The Massachusetts State Budget: Non-Education Local Aid

Ken O’Brien

Southbridge’s FY 2013 non-education budget totals $21,641,836. Of that total, $2,760,518 or 12.8% is projected to come from unrestricted general government local aid from the state. In FY 2012 state aid constituted the same dollar amount, but represented only 12.4% of the town’s non-education budget.

Clearly any funding source that comprises 12% to 13% of the town budget is a matter of serious concern. While it does not rise to anywhere near the $17,650,872 in Chapter 70 funds that underwrite the town’s education budget, 71% of the total, any threat to local aid funding could have dire effects on the town. 

That is why shortfalls in state revenues below projected levels over the last year warrant careful monitoring.

Go Local Worcester noted, “With state revenues already trailing projections for the fiscal year, experts said any solution to the Commonwealth's budget deficit is going to be painful for taxpayers.

Earlier this month, Revenue Commissioner Amy Pitter announced that preliminary revenue collections for October 2012 totaled $1.4 billion, down $48 million or 3.3 percent below what the state took in last October. Due to weak performance in most revenue categories and higher than expected income and corporate tax refunds, October collections were $162 million below the monthly benchmark based on the FY13 revenue estimate of $22 billion….

The state's so-called "rainy day" fund, while the country's third largest at $1.6 billion, is still less than 5 percent of the Commonwealth's annual budget. It could potentially close this year's gap, but such a solution would offer little for future years.”

In another article they note, “The Commonwealth of Massachusetts is not exactly the "Massachusetts Miracle" these days. Pending budget problems and tremendous per capital [sic] debt scores pushed the Commonwealth back in the pack in a recent ranking of how well states are managed. The rankings were developed by the business Web site 24/7 Wall Strret [sic]'

> Debt per capita: $11,310 (the highest)

> Budget deficit: 8.6% (42nd largest)

> Unemployment: 7.4% (tied-18th lowest)

> Median household income: $62,859 (5th highest)

> Pct. below poverty line: 11.6% (9th lowest)”

The Fiscal Year (FY) 2013 budget funds non-school local aid at levels just slightly higher than the current FY 2012 budget. The vast majority of this funding supports general local aid to cities and towns, helping them fund vital local services such as police and fire protection, parks, and public works. General local aid has been cut dramatically over the last several years, and while the FY 2013 budget funds general local aid at levels slightly above the FY 2011 and current FY 2012 budgets, this represents the third year in a row of not making inflation adjustments to fully adjust for the rising cost of providing local services.

Update Note: Prior to the end of the session, and subsequent to the enactment of the FY 2013 Budget, the Legislature approved supplemental funding for FY 2012 and FY 2013. In some cases this changes FY 2012 Current totals. Additional funding provided for FY 2013 includes $50,000 for the Municipal Regionalization and Efficiencies Grant program (1599-0026). These changes are NOT reflected in the tables or discussion that follows, below.

---------------------------------------------------------------------------------------

GENERAL LOCAL AID

The FY 2013 budget funds Unrestricted General Government Aid (UGGA) at $899.0 million, the same nominal level as the current FY 2012 budget. The FY 2012 GAA funded UGGA at a baseline level of $834.0 million, but FY 2012 budget language directed 50 percent of all unexpended balances from general fund spending coming out of FY 2011 (up to $65.0 million) to supplement UGGA appropriations for FY 2012. Unexpended FY 2011 fund balances proved sufficient to fund the full $65.0 million amount, meaning that cities and towns in FY 2012 will receive the same total UGGA appropriation of $899.0 million that they received in FY 2011. While FY 2013 funding will be equal to final FY 2012 levels, the FY 2013 budget does have the virtue of guaranteeing all of this money through a direct appropriation rather than having $65.0 million of it come as a 

contingency.

It should be noted that this FY 2013 funding level is tantamount to a cut since no inflation adjustment will have been made over the last two years to keep up with rising costs. Furthermore, general local aid has been cut dramatically since FY 2001. 

OTHER LOCAL AID

Through outside section language, the FY 2013 budget enacts a few policy changes to the Community Preservation Act (CPA). The budget provides more flexibility for how the open space portion of a community's CPA funds can be spent, allowing cities or towns to renovate existing recreational facilities rather than requiring them to use the funds only to purchase new open space. Allowing CPA money to be spent on recreational renovation projects may help more urban communities, with little passive open space, opt into the CPA for the first time. Additionally, the FY 2013 budget allows for alternative municipal revenues to be used to supplement the current CPA property tax surcharge. The FY 2013 budget couples these policy changes with a deposit of $25.0 million for the Community Preservation Trust if there is sufficient money in the FY 2013 consolidated net surplus to do so. Currently, cities and town can opt into the program and pass a property tax surcharge of up to 3 percent. When the act was first passed, the state provided a 100 percent match to the revenue raised by cities and towns through the surcharge. State matching funds come from revenue raised through the deeds recording fees, and therefore show up off-budget. As housing sales waned during the economic crisis, and as more communities joined the CPA, the state's contribution has diminished considerably, down to 22 percent for FY 2012.