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Advocacy Executive Director's Reports Revenue sharing a cure for lagging state economy
As the governor and Legislature turn their attention to building the state’s budget for fiscal 2009 and beyond, adopting revenue sharing and reinvesting in municipal aid must be back on the table for two related and compelling reasons: to solve the abiding fiscal crisis that has gripped nearly every city and town, and to ensure a turnaround in our sagging and underperforming state economy.
The connection between the fiscal health of cities and towns and the success of the state’s economy has become increasingly clear in recent years, beginning with the release of “Revenue Sharing and the Future of the Massachusetts Economy,” authored by economists at the Center for Urban and Regional Policy at Northeastern University in 2006.
Based on detailed research and analysis, the findings were unequivocal and well stated: “Increasing the overall fiscal capacity of cities and towns turns out to be central to the future prosperity of the Commonwealth … providing communities with the resources to deliver the services and amenities that workers want for their families is critical to the state’s future development and prosperity … (and) equally important is making sure that local municipalities have the ability to provide the economic and social environment that is attractive to industry.”
This economic imperative has been affirmed by powerful voices.
This year, Fannie Mae published “States and Their Cities: Partnerships for the Future,” a major report by experts at the George Washington University’s Institute of Public Policy and Cleveland State University’s Office of Economic Development. Here’s what they concluded: “State economies exist within a fiercely competitive international environment … in this global economy, cities are an increasingly important determinant of state economic performance … states that ignore the economic well-being of their cities will pay dearly, because cities are at the heart of real economies of goods and service production and innovation.”
Further, the Brookings Institution’s Metropolitan Policy Program’s 2007 report “Restoring Prosperity” calls for a renewed partnership and state government investment in urban areas and in communities in general, noting that such investments will bring enormous benefits, including reducing unemployment and poverty, increasing income and wealth, improving the quality of life for families, increasing the jobs, amenities and housing choices for urban and suburban residents, enhancing the regional market for business location, increasing property values, and improving the overall competitiveness of metropolitan areas. The report says all of this is in the states’ own interests: “Ultimately, this all adds up to stronger, healthier, more productive cities and regions that are a boon to, rather than a drain on, state budgets – evidence, to be sure, of money well spent.”
There is no one magic or easy solution to the problems we face. Cities and towns here in Massachusetts need a number of vital tools in addition to revenue sharing and local aid: expanded revenue raising powers in the form of local option taxes, greater control over the local property tax base by closing the huge telecommunications tax loophole, and greater management authority in the form of parity with state officials in their ability to shape personnel benefits and manage day-to-day affairs. These are all vital steps on the road to recovery and we must continue to press hard for their enactment. Yet we must all recognize that an agenda that leaves out revenue sharing cannot fully solve the twin challenges of restoring the fiscal health of communities and the economic health of Massachusetts. Revenue sharing is the final piece, if not the centerpiece, of what we need to build a stronger future for our state.
Many of these issues have been the subject of discussion and debate during the past year, except for revenue sharing and municipal aid. It is essential that we return to this broad agenda now, because without revenue sharing and increases in municipal aid, local budget shortfalls will continue, property tax reliance will be too high, municipal services will be curtailed, and our state economy will fall further behind the rest of the nation.
This year, municipal aid increased by $15 million, or just about 1 percent – not enough to keep pace with growing costs. Moreover, when accounting for inflation, municipal aid is still 16 percent below fiscal 2002 levels, in spite of the Legislature’s deeply appreciated effort to uncap the Lottery in 2006.
This spring, as state leaders gave great attention to education funding, and balancing the state’s tight operating budget, municipal aid was confined to Lottery aid and the level-funding of Additional Assistance. With the Lottery badly missing its revenue benchmarks, and apparently hitting a plateau, this unmasks a glaring shortfall in funding for non-school services, as the major non-property tax source of funds for municipal programs is clearly not enough to maintain current needs, now and into the future. The Lottery will always be important, but we also need new and expanded funding for municipal aid.
The MMA and others, including the Massachusetts Taxpayers Foundation, the Center for Urban and Regional Policy at Northeastern, and the Hamill Commission, support a long-range plan to devote 40 percent of the state’s tax revenues to share with cities and towns, funding expanded municipal and school aid. This framework would need to be phased in over time, in careful consideration of the urgent local need and our concurrent obligation to make certain that the plan would be affordable and sustainable for the state.
It is important to note that municipal leaders have been standing up at home, and taking difficult positions to increase local property taxes and implement cuts in local services, not because they want to, but because without revenue sharing and other local revenue powers, these have been the only choices. Yet these choices are inadequate.
So far this year, only about 40 percent of the communities that have attempted overrides have met with success, and only 28 percent of the revenues requested statewide have been approved by voters. That’s because communities have reached a 25-year high in their reliance on property taxes to fund local budgets, and residents are calling out for more balanced solutions, including restoring local aid and broadening the tax base beyond the property tax.
Local leaders are willing to take on the added responsibility of implementing other local taxes, such as meals and lodging taxes, if given that power. Similarly, if state officials need to enact additional revenues to balance their budget and fund essential priorities for the good of the state, from infrastructure investment to human services to revenue sharing, local leaders will stand up with them.
The good news is that in the new global economy cities and towns mean more to our prosperity and success than ever before.
The challenge is for us to unite and respond in time.
