Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Charles A. Murphy, Chairman
House Committee on Ways and Means
The Honorable Steven C. Panagiotakos, Chairman
Senate Committee on Ways and Means
State House, Boston
Dear Chairman Murphy and Chairman Panagiotakos,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association offers comment on local government accounts and law changes in the fiscal 2010 budget bills before the Conference Committee for consideration.
The fiscal 2010 budget and other measures – such as municipal relief legislation – that the Legislature is working on will have a major impact on whether cities and towns will survive the current economic crisis and their ability to recover once the recession ends. Decisions made this year will have a long-term impact on the quality of vital municipal and school services for years to come. If cities and towns are unable to deliver basic services at an adequate level, the Massachusetts recession will be deeper and will last longer. That is why today’s decisions are so important to our state’s future.
State and Local Taxes
The MMA strongly supports the increase in the state sales tax voted by the House and Senate. The harshness of the recession and its impact on state and municipal finances has made it clear that spending cuts and savings initiatives alone cannot close state and local budget shortfalls. New revenues are necessary.
The MMA strongly supports the municipal taxes included in the Senate budget bill that would give authority to cities and towns to adopt, by local vote, a sales tax on meals of 2 percent [section 32Q] and up to 2 additional percentage points on the existing municipal room occupancy excise [sections 32N and 32O].
We also avidly support sections 32L and 32P that would update the definition of “occupant” in the room occupancy statute to include “other transient accommodation.” This would help end some of the tax avoidance that has occurred as ownership and business practices have changed over the past decade.
While these new municipal tax options cannot replace a strong state-local revenue-sharing program, they will help many cities and towns close budget shortfalls next year and provide alternatives to the property tax in the future, as is common in other states. We support allowing cities and towns to apply a local meals tax of up to 2 percent as a way of providing flexibility in determining the percentage increase at the local level.
The MMA also strongly supports the Senate property tax provision [section 17E] that would make clear that poles and wires on public ways owned by telephone and other telecommunications companies are not exempt from the property tax, consistent with the recent Appellate Tax Board (ATB) decision. Under Department of Revenue guidance, cities and towns have assessed and collected taxes on poles and wires, but have been limited in any use of these revenues until the Legislature or the Court clarifies the law. We strongly support broadening this language to close the loopholes that allow many telecommunications companies to avoid local property taxes on valuable equipment.
Municipal Health Insurance
Local officials and the MMA strongly oppose section 17A of the Senate bill, which adopts the deeply flawed provision from the recommendations of the Special Commission on Municipal Relief to change how cities and towns make decisions on health insurance for municipal employees. There is no similar provision in the House bill.
While the MMA appreciates the work of the Commission and the interest in the House and Senate to provide cities and towns with the means to control costs, this section would be a giant step backward. It would reinstate a form of costly binding arbitration for municipal health insurance decisions that was repealed by the voters in 1980 when the property tax was capped. It would give broad power to arbitrators to make nearly irrevocable decisions on employee compensation and benefits with no accountability to local voters or taxpayers. The entire framework is based on an unworkable dollar benchmark system that is faulty at its core, would actually undo much of the good work that many communities have implemented to generate cost savings locally, and would, ironically, create a system that would virtually guarantee that the total taxpayer-funded cost of health care (insurance, concessions, and health reserve accounts, for example) paid by municipalities would be higher than what the state pays. At public hearings of the commission last month, this proposal was universally rejected by city and town officials as unworkable and unacceptable.
Again, the MMA strongly opposes this provision, and predicts widespread disarray if the section becomes law. We support a proposal [attached] that would move toward standardizing state and municipal decision-making on health insurance (based on plan design flexibility), but would still keep in place real collective bargaining at the local level for both plan design features (through impact bargaining) and the employee-employer share of premium costs (through decision bargaining). This is a fair and reasonable proposal that still leaves municipal unions with much greater power and control than state unions have under state law. Cities and towns would have far less flexibility than the state, but would benefit from an effective framework that would control costs while guaranteeing that municipal employees would have health insurance plans that are at least as generous as the plans that state workers receive.
Without meaningful municipal health insurance reform this year, costs will continue to grow faster than revenues at the expense of jobs and municipal and school services.
Municipal Aid
Municipal aid must be funded at the highest possible level to avoid damaging cuts to essential services, including policing the streets, fire protection, emergency response, road and infrastructure maintenance, and education programs.
The House appropriated $1.094 billion for the new consolidated municipal aid account [1233-2350], a decrease of $220 million (17 percent) below the original fiscal 2009 level of funding.
This new account would replace the longstanding Cherry Sheet Additional Assistance and Lottery distribution accounts that, since Proposition 2½ was enacted in 1980, have provided revenues to help balance municipal budgets and ease reliance on the property tax.
The Senate appropriated $865 million for municipal aid, a decrease of $449 million (34 percent) below the fiscal 2009 amount. At this amount, municipal aid would drop to levels last distributed in the early 1990s, more than 15 years ago, without adjusting for inflation. This level of municipal aid would lead to devastating cuts for cities and towns.
