Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable Brian S. Dempsey, Chair
House Committee on Ways and Means
The Honorable Stephen M. Brewer, Chair
Senate Committee on Ways and Means
State House, Boston
Dear Chairman Dempsey, Chairman Brewer, and Distinguished Members of the House and Senate Committees on Ways and Means:
On behalf of cities and towns in every corner of the Commonwealth, the Massachusetts Municipal Association is writing to support important funding and investment in key municipal and school aid programs in the fiscal 2015 state budget bill that you and your colleagues in the House and Senate will consider in the coming weeks.
A strong and enduring partnership between cities and towns and state government is essential to a healthy and expanding economy and to the ability of local government to provide world-class education and municipal services, ensure safe streets and neighborhoods, and maintain local roads and vital infrastructure. This is fundamental to our state’s economic success and competitiveness.
The Great Recession of 2008-2009 and its lasting impact have challenged this vital state-local fiscal relationship. Cities and towns will continue to face enormous fiscal challenges unless the Commonwealth embraces a revenue-sharing approach to reinvest in local aid. 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 and education 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.
It is good news that state and local governments begin the fiscal 2015 budget season with some measure of optimism about the economy and government finance. The editorial board of the influential journal MassBenchmarks, wrote just two weeks ago that many of the fiscal threats to the Massachusetts economy at the onset of 2013 have “receded into the background.” While the board members expressed worries about the challenge of income equality, they said that the state’s economic prospects looked positive. “The national economy seems poised for moderate growth, as household balance sheets continue to heal, the housing market continues its recovery, and the nation slowly adapts to a new federal fiscal reality. The European Union is expected to slowly emerge from its recession, and Asian economies appear to be either stabilizing or growing. All these developments bode well for the state’s economic outlook,” they wrote.
Lottery revenues are forecast to exceed the estimate for fiscal 2014 by $20 million, as announced in January, and may end the year significantly higher than that. This would set 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 revenues. These funds should be made available to improve on the Governor’s recommendation for unrestricted municipal aid.
UNRESTRICTED GENERAL GOVERNMENT AID (UGGA)
We strongly support an increase in the Cherry Sheet Unrestricted General Government Aid (UGGA) account 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 revenue. The UGGA account is currently funded at $920 million, and the Governor and Legislature are using a consensus revenue forecast of 4.9 percent growth in state tax revenues. Using that same growth estimate, we ask that UGGA be increased by $45 million.
Fiscal 2008: $1,313,546,271
Fiscal 2014: $920,230,293
Fiscal 2015 (House 2): $920,230,293
Fiscal 2015 (MMA request): $965,329,510
Increase for Fiscal 2015: $45,099,217
Municipal aid was cut deeply during the recession and this year remains nearly $400 million below the fiscal 2008 level of funding. Of course, we 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 telecom 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 offset a portion of the Great Recession’s devastating impact, but fiscal distress remains, which is why UGGA aid is so critically important. With local aid levels reduced so deeply, cities and towns have eliminated over 15,000 jobs, reduced many core services, and increased their reliance on the property tax, which is at a 33-year high point.
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 and 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. As noted above, Lottery revenues are trending significantly higher than originally forecast for this year, and this means that at least $20 million to $40 million in local Lottery 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. The MMA appreciates the comments made by House and Senate leaders following the Governor’s budget release in January that the Legislature would do better, and we look forward to the Ways and Means Committee recommendations in April and May.
CHAPTER 70 SCHOOL AID
We strongly support a sufficient funding increase for Chapter 70 school aid to ensure that all municipal and regional school districts are able to reach the “foundation” level of spending, implement the target share/down-payment aid equity provisions adopted in 2006, and provide an adequate amount of minimum aid that ensures that all schools receive an increase in fiscal 2015, which we believe should be at least $100 per student.
A significant majority of school districts only receive minimum aid, which is why the minimum aid aspect of Chapter 70 is so important. The Governor has proposed a Chapter 70 increase of $99.5 million, one of the smallest increases in the past 20 years, which includes minimum aid of only $25 per student. Under House 2, most districts would receive such a small increase that they would be forced to reduce programing, increase their reliance on the property tax or divert funds from the municipal side of the budget. Funding Chapter 70 with $100 per student minimum aid would be possible with an estimated $143 million increase in Chapter 70, which is very close to the $130 million increase provided by the Legislature last summer for the fiscal 2014 budget.
