Economic recovery presents opportunity to address local aid shortfalls

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From The Beacon, May 2014

The state budget debate is moving from the House of Representatives to the Senate this month, and lawmakers are on track to deliver an on-time budget for fiscal 2015.

More than in recent years, however, it seems as though legislators set the broad parameters of most major local aid accounts well before the June 30 budget deadline. This budget glidepath should not be seen as a fait accompli, however. This is the time to recognize that our state’s robust economic growth presents an opportunity to invest in cities and towns and close a number of critical budget shortfalls now.

Back in March, the Legislature adopted a local aid resolution that committed members of the House and Senate to passing a state budget that includes a $25 million increase in Unrestricted General Government Aid, which is very good news for cities and towns, especially when compared with the governor’s proposal to level-fund direct municipal aid.

The local aid resolution, however, also set Chapter 70 funding at the same level offered in the budget submitted by the governor, which would merely provide most cities, towns and school districts with a tepid minimum aid increase of $25 per student. This is far too little, and if this Chapter 70 minimum aid number stands, legislators and the governor can expect to hear statewide reports of education cutbacks or reductions in municipal services imposed to shift more money to school budgets to plug the holes.

Other key accounts have seen some positive movement in the House, including $5 million more for the special education circuit-breaker and $2 million more for regional school transportation. By contrast, two important reimbursement accounts remain underfunded in the current fiscal year and in the pending fiscal 2015 budget: the program to replace a portion of Chapter 70 aid lost to charter schools, and the mandated school transportation costs for homeless students under the McKinney-Vento law. The MMA and local officials will continue to press hard – very hard – for full funding of these critical accounts as the fiscal 2015 budget process moves forward, but more immediately, these accounts are woefully underfunded right now in fiscal 2014.

With the Federal Reserve Bank of Boston and MassBenchmarks (the Commonwealth’s economic forecasting consortium) reporting that the Massachusetts economy is gaining steam and is projected to grow at a faster-than-expected pace in the coming months, state tax revenues will significantly outperform original targets. This will generate a state budget surplus that can be used to fund supplemental appropriations in the current year. Thus, the governor and Legislature will have the revenues to provide the $28 million necessary to fund charter school reimbursements and the additional $7 million to fund the McKinney-Vento mandate.

The state’s general appropriations act is just the beginning. Each year, lawmakers enact several supplemental budgets to build on the original spending plan, address shortfalls, provide funds for unforeseen events, and expand existing programs. The Legislature will be considering at least two more supplemental budgets for fiscal 2014 in the coming months, and these should include appropriations to meet the state’s obligations for charter school reimbursements and McKinney-Vento. Governor Patrick recognized this in the most recent fiscal 2014 supplemental budget he filed at the end of April, because he included $28 million for charter school reimbursements to fully fund the program this year.

In addition to addressing critical funding shortfalls in the upcoming fiscal 2014 supplemental budgets, lawmakers will have an opportunity to ensure that cities and towns receive their full share of Lottery proceeds.

Lottery revenues are now officially forecast to exceed the original estimate for fiscal 2014 by $20 million, and they will almost certainly end the year significantly higher than that. Citizens and municipal officials expect that Lottery revenues will be distributed directly to cities and towns, as intended in the state law that established the Lottery decades ago. Communities use these local funds to support essential municipal and school services and reduce overreliance on the property tax, and these funds must be seen and treated as a local revenue source.

To make sure that cities and towns receive their Lottery revenues, lawmakers and the governor should include an additional Lottery distribution in their next supplemental budget.

Cities and towns should share in the state’s economic recovery. When accounting for inflation, municipal and school aid remains far below pre-Great-Recession levels. Since 2008, communities have increased their reliance on property taxes, cut back on core services, and eliminated 15,000 jobs. Today, the fiscal distress may not be as acute, but very real and painful budget challenges continue, and communities are unable to restore the level and quality of services that are needed to keep and attract families and business investment over the long term.

The short-term economic growth that we are experiencing today is providing the Commonwealth with an opportunity to invest in critical and targeted local needs by sharing a portion of the increased state tax revenues (and all Lottery revenues) with cities and towns.

That’s why the budget deliberations on Beacon Hill are so important. Making these essential investments now will foster and build long-term economic growth and prosperity for all of Massachusetts. But this window of opportunity will not remain open for long. If state leaders decide not to share these revenues or support these investments now, today’s economic momentum will surely fade, and every citizen and business will pay the price.