Once scrounging for cash, Boston is now plucking $13
million from surplus funds to create affordable housing. Across the river, Cambridge
teenagers are playing basketball in a new $4 million city youth center. And in Brookline,
officials recently opened a $6 million highway garage, paid for entirely with town money.
As they clamor for state funds and decry the Big Dig's
drain on public dollars, cities and towns seldom mention a little-noted fact: Many of them
are awash in cash.
Some municipalities are so well off that they say they
can undertake local public construction projects on their own, with or without state
money.
Buoyed by a decade of prosperity, real estate
development, and unprecedented levels of state aid, local governments are amassing cash
reserves four times as great as what they held in the early 1990s.
According to the state Department of Revenue, which
tracks local budgets, free cash accounts and so-called rainy day funds held by the state's
351 cities and towns soared from $166 million in 1992 to $773 million last year.
And total local reserves are probably closer to $1
billion because some cities and towns conceal surpluses in accounts that, on paper, are
earmarked for other purposes.
For example, Boston, among several other
municipalities, reported no free cash or stabilization funds to state officials last year.
But a recent Standard & Poor's credit report said the city had an unreserved fund
balance of $127 million.
Local reserves are growing even as spending on local
amenities has increased. In Boston, considered a fiscal basketcase in the early 1980s,
record cash reserves have piled up through 14 consecutive budget surpluses while spending
by Mayor Thomas M. Menino has climbed steadily.
"The budget is increasing far in excess of the
cost of living," said Samuel Tyler of the Boston Municipal Research Bureau, a
business-backed fiscal watchdog group.
While there is no question the $12.2 billion Central
Artery/Tunnel project is soaking up hundreds of millions of transportation dollars each
year and delaying other state road projects, so far the effect on most cities and towns
has been manageable, and in some cases, even minimal.
With state aid up over the last 10 years, and property
tax revenues strong, some communities have enough cash on hand to issue bonds on their own
for construction projects, rather than wait for the state to assist them.
Cambridge City Manager Robert Healy said the city will
launch plans to site and build a main library whether or not state assistance for library
construction is cut.
"We'd do that with our own bond issue," he
said.
Not every city or town is doing well. Some are
struggling because local economies have not kept pace with the general statewide boom. And
some local officials say inequities in the formulas used to distribute state aid have kept
the pressure on their budgets.
"In terms of the overall economy, I don't think
we're doing that well at all," said Framingham Town Manager George King. "Costs
are way up, especially education costs. And we don't have the income tax and the sales
tax, as the state does, which are economically driven."
To be sure, much of the good fortune enjoyed by cities
and towns can be attributed to state largesse.
After accounting for inflation, general state aid to
local governments climbed from $2.8 billion in fiscal 1992 to $4.6 billion in the current
fiscal year, which ends June 30.
The increase can be traced, in part, to rising aid to
local schools, which spiked from $1.3 billion in fiscal 1992 to $2.8 billion this year.
Also, proceeds from state Lottery sales to local governments more than doubled during the
same period, from $369 million to $716 million.
The generous state aid has allowed some communities to
keep residential property taxes well below the limits permitted under Proposition 2½.
Under the law, local property tax collections cannot increase by more than 21/2 percent
each year and the total amount of taxes collected cannot exceed 2½ percent of the total
value of the city or town's property. State budget officials say that instead of looking
to the state for more money, municipalities should maximize their own tax revenues for
local projects.
Local officials, now launching their annual push for
assistance from Beacon Hill, note that state revenues and reserve accounts have also
soared. And they insist that increased state aid over the last decade has played a crucial
role in the ability of cities and towns to provide essential local services.
"The state is far healthier than our cities and
towns," said John Robertson of the Massachusetts Municipal Association. "And
cities and towns are in a healthy position, not because they receive state aid they don't
need but because there have been healthy economies at the local level and because local
budgets have been managed prudently."
State reserve accounts have grown from $153 million in
fiscal 1993 to more than $3.5 billion last year. And state officials expect a projected
budget surplus and money from a legal settlement with tobacco firms to push that number
over the $4 billion mark by June 30.
"We have so many reserves they're coming out of
our ears," said state Secretary of Administration and Finance Andrew S. Natsios.
"We're swimming in money."
That's why the pitched battle between state and local
officials over transportation spending and local aid seems more about how to divide the
spoils of a robust economy than how to solve a financial crisis caused by the drain of the
Central Artery project.
Local authorities contend that, because of the need to
direct federal highway aid to the Central Artery, state officials have reneged on a pledge
to launch, or seek bids for, $400 million in new state road projects each year. As a
result, they say, important maintenance and improvements on bridges and state roads have
been delayed.
State officials counter that they are slightly
increasing spending on state highways other than the Central Artery, paying out
approximately $600 million annually on non-Artery projects. While they may not be
launching $400 million in new projects each year, they say that is a poor measure, because
so many projects are underway or waiting that it would be foolish to seek bids for new
ones.
Nevertheless, the Massachusetts Taxpayers Foundation,
a business-backed fiscal watchdog group, has spent much of the last year warning that
increased borrowing to pay for the Big Dig will eventually strain the state's ability to
fund crucial infrastructure projects unrelated to transportation.
"The notion that we're swimming in money is
absolutely dead wrong," said Michael J. Widmer, president of the foundation.
"There's not one area of capital spending that's not being squeezed, with long-term
consequences for the Commonwealth."
Specifically, Widmer said previously authorized plans
to improve local seaports, renovate courthouses, and clean up toxic waste sites could be
compromised or put on hold indefinitely if the state continues borrowing to pay for the
Big Dig.
On Friday, Boston officials said the city was shelving
the idea of building a South Boston-Back Bay connector ramp, due to the unlikely
availability of additional transportation dollars.
Widmer said other major projects contemplated by state
officials might never materialize because of a lack of funds. These include state
assistance for a new Fenway Park and new highway construction to Worcester Airport.
State officials argue that, with the Big Dig now
two-thirds complete and another budget surplus on the horizon, they will be able to finish
the project without compromising other programs unrelated to transportation.
But this assertion could be complicated by an economic
downturn or any of three ballot questions that, if approved by voters, could cut annual
state revenues by more than $2 billion.
For example, a referendum question backed by Governor
Paul Cellucci that would cut the state income tax from 5.85 percent to 5 percent over four
years would eliminate an estimated $1.2 billion in annual revenue.
A ballot measure allowing income tax rebates for tolls
and auto excise taxes would eliminate an additional $700 million.
"If we were in an economic recession, all these
things coming together would be a real crisis," said Widmer, referring to the
proposed tax cuts, Central Artery spending, and other infrastructure needs. "We can't
have it all."