Advocacy Executive Director's Reports Revenue sharing a cure for lagging state economy
Revenue sharing a cure for lagging state economy
As the governor and Legislature turn their attention to building the state’s budget for fiscal 2009 and beyond, adopting revenue sharing and reinvesting in municipal aid must be back on the table for two related and compelling reasons: to solve the abiding fiscal crisis that has gripped nearly every city and town, and to ensure a turnaround in our sagging and underperforming state economy.
The connection between the fiscal health of cities and towns and the success of the state’s economy has become increasingly clear in recent years, beginning with the release of “Revenue Sharing and the Future of the Massachusetts Economy,” authored by economists at the Center for Urban and Regional Policy at Northeastern University in 2006.
Based on detailed research and analysis, the findings were unequivocal and well stated: “Increasing the overall fiscal capacity of cities and towns turns out to be central to the future prosperity of the Commonwealth … providing communities with the resources to deliver the services and amenities that workers want for their families is critical to the state’s future development and prosperity … (and) equally important is making sure that local municipalities have the ability to provide the economic and social environment that is attractive to industry.”
This economic imperative has been affirmed by powerful voices.
This year, Fannie Mae published “States and Their Cities: Partnerships for the Future,” a major report by experts at the George Washington University’s Institute of Public Policy and Cleveland State University’s Office of Economic Development. Here’s what they concluded: “State economies exist within a fiercely competitive international environment … in this global economy, cities are an increasingly important determinant of state economic performance … states that ignore the economic well-being of their cities will pay dearly, because cities are at the heart of real economies of goods and service production and innovation.”
Further, the Brookings Institution’s Metropolitan Policy Program’s 2007 report “Restoring Prosperity” calls for a renewed partnership and state government investment in urban areas and in communities in general, noting that such investments will bring enormous benefits, including reducing unemployment and poverty, increasing income and wealth, improving the quality of life for families, increasing the jobs, amenities and housing choices for urban and suburban residents, enhancing the regional market for business location, increasing property values, and improving the overall competitiveness of metropolitan areas. The report says all of this is in the states’ own interests: “Ultimately, this all adds up to stronger, healthier, more productive cities and regions that are a boon to, rather than a drain on, state budgets – evidence, to be sure, of money well spent.”
There is no one magic or easy solution to the problems we face. Cities and towns here in Massachusetts need a number of vital tools in addition to revenue sharing and local aid: expanded revenue raising powers in the form of local option taxes, greater control over the local property tax base by closing the huge telecommunications tax loophole, and greater management authority in the form of parity with state officials in their ability to shape personnel benefits and manage day-to-day affairs. These are all vital steps on the road to recovery and we must continue to press hard for their enactment. Yet we must all recognize that an agenda that leaves out revenue sharing cannot fully solve the twin challenges of restoring the fiscal health of communities and the economic health of Massachusetts. Revenue sharing is the final piece, if not the centerpiece, of what we need to build a stronger future for our state.
Many of these issues have been the subject of discussion and debate during the past year, except for revenue sharing and municipal aid. It is essential that we return to this broad agenda now, because without revenue sharing and increases in municipal aid, local budget shortfalls will continue, property tax reliance will be too high, municipal services will be curtailed, and our state economy will fall further behind the rest of the nation.
This year, municipal aid increased by $15 million, or just about 1 percent – not enough to keep pace with growing costs. Moreover, when accounting for inflation, municipal aid is still 16 percent below fiscal 2002 levels, in spite of the Legislature’s deeply appreciated effort to uncap the Lottery in 2006.
This spring, as state leaders gave great attention to education funding, and balancing the state’s tight operating budget, municipal aid was confined to Lottery aid and the level-funding of Additional Assistance. With the Lottery badly missing its revenue benchmarks, and apparently hitting a plateau, this unmasks a glaring shortfall in funding for non-school services, as the major non-property tax source of funds for municipal programs is clearly not enough to maintain current needs, now and into the future. The Lottery will always be important, but we also need new and expanded funding for municipal aid.
The MMA and others, including the Massachusetts Taxpayers Foundation, the Center for Urban and Regional Policy at Northeastern, and the Hamill Commission, support a long-range plan to devote 40 percent of the state’s tax revenues to share with cities and towns, funding expanded municipal and school aid. This framework would need to be phased in over time, in careful consideration of the urgent local need and our concurrent obligation to make certain that the plan would be affordable and sustainable for the state.
It is important to note that municipal leaders have been standing up at home, and taking difficult positions to increase local property taxes and implement cuts in local services, not because they want to, but because without revenue sharing and other local revenue powers, these have been the only choices. Yet these choices are inadequate.
So far this year, only about 40 percent of the communities that have attempted overrides have met with success, and only 28 percent of the revenues requested statewide have been approved by voters. That’s because communities have reached a 25-year high in their reliance on property taxes to fund local budgets, and residents are calling out for more balanced solutions, including restoring local aid and broadening the tax base beyond the property tax.
Local leaders are willing to take on the added responsibility of implementing other local taxes, such as meals and lodging taxes, if given that power. Similarly, if state officials need to enact additional revenues to balance their budget and fund essential priorities for the good of the state, from infrastructure investment to human services to revenue sharing, local leaders will stand up with them.
The good news is that in the new global economy cities and towns mean more to our prosperity and success than ever before.
The challenge is for us to unite and respond in time.
Written by MMA Executive Director Geoff Beckwith
