Report says Mass. towns have stabilized finances

Moody's warns that problems are looming

 

MASSACHUSETTS CITIES AND TOWNS have managed to stabilize their finances in the wake of the Great Recession, but they are facing challenges ahead as state aid continues to fall and debt and pension obligations continue to rise, according to a new report from Moody’s Investors Service.

The report was generally positive, suggesting that the 228 cities and towns that Moody’s tracks have generally weathered the financial storm. Moody’s downgraded the financial status of a relatively high proportion of Massachusetts cities and towns at the start of the Great Recession in 2008 and 2009, but since then Bay State downgrades have been less than half the national average. In 2012, only two local entities, Saugus and the Seekonk Water District, were downgraded by Moody’s and five were upgraded.

While Moody’s said Massachusetts communities tend to be more stable financially than their counterparts around the country, the ratings service said problems loom on the horizon. The report said unemployment in Massachusetts is likely to show no dramatic improvement over the next few years but will still remain below the national average until at least 2016. The report also said cuts in federal spending on the military and health care could slow the state’s economic growth.  In 2010, according to the report, federal spending in Massachusetts was $84 billion, representing a quarter of the state’s Gross State Product.

The report said Massachusetts has a diverse employment base, led by education and health services, but the cost of doing business in the state is the second-highest in the nation.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Two other major concerns for Massachusetts cities and towns are declining state aid and rising costs for debt service and pension obligations. The report said Massachusetts municipalities received less state aid in fiscal 2012 in unadjusted dollars than in fiscal 2002. The Patrick administration has already announced plans to cut $9 million from local aid this year to deal with lower-than-expected tax revenues.  Moody’s said debt service and pension obligations accounted for a fifth of all municipal expenditures in 2011 and should gobble up a third of spending by 2020.

Moody’s financial rankings fall in three ranges: the high level is Aaa through Aaa3, the midrange is A1 through A3, and the lowest range is Baa1 through Baa3. Most of the state’s Gateway Cities fall in the midrange. The outliers are Brockton and Worcester at Aa3 and Lawrence at Baa1. Lawrence, which has its finances under state oversight, is the Massachusetts community with the lowest Moody’s ranking. Boston enjoys the highest Moody’s ranking at Aaa.