Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2014

Investing in our Communities

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Governor Patrick    FY 2014 Budget Recommendation:
    Issues in Brief

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


The FY 2014 budget continues the Patrick-Murray Administration’s unprecedented commitment to building strong partnerships with cities and towns and supporting their efforts to operate more effectively and efficiently.  The Governor’s FY 2014 budget increases local aid funding for all communities, provides much-needed local aid reform, and will announce programs that enhance cooperation with municipalities and achieve key Administration priorities.

Local Aid and Local Aid Formula Reform

Aid to cities and towns, or local aid, represents approximately 14.6 percent of the Commonwealth’s annual budget.  In FY 2014, local aid programs account for $5.57 B, which reflects the Patrick-Murray Administration’s unprecedented commitment to a strong partnership between the state and its cities and towns.

Unrestricted General Government Aid (UGGA) will be funded at $899 M, the same amount and same distribution provided for in the FY 2013 GAA.

An additional $31 M in local aid will be distributed to all municipalities through the new “Annual Formula Local Aid” program.  The existing allocation of local aid among the Commonwealth’s cities and towns UGGA is meant to maintain year-to-year consistency regardless of changes in a municipality’s circumstances and is no longer based on a rational funding formula. Annual Formula Local Aid addresses these critical aspects of a rational local aid program:

  • Provides a simple and transparent formula using a combined measure of property values and income to calculate each municipality’s relative ability to provide essential local services; and
  • Will consistently provide equitable distributions into the future, as each year the formula components will be updated and the total distribution of aid will be calculated using the updated components.

Education Reform

In FY 2014, K-12 Chapter 70 funding is allocated at $4.39 B, the highest level of state K-12 education funding in history and a $226 M increase over FY 2013; this investment will ensure that the reforms initiated in the 2007 Reforms to Chapter 70 are fully implemented and funded. This increased funding will also account for the following factors in the Chapter 70 funding allocation to local educational authorities:

  • All districts are fully funded at foundation levels;
  • All districts will receive at least an increase of $25 per pupil;
  • Districts will calculate Out of District Special Education at $35,000 per year, an increase of $25,000 per year in prior years to appropriately compensate districts for the costs of providing special education; and
  • Elimination of the cap of pre-kindergarteners included in enrollment for Chapter 70.

Additional investments in cities and towns include:

  • The special education circuit breaker will allocate $230 M directly to municipalities;
  • State Owned Land (PILOT) is level funded;
  • Library Aid is level is funded at the FY 2013 estimated spending level of $16 M;
  • Regional School Transportation is funded at the FY 2013 estimated spending level of $44.5 M;
  • Charter School Reimbursement is increased by $9.8 M to $80 M,from the FY 2013 estimated spending level of $70.5M;
  • The program for Tax Reimbursements to Veterans, the Blind and Widows is funded at $25 M;
  • Caseload-driven increases to Veterans’ Benefits bring the account to $48.1 M for FY 2014;
  • The Department of Veterans’ Services (DVS) will maintain its FY 2013 policy of 100 percent reimbursement to cities and town for the costs they incur providing homeless shelter benefits to veterans – in FY 2013, the total reimbursements to cities and towns exceeded $888,000; and
  • The Administration’s 21st Century Transportation plan includes an additional $100 M per year for local roads and bridges (bringing the Chapter 90 program to $300 M annually) and an additional $40 M per year in capital funds for the Regional Transit Authorities.

Incentive Aid for Local Government Performance

Starting in FY 2015, in addition to the funding level provided for Annual Formula Local Aid, an amount equal to twenty-five percent of the Annual Formula Local Aid account will be used to fund a new program of incentive aid for municipalities.  The incentive aid program will reward municipalities for meeting incentives focused on strong fiscal management, municipal health care cost management, and local government performance management, in line with initiatives of the Patrick-Murray Administration to change the way government does business.  Incentives announced early in FY 2014 will focus on strong fiscal management, municipal health care cost reform and local government performance management.  Municipalities will then have the full year of FY 2014 in which to meet the incentives before incentive aid is provided for in the FY 2015 budget and distributed early in FY 2015.

Community Innovation Challenge Grant Program

The Community Innovation Challenge Grant (CIC) program is just one of the many ways in which the Administration is working with cities and towns to drive innovation and change at the local level.  The budget invests $7 M for a third round of the Community Innovation Challenge Grant Program to provide financial support for one-time or transition costs related to innovative regionalization and other efficiency initiatives in local governments.

