In my small, working class town, our town meeting had a lively debate about whether or not we should spend twenty thousand dollars to rezone some areas in town. Supporters of the article hope that we can begin to attract business and take some of the fiscal pressure off homeowners. Our finance committee articulately demonstrated what I, as selectman, already knew: we couldn’t attract enough business to make a significant effect on our budget.
Granby lacks a much of a commercial and industrial base. They provide us with about $600,000 a year in property tax revenue. Most of our revenue, therefore, comes from residential property taxes. Our only source of additional income, the tipping fees from a landfill, will end in December. With schools that need building, costs of waste disposal, and maintenance of existing services, we are in deep, budgetary trouble. Existing commercial and industrial property brings in $600,000 a year in property tax revenue in Granby. $6.25 million in new property would only bring in about $80,000.
I should mention that the budgets of our town departments have been pretty much level for years. For the third year in a row, we’ve asked the heads of our town departments for three budget scenarios: level-funded; minus 5 percent; minus ten percent. We are at the margin now. We’ve trimmed the fat. We’re now at bone. The next step is amputation.
A town resident recently asked me how we were going to change our fiscal direction. My was as simple as it was out of my control: the Commonwealth would have to start increasing state aid. Since 2008, the Town of Granby has seen state aid drop 41%. This year we’ll receive $453,329 less than we did then. We’re not alone. Most communities across the Commonwealth have seen state aid drop by that much. That’s a lot of money when our $19 million budget is already operating on a shoe string. For several years, our departments have been slightly less than level services.
Granby has fiscal problems that state aid cannot solve. I’m sure most municipalities have their own idiosyncrasies, but a 41% drop in state aid is turning normal problems into inexorable ones. We are more vulnerable than more affluent or commercialized towns, but our trouble would be more manageable if the state were keeping up its part of the bargain. Unfortunately, state aid has dropped 58% since I graduated from Granby High School in 1982.
But between the economy and the 1998 tax cuts, we’re in a bind. As the Mass Budget and Policy Center explains,
Three of these income tax cuts were particularly costly to the Commonwealth: 1) a cut from 5.95 percent to 5.3 percent in the tax rate applied to wage and salary income, 2) a cut from 12 percent to 5.3 percent in the tax rate applied to dividend and interest income, and 3) a doubling of the value of the personal exemption from $2,200 to $4,400 for single filers and from $4,400 to $8,800 for married couples. The combined effect of these three cuts is now a loss of some $3.0 billion in annual revenue.
The effect of these tax cuts were masked by the strong economy of the last half of the 1990s. Once the inevitable recession–this one the worst since the Great Depression–hit, and recessions always come, the pain and cuts came with it.
Once something is given, it’s hard to take back. Once in crisis, it’s even harder. These advantages are complicated by the fact that our diminished revenue didn’t present much of a problem when they were passed. Unlike many in our state legislature, Governor Deval Patrick appreciates the predicament of cities and towns. The rest of our Beacon Hill leadership may be shaking their heads, but our governor has at least started the discussion about revenue.
Prior to the Governor’s proposal, some progressive legislators brought forward An Act to Invest in Our Communities. In a nutshell, the legislation would implement a graduated income tax that would have little affect on most people. A person earning a gross adjusted income of $100,000 a year would pay an additional $100 in personal income taxes. Here’s what does:
1) Restores the income tax rate from 5.3 percent to 5.95 percent while raising the personal exemption enough to hold down increases for middle-class families.
2) Raises the tax rate on wealthy investors, but provides a targeted exemption for middle-class seniors.
3) Raises $1.37 billion in net additional revenue to maintain funding for our communities, schools, health care needs and public safety services.
The bill has sponsors in the House and Senate: Sonia Chang-Diaz, Patricia Jehlen, Ellen Story, Kenneth Donnelly, James Eldridge, Daniel Wolf, Denise Provost, James O’Day, Ruth Balser, Alice Wolf, Kay Khan, Frank Smizik, Carl Sciortino, Marcos Devers, John Fresolo, Patricia Jehlen, Sean Curran, Elizabeth Malia, Angelo Puppolo, Paul Mark. Some of these would likely support Patrick’s plan.
Speaker of the House Robert DeLeo is concerned about transportation and willing to look at new revenue to support it. He told the Boston Chamber of Commerce
that in March or early April the House will put forward an alternative revenue plan that must be enough to address two key issues. There is a $140 million deficit in the MBTA operating deficit for next year. In addition, the state is paying highway workers with borrowed road construction bond money. Mr. DeLeo said using bonds to pay highway workers is costing Massachusetts about $250 million a year.
Lawmakers in both chambers of the General Court have also filed The Transportation Investment Act that would address these issues. Transportation is crucial to the health and welfare of our state and economy, but too many fiscal burdens have fallen to cities and towns. As the MMA explains,
Reductions in state aid to local government, particularly municipal aid, have translated into deepening over-reliance on the property tax and cuts in core services to residents and businesses. This is a trend that places enormous fiscal stress on cities and towns and undermines their ability to take care of basic obligations, including schools and public safety.
This is what’s happening in my town. Is happening in yours?