and continues to increase far above municipal revenue growth, placing great stress on local budgets, as communities do their best to maintain the essential local services that benefit their residents, businesses and local economies. As a result, the Legislature’s continued leadership in funding key municipal and education aid accounts, as well as infrastructure investments, is vitally important and deeply appreciated.

We ask you to please invest in essential municipal and school aid programs, as well as adopt provisions that will support city and town operations.

Appropriations

Unrestricted General Government Aid (UGGA)
The Senate appropriated $1.27 billion for the Unrestricted General Government Aid (UGGA) account (1233-2350 and section 3), an increase of $39.3 million, or 3.2%, over the fiscal 2023 level of funding. With property taxes tightly capped by Proposition 2½, cities and towns rely on adequate state revenue sharing to provide municipal and school services, ensure safe streets and neighborhoods, and maintain vital infrastructure. Unrestricted General Government Aid is the revenue sharing program that cities and towns receive to fund these essential municipal services. We respectfully ask the Conference Committee to include the full UGGA amount voted by the Senate. This is a very high priority for municipalities throughout the state, as these funds will all be devoted to balancing local budgets and maintaining the local programs and services that residents rely on every day.

Chapter 70 School Aid
We greatly appreciate the support from both the House and Senate to fund Chapter 70 School Aid at $6.5 billion, representing a commitment to fund the Student Opportunity Act following the original intended schedule. In addition to keeping the commitment to fund the SOA rates on target, both chambers recognized the challenges facing 119 “minimum aid” districts that would only receive an increase of $30 per student over the previous year under the budget filed by the governor in January. We applaud both the House and Senate for doubling this increase to $60 per student in minimum aid, and strongly support the investments in both H. 3901 and S. 2400.

Special Education Circuit Breaker
We support the appropriation for Special Education Circuit Breaker (7061-0012) in H. 3901 and S. 2400, which would reimburse school districts for the high cost of educating students with learning disabilities. We applaud both the House and Senate for fully funding the state’s commitment to the circuit breaker program as envisioned in the Student Opportunity Act.

We also urge timely action in the fiscal 2023 supplemental budget to provide communities with much-needed relief from the 14% increase in out-of-district tuition that the state’s Operational Services Division has implemented for fiscal 2024. The OSD rate increase will impose an unexpected new cost of $92 million on school districts. Because the circuit breaker operates on a reimbursement basis, communities will not receive funding to assist with this 14% increase until fiscal 2025. To avoid painful shortfalls in schools’ fiscal 2024 budgets, we respectfully ask that this issue be addressed with supplemental aid.

Charter School Mitigation Payments
We support the appropriation in the charter school impact mitigation account (7061-9010) of $230 million for charter school mitigation payments. Both bills would fully fund the state’s statutory obligation for charter school mitigation payments as outlined in the Student Opportunity Act. We thank the House and Senate for fully funding the state’s obligation.

Rural Schools
We support the appropriation of $15 million in S. 2400 for Rural School Aid (7061-9813), providing rural school assistance to eligible towns and regional school districts. These grants will help schools facing the challenge of declining enrollment to identify efficiencies in school services or opportunities for regional collaboration. We respectfully ask the Conference Committee to support the $15 million amount, which is meaningful progress toward the goal set forth in the Commission on the Fiscal Health of Rural School Districts report, “A Sustainable Future for Rural Schools,” released in July 2022.

Regional School District Student Transportation
We support the appropriation of $107.8 million for Regional School District Transportation (7035-0006) in H. 3901 , which represents a 100% reimbursement rate according to DESE’s full funding estimate of fiscal 2024 claims. We respectfully ask the Conference Committee to support the full funding included in the House budget.

Out-of-District Vocational Student Transportation
We support the appropriation of $5.1 million for reimbursements due under statute for part of the cost of transporting students to out-of-district vocational education placements (7035-0007). Chapter 74 of the General Laws requires the state to reimburse cities and towns for the cost of transporting students to out-of-district vocational education programs. This reimbursement program recognizes the significant expense of providing transportation services for out-of-district placements, as these students must travel long distances to participate in vocational programs that might not be locally available. For many years, this account has been funded at $250,000 statewide, representing a reimbursement rate of 6% of total claims. We respectfully ask the Conference Committee to support the amount included in S. 2400, which reflects a 90% reimbursement rate of estimated claims.

McKinney-Vento Homeless Student Transportation
We are grateful to both the House and Senate for adopting budgets intended to fully fund the state mandate to provide school transportation for homeless students (7035-0008). In both House and Senate bills, the amount of $28.6 million reflects 100% of DESE’s anticipated claims for fiscal 2024. We thank the House and Senate for fully funding this important item.

Payments in Lieu of Taxes on State-owned Land
We support the appropriation of $51.5 million included in both House and Senate bills to pay a portion of the payment-in-lieu-of taxes (PILOT) amount to cities and towns with state-owned land (1233-2400). This amount holds communities harmless from recent property valuations, so no municipality would receive less than they did in the current fiscal year. We respectfully ask the Conference Committee to support the $51.5 million funding amount included in both bills.

