Budget season is here and the stakes are high

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From The Beacon, February 2014

Jan. 22 marked the beginning of the state’s budget-setting season, a five-month sprint to beat the July 1 deadline to have a spending plan in place in time for the new fiscal year. Once the governor filed his budget, all eyes turned to the Legislature, because that’s where all the action will be from now on.

Last month, the governor offered a $36.4 billion budget that would increase state spending by 4.9 percent, but would level-fund Unrestricted General Government Aid (UGGA), provide a small 2.3 percent increase for Chapter 70, and level-fund or underfund most other municipal and education accounts.

With state tax revenues increasing by $1.14 billion, it was expected that the initial budget plan would share at least some of those funds with cities and towns, especially in UGGA funding, because direct municipal aid was cut so deeply during the recession and is still nearly $400 million below fiscal 2008 levels.

The good news is that just two days after the governor’s budget was filed, House Speaker Robert DeLeo came to our Annual Meeting and declared that the House would not level-fund municipal aid but would provide an increase.

This is excellent news. Cities and towns are struggling to rebuild their finances in the aftermath of deep local aid cuts and a longer-than-anticipated recovery from the Great Recession. A recent Massachusetts Taxpayers Foundation report documents that cities and towns have eliminated 15,500 jobs in recent years, and reliance on the property tax has hit a 30-year high.

It’s important to highlight the top issues that need to be addressed in the fiscal 2015 budget, starting with municipal aid. The governor’s budget (House 2) would level fund UGGA at $920 million. This is the main municipal aid account that communities rely on to fund police and fire protection, public works, libraries, parks, recreation programs, senior and youth programs, and public education. With the cost of these services increasing every year, level-funding local aid would force cuts in these essential services, increase reliance on property taxes, or both.

We believe the state should increase unrestricted local aid by the same rate that state revenues are increasing – 4.9 percent – because local aid should grow at the same pace as the Massachusetts economy, which would require a $45 million increase. As the Massachusetts Budget and Policy Center notes, when one factors in inflation, unrestricted aid is more than $800 million lower than it was in 2001, a 47 percent reduction. Communities can no longer do more with less, as evidenced by the large reduction in the municipal workforce. Cities and towns need this aid to provide the essential services necessary to foster economic growth in Massachusetts.

In terms of investing in education, House 2 offers a Chapter 70 increase of $99.5 million, or 2.3 percent. This would be one of the smallest increases since the passage of education reform more than 20 years ago. Chapter 70 must receive a higher increase to prevent cuts in many school districts across the state, and we recommend a much higher level of minimum aid than $25 per student. Adding $30 million to Chapter 70 would allow for $100 per student minimum aid, an increase that would benefit more than 200 school districts across the Commonwealth.

House 2 would level-fund the Special Education Circuit Breaker program at $252.5 million. Because special education costs are expected to rise by approximately 5 percent or more, level-funding would create a shortfall of $10 million to $15 million next year. This is a vital account that every city, town and school district relies on to fund state-mandated services. The MMA deeply appreciates the efforts of legislators to fully fund the program for the past two years, and is asking for the increase necessary to stay at full funding.

The governor’s budget would level-fund reimbursements for the transportation of homeless students at $7.4 million, which is at least $4 million below the full reimbursement called for under the state’s unfunded mandate law. Two years ago, the state auditor ruled that the adoption of the federal McKinney-Vento law imposed an unfunded mandate on cities and towns. The program was funded at $11.3 million in fiscal 2013 and $7.4 million in fiscal 2014. Freezing the program at that amount would ignore the auditor’s ruling and impose a significant burden on those cities and towns that are providing transportation services to homeless children who have been placed in communities by the state.

Another underfunded account is the charter school reimbursement program that was created to provide fiscal relief to the dozens of cities and towns that host or send students to charter schools. These communities are entitled to be reimbursed for a portion of their lost Chapter 70 aid. The state fully funded the reimbursement program in fiscal 2013, but is underfunding reimbursements by approximately $28 million this year. House 2 would level-fund charter school reimbursements at $75 million, which would guarantee a major shortfall in fiscal 2015. Underfunding this program causes major fiscal distress in every community that has a significant charter school presence. Only a small fraction of the public school students attend charter schools, so shortchanging this program would cut school services for the vast majority of students who remain in the traditional school setting.

House 2 would level-fund regional school transportation reimbursements – an account that is already underfunded – at $51.5 million. Freezing this appropriation would force communities to absorb increased costs due to fuel and inflation. We thank the Legislature for increasing this program in recent years, and we will be advocating for the funding necessary to prevent deeper budget woes in dozens of school districts.

Finally, the governor’s budget would slice $500,000 from PILOT payments, cutting this already underfunded program from $26.77 million to $26.27 million. Communities use PILOT funds to offset the expense of hosting and providing emergency response services to state-owned property within their borders. Funding this modest program is a matter of fairness, and underfunding the program harms a large number of small and rural communities.

The bottom line is that significant local aid investments are necessary. Freezing municipal aid and offering minimum education funding would force higher reliance on the property tax, trigger service reductions in cities and towns across the state, and prevent needed investments in key programs that build our economy.

It will be vitally important for local leaders to tell their representatives and senators how these specific local aid issues impact their hometowns and home districts. The budget race is on, and July 1 will be here before we know it, so there’s no time to lose.