CLT
UPDATE
Thursday, September 8, 2005
The problem has again been defined.
Now what's the solution?
The state is paying for a smaller share of local
budgets than in 1988 and residential homeowners are picking up an
increasing portion of the tab, according to a new report....
The analysis, conducted by a Municipal Finance Task Force of
public and private sector experts led by Sovereign Bank of New England Chairman
John P. Hamill, said three large problems are haunting local officials in city
and town halls across the state: increasingly restricted and unpredictable local
aid levels, constraints on ways to raise local revenue, and health care,
pensions and debt costs that are growing far faster than municipal revenues....
"I think it is fundamentally true that we have a system right now that's
broken," Hamill said at a Beacon Hill press conference to release the report.
"It has been cobbled together over many years, attempting to solve the problems
that arise at different times in our lives. There are well-intentioned people
that put those solutions in place but over a period of 25 years you find that
you have different pieces that don't fit together." ...
The Metro Mayors Coalition, a group representing the leaders of 10 urban Greater
Boston communities, convened the task force, which worked with the Metropolitan
Area Planning Council. The task force includes city officials from Cambridge,
Revere, Quincy, Medford, Everett, Boston and Melrose.
State House News Service
Wednesday, September 7, 2005
Report: State pays smaller share,
residents a larger share of local budgets
Chip Ford's CLT Commentary
The State House News Service reported: "The
analysis, conducted by a Municipal Finance Task Force of public and
private sector experts led by Sovereign Bank of New England Chairman
John P. Hamill, said three large problems are haunting local officials
in city and town halls across the state: increasingly restricted and
unpredictable local aid levels, constraints on ways to raise local
revenue, and health care, pensions and debt costs that are growing far
faster than municipal revenues...."
". . . and health care, pensions and debt costs that are
growing far faster than municipal revenues."
The report noted that "residential homeowners are
picking up an increasing portion of the tab."
Now my dictionary defines portion as: "noun, a
part or a share."
Understood: state local aid is erratic because
the Legislature spends in good times as if there are no economic cycles,
increasing spending it can't sustain in bad years. Thus local aid has
been reduced during fiscal crises. But here's the real problem.
If municipal spending is let's say $1,000,000
in a given year and the state pays half, then the state is paying $500,000
and the city or town is paying $500,000. If municipal spending
increases to $1.5 million the next year, and the state still pays $500,000 --
then the state is "only contributing" one-third of municipal spending,
right?
In that situation, state spending hasn't decreased:
municipal spending has increased. This created a smaller
"portion," you still with me?
In my commentary for the CLT Update of Apr. 24, 2005
("The
secret ticking time bomb: 'public service' pensions, health insurance
giveaways"), I wrote:
As if the impending crash of Social Security and
Medicare isn't overwhelming enough for taxpayers, now comes news of
perhaps an even bigger threat to our financial survival -- and
especially that of younger workers and taxpayers and those not yet
born. The "public service" gravy train is soon to utterly bury us,
especially the younger generations coming up who'll have to pay the
staggering bill for government first and foremost taking care of
itself as usual.
Then, in the CLT Update of May 1, 2005 ("Hit
a pothole, thank a teacher") I amplified:
Now we know that over half of that $1.2 BILLION
extracted from us taxpayers annually for public employees' platinum
parachutes -- $682 million of it every year -- goes directly just to
"retired" teachers, much of it to cover this newest scam.
Why was the "Hamill Commission" unable to confront
the real problem?
Probably because one of its members was present,
Kathleen Kelley, president of Massachusetts Federation of Teachers.
Again I ask -- were any of you blue-collar taxpayers
invited onto this Fat-Cat self-declared "commission"? Was your input
sought?
Nobody at CLT was either. And my goodness,
without CLT two decades ago there never would have been any
municipal finance reform.
Hamill Commission II Members
John Hamill, Chairman, Sovereign Bank New England – Chairman of Task
Force
Mayor Thomas Ambrosino, City of Revere
George Anzuoni, Director of Finance, City of Revere
Katharine Bradbury, Senior Economist and Policy Advisor, Federal
Reserve Bank of Boston
Janice Bourque, Senior Vice President and Group Head of Life Sciences
Practice, Comerica Bank
Alan Clayton-Matthews, The McCormack Graduate School of Policy
Studies, UMass Boston
Patrick Dello Russo, Chief Financial Officer/Auditor, City of Melrose
Louis DePasquale, Assistant City Manager for Fiscal Affairs, City of
Cambridge
Ruth Ellen Fitch, President, Dimock Community Health Center
Catherine Gover, City Council, City of Everett
Mayor Mary Clare Higgins, City of Northampton; Vice President, MMA
State Representative Rachel Kaprielian, 29th Middlesex
Kathleen Kelley, President, Massachusetts Federation of Teachers
William Kennedy, Partner, Nutter, McClennen & Fish
Mayor William Phelan, City of Quincy
James Segel, Partner, Smith, Segel & Sowalsky
Lisa Signori, Chief Financial Officer, City of Boston
State Senator Steven Tolman, 2nd Suffolk and Middlesex
Michael Widmer, President, Massachusetts Taxpayers Foundation
Technical Advisors
Cameron Huff, Senior Research Associate, Massachusetts Taxpayers
Foundation
Gerard Perry, Deputy Commissioner, Massachusetts Department of Revenue
Phineas Baxandall, Assistant Director, Rappaport Institute, Harvard
University’s Kennedy School of Government
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Chip Ford |
State House News Service
Wednesday, September 7, 2005
Report: State pays smaller share,
residents a larger share of local budgets
By Michael P. Norton
The state is paying for a smaller share of local budgets than in 1988
and residential homeowners are picking up an increasing portion of the
tab, according to a new report.