Surtax Revenue Programs

The voter-approved surtax offers exciting and unique opportunities for funding additional education and transportation programs in fiscal 2024. We are grateful to both the House and Senate for their thoughtful inclusion of programs that would directly benefit municipalities and their residents. To that end, we respectfully ask the Conference Committee to include several surtax investments provided by the House and Senate proposals:

• $100 million for local roads and bridges in item 1596-2428 of S. 2400: S. 2400 includes $100 million in supplemental aid supporting the construction and maintenance of municipal roadways, including at least half of the funding distributed based on each municipality’s total share of road mileage. There are more than 30,000 miles of roads under municipal control, which represents nearly 90% of all road miles statewide. This funding would importantly aid communities to quickly address immediate safety needs on local roadways.

• $100 million for Green School Works in item 1596-2424 and Section 16 of H. 3901: H. 3901 includes $100 million for a grant program administered through DESE to provide financial support to K-12 districts to install or maintain clean energy infrastructure. The Green School Works program would further invest in our schools while helping support local climate action and promote energy efficiency.

• $100 million for MSBA school project extraordinary costs in item 1596-2431 of S. 2400: S. 2400 includes $100 million in supplemental grants for school construction projects already approved for financing by the Massachusetts School Building Authority. This funding would address significant and unanticipated cost escalations impacting previously-approved MSBA projects in recent years.

• $161 million for universal school meals, in item 1596-2422 of H. 3901: H. 3901 includes $161 million to codify the universal school meals program, allowing all Massachusetts students to eat for free at school, regardless of household income. The state has done tremendous work to extend this pandemic-related school lunch program, and the natural next step is to make this program a permanent fixture across school districts in the Commonwealth.

Outside Sections

Community Preservation Trust Fund
We support Section 75 in S. 2400 to direct the Comptroller to transfer $30 million to the Massachusetts Community Preservation Trust Fund prior to sending the net surplus for fiscal 2023 to the state’s stabilization fund. Some 195 municipalities have now adopted the Community Preservation Act, and this provision would provide much-needed stability to the Community Preservation Trust Fund. This deposit proposed by Section 75 is common during times of surplus state revenues, and would greatly benefit communities that have adopted higher local property taxes to address environmental and housing challenges.

MassHealth Crossover Payments
We support Section 34B in H. 3901, which would provide important financial relief for emergency medical service providers for the transport of patients who are eligible for both Medicare and MassHealth. This section provides “MassHealth crossover” reimbursements for dual-eligible transports, which would provide additional assistance to EMS providers to support ongoing efforts to recruit and retain staff. The MMA has been proud to partner with the Fire Chiefs of Massachusetts, Professional Firefighters of Massachusetts, and the Massachusetts Ambulance Association in support of this provision in the House budget.

Preserving the Lottery as the Foundation of Unrestricted Local Aid
As we discuss the need for a strong state-local fiscal partnership, the conversation also involves the largest revenue source that the state uses to fund unrestricted local aid: the Massachusetts State Lottery. More than 50 years ago, the Lottery was established for the sole purpose of supporting cities and towns. According to the State Lottery Commission, in the most recently completed fiscal year (fiscal 2022), the Lottery generated $1.105 billion in net proceeds to the state, supporting approximately 94.6% of the Commonwealth’s annual appropriation for Unrestricted General Government Aid.

We appreciate the interest in expanding Lottery operations to compete in a rapidly changing market. If the Legislature does decide to authorize internet-based Lottery games through the final fiscal 2024 general appropriations act, the MMA strongly urges that all proceeds continue to solely support cities and towns through UGGA. Diverting future Lottery proceeds to other programs and interests would weaken the funding base for the state’s primary local aid account.

The Lottery’s mission is to serve cities and towns, and preserving that mission is necessary to protect a vital revenue stream that accounts for the overwhelming amount of discretionary local aid that cities, towns and taxpayers rely on to fund essential municipal and school services and balance local budgets.

Summary

In H. 3901 and S. 2400, you and your colleagues have demonstrated thoughtful consideration and strong support for municipal needs and priorities, and we again express our appreciation to you for your ongoing partnership with cities and towns.

This is a critical time for the Commonwealth, as cities and towns in every corner of Massachusetts continue to manage operating budgets with very little room for margin. Municipalities still face significant inflationary pressures, and local revenues are capped by Proposition 2½. Federal funds can only be responsibly dedicated to one-time capital or economic recovery investments, not to fund ongoing operations. In order to deliver the essential local services that anchor our economy, cities and towns are relying on Unrestricted General Government Aid, Chapter 70 school funding, and the key municipal and school priorities outlined above.

If you have questions or need additional information, please do not hesitate to contact us at any time. Your office can reach out to me or MMA Senior Legislative Analyst Jackie Lavender Bird at jlavenderbird@mma.org or MMA Senior Executive & Legislative Director Dave Koffman at dkoffman@mma.org at any time.

Thank you very much for your support, dedication and commitment to the cities and towns of Massachusetts.

Sincerely,

Geoffrey C. Beckwith
MMA Executive Director & CEO

Cc: The Honorable Ronald J. Mariano, Speaker of the House
The Honorable Karen E. Spilka, Senate President

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