Expansion of Municipal Revenue Sources

This budget expands the Hotel and Motel Room Occupancy Excise to provide new local revenues and to bring equity to this tax base.  Currently, properties such as rental vacation homes, corporate executive temporary apartments, time shares, and rented vacation condominiums are not subject to the state or local hotel/motel room occupancy excise.  Our proposal would expand the state and local option tax base to include these so-called transient accommodations and eliminate the existing statutory exemption for small bed and breakfast establishments with three bedrooms or less. This expansion of the existing room occupancy excise base could generate more than $3.8 M annually for the 176 municipalities (50 percent) that have opted to enact the local option room occupancy excise to date, and will benefit municipalities that choose to adopt the local option room occupancy excise in the future.

Municipal Health Care Cost-Containment

Since Governor Patrick proposed municipal health reform in January 2011, 204 municipalities and regional school districts came to agreements with employees, either by using the new reform process or negotiating outside of the reform, achieving more than $175 M in premium savings. The Administration continues to provide technical assistance to additional local governments interested in using the reform process to manage health care costs for current employees.

A municipal map of Massachusetts, indicating which of:  64 municipalities used reform practices; 101 municipalities negotiated outside reform process; and which did neither.  39 school districts (not displayed) also took action.

The Administration similarly is working to help municipalities control the cost of retiree health benefits by filing legislation to reform health insurance benefits for retirees, based on just released recommendations of the Commission to Study Retiree Healthcare and Other Non-Pension Benefits (OPEB). This proposal will make retiree health benefits for career public employees more sustainable, saving local governments as much as $12 B over 30 years (combined state and local governments will save up to $20 B), which will help to support the continued delivery of critical local services and maintain quality healthcare benefits for our future retirees.

Municipal Unemployment Insurance Reform

The Municipal Unemployment Insurance Task Force, created in 2012, issued recommendations and related legislation to implement these recommendations, to close loopholes in Municipal Unemployment Insurance (UI) and create a fair and collaborative system that provides economic relief to cities and towns.  The Governor has filed legislation following the Task Force’s recommendations to:

  • Create a 65 percent Unemployment Insurance offset to retirees collecting a defined benefit pension, limiting a returning employee’s access to unemployment when laid off and collecting a pension;
  • Eliminate the disparity between those employed directly by a school department and those providing services to the school but paid by a municipality;
  • Prevent municipalities from being charged wages earned by election workers; and
  • Allow the Department of Unemployment Assistance (DUA) to participate in a Federal program allowing the interception of Federal tax returns of persons owing DUA a reimbursement as the result of overpayment of benefits.

These changes will allow the state to better collaborate with municipalities on issues of Unemployment Insurance.

Innovations for Municipalities

Throughout government, Governor Patrick is driving innovation to improve customer service and efficiency. Consistent with that focus, the administration has developed the following tools to assist communities:

One-Stop Grant Index for Municipalities

The Administration is developing a new one-stop listing of state grant programs for cities and towns.  Municipal officials seeking opportunities for state resources to support local initiatives will be able to find these resources without needing to search state agency by state agency.

Citizens Connect Smartphone Application

Citizens Connect is the City of Boston's award-winning effort to empower residents to be the City's “eyes and ears.” Residents can alert the City of Boston to neighborhood issues such as potholes, damaged signs, and graffiti using a smart phone app that identifies the location of the issue and alerts the City of the complaint. Funded through the CIC Grant Program and led by the City of Boston, this project adapts the Citizens Connect Smart App used by Boston into a tool for municipalities of any size and will implement this tool in more than 30 municipalities of all sizes across the state at no initial cost as part of a pilot program. Additional municipalities will be able to purchase the Citizens Connect Smart App at a much-reduced price.

State Support for Municipal IT Challenges

The Administration will partner with local governments in addressing various local government information technology (IT) challenges, by leveraging existing state resources needed by communities, as well as sharing expertise. Activities include:

  • Developing a series of IT models for the benefit of local governments, based upon successful IT-focused CIC Grant projects;
  • Promoting the Springfield Data Center (SDC) to municipalities;
  • Establishing a State-Local IT Committee to develop working relationships and identify new opportunities; and
  • Developing and marketing an IT “toolkit” of services that the state can provide to municipalities.

Geographic Information System (GIS) Services

New MassGIS municipal planning and mapping services and online tools for municipalities will give cities and towns increased functionality and eliminate the burden on them to purchase and manage their own GIS systems.

Municipal Purchasing Assistance

The Operational Services Division (OSD) is developing statewide contracts which specifically assist municipalities by achieving aggregated savings on large procurements, eliminating the need for individual bidding processes, and providing long-term, competitive contracts never before managed on a statewide level.  Identifying common needs and aggregating purchasing power at a statewide level is becoming increasingly attractive to our cities and towns based on the need to save taxpayer dollars while obtaining the best goods and services possible.

Prepared by the Executive Office for Administration and Finance ·
For more information email: (617) 727-2040

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