Local aid investments at stake in budget negotiations

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From The Beacon, June 2015

Most cities and towns are nearing the fiscal finish line, and by the end of this month, every community will have next year’s budget locked in. This has been another challenging year, as municipalities are struggling with tepid revenue growth, rising expenses and expectations from residents and businesses that community services will be maintained or expanded.

The same dynamic is occurring at the state level, as lawmakers are nearing completion on a $38.1 billion spending plan that increases expenditures by 3 percent, the smallest growth rate since the Great Recession of 2008-2009, predicated on the elimination of up to 5,000 state jobs through early retirements and attrition.
The budget action has shifted to a House-Senate conference committee, as legislative leaders will need to iron out differences on a number of major budget matters, including disagreements on state tax policy and the strength of MBTA reform measures. The conference committee process is expected to take several weeks.

In terms of local aid, the House and Senate budgets provide progress on many important municipal priorities, although each branch has adopted different appropriation amounts for several local aid accounts and programs, and it will be important for local officials to talk to their legislators and urge the conference committee to agree on the highest possible funding levels.

Below is a summary of the major local aid accounts, and where they stand, with a focus on those programs that are treated differently in the House and Senate budgets.

First, however, it is important to highlight a major win for cities and towns: the Senate, House and governor’s budgets all support $979.8 million for Unrestricted General Government Aid, a $34 million increase over current funding, which means local officials can count on this level of funding for fiscal 2016. This will be the largest increase in discretionary municipal aid in nearly a decade. Every city and town will see its UGGA funding increase by 3.6 percent.

In another victory for cities and towns, each branch has announced its intention to fully fund the Special Education Circuit Breaker program. The Senate budget plan would provide $271.6 million, an $18.2 million increase above fiscal 2015. House leaders have also stated their intention to fully funding the account and appropriated an increase of $8.3 million. Based on the latest information, we predict that full funding would require the full $18.2 million increase. This is a vital program that every city, town and school district relies on to fund state-mandated services, and the MMA is urging legislators to support the $271.6 million proposed by the Senate.

On the other hand, the Senate budget would fund Kindergarten Development Grants at only $1 million in fiscal 2016, which would translate into a painful $17.6 million cut for the 117 communities and school districts that depend on these funds. The House budget would maintain the program at $18.6 million. The governor’s budget would have eliminated all funding. This is an important account, because reducing or eliminating the $18.6 million would jeopardize expanded kindergarten programs throughout the state, and the MMA is asking legislators to support the House appropriation of $18.6 million.

During the budget debate, senators voted to add $7.5 million for regional school transportation reimbursements. The House budget also recognizes the importance of restoring regional transportation funds and has offered a $5 million boost. Both proposals compare favorably to the governor’s recommendation to level-fund the program, and we are asking the conference committee to embrace the $7.5 million increase.

In terms of basic education funding through Chapter 70, both the House and Senate are supporting minimum aid at $25 per student – higher than the $20-per-student amount proposed by the governor. The Senate’s overall Chapter 70 appropriation is $3 million more than the House to accelerate the implementation of the target share provisions enacted in 2007, which is why several districts would see a somewhat higher Chapter 70 aid level in the Senate’s proposal. Because most cities and towns only receive minimum aid (245 operating districts in cities, towns and regions), the MMA will work to build on this progress and continue to call for higher minimum aid funding in the future.

Cities and towns that host or send students to charter schools are entitled to be reimbursed for a portion of their lost Chapter 70 aid. The state fully funded the reimbursement program in fiscal 2013 and 2014, but is underfunding reimbursements by approximately $34 million in fiscal 2015. The governor and House have proposed fiscal 2016 budgets that would level-fund charter school reimbursements at $76.8 million, which would guarantee another major shortfall in fiscal 2016 and result in cutbacks for the majority of students who remain in the traditional school setting. The Senate voted to provide $7.7 million more than the House and governor’s budgets. The Senate’s action to increase funding by 10 percent is deeply appreciated, yet it is important to remember that the account is still significantly underfunded.

During the budget debate, both the House and Senate approved amendments intended to prevent the practice of “pay the patient” by insurance companies, which undermines the ability of cities and towns to fund and operate effective and efficient ambulance services that are at the core of emergency medical response in Massachusetts. “Pay the patient” would force communities to pursue their own residents to recoup thousands of dollars in ambulance expenses, a system that is inefficient and subject to abuse. The Senate amendment would give ultimate rate-setting authority to the secretary of Health and Human Services. The House adopted an amendment to ban “pay the patient” practices, with language stating that municipalities would be authorized to set a fair rate for ambulance services, preventing insurance companies from shifting costs to local property taxpayers through below-cost reimbursements. The governor’s budget did not address the issue. The MMA is asking legislators to support final budget language that prevents “pay the patient” and ensures that cities and towns can retain the power to set their own rates to pay for emergency ambulance services, based on their own needs.

During fiscal 2015, 156 cities and towns collected the local Community Preservation Act surcharge and are eligible for state matching grants in fiscal 2016. The Division of Local Services estimates that the balance in the state trust fund will be sufficient to provide a first-round match of only 18 percent of the surcharge levied by each city and town. This would be the lowest state match in the program’s history. Knowing this, House members voted to dedicate up to $10 million of any fiscal 2015 year-end state budget surplus to supplement the fiscal 2016 state match. The Senate budget does not include CPA funding. The MMA is asking legislators to support the House funding level.

Cities and towns have balanced their budgets based on the reasonable expectation that the state will fully fund its local aid obligations. Now is the time for local officials to call their legislators to thank them for the $34 million increase in unrestricted local aid, and explain how the House and Senate budgets would impact their communities.

We need our legislators to support the highest possible funding for the Special Education Circuit Breaker, charter school reimbursements, kindergarten development grants, Chapter 70, regional school transportation, the Community Preservation Act and other key accounts, and to ensure that communities retain their authority to set fair ambulance rates.

The House and Senate have each made progress in restoring stability to municipal finances, but that stability will only be secured if the final budget negotiations maximize the investment in cities and towns.