High cost of health insurance — Obviously, every employer is struggling with soaring health-care costs. However, municipalities are particularly hard-hit, and there is a quiet crisis at the local level.
The Massachusetts Taxpayers Foundation recently surveyed a representative sample of Massachusetts municipalities and found that local health insurance costs have skyrocketed more than 60 percent since 2001, a rate of growth that is simply not sustainable.
Unlike private employers or the state government, complicated laws leave cities and towns with little flexibility in mitigating rising health-care costs. As a result, the rate of growth in health insurance premiums for municipalities is double the level of growth for state government.
Stagnant state aid — People often argue that cities and towns have benefited from enormous increases in local aid from state government through the 1990s. It is true that there has been a significant and worthwhile increase in education aid to cities and towns (although the distribution of that aid has varied greatly by community), but municipalities are limited to spending those resources only on schools.
At the same, a broad analysis of all major categories of local aid clearly shows that nonschool aid has been stagnant or declining for more than 15 years.
Massachusetts cities and towns are partners with the commonwealth in delivering public services, such as police protection, educational services from pre-school to graduate school, and a transportation system that runs from neighborhood cul-de-sacs to interstate highways.
However, despite the best intentions and sustained efforts of state policymakers, the partnership between the state and municipalities is threatened and needs to be reinvigorated. One striking fact: State expenditures for local aid reached its peak in fiscal 1988 at 20 percent of total state expenditures, then dropped to 13.4 percent in 1993, and stood at 16.4 percent in 2004.
Increasing property taxes — In part because of the cuts to local aid that have occurred in recent years, as well as other factors like stagnant commercial property values, property taxes in Massachusetts are increasing, and the average family tax bill, excluding a handful of communities that offer residential exemptions, has increased by $910 from FY 2000 to FY 2005.
We have also become fundamentally reliant, once again, on the property tax to pay for local government services. Property taxes accounted for 52.9 percent of all municipal revenues in fiscal 2004, up from 46.1 percent in 1988.
Diminishing services — All of these trends combined put enormous pressure on core municipal budgets. Remarkably, per-capita expenditures by cities and towns for core municipal services (excluding the categories of schools and health insurance) have actually decreased in real terms over the past 25 years.
As an example of what this means, the task force report highlighted that spending on public works declined from 15 percent of municipal expenditures in fiscal 1987 to 9 percent in 2004. Ultimately, the statistics mean that we have fewer employees filling potholes, picking up trash, or plowing snow — the basic quality of life services that citizens expect from local government.
The Municipal Finance Task Force has proposed a comprehensive set of recommendations to stabilize municipal finances and revisit the partnership between the commonwealth and its communities. The Massachusetts Municipal Association, which advocates for cities and towns, is also launching a yearlong campaign to reinvigorate the partnership of municipal and state governments.
The Task Force recommendations center around the commonwealth's need to pursue strategies and policies that will ensure state assistance is sufficient and predictable, provide communities with additional ability to control nonproperty-tax local revenues, and give communities the tools to better control costs.
Fortunately, we can shape our state's future through positive actions that recognize the struggle of cities and towns to provide the public services we deserve.
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