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 Representative Murphy, Senator Panagiotakos and Committee Members,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association would like to offer comments on House 2, the fiscal 2011 state budget recommendation filed by the Governor on January 27, 2010.
As you know, cities and towns are facing widespread fiscal distress, triggered by the national recession, a steep decline in local revenue capacity, and the impact of the $724 million local aid reduction contained in the fiscal 2010 state budget. The Governor’s proposal to level-fund the main municipal and school aid accounts is a first step toward stabilizing local government finances and the essential services that communities deliver to the residents of Massachusetts.
We urgently and respectfully ask that the House and Senate adopt a Local Aid Resolution following the end of budget hearings in early March using the local aid levels in House 2, sending an early signal to cities, towns and taxpayers that the major local aid accounts will be protected in the fiscal 2011 budget. Consensus Cherry Sheets would be a major help to cities and towns as they work to craft their own budgets over the next few months, a budget season that will be dominated by very challenging and painful decisions on municipal and school services and programs, personnel and employment levels, and high reliance on the property tax.
Municipalities are facing large structural budget gaps, just as the state is, as they try to balance local budgets for fiscal 2011. The recession has had an adverse impact on the property tax base by slashing new growth, and has eroded investment income, the motor vehicle excise tax and other traditional sources of local funding for core services. Local aid reductions have been deeper than at any time in state history. Municipal leaders know what you are experiencing as you struggle with the state’s fiscal crisis, because communities face the same problems, in scope and magnitude.
Municipal Accounts
Unrestricted General Government Aid, the primary municipal Cherry Sheet account, has been cut by $377 million since the beginning of fiscal 2009, or 29 percent. This consolidated account includes the formerly separate Cherry Sheet accounts for Additional Assistance and Lottery distributions, and is now funded by a combination of state tax collections and Lottery revenues. The announcement by State Treasurer Timothy Cahill at the budget hearing on February 16 that Lottery revenues will outpace current estimates for both fiscal 2010 and next year is good news. Lottery proceeds are now expected to exceed the original projection for this year by $20 million and exceed the fiscal 2011 estimate in the Governor’s budget by $10 million.
The MMA supports level-funding and no further cuts to the Cherry Sheet Unrestricted General Government Aid account in Section 3 of House 2. If Lottery revenues continue to exceed expectations, we request that there be a supplemental distribution to give communities access to local Lottery funds.
We support level-funding and no further cuts to the Cherry Sheet Payment-in-Lieu-of-Taxes (PILOT) account, but note that because of revaluation of state-owned land and other factors, many cities and towns are facing cuts in payments.
Funding for the Police Incentive Pay program at $5 million, only a fraction of the approximately $60 million that would be needed to fully fund the state’s share, highlights the need to clarify the law governing local funding obligations and to quickly develop a successor program that is fair and sustainable.
We support the House 2 increase in state reimbursements to cities and towns for the cost of helping needy veterans. Assisting veterans is a high priority to local government.
School Aid
The MMA supports level-funding and no further cuts to Chapter 70 school aid distributions and the appropriation of adequate funds for all school districts to remain at the foundation level. Local officials appreciate that level-funding, plus added funding necessary to bring all school districts to foundation, requires the state to cover the loss of temporary federal State Fiscal Stabilization Funds (SFSF) used in fiscal 2010 and to appropriate an additional $178 million in state revenues.
We note that the -2.2 percent foundation budget adjustment factor used to calculate aid does not reflect unavoidable cost growth in local school districts, particularly in health insurance. Use of this factor may be necessary for fiscal 2011, but it will undermine and diminish the credibility of the foundation budget and the state’s landmark education reform law going forward.
The MMA supports the Governor’s proposed $40.5 million in funding for student transportation in regional school districts. This amount would cover 50 percent to 55 percent of the state’s share of local costs. Over time, adequate funding of this account will be vital if the Commonwealth is at all interested in encouraging other school districts to consider whether regionalization offers long-term benefits.
