Common Sense Options

By Joe Markman

Local officials found themselves backed against a wall of limited revenue options when, in January, Gov. Deval Patrick announced local aid cuts of $128 million this year and $375 million in 2010 to help make up for billions of dollars in state deficits.

The move revised a long simmering debate. Does the following sound familiar?

“There are only two ways that cities and towns can deal with local aid cuts. One is to raise property taxes even more. The other is to cut essential services, since that’s where most of the money is spent.”

The Massachusetts Municipal Association said this back in 2003, when former Gov. Mitt Romney cut local aid by $114 million – the largest local aid reduction in state history until this year according to the association.

Next year’s $375 million reduction will be more than three times the Romney cut, unless lawmakers work quickly (which they seem loathe to do) to give municipalities much needed revenue streams beyond property taxes (around which they tread lightly because of tax-averse voters).

Legislators should strongly consider the long-term alternatives the MMA and Patrick have suggested, unless, of course, they believe this is the last economic downturn Massachusetts will ever face.

“Unfortunately, taxes are on the table,” said Geoff Beckwith, MMA’s executive director, back in February. “Right now, cities and towns have the property tax, and we need to have other options that are fairer.”

Such alternatives include local-option meal and hotel levies and taxes on telecommunication properties.

Massachusetts towns should not be surprised by the cuts. When there is an economic downturn, the state government undoubtedly turns to local aid reductions to address deficits.

In 1992, as the country was recovering from a recession, Weymouth residents were forced to deal with $600,000 in local aid cuts by then Gov. William Weld. The town decided to defer payments to its pension fund to make up for the reductions.

This year, Weymouth lost $1 million, which it covered with the proceeds from selling an unused elementary school building. Next year a $3.6 million reduction means the town faces layoffs and hiring and wage freezes.

Yet even as towns have faced local aid cuts again and again, their options remain limited because of voter distaste for taxes.

A recent Suffolk University-7News poll shows that 32 percent of voters sampled support an increase in the sales tax to help solve the state's fiscal crisis, with 20 percent supporting a hike in the gas tax, and 12 percent favoring raising the state income tax.

With such low public support for higher taxes, state legislators face an uphill battle to give towns more options. Even an increased hotels and meals tax – which represents an extra 10 cents on a $10 lunch bill – has faced strong opposition from taxpayers and those in the hospitality industry.

“Our industry, not unlike the automobile industry, is reeling from the economic downturn,” Peter Christie, chief executive officer of the Massachusetts Restaurant Association said in response to Patrick’s proposal to add one penny to both the 5 percent meals and 5.75 percent hotels taxes.

“Would anyone suggest targeting automobiles for a local tax? Of course not, but that is exactly what the administration is suggesting to us,” Christie said.

Rep. Jay Kaufman, D-Lexington, House chair of the Joint Committee on Revenue, told reporters recently that “there is no topic off-limits” in seminars on the state’s tax policy.

That includes, he said, Proposition 2 ½, which limits the total taxes that can be assessed every year on the real and personal property of each municipality to not more than 2 ½ percent of the “full and fair” cash value of the property.

Kaufman, wisely understanding that a rough economy calls for fresh alternatives, has opened a needed discussion about allowing towns to increase revenue through property taxes.

In addition, Kaufman said the committee will consider Patrick’s re-filed state and local options taxes on meals and hotel rooms, and telecommunications levy, proposals that failed to advance last session.
Patrick had said that a statewide 1 percent increase on the meals and lodging taxes would raise about $150 million, to be distributed to towns and cities in the same way as lottery aid. He also said the local taxes, including telecommunications revenues, would be worth another $150 million.

“Maybe it will save one position, and that’s worth it,” said Stoughton Selectman Joseph M. Mokrisky in response to the governor’s proposal in January.

State elected officials are put into office by the voters to create policy based on the best interests of the state, and, in effect, each town and city in Massachusetts. Tough decisions are part of their job. So while voters may balk at tax increases, legislators must use the power given to them, deliberatively and logically, to mitigate cuts to core town services.