Mass. economy depends on key local aid investments

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From The Beacon, April 2015

The Legislature shifted into full budget-debate mode almost immediately after Gov. Charlie Baker filed his fiscal 2016 state budget plan on March 4. The next two months will establish the contours of essential funding commitments from the state, with the House expected to approve its budget bill in late April, and the Senate preparing to act in May.

Improved 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, to mitigate today’s overreliance on the regressive property tax, and to build stronger economic growth.

Here are the most pressing fiscal 2016 local aid issues that the Legislature will be acting on in the next eight weeks:

Unrestricted Local Aid: The MMA strongly supports the $34 million increase in Unrestricted General Government Aid (UGGA) included in the governor’s budget proposal. The 3.6 percent increase recommended by the governor is certainly achievable, as it is below the consensus forecast of 4.8 percent growth in state tax revenues. Further, the state will receive gaming revenue from the new Plainridge Park Casino facility of between $86.7 million to $118.5 million. These funds, required by law to flow directly into the Gaming Local Aid Fund for the primary purpose of funding UGGA, are more than enough to cover the $34 million local aid increase.

Municipal aid was cut deeply during the recession and remains $368 million below 2008 levels (even without adjusting for inflation). Because of this, cities and towns have eliminated more than 15,000 jobs, reduced many core services, and increased their reliance on the property tax, which is now at a 33-year highpoint.

In the long-term, the MMA is calling for a return to revenue sharing that links UGGA to the growth in state tax revenues. This means 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 begins this process.

Chapter 70 Education Aid: The MMA strongly supports higher funding for Chapter 70 school aid to ensure that all municipal and regional school districts are able to reach the “foundation” level of spending, to implement the target share/down payment aid equity provisions adopted in 2006, and to provide an appropriate amount of minimum aid, which we believe should be at least $100 per student.

A surprisingly high majority of school districts only receive minimum aid under the current formula, which is why the minimum aid aspect of Chapter 70 is so important. The governor has proposed a Chapter 70 increase of $105.3 million, which includes minimum aid of only $20 per student for 245 school districts, an insufficient amount to maintain current school staffing and services.

We are calling on the Legislature to increase minimum aid to $100 per student to prevent further erosion in school financing at the local level. This level of funding is clearly achievable within the context of the 4.8 percent growth in state tax revenues.

Special Education Circuit Breaker: We support full funding of the Special Education Circuit Breaker account, 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 Legislature’s fiscal 2015 budget was intended to fully fund the state’s full reimbursement obligation this year, but the appropriation was reduced by emergency budget cuts last November and in February, and after earmarks and Department of Education administrative costs, the final fiscal 2015 amount set for distribution to cities and towns will fall $4.8 million short.

The governor’s budget would level-fund the circuit breaker program. Because special education costs are expected to rise, however, this means that the governor’s budget underfunds next year’s reimbursements by millions of dollars.

Cities and towns are providing special education services under a mandate imposed by state government, and communities recognize the importance of these services to the schoolchildren who rely on these programs to achieve their maximum educational potential, which is why cities, towns and school districts are committed to meeting their obligations as mandated by the state. If the Circuit Breaker program is underfunded, this will force cuts to other areas of local school budgets and services.

Charter School Reimbursements: The diversion of Chapter 70 school aid away from public schools to pay tuition to charter schools is imposing 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.

In fiscal 2015, it is expected that cities and towns will be forced to divert $444 million to fund charter schools, or 10 percent of all Chapter 70 dollars. 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. The original $80 million appropriation in the fiscal 2015 budget was $30.5 million below the full funding amount required in the statutory formula, which was signed into law only a few years ago. The problem has deepened with two rounds of 9C cuts to this account ($3.1 million), increasing the fiscal 2015 shortfall to more than $33.6 million.

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 more than $10 million, most 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.

The governor’s budget would level-fund charter school reimbursements at $76.86 million, even though local payments to charter schools are expected to increase by $55 million. Full funding of the statutory formula would require $130.4 million. Without these funds, cities and towns will face another major shortfall next year, which will result in cutbacks for the vast majority of students who remain in the traditional public school setting.

We continue to call on the Commonwealth to close this year’s $33.6 million gap and to appropriate the full amount necessary to meet the state’s statutory obligation in fiscal 2016.

School Transportation Reimbursements: One of the MMA’s top budget priorities is funding to assist cities, towns and school districts with the cost of transporting schoolchildren. There are three aspects to this important budget priority: reimbursements to regional districts; the transportation of homeless students under the McKinney-Vento program; and transporting out-of-district vocational students.

Funding for transportation reimbursements to regional school districts is vital to all regional districts and their member cities and towns, particularly in sparsely populated parts of the state. We applaud the Legislature for appropriating $70.25 million for fiscal 2015, but, unfortunately, Gov. Deval Patrick used his 9C powers to cut the amount in November by 27 percent, an unexpected and painful $18.7 million loss.

Decades ago, the state promised 100 percent reimbursement as an incentive for towns and cities to regionalize, and the consistent underfunding of this account has presented serious budget challenges for these districts, taking valuable dollars from the classroom. Gov. Baker’s budget would simply level-fund regional school transportation reimbursements at $51.5 million, dropping the reimbursement percentage down to 61 percent. We are asking the Legislature to restore the $18.7 million mid-year cut and return the program to the Legislature’s original fiscal 2015 appropriation.

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 the Legislature took to provide full funding soon after that ruling. Under the program, communities are providing costly services to bus homeless students to schools outside of the local school district.

The fiscal 2014 state budget reduced McKinney-Vento reimbursements to $7.35 million, underfunding this state mandate. Full funding for fiscal 2015 is estimated at $19.8 million, but the Commonwealth level-funded the program at $7.35 million, creating a shortfall of $12.45 million in the current fiscal year. We are asking the Legislature to fully fund this state mandate, which would require $20.8 million, according to the most recent projection from the Department of Elementary and Secondary Education.

The fiscal 2015 state budget included a $2.25 million item to reimburse communities for a portion of the $3.8 million 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. Gov. Patrick eliminated all funding with his November 9C cuts, and Gov. Baker’s budget includes no funding at all. We are asking the Legislature to restore this funding in the fiscal 2016 budget act. According to DESE, full funding would cost $3.9 million.

Payments-in-Lieu-of-Taxes (PILOT): 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 underfunded at $26.77 million in fiscal 2015, and is still below the $28.3 million funding level provided in fiscal 2008. Many of our state’s smallest communities are heavily reliant on PILOT payments, and shortfalls in this account have a significant impact on their ability to deliver basic municipal services.

House 1 would level-fund PILOT at $26.77 million, and we are asking the Legislature to at least return to the $28.3 million amount provided in fiscal 2008, a $1.5 million increase.

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 serve their residents and businesses, which is why the MMA is asking our representatives and senators to embrace these local aid investments.

This is a critical time for our economy, and for cities, towns and local taxpayers. After years of constant fiscal pressure from declining state aid, rising fixed costs, and stagnant development, communities in every corner of Massachusetts are reporting that their fiscal 2016 budgets are more challenging and painful than even the darkest days of the Great Recession.

The stakes are high. Improved local aid and school funding from the state will set us on a positive course to strengthen our economy, grow more jobs, and improve the quality of life for all residents. Continued shortfalls will deepen fiscal woes that have been around far too long.