Michael Widmer and Cameron Huff accurately document the damaging cuts that have been inflicted on cities and towns over the past five years. When we reduce spending on education, public safety, and other basic government services, we not only reduce the quality of life in our communities today, we also threaten the economic future of our state. When we weaken our schools by cutting education aid, we make it less likely that our children will receive the education they need to become the highly skilled workers that attract employers to Massachusetts. When the state cuts the local aid that pays for police and fire and other basic services, we make it less likely that our communities will remain the types of places where companies will want to locate.
There is no doubt that local aid cuts are causing real pain today and could cause greater harm in the future. But the same could be said for many other cuts enacted during the fiscal crisis (all numbers adjusted for inflation):
- Public higher education funding has been cut by 23 percent since 2001. This not only harms the 180,000 students attending the Commonwealth’s public university and state and community colleges, but it also strikes at the very core of our economic strength: a well-educated workforce.
- Spending in the Department of Housing and Community Development has declined by nearly 50 percent since 2001. Even with increases in other forms of public funding for housing, it hardly seems wise to reduce the budget of DHCD, considering that the lack of affordable housing is widely cited as a leading cause of our economic troubles.
- The Department of Public Health budget has declined by 27 percent since 2001. All of our communities could suffer from the long-term implications of cutting the type of health protections that are at the core of our state’s public health efforts.
- The Executive Office of Environmental Affairs budget has been cut 25 percent since 2001. In February 2005, The Boston Globe reported an internal Department of Environmental Protection memo that described the cuts to the department and warned: “Over the long term… these budget and staffing cuts cannot be maintained without significantly increasing risks to public health and the environment.”
These are just a few examples of the cuts implemented during the fiscal crisis, but they help to illustrate a problem with the Massachusetts Taxpayers Foundation proposal to dedicate 40 percent of the state’s principal taxes to local aid. Virtually every major sector of the state budget—local aid included—has been cut during the fiscal crisis. Yet cuts to these other critical sectors would have to be much more severe if the share of the budgetary pie going to local aid were increased dramatically.
If the slice of state taxes going to local aid isn’t getting smaller, then what’s the cause of the local aid crisis? State tax revenue is now a significantly smaller share of our overall economy than it was a decade ago. During the 1990s all state taxes combined accounted for, on average, 6.73 percent of personal income earned in Massachusetts, as measured by the US Bureau of Economic Analysis. But during the late 1990s Massachusetts was one of the most aggressive tax-cutting states in the nation. By 2005, tax cuts had reduced state taxes to 6.16 percent of personal income. This doesn’t sound like a lot, but since $277 billion of personal income is earned in Massachusetts each year, reducing state taxes by 0.57 percent means that the state has $1.5 billion less in revenue to provide essential services.
The relative size of the slice going to local aid didn’t shrink, the whole pie did.
If the share of income going to state taxes was restored to what it was in the 1990s and 40 percent of the resulting revenue were dedicated to local aid, that would generate $600 million for new local aid each year. It would also allow the Commonwealth to restore hundreds of millions of dollars cut from higher education, health and public health, environmental protection, and other critical areas.
Is it realistic to think that the tax cuts of the 1990s could be reversed? I don’t know. But as our local officials see every day, the budget cuts that are paying for those tax cuts are hurting our communities in severe and dangerous ways, impairing the ability of cities and towns to fund public safety, education, and other vital services. The same is true when we look at the critical services provided by state government, like health care and higher education. Consequently, it is important to consider all possible options.
It is true that in the 1980s local aid was a significantly larger share of the state budget than it is today. But simply returning the local aid share to what it was 20 years ago would require cutting close to a billion dollars out of other areas of the state budget. There is no evidence that such cuts could be implemented without causing severe pain to people in local communities who rely on state, as well as local, government services.We could also hope that the economy keeps growing fast enough to allow hundreds of millions of dollars in new local aid without new taxes or budget cuts elsewhere. That might be a temporary solution. But, as we learn time and time again, economic booms are followed by economic busts. Local aid increases that are not financed by permanent new revenue sources are reversed when a slowdown wipes out the temporary revenue surpluses generated during economic growth spurts. If, as some have proposed, the state were to cut taxes again this year, fixing the local aid problem would become even harder.
The Massachusetts Taxpayers Foundation is absolutely right to emphasize that the local aid crisis is a problem the state should not ignore. When our local governments have the resources they need, they play a vital role in making Massachusetts a great place in which to do business and to live—a place with strong communities, good schools, quality services, and safe neighborhoods. But so, too, do public services delivered at the state level. In either case, slashing vital services affects not only the quality of life in our communities, but the future of our economy as well.
Noah Berger is executive director of the Massachusetts Budget and Policy Center.