Moving beyond Boston

Other states have many successful regions within their borders. Why doesn’t Massachusetts?

SPRINGFIELD WAS ONCE synonymous with innovation. Today the city that produced the first tire, the first car, the first motorcycle, and the first commercial radio station is counting on a casino to drive growth. Springfield’s lost industrial prowess comes at a cost to the entire Pioneer Valley economy. Gateway Cities in other parts of the state have much the same story to tell, with similar consequences for their regions. Some of them are also competing for casinos, the most enticing hand-up the state has offered. Until a better economic development policy is found, the neglect and subsequent collapse of these historic urban centers will continue to feed a pattern of slower, geographically unbalanced, and more inequitable growth for Massachusetts.

The clearest indicator of this challenge is metro area per capita GDP, a region’s economic output divided by its population. On this basic measure of regional competitiveness, Massachusetts can hold up Greater Boston, the fifth-most-productive region in the nation excluding a pair of oil-boom towns. But beyond Boston, the state has very little to show. The Bureau of Economic Analysis provides data for three other Bay State regions: Pittsfield ranks 167th and Worcester comes in at 211th; Springfield falls well below the middle of the pack, 225th out of 381 US metro areas.

This in-state disparity is not necessarily the norm. Many of the states with whom we compete have highly productive regions scattered within their borders. Virginia, for instance, claims a large chunk of the tenth-ranked DC metro, but it still manages to place Harrisonburg, Richmond, Virginia Beach, Charlottesville, and Roanoke well ahead of our second-tier regions. Indiana and Wisconsin, two states similar in size to Massachusetts, have six and seven metro areas in the top 100, respectively.

A strong core city is not the defining feature contributing to the productivity of these regions in every instance, but it is certainly an important differentiator. A region with a competitive urban core tends to have healthier institutions (i.e., local banks, hospitals, and universities), more effective chambers of commerce and economic development organizations, and amenities that attract visitors and young professionals. Outside of Massachusetts, there are many examples of midsize cities such as Harrisonburg, Virginia, capitalizing on their small- town quality of life and cost of living, proximity to major markets, local universities, and attractive urban fabric to power regional economic development.

A key difference between Massachusetts and these other states is the amount of power given to local cities to raise revenues. Massachusetts, with its limited home rule, basically tied the hands of Gateway Cities as disinvestment took hold. In Virginia and many other states, counties and incorporated cities were given the power to raise revenue and shape their own destiny.

While Massachusetts doesn’t offer its cities and towns revenue tools to make economic development investments, it does provide more generous assistance in the form of transfer payments for poverty alleviation than most other states. These transfers support thousands of jobs that would not otherwise exist and partially obscure the extent to which the economies of Gateway Cities are in decline. In Brockton, for example, approximately $430 million in Medicaid spending equates to roughly a third of total payroll for private employers in the city.

Take out the growth in health and human service employment financed by state funding to support high poverty populations and Gateway City job growth over the last decade disappears. Instead of holding steady, Worcester sheds 5 percent of its jobs, Brockton and New Bedford drop 7 percent, and Springfield falls 10 percent. Fall River’s difficult 10 percent job loss becomes a much more severe 18 percent pounding.

With the Massachusetts economy increasingly centered around human capital, prospects for the future in Gateway Cities are tempered by the economic struggles of their residents. The number of Gateway City residents living in concentrated poverty (areas with poverty rates over 40 percent) has grown by 140 percent, from about 50,000 in 2000 to 127,000 in the latest Census figures. New research by Harvard economist Raj Chetty provides powerful confirmation that growing up in these circumstances is damaging; children randomly moved out of high-poverty neighborhoods as part of a federal study in the 1990s are already earning incomes 30 percent higher than their peers who stayed behind.

In a similar way, social science research indicates that attending a high poverty school has a deleterious effect on an individual’s future economic wellbeing. With the percentage of students in Gateway Cities who are low-income rising from less than half in 1994 to over two-thirds in 2014, nearly all students in these communities are now in schools where poor students make up more than 40 percent of enrollment.

