Bizarre and Out of Touch

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.

Comments

[NoPolitician]

I'd like to point out something that may not be evident to someone living outside of a poor urban area.

You point out that development "brings along with it increased costs, particularly in education". I know this is the current conventional wisdom, but I don't think it's been proven.

However, when you talk about cities that haven't held the line on spending, I'd like to ask you this: Which group of students are more expensive to educate: students from wealthy families or those from poor families?

I suspect poor family students are harder, and therefore more expensive to educate.

If most communities won't accept development with property values ranging in the $400-600k range -- property that will probably be occupied by on average less than 2.2 affluent children [wealthy people tend to have fewer kids], then how is a city supposed to afford to educate the poor children who live in 32-unit tenement buildings that are valued at about $300k [keeping in mind that poorer people have MORE kids]?

Most communities are feeling the bite while dealing with relatively affluent residents that require few municipal services. But what of the mostly poor cities that have double the problems with a tenth of the tax base?

Proposition 2.5 has created some positive circumstances, but one of it's most astounding failures has been to transform every town in this state into financial cherry pickers, making value judgments over the "profitability" of its residents.

If a town can't increase revenues, then they must control expenses, and that means keeping out any signs of poor yet more expensive residents, shunting them into the cities, and closing their gates.

We are seeing the trend continue; one of the hottest new development opportunities is over-55 housing. Its effect is to attract the older, more "profitable" residents still left in urban centers and move them where they consume few services, but spend money and pay taxes. Is it any wonder that most 40B housing built today is age-restricted?

I believe the only way to justice is to eliminate this economic stratification, to remove barriers that have been set up to keep the rich separate from the poor -- barriers accelerated by the constraints imposed by Proposition 2.5.

[David Eisenthal]

I think that poor urban areas, such as Springfield, are different in a number of ways from most other cities and towns in this state. First, the tax bases of places like Springfield are not and should not be expected to carry the same fiscal burden as wealthier and less complex communities. State aid to such places is higher than it is to other communities. (Whether it is high enough is a matter for some debate.) Second, places like Springfield are or should be economic engines for their surrounding areas. Development in such places needs to be viewed differently than it is in suburban and rural communities.

I'm not sure how one would go about eliminating the economic stratification that NoPolitician describes - other than through small and gradual steps to improve urban education and other infrastructure. Some of these steps - Education Reform Act - have been going on for years with less results than we might hope for.

[NoPolitician]

Most people in this state don't even seem to believe that economic stratification SHOULD be eliminated.

From my vantage point, everyone who does not live in a poor urban area is doing everything they can to keep the doors closed on poverty, to keep it away from themselves. They even feel it is their right to do so, that perhaps they "earned" this through their own hard work.

Funny though, they don't seem to mind gassing up at a convenience store that pays $6.75/hour. Isn't there a term for economically depending on people who you would never let live near or associate with you?

Until people begin to realize that no one has a "right" to exclude others from their communities, we're not going to make any progress in this state. We're still going to focus our attention on splitting up the existing pie, instead of on making more pie.

It's far too easy to point at others and say "Springfield is failing due to their own fault". Kind of like a Yale grad pointing at New Orleans and saying "those people just need to try harder".

I think Massachusetts is a lot less Democratic than people give it credit for.