Outgoing Massachusetts Secretary of Administration and Finance Eric Kriss gave an interview that appeared in this morning's Boston Globe. In this interview, Kriss said that Massachusetts cities and towns are "in their worst financial shape ever" and that this is "a crisis largely of their own making." Kriss blames "overly generous" salary increases for public employees, a "failure to control" health care costs, and "aversion to development that could spur new tax revenue." These comments can be best described as bizarre and out of touch with the reality that faces local governments in Massachusetts.
Kriss gets both his context and his facts wrong. For context, one could cite a long-stand opinion of the Massachusetts Supreme Judicial Court that says, in part:
A town is not an independent sovereignty. It is merely a subordinate agency of the State government. It is a creature of the Commonwealth, from which are derived all its powers and those of its voters and officers.
In other words, cities and towns operate under rules established by the state. A good example of this is public employee health care coverage. For a city or town, the percentage of an employee's health care premium paid by the city or town is subject to collective bargaining. These percentages can be reduced - some cities and towns have been successful in doing this - but it is a struggle and it comes at a cost ; since this is part of a bargaining process, municipalities usually need to give up something - usually higher cost-of-living increases. (For the Commonwealth, this percentage is not subject to collective bargaining. The legislature and Governor can reduce the percentage by fiat.) Collective bargaining rules for cities and towns are not determined by the cities and towns - they are set by the state government.
While there are certainly examples of cities and towns that give large salary increases or that are averse to development, there are many others that have held the line on salary increases and that are doing their best to bring in development. Many of the communities that are doing the right thing on salaries, health care costs, and development are still struggling financially. The two main causes are Proposition 2 1/2 and recent slow growth in state aid.
Proposition 2 1/2 created a dynamic that in most cases continually reduces the size of local government. The 2.5 percent annual base increase in local property taxes provided by Proposition 2 1/2 is in most years smaller than the increase required to maintain services at prior year levels. Proposition 2 1/2 does allow property tax increases related to new construction, but much new construction - particularly residential new construction - brings along with it increased costs, particularly in education. Any other increases in property taxes - overrides and debt exclusions - require voter approval. While voters in some communities may approve occasional overrides and debt exclusions, they do not usually vote for the regular overrides that would be required to maintain services.
To the extent that communities have maintained services, it has been in years when state aid increases have been sufficient to cover increased costs. Such was generally true in the mid 1980s and the late 1990s. To a great extent, Massachusetts cities and towns built their financial reserves while maintaining services during the "good" years. Many of these communities are now using those reserves to maintain service levels at a time when state aid increases are small or non-existent. There is a limit, however, to how long cities and towns can continue to draw on their reserves to maintain services. We can be hopeful that with a recovering state economy, state aid increases will be more generous in the next few years.
As for development, there are many communities that are aggressively seeking and managing new development. This is particularly true along the Massachusetts Turnpike, I-93, and Route 3 corridors west and north of Boston. There are communities along the MassPike corridor where assessed valuations have increased by 80 or 100 percent in the past five years. While much of this is related to increased real estate values, much of it is also related to new commercial and industrial development that provides fiscal benefits to cities and towns.
To conclude, it's not clear which Massachusetts Eric Kriss is looking at. It is not the Massachusetts with which I am familiar. Kriss is well-known for his provocative comments, but these likely stand out as the strangest of his tenure in state government. If Kriss has performed a service with his comments, it is perhaps that spirited discussion will be forthcoming about the state of the cities and towns of Massachusetts.