His Excellency Charles D. Baker
Governor of the Commonwealth

The Honorable Robert A. DeLeo
Speaker of the House

The Honorable Karen E. Spilka
Senate President

State House, Boston

Dear Governor Baker, Speaker DeLeo and President Spilka,

The COVID-19 pandemic and the deep coronavirus recession have presented an unprecedented threat to the sustainability of state and local government here in Massachusetts and across the nation. The Commonwealth has benefited greatly from your steady leadership and thoughtful and appropriate responses to this almost unimaginable public health and economic emergency as it has progressed from its springtime emergence to now.

We very much appreciate the priority that you and your colleagues in state government have given to cities and towns during this emergency, issuing orders and enacting laws to provide flexibility and resources for your partners in local government. All of these steps have been vital to keeping municipal government and essential services functioning during turbulent and uncertain times.

Cities and towns started the new fiscal year in a state of extreme anxiety and concern regarding the health of our state and local economies and the short- and long-term impact on municipal revenues and essential state funding. Local revenues generally reflect state economic conditions, and ended fiscal 2020 lower than expected. This revenue loss will certainly be carried forward through fiscal 2021, with lower meals, lodging and motor vehicle excise revenues, and will continue into fiscal 2022, when the recession and economic slowdown will clearly depress property values and new growth, negatively impacting property tax revenues while shifting a greater burden onto residential property taxpayers due to falling commercial valuations. Cities and towns will be struggling with major local revenue problems well after the COVID-19 pandemic eases.

We appreciate the challenges you face in drafting a state budget for fiscal 2021, with uncertainty about state revenues at the close of fiscal 2020 and into the new year. We also understand that relief legislation being negotiated in Congress will influence the state’s fiscal 2021 general appropriations bill, as will the amount of any draw on the state’s $3.5 billion stabilization fund. Recognizing the prime importance of federal assistance, MMA is working with municipal associations across the nation, calling on federal lawmakers to provide a sweeping relief package that includes direct aid to local and state governments to make up for billions in lost revenue.

Municipal and school aid appropriations in the state budget are a critical part of fiscal sustainability at the local level. We very much appreciate recent statements that state leaders will provide guidance to city and town leaders sometime over the next few weeks on the levels of municipal and school aid that can be expected in the state’s fiscal 2021 appropriations act. This will be crucially important information as cities and towns get ready to revisit local revenue and spending plans after Labor Day, in preparation for finalizing budgets and setting property tax rates later in the fall.

As you contemplate municipal and education aid funding for fiscal 2021, we ask that you do so considering the compelling need to protect the fiscal capacity of local government, knowing two certainties: 1) cities and towns are on the front lines fighting the COVID-19 pandemic; and 2) municipal services are essential to our state’s economic recovery.

This is why we are asking the Commonwealth to avoid any cuts to municipal and school aid accounts below fiscal 2020 levels, and to increase appropriations where possible to fund state commitments, including the Student Opportunity Act and statutory reimbursement accounts. We also ask that assessments on cities, towns and school districts be capped at the fiscal 2020 level to avoid having net local aid payments fall below fiscal 2020 levels.

When the federal government does provide direct relief to local governments, these funds will be used to replace lost local revenues, protect core municipal services and fight the coronavirus, and will not be available to offset local aid cuts. When the state receives direct federal aid, we ask that it be used as replacement tax revenue, and be leveraged to sustain key state services and core municipal and education aid programs. If federal aid is insufficient, we ask that you prioritize local aid, and find other ways to stabilize state finances, including borrowing, new revenues, and prudent reliance on the state’s stabilization fund.

This late in the process, cities and towns have no way of raising additional revenues to offset local aid reductions. Cuts in state aid will lead to direct reductions in local budgets, leading to layoffs and higher unemployment, deferred maintenance and crumbling infrastructure, and reduced service levels for residents, businesses and schoolchildren across the Commonwealth. Cutting essential services now would deepen and prolong the COVID-19 recession, and negatively impact Massachusetts for years, which is why dozens of the state’s leading economists, including leaders of MassBenchmarks, issued a rare public statement in May, asking state officials to take all necessary steps to preserve quality-of-life programs in the state budget, including protecting local aid.

