Aid keeps pace with tax rev. growth
During his run for governor in 2014, Charlie Baker promised to increase total local aid, including education funding and unrestricted aid, by the same amount as growth in state revenues.
As governor, Baker has nearly achieved his pledge, as measured by increases in Chapter 70, the big state account that supplements property taxes to pay for education. On unrestricted aid, which covers local spending on police, fire, parks and public works, state-funded local aid has roughly matched the governor’s commitment.
“The framework has worked out over time,” Geoff Beckwith, executive director of the Massachusetts Municipal Association and a former state representative, said in an interview a few days before Baker’s scheduled unveiling of his sixth state budget. “We have a revenuesharing framework that we appreciate very much.”
The two big local aid accounts are critical financial lifelines for the state’s 351 cities and towns, helping to both control increases in local property taxes while ensuring the delivery of local government services.
Under Baker, unrestricted local aid was protected from reductions during the early years of his tenure, when tax revenues fell short of projections, and conversely trailed actual increases in tax revenues over the past two fiscal years when receipts eclipsed annual estimates.
The bottom line: in the aggregate, over Baker’s five years as governor, unrestricted aid has grown by about 19%, the same rate of growth as state revenues over that period.
The unrestricted aid account in this year’s budget totals $1.128 billion, up $182.6 billion from fiscal 2015, when the account totaled $945.8 million. Over that same period, tax revenues have risen to $30.01 billion, up from $25.2 billion.
The fiscal 2021 budget Baker will file today is expected to seek a 2.8% increase in unrestricted aid, based on revenue growth the Baker administration and Democrats in the Legislature agreed to last week.
Anchoring the unrestricted aid allocation based on the consensus revenue estimate, which is agreed to each January, has given cities and towns certainty as they plan for springtime budget cycles. Municipalities have benefited from the tailwinds associated with the long, slow growth associated with the current economic expansion, and essentially been exempted from the ups and downs in state tax collections during that cycle.
“Volatility is really bad,” said Beckwith, who noted cities and towns have also shared in one-time bumps in state aid amidst budget surpluses on Beacon Hill. “You flatten out that volatility and you don’t have lurching from year to year.”
Baker officials say it’s impossible to perfectly match up annual local aid allotments with revenue growth because appropriation recommendations must be made over the first half of each year, before annual revenues begin to flow into the state’s coffers.
Sarah Finlaw, a spokeswoman for the governor, said the administration “has prioritized serving as a reliable partner for municipal leaders, including providing consistent local aid funding for cities and towns.”
Chapter 70 education funding increases have nearly matched the growth in tax revenues during Baker’s tenure, rising about 17.7% from $4.4 billion in fiscal 2015 to about $5.18 billion in this year’s budget.
Frustration with Chapter 70 funding levels and evidence that state aid had failed to keep pace with education costs fueled the multiyear push that culminated with Baker signing a bill in November to boost education aid.