The report and analysis by a task force convened by urban mayors finds
Massachusetts cities and towns are facing a long-term financial crunch
and concludes it's up to Beacon Hill leaders to fix an unpredictable
system of municipal finance and local aid that "is now broken and needs
immediate attention."
The analysis, conducted by a Municipal Finance Task Force of public and
private sector experts led by Sovereign Bank of New England Chairman
John P. Hamill, said three large problems are haunting local officials
in city and town halls across the state: increasingly restricted and
unpredictable local aid levels, constraints on ways to raise local
revenue, and health care, pensions and debt costs that are growing far
faster than municipal revenues.
The property tax, one of two major sources of revenues for local
budgets, accounted for 53 percent of total municipal revenues in 2004,
up from 48 percent in 1990. The other major source of local funding is
state aid.
And residents, rather than commercial property owners, are paying 72
percent of total property taxes, up from 68 percent in 2000. The average
family property tax bill rose by $910 between 2000 and 2005, according
to the report, while per capita, inflation-adjusted municipal budget
growth since 1981 stands at 1.1 percent.
The percentage of the state budget devoted to local aid peaked in 1988,
according to the report, at 20 percent of state expenditures. It fell to
its low of 13.4 percent in 1993, before rising to 16.7 percent in 2004.
"I think it is fundamentally true that we have a system right now that's
broken," Hamill said at a Beacon Hill press conference to release the
report. "It has been cobbled together over many years, attempting to
solve the problems that arise at different times in our lives. There are
well-intentioned people that put those solutions in place but over a
period of 25 years you find that you have different pieces that don't
fit together."
While most of the report's recommendations have been aired before on
Beacon Hill, the report's authors hope the comprehensive analysis and
set of recommendations will refocus attention on key issues that help
determine how much money is available for municipalities to spend on
public works, public safety, education and other priorities.
"This is an important document that lays out the real issues facing
mayors, selectmen, and taxpayers in the Commonwealth," said Northampton
Mayor Mary Clare Higgins, the vice president of the Massachusetts
Municipal Association. "We need to understand these trends and make the
necessary policy adjustments that will let our cities and towns thrive
in the future."
The Metro Mayors Coalition, a group representing the leaders of 10 urban
Greater Boston communities, convened the task force, which worked with
the Metropolitan Area Planning Council. The task force includes city
officials from Cambridge, Revere, Quincy, Medford, Everett, Boston and
Melrose.
The report recommends that the Legislature adopt a revenue sharing
policy that would allocate a fixed percentage of state tax receipts to
local aid. In recent years, the Legislature has agreed to similar
accords to provide predictable revenues to the state's school
construction program, its pension system, and the MBTA. Analysts are
also calling for the Legislature to once again deliver all Lottery
proceeds, as originally envisioned, to cities and towns, and urging
lawmakers to reform the formula used to distribute the biggest pool of
local aid, Chapter 70 education aid.
Municipal officials said it's difficult to determine how much money they
will receive each year, as health care costs rise and they're forced to
cut other core services. "Local aid has been uneven," said Boston Mayor
Thomas Menino. "It's like being blindfolded on a roller coaster ride.
Totally unpredictable."
Another recommendation has long caused controversy at the capitol, and
has been shot down in recent years by the Legislature. Cities and towns
need to be granted more flexibility to develop "local option" meals
taxes, parking excise taxes, or rental car surcharges, the report
declares. And the municipal-finance study panel is urging a review of
Internet-based hotel-motel tax issues.
Chelsea City Manager Jay Ash said the state's refusal to allow local
officials to develop local taxes and surcharges means municipalities
will grow even more dependent on state aid. "If the state restricts our
ability to raise revenue, then the state has a responsibility to provide
us with assistance," he said.
Coalition members, including state Sen. Steven Tolman (D-Brighton), said
they hope the report will help Democrats and Republicans agree about how
best to aid cities and towns. "There are certain options in the report,
but there weren't specific plans," Tolman said. "Any issue that is going
to be changed needs a consensus. And it has to come within, from both
sides of the aisle."
More broadly, the task force is calling on state decision-makers to
clarify the roles of municipal and state governments, and to develop a
plan to let the state take responsibility for its functions, mentioning
regional transportation and county-based responsibilities as two
examples.
"There is no one single answer, but what's clear is that, if there's not
a partnership that works in a way that citizens can in fact depend upon
state government, local government, and in some cases, federal
government working together, we're not going to be able to attack all
these issues," Hamill said.
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