Fiscal 2015 Increase (H. 2 w/$25 Min. Aid): $99,481,596
Fiscal 2015 Increase ($100 Min. Aid): $143,003,937
Difference Resulting from Higher Min. Aid: $43,522,341
We also request the addition of language in the budget bill that would allow all school districts to count spending on health insurance for retired district employees toward the “net school spending” requirement under Chapter 70. The current rule that excludes these costs in some districts and allows these costs in others is not part of Chapter 70 but has routinely been included as temporary language in Section 3 of the budget to the detriment of many cities and towns. The Department of Elementary and Secondary Education (DESE) has drafted transitional language that would address this problem and end this inequity.
REIMBURSEMENTS FOR SCHOOL AID LOSSES RELATED TO CHARTER SCHOOLS
The diversion of Chapter 70 school aid away from public schools to pay tuition to charter schools has imposed a major and growing financial burden on cities and towns, a problem made more acute as the state grants more charters and existing charter schools expand. Local officials strongly support full funding of the Commonwealth’s commitment under Section 89 of Chapter 71 of the General Laws to reimburse school districts for the loss of a portion of their Chapter 70 aid that is redirected to fund charter schools.
We deeply appreciate the Legislature’s leadership last year to win an $8 million supplemental appropriation to fully fund the program in fiscal 2013. However, for fiscal 2014 it is expected that cities and towns will be forced to divert more than $400 million to fund charter schools, an increase of more than $40 million over the prior year level. This illustrates the importance of this issue to local governments, and is why it is critical for the state to meet its commitment to this program. Currently, the $75 million appropriation in fiscal 2014 is $28 million below the full funding amount required in the statutory formula, which was signed into law only a few years ago.
The funding shortfall means that cities and towns are receiving a fraction of the reimbursements due according to state law, and this is impacting a large number of communities. When charter school reimbursements fall short, communities are forced to cut other programs and services to make up the difference. Of the 20 cities and towns with the largest shortfalls, ranging from $250,000 to $10.3 million, 14 of them have been deemed by the state to have underperforming schools. These include some the state’s poorest and most financially distressed cities and towns. Thus, the underfunding of the charter school reimbursement formula is harming the most vulnerable and challenged school districts and communities.
We are asking the Legislature to close this year’s $28 million gap, and also appropriate the full amount to meet the state’s obligation in fiscal 2015, noting that H. 2 (the Governor’s budget) would level-fund the reimbursement account and extend the problem far into the future.
Fiscal 2014 Charter School Reimbursement Shortfall: $27,595,074
Fiscal 2015 Charter School Reimbursement Shortfall: $29,306,195
SPECIAL EDUCATION “CIRCUIT BREAKER”
We support full funding of the Special Education “Circuit Breaker” Program through which the state provides a measure of support for services provided to high-cost special education students. Under Section 5A of Chapter 71B of the General Laws, the state’s share is 75 percent of costs that exceed four times the state average per pupil foundation budget. This is an essential program that provides critical funding to assist all school districts with the increasingly burdensome and volatile cost of complex and expensive special education services.
The MMA and municipal and school officials appreciate the Legislature’s demonstrated record of commitment to full funding for this vital program. The appropriation in the Legislature’s fiscal 2014 budget fully funded the state’s full statutory reimbursement obligation this year. However, the Governor’s fiscal 2015 budget proposal would level-fund the Special Education “Circuit Breaker” Program, which would clearly fall short of full funding due to expected increases caused by inflation and normal operating costs. According to DESE, the state will need to increase its reimbursement payments to cities, towns and school districts by $10 million to fully fund the program in fiscal 2015. Without a $10 million increase in the fiscal 2015 state budget, the program would be underfunded by 4 percent.
Fiscal 2015 (H. 2): 4% Underfunding
Fiscal 2015 with $10M Increase: 100% Funding
STUDENT TRANSPORTATION REIMBURSEMENTS
We support and respectfully request that you include funding to assist cities, towns and school districts with the cost of transporting schoolchildren. There are four aspects to this important budget priority: 1) reimbursements to regional districts; 2) the transportation of homeless students under the McKinney-Vento program; 3) transporting out-of-district vocational students; and 4) renewed reimbursements to regular (non-regional) school districts. A brief summary of each of these transportation funding issues follows below.