The MMA supports the Governor’s proposed $135 million in funding for the special education “circuit-breaker” program. This amount is estimated to cover about 35 percent to 40 percent of eligible costs. The statutory state share is 75 percent.
The MMA also supports Section 30 in the Governor’s bill, which would freeze state-set special education rates charged by private providers for residential and day placements. This is a necessary step, given the deep reductions in the circuit-breaker program, as communities and school districts simply cannot afford higher rates at this time.
Key Legislation to Aid Cities, Towns and Taxpayers
While level-funded municipal and school aid and a timely Local Aid Resolution would be extremely helpful and very welcome during this time of fiscal crisis, cities and towns also need major changes and reforms in state law to address immediate and long-term structural cost factors that are unsustainable.
Pension Funding Relief. We ask that the Legislature move forward quickly to approve legislation filed by the Governor (H. 4439) to allow cities and towns to extend local pension funding schedules under carefully controlled circumstances. This important bill would allow communities to extend their pension funding schedules by 10 years, to 2040, to protect local taxpayers from unnecessarily high assessments during this time of fiscal crisis – unless the funding schedules are extended, market losses due to the recession will trigger steep increases in annual pension payments and force budget cuts to key municipal and school services.
Avoiding Quinn Bill Unfunded Mandates. We ask that the Legislature move forward quickly to approve legislation filed by the Governor (Section 8 of H. 4444) to clarify that cities and towns are NOT responsible for paying the state’s share of the police career incentive program. Police unions are in court trying to force cities and towns to make up the $48 million that the state cut from its share, which would represent an unaffordable new unfunded mandate on municipalities.
Health Insurance Plan Design Reform. We ask that the Legislature move forward quickly to approve H. 2509, legislation to give cities and towns the power to update municipal health insurance plans outside of collective bargaining, which is what state government does, and would save $75 million to $100 million statewide. Cities and towns have worked hard to control health insurance costs as best they can, but they operate under a state law that reflects a double standard. Municipalities are required to negotiate and receive union approval to implement changes in their health insurance plans, while the state has exempted itself from this requirement and implements basic decisions on health insurance outside of collective bargaining. It is time to end this double standard, and we ask the Legislature to give cities and towns the same authority as the state in designing health insurance plans for employees. The bill has been written with a guarantee that every local employee would receive health insurance plans that are at least as generous as the plans that state employees receive. This one reform is the most effective way to bring fiscal relief to all cities and towns, and it is urgently overdue. This bill will provide equity and relief for local taxpayers, protect vital municipal and school services, and preserve the jobs of teachers, police officers, firefighters and other local workers.
Working in Partnership
Municipal officials appreciate the actions already taken by the Legislature to help local government. Since last summer, cities and towns have won approval locally of the meals tax and room occupancy excise option granted by the Legislature last year. Seventy-two cities and towns have adopted the local meals tax, including the four largest cities. Sixty-nine municipalities have adopted the expanded room occupancy excise. We expect that many more cities and towns will make use of these important options for fiscal 2011. In addition, cities and towns across the state have benefited by the Legislature’s work to close the telecommunications property tax loophole on poles and wires, generating $26 million for local budgets. We thank you very much for these important revenue tools.
As we continue to face extraordinary fiscal and economic challenges stemming from the recession, it is more important than ever that communities and the Commonwealth work together as partners. We have asked you to support items in the fiscal 2011 state budget that would help cities and towns balance local budgets and recover from the recession. We have also asked you to support important reforms and legislation that will help cities and towns tame budget busters, starting right away, and save the jobs of teachers, firefighters, police officers and other local government workers. These areas of partnership will benefit all of the residents of our state, and are key steps to an early end to the recession and a new beginning for economic prosperity for Massachusetts.
Please do not hesitate to contact us at any time if you have any questions or need additional information. Your office can contact me or John Robertson, the MMA’s Deputy Legislative Director, at (617) 426-7272 ext. 122 or jrobertson@mma.org. We look forward to a year of progress and partnership.
Thank you very much.
Sincerely,
Geoffrey C. Beckwith
Executive Director, MMA