Monday, January 30, 2006

Governor’s Budget

Last Wednesday Governor Romney released his proposed budget for Fiscal Year 2007. While we have a long way to go before the state’s budget is finalized, community leaders throughout the state got a first, important, look at what they can expect to get in the form of state aid just as the process of preparing local budgets moves into high gear.

For the second year in a row the State’s revenues have increased significantly. The Governor is proposing ending the diversion of lottery money, directing 100% of the proceeds to cities and towns as the legislation establishing the lottery intended. Chapter 70 aid to education will increase by approximately $166 million dollars, and the Governor is offering a change to the formula which determines a community’s share. He wants to add an “ability to pay” component to the formula, giving it equal weighting with property value. It is not yet clear whether Milton, which has long been unfairly treated by the current formula, will benefit.

Despite this good news the sad fact is that state aid remains below what it was 5 years ago in fiscal year 2002, just before the recession. The Massachusetts Municipal Association estimates total local aid to be $400 million less than in that year on an inflation adjusted basis. Since that time Massachusetts communities have cut thousands of jobs, more than any state in the country, and have raised property taxes to prevent even larger cuts.

But what about the picture for Milton? The Patriot Ledger reported on the budget numbers for South Shore communities (the numbers for Milton were incorrect). A chart listed Milton as receiving a 20% increase, one of the largest south of Boston. Milton received a $232,000 increase from last year in Chapter 70 education aid. But the total is $200,000 less than we received in 2002 (close to $700,000 if adjusted for inflation). We join half of the commonwealth’s communities receiving less education aid today than 5 years ago. We also received a $388,000 increase in Lottery Aid resulting from the end of diversion. And in probably the most pleasant surprise, we received a $500,000 increase in PILOT, or payment in lieu of taxes for the large amount of land in the town owned by the state.

This new money for Milton, which began last year with a small award of $9,000, is the result of a great deal of hard work by many people. The idea of securing money as recompense for state land from which we can derive no taxes has been discussed and proposed for many years. A few years ago a committee of Milton residents formed to aggressively pursue both PILOT and a better Chapter 70 funding formula at the State House. Calling itself “Fair Funding For Milton”, the group consisted of Laurie Stillman, Glenn Pavlicek, Beirne Lovely, Ada Rosmarin, Jim May, and Natalie Monroe. They took their case to then House Speaker Tom Finneran as well as to anyone who would listen. Their persistence helped make it possible for Senator Brian Joyce and Representative Walter Timilty to have Milton added to the list of communities eligible for these funds. The sum of $500,000 is significant and these individuals deserve the thanks of the community.

In total Milton would receive an increase of $1.1 million in State Aid under the Governor’s budget. This is certainly an improvement over recent years, even though it is still less than we received in 2002. Unfortunately that’s not the complete story. Each year when the state budget is discussed media outlets cover the local aid numbers and do a good job of reporting each community’s total. What they never discuss is the fact that with the state revenue comes state charges, or what they call “assessments”. Each year the state deducts from the local aid amount the cost of various charges incurred by the state on behalf of communities. Milton, for example, will this year pay $1.5 million for MBTA service. We’ll pay almost $200,000 toward the costs of County Government. And we’ll pay $1.5 million for the cost of Retired Teachers Health Insurance. This item alone increased by $385,000. When you look at the numbers proposed under the Governor’s budget and compare it to 2002 you see a less rosy picture than looking at local aid alone.

-----------Local Aid-----------Local Aid Assessments -----Net Local Aid

2002------$8,596,535-------------$2,454,729----------------$6,141,806

2006------$7,464,011-------------$3,015,970----------------$4,480,863

2007------$8,564,962-------------$3,460,870----------------$5,104,092

The proposed local aid for Milton is roughly $30,000 less than it was 5 years ago. This is a significant difference when you consider that even a modest factor for inflation makes that an $850,000 dollar difference in today’s dollars. But the real problem is what I’m calling Net Local Aid. This is the amount we can actually spend on our local budget. While state aid is essentially flat compared to 5 years ago, assessments charged by the state have grown over $1 million. And the amount of money we can actually spend on local needs is over $1 million less than five years ago, and only $623,000 more than last year.

Sorry for all the numbers, but I’m afraid the coverage on this topic might be unintentionally misleading. We are going to be faced with another difficult budget year. A number of town departments – Schools, Police, Fire—have submitted budgets which seek to recover from losses over the last few years. The increased state aid, while a small help, is not going to get us there. If we want to reduce class sizes in the schools, put more Police on patrol, and properly staff our Fire Department, we’re going to have to consider the first operational override in five years. The Town Administrator has proposed an intriguing option to address our town finances which I’ll address at another time. The presentation of this can be seen here:

http://www.townofmilton.org/Public_Documents/MiltonMA_BComm/06%2001-27%20Strategic%20Fiscal%20Plan.pdf

One final point. The Governor has been touting increased revenues during the past two years as justifying a tax decrease as voted in 2000. At the time that vote was taken the state was rolling in money. We’d had years of ever growing revenues. The state had a full rainy day fund. Communities generally had sufficient levels of personnel to conduct the basic business of government. Since then 6,500 employees have been cut, even after many cities and towns raised property taxes. Before the legislature considers any tax cuts, the state should use any growth in revenue to return local aid to the inflation adjusted level of 2002. Let’s not sacrifice our ability to fund necessary local services to the campaign resume of a Presidential candidate

1 Comments:

Blogger Michael Maholchic said...

Phil,

I am amazed at your ability to put out such detailed posts such as this one regarding the impact of state aid on town finances. You have shown that despite the addition of 1/2 million dollars or so in additional PILOT from the state, we are behind a significant amount of money compared to 2002 in constant dollars.

I'm curious to see what clever ideas our town administrator has to close the upcoming budget gap. Could it be something in the area of insurance again?

I'd also like to see more ideas on how the town government could raise money outside of an operating override. There was talk about taking over Ulin Rink...maybe that could be a money maker for the town, just as Presidents Golf Course makes money for Norfolk County. Or maybe put a windmill on the Town Farm site and sell power back to Nstar. Or sell commemorative mugs, t-shirts and key chains...(I'm writing this from Orlando, Fla.) Maybe these aren't the best ideas, but the way to get a good idea is to have a lot of ideas, and it would be nice to get a discussion going on that.


Speaking of counties, I'm from a state originally where counties do more than they do here (what else does Norfolk County do besides provide its citizens with a jail, a courthouse, and reasonably priced greens fees?) Has there ever been talk of centralizing purchasing county-wide?

Finally, I want to add my two cents about the MBTA. With the coming of the new high school, the T was no longer a viable option for kids from East Milton to ride to and from school. I tried to get them to re-route the bus to help us get our kids for school but I got nowhere. The details are here: http://www.mhs-ptsfo.org/mainfaq.html#mbta if anyone is interested. I wonder how much our T assessment went up...and whether the loss of the high school traffic brought their local ridership down.

9:13 PM  

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