Imagine if every town facing shortfalls (nearly all of them in MA!) tried this credit card scheme. The state doesn’t yet have the revenue either – or else local aid would be pouring in and this whole debate would be moot. The state should hardly be expected to bail Tewksbury out of its own stupidity. Government by credit card is not a good way to do business. Sometimes it’s necessary, I suppose, but if used to address a structural deficiency, it only serves to further erode the situation, and put a budget into freefall. There’s a reason why “paygo” (pay as you go) budgeting is so appealing – it forces government (or business, or even your own family) to address the structural problems underlying a budget (not enough revenue, or too much spending) instead of relying on the quick fix which only serves to escalate the problem.
Instead, I’d like to ask Reps. Finegold and Miceli both why they failed to address the larger structural issue facing Tewksbury, and most other towns and cities of the Commonwealth, when they backed DiMasi and the fiscally rightwing Greater Boston Chamber of Commerce in killing Patrick’s longer term fix of rebalancing revenue generation. This would have pulled us back from the regressive overuse of the property tax, and return us to a fair taxation of the business community (including the very sensible combined reporting, which forces businesses to stop getting away with claiming to be one entity for federal taxation, and another for state). Business does not pay a fair share in Massachusetts (but benefits greatly by government’s initiatives in the form of infrastructure, educated workers, etc). Patrick’s proposals were a slow, gradual start to tackling the fundamental dilemma we have put our cities and towns in under the tender ministrations of Republican governors and legislatures bought and paid for by big corporations.
Miceli and Finegold need to answer that question, before they can be lauded for their support of pulling out the credit card.
[Cross posted at Left in Lowell.]
It seems the mistake that the folks in Tewksbury made was in playing the game the wrong way. From what I’ve seen in various towns around here, you don’t get extra money by borrowing from next year, but rather you overestimate tax revenue by 15% when you do the budget.
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Their problem isn’t trying to pay bills with money they don’t really have, but not building that cheat into their budget last year.
Their problem isn’t trying to pay bills with money they don’t really have, but not building that cheat into their budget last year.
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…is what is referred to as “bonding the deficit.” The state of Massachusetts did it in the last years of the last Dukakis administration. And, except during the last years of the Clinton administration, the federal government has been doing it for decades.
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I just want to point out that this statement is not true. Property tax revenue is not lowered if housing values drop. The tax rate would simply increase so that math works out on the 2.5% increase in tax levy that cities and towns generally take.
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The only exception to this would be if values dropped so much that the city or town hit against the $25/1000 levy ceiling. But except for that, the 2.5% levy increase is the most predictable revenue a city or town has.
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Isn’t the increase in overide proposals evidence that this is exactly what is happening in municipalies all over the state?
The overrides are proliferating because the budgets are growing at 4 – 5% annually, and the revenues (property tax levies plus state aids) are slightly less.
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Maybe it’s happened, but I don’t know of a single town that has come anywhere close to the levy ceiling.
You linked to the wrong spreadsheet. When there is a split tax rate, there is a third “levy percentage” calculated. If you look at this sheet from 2007 you will see that there are a couple of communities that are withing striking distance, if property values drop, say, 30%, notably Monroe, Springfield, West Springfield, Holyoke, Pelham, Heath, Hawley, Wendell, and Shutesbury.
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http://www.mass.gov/…
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Here are historical values:
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1985-1989: http://www.mass.gov/…
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1990-1999: http://www.mass.gov/…
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2000-2006:
http://www.mass.gov/…
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You’ll see a number of communities hitting the ceiling in the 80’s.
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Lawrence had to reduce their levy from 1996 to 1997, 1997 to 1998, and 1998 to 1999. Lynn had to reduce their levy from 1996 to 1997. Pittsfield hit upon it from 1985 to 1986.
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Springfield bumped against the ceiling when property values dropped steadily from 1990 to 1998. Although Springfield didn’t ever have a lower levy than the previous year, three straight years the increase was 0.4%, 1.67%, and 0.71%, and that’s with new construction factored in. Other communities were enjoying 5-6% increases in levy during that same era.
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If you view this as a race, being held back when everyone has the same “acceleration” is a big problem. Once you get held back like that, it’s impossible to make it up without controversial overrides, and given that even well-informed posters don’t fully understand Proposition 2.5 here, it would be virtually impossible to make the case of “we couldn’t raise your taxes by 2.5% for the past three years because we were at the levy ceiling, so we just want to get ourselves back to that level”.
Default, and go to the state for a bailout. Plymouth County sheriff has done that several times. Works great. I believe numerous counties in MA have done that, and then the state took over. I’m surprised this hasn’t caught on.
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What was California going to do when brown drowned them in red ink. They were going straight to the federal government. “Ooops, we screwed up—-it would be mean spirited to not pay the tab, so USA wins the prize for our egregious fiscal irresponsibility.”