Muni Officials Say State Not Sharing Enough Revenue

Collections Have Far Exceeded Conservative Projections

Cities and towns run the risk of being “permanently left behind” in their ability to fund key local services without a change in the way state revenue growth is calculated, the head of the Massachusetts Municipal Association warned Tuesday.

Speaking at a meeting of the Local Government Advisory Commission, MMA Executive Director Geoff Beckwith asked that state officials look for another way to gauge annual revenue growth to make sure that communities are able to share in the upswings.

“We fear what will happen to communities if local aid does not keep pace, not just for this year, but for many years,” Beckwith said.

Massachusetts Municipal Association Executive Director Geoff Beckwith said at a Local Government Advisory Commission meeting Tuesday that the gap in growth between state revenues and local aid creates a risk that cities and towns will be “left behind.” [Screenshot]

Gov. Charlie Baker’s fiscal 2023 budget includes $1.2 billion in unrestricted general government aid for the state’s 351 cities and towns, an increase of $31.5 million or 2.7 percent over this year’s budget. Baker and Lt. Gov. Polito ran for office on a pledge to match the state’s estimated revenue growth with similar increases in local aid, and budget-writers have projected tax collections will rise 2.7 percent next year.

The 2.7 percent figure is based on a revised revenue forecast for this year of $35.9 billion, which was recently upgraded by more than $1.5 billion. Massachusetts ended fiscal 2021 with a sizeable surplus and so far this year actual collections have been running well above benchmarks, a dynamic that has been prompting municipal officials to call for additional unrestricted aid next year.

Beckwith said state revenues and unrestricted local aid were “generally growing at the same rate” until 2020, when the COVID-19 pandemic knocked the global economy askew. Since then, he said, the growth estimates used to set local aid levels have been “extraordinarily low and missed the mark in fiscal 2021 and fiscal 2022.”

“If this method of calculating revenue growth isn’t corrected, cities and towns will be permanently left behind and their capacity to fund key, core services at the municipal level will be hindered on a long-term basis for many, many years,” Beckwith said. “And local services are the building blocks for our state’s economy,” he said.

He said that while state revenue growth has averaged about 5 percent each year, local aid will have risen about 3 percent, resulting in an approximately “40 percent difference in terms of revenue sharing for unrestricted general government aid.”

The House and the Senate will draft and pass their own spending plans in April and May, and Beckwith said the MMA is asking lawmakers to use the tax revenue prediction baked into this year’s budget as their benchmark for growth, which would raise unrestricted local government aid by $85.3 million.

On school funding, the MMA wants the minimum aid funding — the increase districts receive when funding formulas mean their school aid would not otherwise go up — to rise from $30 per student in Baker’s plan to $100 per student.

Baker’s budget recommends a $485 million hike in Chapter 70 aid to local schools, bringing that account up to $5.989 billion.

Sandwich Town Manager George “Bud” Dunham said that despite the 8 percent increase in Chapter 70 over this year, 136 of 318 school districts would receive just the minimum aid increase, for a combined increase of just over $9 million at those districts.

Sandwich is a minimum-aid community and stands to receive a 1 percent aid increase, he said.

“A 1 percent increase in Chapter 70 funding really doesn’t come close to keeping up with our rising internal costs for things like employee benefits and school operational needs,” Dunham said.

Lt. Gov. Karyn Polito said the points around school funding were “well-taken” and that the administration would look more specifically at the minimum-aid districts.

She told the local officials that the administration had “tried hard in the revenue sharing to hold you harmless during those tough years” when state tax collections landed below projections.

“We all know that in 2020, everything changed, so a formula that would have run, I think, in a good way had the pandemic not occurred, probably would have continued on that track,” she said.