Municipalities will have to make tough choices

Scaling The Hill: September Revenues in Free-Fall

It appears the state of Massachusetts is once again in the early stages of a budget crisis. And the cities and towns of the Commonwealth will be left holding the bag.

A year ago at this time, tax revenues (it was capital gains taxes last year) were missing estimates and the politicians on Beacon Hill began searching for any extra money.

Well, they found some. Most of it came from our newly elected President, and the rest came from rainy day funds that were not going to be replaced. That was last year...

Here we are, a quarter of the way through FY10, and revenues are missing expectations again. This year its the JUST INCREASED sales tax that is falling short. Ok, so let's just go back to the well...only problem is that the wells are dry! The "rainy day" funds were virtually depleted in order to balance the current budget and there doesn't appear to be another "Stimulus Package" coming from Governor Patrick's good pal in D.C.

What does this mean? If the sales tax increase isn't generating the necessary funds for THIS YEAR, how is it also going to make up for the Stimulus Funds AND Rainy Day funds that will need to be covered in FY11.

Answer: Tax increases or Shifting the burden to cities and towns

Given that we are in an election year, I would expect it to be the latter of the two. Meaning, the state will shift an even larger portion of the expense burden to the 351 municipal governments in Massachussetts. The burden will be shifted most obviously through cuts to local aid. However, it will also be shifted through state-mandated increases to certain categories of expenses.

Given the current revenue trends at the state level, I believe that all mandated expense formulas (such as the "foundation level" for education) should be reduced to the FY09 levels. This will ensure that the state can maintain its proportional obligation to cities and towns. Until the state can keep up with its responsibility to the municipalities, there should be no expense increases mandated from Beacon Hill.

In lieu of this adjustment to mandated expense levels, municipalities will be forced to either cut positions beyond safe levels. That is unless, residents vote to increase their property taxes in excess of the Prop 2 1/2 limit (yes...OVERRIDES!).