Budget Season Brings Out A Familiar Fight Over Local Aid In Massachusetts

Fed offers fix, but little appetite on Beacon Hill

Last week marked the official start of spring, but it’s also the middle of two other seasons in Massachusetts: budgets and potholes. The two are quite similar. Cities and towns are looking to fill holes in their roads and their finances. One way to do both is through payments from the state known as local aid, but the process of distributing that aid is a predictably contentious affair between state and local lawmakers.

This winter was brutal for communities throughout Massachusetts. No exception for the small city of Easthampton, run by Mayor Karen Cadieux.

Cadieux says the city’s public works department tells her this was the costliest winter for snow emergencies ever. The problem was compounded by years of budget cuts.

“We actually had to rent a plow, because our plows died,” she says. The cuts go well beyond snow plows.

“There isn’t any more cutting,” Cadieux adds. “Once you cut for eight to ten years, what cutting is left? And you still have to keep all your offices running, and your schools running, and try to provide all the services the residents deserve.”

Why all the cuts? Cadieux says one big reason is a lack of state funding. The amount of aid Easthampton received last year was slightly lower than it was in 2002, and that’s not even taking inflation into account. Most of the aid for all cities and towns is reserved for schools.

“When local aid has been cut during bad economic times, it then gets rebuilt during good economic times,” says Economist Bob Nakosteen of UMass Amherst, “but I think from a local point of view, at least it feels as though it’s never really caught up and gotten ahead of the curve.”

UMass economics professor Bob Nakosteen.

UMass economics professor Bob Nakosteen.

That’s led to calls from local officials, year after year, for more state aid. One kind in particular: “general aid, that’s unearmarked, that can be used by communities for basically any kind of expenditure they deem fit,” says Nakosteen.

Unrestricted money communities can use for anything. No wonder it’s popular. Governor Deval Patrick got flack from local leaders when he kept local aid the same as last year in his new budget. Though he did increase the separate local fund for schools.

“It is not factually accurate to say that we have level-funded local aid,” Patrick noted in a press conference earlier this month. “What cities and towns are focused on, and I think have encouraged all of you [reporters] to focus on, is one line item.”

Gov. Patrick holding a baby bear at a photo-op earlier in March. He later re-iterated that he hasn't level-funded local aid in his proposed budget.

Gov. Patrick holding a baby bear at a photo-op earlier in March. He later re-iterated that he hasn’t level-funded local aid in his proposed budget.

State Senator Stephen Brewer of Barre heads the Senate’s Ways and Means Committee. He acknowledges that unrestricted aid has diminished, but he sounds tired of municipal moaning on the subject.

“The only thing that I hear, and I try to stay pretty well informed of ongoing issues, is just that it’s not enough. They would like to have more,” says Brewer.

Brewer notes there’s lots of other line items in the budget that benefit cities and towns. But regardless, no one’s very happy when the subject of local aid comes up. Part of the problem is the way it’s divvied up. Bob Nakosteen says the distribution used to be based on the needs of cities and towns, but is overdue for an update.

So what is it based on?

“Legacy. The legacy of what’s been done in the past,” says Nakosteen.

“It has historic roots that go way back before my time in office,” says Governor Patrick.

“The current distribution is largely based on the historical aid allocation,” say Bo Zhao, an economist at the Federal Reserve Bank of Boston.

In the words of Tevye from Fiddler on the Roof: tradition.

But back to Bo Zhao. He’s one of several researchers at the Boston Fed who’s studied local aid distribution in Massachusetts. He recommends a new formula that would dole out aid based on what he calls the “municipal gap.”

“The municipal gap is the difference between the cost of providing municipal services, and the ability of a community to raise revenue locally to pay for those services,” Zhao says.

He adds that his proposed formula is based on factors outside the control of local officials, “such as population density, poverty rate, jobs per capita, property value, and personal income.”

So, for example, a city, where people come to work and use the roads and sidewalks, but don’t live or pay property taxes there, will have a larger municipal gap than say, a suburb – with a wealthier tax base, lower population, and fewer services it needs to provide. Rural towns also have a big gap, with large areas to cover, but small populations with low incomes.

Zhao says new aid would be given to cities and towns based on their gap, ideally evening things out so struggling communities get more, and well-off communities get less. Zhao points out the formula wouldn’t apply to already existing aid. In his words, the current money would be “held harmless.”

“With the ‘hold harmless’ guarantee, no community would lose aid,” Zhao says.

That could make the proposal easier for politicians to go along with, but it doesn’t make the change simple.

Governor Patrick pushed for a similar proposal last year. He included a small local aid boost in his budget, $31 million, that would have been distributed along similar lines to what Bo Zhao has proposed. But the idea died in the legislature, and this year, it’s nowhere to be found.

So what are frustrated municipal leaders to do? Well, there’s a glimmer of hope in this year’s budget process. In a non-binding deal, legislative leaders say they’ll increase unrestricted local aid by 25 million dollars. But whether that money would be distributed in any different formula, who knows?

Still, Bob Nakosteen says to really boost local aid in Massachusetts, the national economy needs to improve.

“If that happens, then tax revenues increase, the state has the ability to distribute more money to cities and towns,” Nakosteen says. “Economic growth is the antidote that is really going to solve this problem.”

Until then, communities could very well be stuck with tradition.