Municipal Aid
Unrestricted General Government Aid (UGGA) provides essential funding for vital municipal and school services, allowing communities to deliver core services to residents and businesses, and mitigating further overreliance on the property tax. As you know, this account suffered disproportionately large cuts during the Great Recession, and is still nearly $200 million below fiscal 2008 levels, without adjusting for inflation. While we sincerely appreciate the increases provided in recent years, this modest indexed growth means that cities and towns are still facing fiscal repercussions from the last recession, which is why reliance on local revenues to fund local budgets is at its highest point since the passage of Proposition 2½. Further, state tax revenues make up a very small portion of this account, which is primarily funded with local Lottery revenues. As you know, the state Lottery closed fiscal 2020 with strong revenue performance, which is good news to all those who support protecting UGGA aid.

We respectfully ask that fiscal 2021 UGGA funding be preserved at fiscal 2020 levels, and that the account be increased if federal aid offsets projected state revenue losses in the upcoming fiscal year. Communities are relying on these funds to support local health departments, first responders, public schools, public works and infrastructure, and key quality-of-life and economic-growth services to residents and businesses.

School Aid
Clearly, cities, towns and school districts are relying on federal and state funding to cover the full cost of adapting school programs, staffing and facilities to resume safe in-person and remote services for the upcoming year. The safe reopening of schools and continuity of K-12 operations must have a strong foundation to stand on, which is why Chapter 70 and the full range of education-related accounts in the state budget are essential going forward.

We ask that fiscal 2021 funding for Chapter 70 school aid be appropriated at a level that will, at a minimum, support at least level funding of all school districts, with increases targeted to those districts that are the focus of reforms and investment in the Student Opportunity Act (SOA), enacted and signed last year, with the MMA’s strong backing. The SOA is one of your signature accomplishments, and we know that this remains a top priority for all lawmakers and the Administration.

We ask that funding for student transportation reimbursements be maintained, and that the Commonwealth use federal and state dollars to fund the additional cost of student transportation associated with the safe reopening of schools this year. We ask that special education circuit breaker funding and reimbursements for school aid assessments to pay charter school tuition be maintained, two main commitments of the SOA.

We appreciate that these accounts may be funded differently than in recent years, with contributions from state revenues as well as from current and new federal relief accounts and state reserves. This would be similar to funding methods employed during the last recession when federal revenues were available to sustain state and local government during the economic crisis at that time, and ARRA funds were used to shore up Chapter 70 funding.

Assessments and Charges
We ask that Cherry Sheet assessments and other charges be capped at fiscal 2020 levels. If local assessments and charges are allowed to grow, and aid is not increased by a matching amount, this would have the same effect as a local aid cut, as net revenues would decrease. Some accounts, such as assessments to pay tuition to charter schools, can have a substantial and destabilizing impact, which is why an assessment cap is particularly important for charter school tuition payments.

Summary
This is a critical time for the state and its cities, towns and residents – yet with close collaboration and resources, these challenges do not need to evolve into a multiyear fiscal crisis that harms public health and our economic prospects. We know that you are outstanding partners for the communities of the Commonwealth, and we know your partners in local government are determined to take every possible action to battle the coronavirus and protect the residents of Massachusetts, and are just as determined to deliver the essential services that our economy needs in order to rebound and grow. We will only reach our full potential for statewide recovery if all 351 cities and towns have the resources to adequately serve the residents and businesses of the Commonwealth.

On behalf of local leaders across the state, we offer our deep appreciation for your support for cities and towns during this worldwide emergency. We look forward to working together on revenue and spending frameworks to provide adequate and stable funding for local and state needs in fiscal 2021 and beyond. If you have any questions, please do not hesitate to have your offices contact me or MMA legislative Director John Robertson at jrobertson@mma.org at any time.

Thank you very much.

Sincerely,

Geoffrey C. Beckwith
MMA Executive Director & CEO

cc:
The Honorable Karyn Polito, Lieutenant Governor of the Commonwealth
Secretary Michael J. Heffernan, Executive Office for Administration and Finance
The Honorable Aaron M. Michlewitz, Chair, House Committee on Ways & Means
The Honorable Michael J. Rodrigues, Chair, Senate Committee on Ways & Means