Resolution on Renewing and Revitalizing a Strong State-Local Fiscal Partnership (2007)

As adopted by the members, January 13, 2007

Whereas, in order for the residents and the economy of Massachusetts to prosper and thrive, it is essential that the Commonwealth establish an enduring state-local financial relationship that ensures an adequate and stable revenue source to help pay for all essential local government services and responsibilities, including public safety, public works, public education and the full range of vital local government activities and obligations;

Whereas, the sound financial health of cities and towns and the high quality of municipal and school services are necessary for the growth of the knowledge-based Massachusetts economy and to the well-being of residents and businesses;

Whereas, the great majority of cities and towns have not financially recovered from the deep and painful municipal and school aid cuts imposed in fiscal 2003 and fiscal 2004 that resulted in widespread reductions and cutbacks in local services and the municipal workforce;

Whereas, reliance on the regressive property tax has increased to historic levels and has placed a heavy property tax burden on low- and moderate-income homeowners, especially seniors and those on fixed incomes, and the communities of the Commonwealth are unable to further their reliance on the property tax, which is the only major source of tax revenue granted to local government;

Whereas, the present system for supplementing the property tax and supporting municipal services is based almost exclusively on Additional Assistance and Lottery distributions and has become obsolete and in need of renewal;

Whereas, the resolution approved by local officials from across the state at the MMA’s January 2006 Annual Business Meeting called for a “new and enduring compact between state and local government” based on a fixed share of state tax collections and for local option taxes; and

Whereas, revitalizing the state-local relationship must be a clear and immediate priority for the new Governor and a new legislative session beginning in fiscal 2008;

Therefore it is hereby resolved by the members of the Massachusetts Municipal Association that:

State and local government leaders must work together to establish a new and permanent framework and partnership for revenue sharing and local aid for the next fiscal year and beyond, in order to ensure that all cities and towns can meet the needs of their residents and businesses, reduce the regressive property tax burden, restore fiscal stability, and build a stronger and more prosperous Commonwealth; and

It is further resolved by the members of the Massachusetts Municipal Association that the core elements of this new state-local revenue sharing partnership shall include the following:

Beginning in fiscal 2008, the Governor and the Legislature must enact a new permanent revenue sharing law that over time distributes 40 percent of the state’s growth taxes (personal income, sales and use, and corporate excise) annually to cities, towns and regional school districts to support municipal and school services and to ease reliance on the property tax;

The new revenue sharing law must over the next five years dedicate an amount equal to 10 percent of growth taxes (one-quarter of the 40 percent amount) for distribution to all cities and towns through a new general municipal revenue account that is not earmarked and is available for local appropriation to support vital public safety, public works and other essential local government services;

The “40 percent” revenue sharing law must also provide funds for important ongoing and new state commitments to local government for direct municipal and school services, including payments in lieu of taxes for state-owned land, police incentive pay reimbursements, community policing grants and other direct municipal aid programs, Chapter 70 school aid, the sales tax set-aside for the school building assistance program, school transportation reimbursements, special education reimbursements, increased charter-school-related reimbursements and other direct school aid programs, recognizing that the renewal of the state’s school aid funding plan must support a target of a 50-50 state-local government share of the statewide statutory minimum school spending amount;

The allocation of revenue sharing amounts to individual cities, towns and school districts must be based on the principles adopted at the 2006 annual business meeting, including the protection of base amounts and the distribution of new amounts to all municipalities and districts through fair and equitable formulas based on acceptable measures of ability to pay, including the use of median household income when feasible, and reasonable estimates of the cost of local obligations;

To ensure adequate time and resources for planning and budgeting at the local level, the Governor and the Legislature must reach agreement early in the state budget process on revenue sharing amounts so that a consensus local aid resolution can be approved in each branch and accurate Cherry Sheets can be released by March 1;

The Governor and the Legislature must also ensure that the state’s capital spending plan supports local road improvement and other capital projects that facilitate economic expansion and job growth, including an adequate level of Chapter 90 road construction authorizations, ensuring that cities and towns receive a fair share of gas tax revenues to maintain, repair and build the roads and bridges of the Commonwealth;

In policies regarding the property tax and local option taxes, the Governor and the Legislature must modernize the system of municipal taxation to address the reality that communities are over-reliant on the regressive property tax, and are undermined by a lack of diversity in allowable revenue sources, and thus the Commonwealth must authorize cities and towns to levy limited local option taxes, including the meals tax, as is common in other states;

To protect against a further shift of the property tax burden onto residential homeowners and local businesses, laws must be enacted to protect the existing property tax base from reduction by closing tax loopholes used by certain telephone and telecommunications companies to avoid local taxation, and to guard against tax shifts or increased burdens caused by the acquisition of property by tax-exempt businesses, such as hospitals, universities and other tax-exempt corporations; and

The state’s complex system of property tax exemptions, abatements and credits for elderly and other needy local taxpayers must be modernized, and relief programs, including the “circuit breaker” in the state income tax, must be evaluated and expanded to provide more meaningful levels of property tax relief.