Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2009

Governor's Budget Recommendation FY 2009

Local Aid

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Governor Patrick    FY09 House 2 Budget Recommendation:
    Issues in Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor



The fiscal challenge the Commonwealth will face in FY2009 limits the options for increasing local aid. Despite these challenges, the Governor's budget recognizes the state's role in supporting the economic health of cities and towns. This budget continues to invest billions of dollars into existing local aid programs, while outside of the budget process the administration has been thinking creatively about how to continue to ease the burden on the municipalities.

Governor Patrick's budget includes $225M in new funding through programs to benefit municipalities. Beyond the Governor's Municipal Partnership Act, property tax relief from gaming revenues and various off-budget items like the School Building Authority, the budget includes a total of $5.569 billion for local government. This budget increases the contribution to cities and towns directly through local aid to for education through the Chapter 70 formula and the Payment in Lieu of Taxes (PILOT) for State-Owned Land program. In addition, the expected shortfall in Lottery revenues in FY08 of $124M will not cause a decrease in state aid to localities in FY2009 if the Governor's casino legislation is passed, and the $379 million in additional assistance will be distributed once again.

Full funding for Chapter 70: $223.1M increase totals $3.948B. This is an increase of 6% over the FY08 GAA and the second largest increase in the budget after Medicaid. Chapter 70 state aid will be at an unprecedented level totaling $3.948B in FY2009. With this increase in aid, all 328 districts will get more Chapter 70 funds than they received in FY2008 and it ensures that the growth in each district's foundation budget is supported by the state. This year, the Governor's budget does not reflect any changes to the Chapter 70 formula, which was reformed in FY2007 by the legislature. The Governor's budget implements the 3rd year of this 5 year phase-in model, which was set up to resolve some of the inequities of the original Chapter 70 formula that was conceived during the education reform in 1993.

Considering the budget projects 3.8% baseline growth in the state's tax revenue, this 6% increase to Chapter 70 shows the Governor's commitment to municipalities and local education funding.

  • Currently, the DOE predicts that 303 operating districts will see an increase in their foundation budget in FY2009.
  • Since the $223M increase raises Chapter 70 funding for all 328 operating districts, 228 of them can spend above their foundation budget.
This chart shows the Chapter 70 State Aid historical numbers as follows (figures are in billions): FY00 GAA 2,761; FY01 GAA 2,948; FY02 GAA 3,213; FY03 GAA 3,259; FY04 GAA 3,108; FY05 GAA 3,183; FY06 GAA 3,289; FY07 GAA 3,506; FY08 GAA 3,726; FY09 H.2 3,949.

Easing the Local Burden for State Property - Cities and towns that house state-owned property such as facilities or office buildings receive no property taxes on those assets. To ease this burden, the payment in lieu of taxes (PILOT) program was established to partially reimburse cities and towns for this revenue loss. The Governor's budget continues to make progress in providing funding for state-owned land and increases the PILOT program by $2M, or 7%, to ease the local pressure on property taxes. This account distributes funds to 292 communities and is an important program for small towns within the Commonwealth.

Veterans Benefits: $5.7M Increase. These funds, totaling $20.9M in FY2009 serve as benefits to Veterans as required under MGL Chapter 115 section 6. This benefit is needs based and due to a caseload increase of 574 veterans this year (4,687 veterans in total) and anticipated increased of 755 veterans (5,442 veterans in total) in FY2009, this budget appropriately reflects our obligations to cities and towns for veterans who are entitled to benefit payments.

Other Local Aid Increases - Cities and towns of the Commonwealth will also realize the following:

  • Additional Assistance is level funded, providing $379M to cities and towns.
  • $702M ($67.3M, or 10.55%, increase) for the School Building Authority to better invest in capital needs.

Subject to support for Governor's initiatives:

Lottery Proceeds "Shortfall" in Aid: $124M. Actual Lottery proceeds to be distributed to cities and towns are estimated at $811M in FY2009, $124M short of the $935M distributed in FY08. The Governor's budget proposes to use one-time funds from Year 1 of destination resort casino license fees to hold communities harmless at $935 million.

Property Tax Relief and Transportation Funding: $176M. The Governor's casino proposal will allow for the distribution of $176M in one-time funds from Year 1 of destination resort casino license fees to grant $88M in direct property tax relief to the citizens of Massachusetts and an additional $88M in Chapter 90 funds to be used for various local transportation and infrastructure projects.

Municipal Partnership Act: Telecommunications, $78M; 1% Meals Tax, $125M; 1% Hotel Tax, $20M. The Municipal Partnership Act, filed in February 2007, contains three local revenue pieces that total up to $223M that would go back to the cities and towns if adopted. Eliminating the outdated telecommunications pole and wire exemption will allow communities to tax equipment previously exempt. This $78M would go straight into municipal coffers. A local option 1% meals tax that would raise up to $125M would be split. Three-quarters of it, $94M, would go back to the municipality, while the remaining quarter would go into a fund to help the elderly with their property tax bills. The final revenue proposal would increase the current local option hotel/motel tax from 4% to 5%. This could bring over $20M in flexible funds straight back to the municipalities.

FY2009 Local Aid Cherry Sheet Items: Chapter 70, FY2008 GAA $3,725,671,328, FY2009 H.2 $3,948,824,061, FY2009 H.2, Increase over FY2008 GAA $223,152,733, 6.00% Increase; Veterans Benefits, FY2008 GAA $15,165,374, FY2009 H.2 $20,904,223, FY2009 H.2 Increase over FY2008 GAA $5,738,849, 37.80% Increase; State Owned Land, FY2008 GAA $28,300,000, FY2009 H.2 $30,300,000, FY2009 H.2 Increase over FY2008 GAA $2,000,000, 7.10% Increase; Lottery, FY2008 GAA  $935,028,283, FY2009 H.2 $810,875,000,  FY2009 H.2 Increase over FY2008 GAA ($124,153,283), no % Increase; Gaming Proceeds, FY2008 GAA 0$, FY2009 H.2 $124,153,283, FY2009 H.2 Increase over FY2008 GAA $124,153,283, no % Increase; Additional Assistance FY2008 GAA $379,767,936, FY2009 H.2 $379,767,936, FY2009 H.2 Increase over FY2008 GAA 0, no % Increase; School Building Authority, FY2008 GAA $634,700,000, FY2009 H.2 $702,000,000, FY2009 H.2 Increase over FY2008 GAA $67,300,000, 10.60% Increase; Other Cherry Sheet Items, FY2008 GAA $340,440,913, FY2009 H.2 $352,569,564, FY2009 H.2 Increase over FY2008 GAA $12,128,651, 3.60% Increase; Total FY2008 GAA 6,059,073,834, FY2009 H.2 6,369,394,067, FY2009 H.2 Increase over FY2008 GAA 310,320,233, 5.10% Increase.

Prepared by the Executive Office for Administration and Finance • Rooms 373 & 272 • State House
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