Limited Taxation & Government
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CLT&G Update
Monday, December 28, 1998

It's the end of your fiscal year, so how much "free cash" do you have in your pocket? "Free cash" apparently is all the money the state has given you that you didn't need.

The state has got such a super-abundance of our income tax over-payment that it's been spreading around our wealth, sharing it with the cities and towns -- which really can't find a need for it either.

In other words, a bigger state surplus than has been previously reported has been quietly divvied up and buried among the lesser fiefdoms of the commonwealth.

This fiscal year, the state handed out $4.2 billion in local aid, an increase from about $2.5 billion in fiscal 1993.

That's on top of the $397.9 million in the "free cash" surplus left over (in the cities and towns which reported, and many didn't) from last year's taxpayer largesse.

But, just to prove once again that "More Is Never Enough," Geoff Beckwith of the Massachusetts Municipal Association still shamelessly pleads for more taxpayer cash, free or otherwise, to meet "giant needs." He complains that Proposition 2 makes it oh so difficult for cities and towns to "invest in needed - but expensive - infrastructure projects."

Beckwith and his ilk recognize that you still just might have some of your own "free cash" laying around -- and they want that too, all of it!

Remember all this "free cash" buried away in some dark hidden recess of town hall the next time Beckwith and his gang come pounding on your door for another Prop 2 override.

Chip Ford --

Associated Press
Friday, December 25, 1998

Cities and towns reporting

high levels of free cash
By Martin Finucane

BOSTON (AP) - With a booming economy and increased aid from the state, Massachusetts cities and towns are in better financial shape than they have been in years, local budget statistics suggest.

The strong finances are reflected in a record amount of "free cash" being reported by municipal governments to the state Revenue Department.

"The overall fiscal climate for cities and towns is sound. And that's good news," said Geoff Beckwith, executive director of the Massachusetts Municipal Association.

But Beckwith also said there continue to be "giant needs" locally for money to fix up everything from roads and bridges to town halls, libraries and sewer treatment plants.

As of the end of fiscal 1997, cities and towns that report to the department - not all do - said they had $397.9 million in free cash.

That was a record high, said Joseph Chessey, deputy commissioner of the Division of Local Services for the Revenue Department.

As recently as the end of fiscal 1992, when the state was just emerging from a recession, the cities and towns declared only $79.3 million in free cash. But that number has been rising ever since.

By the end of fiscal 1996, free cash had risen to $355.3 million.

Not all communities have reported yet for the end of fiscal 1998, but it looks as if fiscal 1998 figures will again show an increase, said Chessey, who served 10 years as mayor of Chicopee.

"Times are, I think, in the commonwealth, fantastic," Chessey said. "Just looking at the bottom lines we have here, free cash has gone up consistently over the last five years."

Chessey said communities can use their free cash as a reserve for unexpected expenses, citing his own experience as a mayor who was glad to be able to tap into $200,000 in free cash when a boiler blew up in a school building.

Chessey said that, as a rule of thumb, a financially healthy community should have 5 percent of its budget in free cash.

Cambridge City Manager Bob Healy reported having $32 million in free cash at the end of fiscal 1997. That number had dipped to about $10 million at the end of fiscal 1993.

He said there are always people who have good ideas for spending the surplus - and Cambridge has used some of its free cash recently for affordable housing and open-space acquisition.

There's a temptation to "be a hero and go out and blow all the dough," he said. But he also said: "Any good business always has a reserve and that's really what the free cash is. ... The good times we're in don't last forever."

Beckwith, whose organization represents cities and towns around the state, said the reasons for the rise in free cash included increases in state aid to local schools under the state's education reform law.

The state also has gradually been returning a greater share of revenues from the state lottery to cities and towns. A portion of the lottery revenues was funneled into the state's budget to help out during the state's fiscal crisis in the early 1990s.

State officials announced in August that the state was sending out about $4.2 billion in local aid this fiscal year, an increase from about $2.5 billion in fiscal 1993. Education aid alone accounted for much of the increase. It was up to about $2.6 billion this year from about $1.3 billion in fiscal 1993.

Beckwith said that, with Proposition 2, the state's property-tax-limiting law, in place, it remains difficult for communities to invest in needed - but expensive - infrastructure projects.

But he said, "It's a much stronger platform than we were on seven or eight years ago."

Beckwith noted that the state's education reform plan, which mandated funding increases to make sure kids all over the state got an adequate education, runs out in the next budget year.

What happens next will be crucial to the 351 cities and towns, he said.

"We're heading towards a crossroads, and we just need to be able to anticipate that," he said. "We just need to be sure it's navigated without any collisions."

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