The damage that concentrated disadvantage is inflicting on human potential is particularly problematic because Gateway City youth make up a very significant percentage of the future workforce in regions outside of Boston. Currently, fewer than one in five Gateway City students graduate high school and go on to complete a post-secondary degree. This low yield is especially disconcerting for Western Massachusetts, where well-educated workers are aging. Between now and 2030, forecasts suggest the number of working-age residents with college degrees will slip by nearly 10 percent in the Berkshires and more than 25 percent in the Pioneer Valley.

Gateway City leaders are putting considerable effort into initiatives to better prepare students for the demands of today’s workforce, but these models call for a higher dose of learning, which comes with a price tag that is increasingly out of reach. Gateway City fiscal challenges put them $45 million below the minimum education spending floor under the state’s local Foundation Budget formula in FY 2014. And fiscal conditions are likely to get more difficult as aging municipal workers enter retirement.

Gateway Cities are already spending a sizeable share of their limited revenues trying to meet obligations to municipal workers, according to the Massachusetts Taxpayers Foundation. Covering municipal retiree health insurance, for instance, takes one out of every four dollars that Fall River generates locally. With pension balances hovering around 40 percent of obligations (well below the 70 percent average for Massachusetts municipalities), Gateway Cities are also on the hook for very significant unfunded pension liabilities.

Driving regional growth across the state will require the resolution of two complex puzzles simultaneously. We will need to shake up public education systems so that successful models for educating disadvantaged students can be brought to scale. At the same time, we must devote a larger share of the state’s capital budget to repair the physical fabric of Gateway Cities with the aim of drawing private investment back into the downtowns and residential neighborhoods, building up the tax base of these urban centers.

Leaders have a mandate to pursue this agenda. Recent surveys conducted by the MassINC Polling Group indicate the majority of Massachusetts residents favor efforts to produce more balanced economic growth even if it means slower economic development overall. MassINC polling also suggests Gateway City voters are eager to see more transformative change to their local public education systems.
With Boston’s high-flying economy hungry for state resources, public support may not be the deciding factor. Whether it is hosting a Boston-based Olympics, transferring MBTA debt to the state, or expanding the Boston Convention Center, well-healed interests are pushing every day for state commitments that could crowd out investments in Gateway Cities.

Fortunately, Gateway Cities have a powerful response to this political challenge: the energy of a growing stable of dynamic leaders with the vision to address unmet needs and unlock untapped potential. These leaders include up-and-coming mayors such as Dan Rivera in Lawrence and Kim Driscoll in Salem and innovative educators such as Monty Tech’s award-winning principal Sheila Harrity and Northern Essex Community College President Lane Glenn.

These leaders have access to a growing reservoir of outside support. Concerned by unbalanced regional growth, Eastern Bank, MassMutual, and other private companies are engaging in a big way, with assistance from the Federal Reserve Bank of Boston and the Massachusetts Competitive Partnership. Philanthropic leaders with a traditional focus on Boston are also beginning to look beyond Route 128. From Springfield’s freshman senator Eric Lesser to Lynn’s freshman representative Brendan Creighton, there is new energy in both branches of the Legislature. And Secretary Ash has built a talented team of economic development leaders with strong ties to regions across the state.

Meet the Author

Ben Forman

Research Director, MassINC

About Ben Forman

Benjamin Forman is MassINC’s research director. He coordinates the development of the organization’s research agenda and oversees production of research reports. Ben has authored a number of MassINC publications and he speaks frequently to organizations and media across Massachusetts.

About Ben Forman

Benjamin Forman is MassINC’s research director. He coordinates the development of the organization’s research agenda and oversees production of research reports. Ben has authored a number of MassINC publications and he speaks frequently to organizations and media across Massachusetts.

Working together, this impressive array of state and local leaders can take Gateway Cities from a conceptual problem to an effective strategy for more balanced regional growth throughout our Commonwealth.

Benjamin Forman is the research director of MassINC, the publisher of CommonWealth magazine.