Four Major Reforms Are Key to Municipal Relief

Dear Legislator,

As you know, cities and towns are in a fiscal crisis that is forcing deep cuts in vital services, higher reliance on the overburdened property tax, and widespread layoffs of police officers, firefighters, teachers, public works employees, and other key workers. The damaging recession has caused a plummeting decline in every major source of local revenues and receipts, including motor vehicle excise taxes and investment income, and brought “new growth” in the real estate tax levy to a standstill. Earlier this year, due to a steep decline in state revenues, the Commonwealth cut local aid (Lottery and Additional Assistance) by $128 million, the largest mid-year local aid reduction in history.

Municipalities have responded to this crisis with swift action and leadership, doing their best to mitigate the impact on local services. But the crisis is so deep that cities and towns have been forced to lay off police and fire personnel, eliminate public works employees, reduce library hours and much more. Many communities have asked unions to agree to across-the-board wage freezes for municipal and school personnel. Many have reduced municipal payrolls by furloughing non-union personnel. In too many cases, communities have been forced to use all three options of layoffs, wage freezes, and furloughs in order to maintain basic services with existing revenues. And fiscal 2010 looks to be even worse, especially if municipal aid is reduced by $220 million below original fiscal 2009 levels as proposed in the Governor’s budget, and Chapter 70 is level-funded. Cities and towns will impose even deeper cuts in the municipal workforce and cut education programs and teachers from next year’s budget. Services will go down, property tax reliance will grow even more than necessary, and our economy will become even weaker.

A municipal relief bill is expected within the next several weeks, and the MMA is writing to you today to underscore the call for the necessary reforms and revenues that cities and towns will need to address this crisis. These are the new tools that your communities must have to meet the fiscal challenges confronting local and state government:

1. HEALTH INSURANCE PLAN DESIGN: Cities and towns must have the same authority the state has to control health insurance costs, which means freeing municipalities from the requirement to collectively bargain the design of health plans. The state exempts itself from collective bargaining on health insurance issues, including plan design. This reform would allow municipalities to quickly adjust their co-pays and tiered networks up to the same level the Commonwealth’s Group Insurance Commission has implemented for state employees. Again, this would simply give local officials the same power the state has to update health plans, and would save more money, more quickly and more efficiently than any other option (including joining the state plan, which doesn’t work for many municipalities). This one reform would save millions of dollars, and protect against the elimination of thousands of municipal and school positions, while providing municipal employees with health insurance plans that are as generous as the state offers.

2. LOCAL OPTION TAXES: The state must allow local option taxes
, including a local meals tax of at least 2%, and an increase in the local hotel-motel tax by an additional 2%, so that communities can have an additional local revenue sources beyond the property tax. These revenues must stay at the local level to fund local services and balance local budgets.

3. CLOSE TELECOMMUNICATIONS TAX LOOPHOLES: It is far past time to close loopholes that give telephone companies a tax break of up to $80 million at the expense of cities and towns and local taxpayers. The state should clarify that telecommunications companies must pay their fair share of local taxes on all poles, wires and equipment.

4. CHARTER SCHOOL FUNDING FAIRNESS: The state must fix the flawed charter school funding scheme
, which harms school districts all across the state. In the short-term, please provide a circuit-breaker to ensure that future losses to charter schools will not consume a greater percentage of the Chapter 70 aid a city or town now receives. Without this protection, communities will lose another $21 million in education aid in fiscal 2010.

These four reforms are absolutely necessary tools that cities and towns need as they work to responsibly confront the local fiscal crisis. Without these reforms and revenues, cities and towns will be forced to make tens of thousands of layoffs and drastically reduce municipal services to unsafe levels.

The MMA urges you in the strongest possible terms to include these essential tools in your municipal package and enact these reforms as soon as possible.

Thank you very much.

Sincerely,

Geoffrey C. Beckwith
MMA Executive Director

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