1) We urge you to increase funding for transportation reimbursements to regional school districts. Funding for this account is vital to regional districts and member cities and towns, particular in sparsely populated parts of the state. The current $51.5 million appropriation is appreciated, yet is nearly $7 million below fiscal 2008 levels and is still far below full funding. Decades ago, the state promised 100 percent reimbursement as an incentive for towns and cities to regionalize, and the underfunding of this account has presented serious budget challenges for these districts, taking valuable dollars from the classroom.
2) In fiscal 2013, the state budget provided $11.3 million to fully fund the state-mandated costs that resulted from the Commonwealth’s adoption of the federal McKinney-Vento Act. The State Auditor ruled that the McKinney-Vento program was an unfunded mandate on cities and towns, and we appreciate the action you and the Legislature took to provide full funding soon after that ruling. Under the program, communities are providing very costly transportation services to bus homeless students to schools outside of the local school district. However, the fiscal 2014 state budget reduced McKinney-Vento reimbursements to $7.35 million, underfunding this state mandate. Local officials urgently request full funding for fiscal 2015 at an estimated $14.8 million, as well as a supplemental appropriation of $7.5 million to meet the state’s obligation for fiscal 2014.
3) The fiscal 2014 state budget included a $3 million item to reimburse communities for a portion of the cost of transporting students to out-of-district placements in vocational schools, as mandated by state law. This account 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 are not offered locally. We ask that you maintain and fully fund this reimbursement account at an estimated $3.8 million.
4) Finally, we support a renewed reimbursement program for non-regional school districts to help fund a portion of the burden of student transportation costs. The program was removed from the state budget during a time of economic distress. Restoring funding would benefit school districts in every corner of the state, and would provide important relief that would allow communities to use more of their Chapter 70 aid and local property tax dollars in the classroom.
PAYMENTS IN LIEU OF TAXES
We support full funding of the Commonwealth’s obligations and commitments to the program for payments in lieu of taxes for state-owned land (PILOT). This is a particularly important program for the cities and towns that host and provide municipal services to state facilities that are exempt from the local property tax. This account is funded in H. 2 at $26.3 million, a reduction of $500,000, and it is still below the $28.3 million funding level provided in fiscal 2008.
SHANNON ANTI-GANG GRANT PROGRAM
We support continued funding for the Shannon anti-gang grant program that has helped cities and towns respond to and suppress gang-related activities. H. 2 would fund this program at $8 million.
COMMUNITY INNOVATION CHALLENGE GRANT PROGRAM
We support continued funding for the Community Innovation Challenge Grant Program that was designed to provide resources and incentives for cities and towns to undertake regional and collaborative approaches to municipal and school services as a way to improve service delivery and save money.
CHAPTER 40S PAYMENTS
We support full funding of the Commonwealth’s commitment to make payments to cities and towns that approve “smart growth” zoning districts under Chapter 40R and are due school cost payments under Chapter 40S. This program is key to joint state-local efforts to develop affordable housing.
A LOCAL AID RESOLUTION TO FACILITATE TIMELY BUDGET DECISIONS AT THE LOCAL LEVEL
Cities, towns and regional school districts need timely notice of the main municipal and school aid accounts in order to prepare and approve forward-looking local revenue and spending plans. We ask that legislative leaders secure an agreement on our requested Unrestricted General Government Aid (UGGA) amount for next year, and also agree on a methodology for calculating Chapter 70 local contribution and school aid levels. An agreement would set the stage for a consensus Local Aid Resolution and a commitment to minimum municipal and school aid amounts during March. This would avoid the very difficult budget challenges that occurred last year for regional school districts and member cities and towns when required local contributions were not finalized until mid-July.
SUMMARY
This is a critical time for our economy, and for cities, towns and local taxpayers. We respectfully ask that you adopt the local aid investments and targeted funding detailed above. Massachusetts is starting to find some new vigor in its economy. But the Massachusetts economy will only reach full 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.
Please contact us at any time if you have any questions or need additional information by having your office reach out to me or MMA Legislative Director John Robertson at (617) 426-7272 or jrobertson@mma.org.
Thank you very much for your support, dedication and commitment to the cities and towns of Massachusetts.
Sincerely,
Geoffrey C. Beckwith
Executive Director, MMA