From The Beacon, March 2014

It’s state budget season on Beacon Hill, a five-month exercise that inevitably overlaps with winter, spring and summer.

Back home, every city and town is going through the same process, though they face shorter and more urgent deadlines. This is complicated by the reality that decisions made at the State House will determine whether our communities will have the local aid and resources required to balance local budgets and deliver the essential municipal and school services that are necessary to grow the Massachusetts economy.

One key measure of success will be whether cities and towns receive all of their local Lottery revenues when the fiscal 2015 budget is signed into law. The Lottery was established decades ago for the express purpose of providing a vital revenue stream for cities and towns, and these funds must continue to flow directly back to communities as originally intended.

As the Legislature leans in and builds its budget framework, the MMA will be right there fighting for local aid. In the fiscal 2015 state budget, this includes calling for Unrestricted General Government Aid to increase by $45 million. Further, Chapter 70 aid should be increased to get all communities up to foundation, provide $100 per student in minimum aid to all districts, and accelerate the phase-in of the target share reforms.

Essential reimbursement programs must be fully funded, including the Special Education Circuit Breaker program, regional school transportation payments, McKinney-Vento transportation of homeless students, Charter School reimbursements, and PILOT funding.

The MMA is calling for an increase in UGGA of at least the same percentage that state tax collections for fiscal 2015 are forecast to grow through the state “consensus” revenue process, including distribution of the full municipal share of Lottery revenues. The UGGA account is currently funded at $920 million, and the governor and Legislature are using a revenue forecast of 4.9 percent growth. Using that same growth rate, UGGA should be increased by $45 million.

Municipal aid was cut deeply during the recession and this year remains nearly $400 million below the fiscal 2008 level of funding. Of course, local leaders deeply appreciate the important tools that the Legislature has provided communities to manage during the fiscal crisis, including municipal health insurance reform, elimination of the telecommunications property tax loophole, and new local revenue capacity via a sales tax on meals and an increase in the lodging excise tax.

Communities have used all of these tools, which helped to offset a portion of the Great Recession’s devastating impact. But fiscal distress remains, which is why unrestricted aid is so critically important. With local aid levels reduced so deeply, cities and towns have eliminated more than 15,000 jobs, reduced many core services, and increased their reliance on the property tax, which is at a 33-year high.

A modest 4.9 percent UGGA increase would simply mean that unrestricted aid would track the growth in the state’s revenue capacity – no more, no less – and would provide cities and towns with much-needed funds to deliver vital services that are critical to our overall economic growth, and ensure that today’s municipal overreliance on the property tax will not deepen. The governor’s budget would level-fund UGGA at $920 million, a disappointing and painful proposal that would create major fiscal problems for cities and towns.

Lottery revenues are now forecast to exceed the original estimate for fiscal 2014 by $20 million, as announced in January, and may end the year significantly higher than that. This sets the stage for growth in fiscal 2015 above the amount included by the governor in his budget recommendation. Citizens and municipal officials expect that Lottery revenues will be distributed directly to cities and towns, so that communities can use these local funds to support municipal services and reduce overreliance on the property tax. It is good news for local government that there will be growth in this vital source of revenue. These funds should be made available to improve on the governor’s recommendation for unrestricted municipal aid.

Because Lottery revenues are trending at least $20 million to $40 million higher than originally projected, these local funds will be available to cover a very large portion of local government’s request for a $45 million increase in Unrestricted General Government Aid, and the actual state tax revenue contribution to the UGGA increase would only be the amount needed to build on the surplus Lottery funds to reach the $45 million amount.

Cities and towns will continue to face enormous fiscal challenges unless the Commonwealth embraces a revenue-sharing approach to reinvest in local aid, and ensures that communities receive all of their Lottery funds. Despite a tightly capped property tax due to Proposition 2½, municipalities are more reliant on the property tax to fund essential services than at any time in the past 30 years. Adequate funding for municipal aid is necessary in order for cities and towns to provide the basic local and school services that the residents of Massachusetts deserve and expect, and to mitigate today’s overreliance on the most regressive of the major revenue sources in the state: the property tax.

This is a critical time for our economy, and for cities, towns and local taxpayers. Massachusetts is starting to find some new economic vigor. But the Massachusetts economy will only reach its full potential for statewide growth and job creation if all 351 cities and towns have the resources to adequately serve the residents and businesses of the Commonwealth, which is why Lottery revenues and unrestricted municipal aid are fundamentally important to our future success.