Mass. cities and towns face ‘perfect storm’ of fiscal pressures. What that means to you

Everywhere she goes in her city of 90,700 souls just west of Boston, Newton Mayor Ruthanne Fuller hears the same stories.

“Everyone I meet is feeling anxious financially. Everyone goes to grocery stores, you walk out, and you’re gobsmacked at the cost of the goods in your grocery cart,” Fuller told MassLive. “Energy prices. Home insurance. It’s all just so darn expensive. They love living in Massachusetts, they love their towns and cities, and they can’t imagine having to pay more in taxes. It’s tough out there.”

Those stories go to the heart of a mounting fiscal challenge facing the Bay State’s cities and towns as costs continue to rise, tax revenues remain tight, and no relief is in sight.

Fuller sees it in her city. The cost of paving has tripled in less than a decade. Sure, she wants to keep up the roads. Residents demand it. But she’s had to scale back.

“Each city and town is different, but universally, however, is the ability to keep providing excellent services at the level our residents want, and particularly our parents want,” she said. ” … You could call any mayor, any town manager, and you will hear the same high level of worry.“

In short, it’s a “perfect storm” of budgetary pressures, according to a new report by the Massachusetts Municipal Association, with an assist from the Center for State Policy Analysis at Tufts University, that documents a “convergence of severe factors” that have led to a “fiscal crisis” from Boston to the Berkshires.

“Municipalities have been frugal, and any cuts they’re forced to make are now cutting bone,” the municipal association’s executive director, Adam Chapdelaine, said in a statement.

“Even with the most valiant efforts to operate efficiently, city and town leaders simply can’t overcome the larger trends that are forcing them to make drastic reductions, felt by … residents and local businesses,” he continued.

The report lays out several trends that have brought municipal governments to where they are now:

• While average annual state government spending has risen by 2.8% each year since 2010, constraints on local revenue sources have held local spending growth to just 0.6%. That includes those imposed by Proposition 2½, which bars local governments from tax hikes in excess of 2.5%, without voter approval,
• Nearly 3 out of 4 Massachusetts municipalities are at 95% to 99% of their “levy limit,” or the amount of property taxes they can generate before they have to ask the voters to override the constraints of Proposition 2½.
• The spending growth for local governments also has lagged behind the national average of 1%, well below inflation.
• Adjusted for inflation, funding for Unrestricted Government Aid, the state’s largest source of funding for local governments, is 25% lower than it was in 2010. Nationwide, cities and towns get about 31% of their revenue via state aid, compared to 26% in Massachusetts.

And faced with ongoing fiscal pressures, “municipalities have been keeping budgets balanced by cutting or reducing essential services, which impacts schools, libraries, roads, public safety and an overall shrinking of community vibrancy,” the report’s authors noted.

For Adams Select Board Member Christine Hoyt, some things are non-negotiable.

“When you talk about what makes a city or town a ‘community,’ it’s libraries and senior centers and the staff you can rely on to respond to a 911 call or fix a pothole,” she said, according to State House News Service. “The big things and the little things all matter. We need to rally in support of the investments our residents deserve.”

One big challenge: The decades-old Proposition 2½, which was intended to rein in local tax hikes, but now has become overly burdensome, according to some elected officials.

During an appearance before business leaders last month, Boston Mayor Michelle Wu suggested that it might be time for the state to take another look at the law.

• Read More: ‘This is our city’: Mayor Wu makes pitch to bring Boston biz leaders onside

“Prop. 2½ was put in place through significant pressure and advocacy from the business community against municipal government’s advocacy several decades ago,“ Wu said during an appearance before the Greater Boston Chamber of Commerce. ”And we, I think, are continuing to feel the strain in these economic times under that.”

The Democratic mayor’s musings netted her some instant pushback from Republicans and their allies, who argued that any attempt to alter the 43-year-old law would open the door to massive tax hikes and undermine the state’s competitiveness.

Wu used that discussion as “a cover to push her real agenda: higher taxes for Massachusetts. If it weren’t for Prop 2½, the cost of living in Boston would be even higher than it already is,” Paul Craney, of the business-friendly Massachusetts Fiscal Alliance, said in an email.

While local leaders can turn to the public to ask them to vote to override the law, such efforts can be costly and time-consuming.

And because many communities lack the property values or the household income to make an override effort workable, only 44% have mounted an override campaign since 2010, according to the report

For the last two years, the Healey administration has tried to expand municipalities’ taxing powers by giving them the option to boost local vehicle excise taxes or to impose a hotel or meals tax. Those efforts so far haven’t gotten over the goal line.

“We clearly need to have serious conversations about how we can adequately support municipal services,” Amherst Town Manager Paul Bockelman told State House News Service.

In the coming weeks and later this fall, municipal leaders said they plan to release a series of policy recommendations that will “put cities and towns back on the path toward long-term financial sustainability.”