The Senate appropriation would drop municipal aid far below amounts that could be covered locally by normal property tax increases or any savings available within the strict rules that cities and towns operate. The Senate amount would require cuts in staff and programs significantly deeper than currently anticipated and would force thousands of additional layoffs in communities across the state.
The MMA supports the House level of funding for municipal aid to avoid compromising public safety in cities and towns and reversing important local contributions to education reform.
The House appropriates $30 million for the Cherry Sheet Payment-in-Lieu-of-Taxes program [0611-5510]. The Senate appropriated $27 million. We support the House amount for this account.
Public Safety Accounts
The MMA supports state assistance for targeted public safety reimbursement and grant programs that help keep neighborhoods and communities safe. The reduction planned for general municipal aid will affect public safety funding and staffing levels across the state. This is especially a concern in cities and towns most at risk of increased crime.
The MMA supports basic levels of funding for the Community Policing [8000-0010] and Shannon Anti-Gang [8100-0111] grant programs.
The MMA supports the House level of funding for the Police Incentive Pay (Quinn) program [8000-0040]. At $25 million, the program is under-funded by an estimated $33 million. Many cities and towns will be required to pay for any shortfall in the state’s share in this program, leaving less to spend on other pubic safety expenses. The full state share of this program for fiscal 2010 is estimated to be $58 million.
The House budget bill includes language in the appropriations item that would close the Quinn program to police officers hired after July 1 and current officers who have not commenced participation. The Senate bill would create a special commission to study the Quinn program and file a report by January 2010. These two provisions strongly complement each other, and we urge that both are included in the Conference Committee report. In addition, we ask the Conference Committee to add the strongest possible language to avoid the untenable result that state cuts in this account would translate into an unfunded mandate because of interpretations that cities and towns would have to make up the state’s funding shortfall.
We also support the prison mitigation payments [8900-0001] included in the Senate budget bill.
School Aid
The House budget bill would level-fund the Chapter 70 school aid account [7061-0008] at $3.95 billion and level-fund the allocation to individual municipal and regional school districts [section 3]. Section 3 of House 4101 includes language urging the Governor to use $164 million of State Fiscal Stabilization Fund (SFSF) funds allocated to Massachusetts through the American Recovery and Reinvestment Act of 2009 to ensure that all districts have sufficient resources to reach the “foundation” level of spending and an increase of at least $50 per student.
The Senate budget would reduce the Chapter 70 school aid appropriation by $79 million to $3.87 billion and reduce the allocation to individual districts by a standard 2 percent. Similar to the House bill, the Senate bill in section 3 includes language urging the Governor to use $180 million in SFSF funds for “foundation” level spending purposes. The Senate budget uses lower “foundation budget” targets based on a downward adjustment in the foundation budget growth factor from 4.5 percent to 3.04 percent. The Senate budget does not include the $50 per student minimum aid amount.
Both the House and Senate budget bills include in section 3 the recommendation of the Governor to accelerate required local contributions from the property tax and other municipal revenues. The MMA opposes this change absent other long overdue updates to other Chapter 70 components.
While the changes to Chapter 70 do reflect the critical state of state finances, it will continue the unsustainable trend of increasing reliance on the property tax to fund public education. The MMA asks the Conference Committee to support the highest possible Chapter 70 appropriation.
The House appropriated $185 million for the special education “circuit breaker” program [7061-0012] to help school districts with the expense of high-cost special education placement. The Senate appropriated $141 million. After the standard deductions for administrative and other purposes, this account will be seriously under-funded next year. The MMA supports the House level of funding with a strict limit on deductions.
The House appropriated $51 million for partial reimbursements to regional school districts for student transportation expenses [7035-0006]. The Senate appropriated $31 million. This is an important account for school districts serving large land areas and is a key incentive for school district consolidation. The MMA supports the House appropriation.
Massachusetts School Building Authority
Section 33 of the Senate bill would eliminate the 40 percent floor on the state’s share of eligible costs of school construction projects. This would increase the local share, paid mainly from the property tax, by as much as 15 percent for those municipalities and districts affected by the floor. The MMA strongly opposes this section.
Section 34 of the Senate bill would eliminate the current statutory framework for awarding incentive points and allow the Massachusetts School Building Authority to determine and award incentive points without oversight. The MMA opposes this section absent further review.
Recovery High School
Section 35 of the Senate budget would establish a “Recovery High School” funded by locally paid tuition equal to the statewide average per student Chapter 70 amount. The section 35 language provides no guidance on how Recovery Schools would be accountable to local municipal and school officials or to local voters for the use of public funds or for performance or to the place of these schools in education reform and special education law. The MMA opposes the establishment of Recovery Schools as a section in the fiscal 2010 budget.
Summary
In the midst of the greatest economic crisis in modern times, it is essential that state and local governments do whatever is necessary to support the provision of vital services that are important to our economy and our quality of life. That is why the outcome of the issues before your Conference Committee will determine the Commonwealth’s ability to compete and serve its citizens for years to come.
We strongly urge you to shape a budget that provides communities with the resources and tools that are necessary to safeguard the residents of Massachusetts today and in the future, and respectfully ask for your support for the local government priorities outlined above.
Thank you very much.
Sincerely,
Geoffrey C. Beckwith
MMA Executive Director