Leon Gaumond Jr, the Town Administrator of (my hometown) West Boylston, MA, passed along a brief article from the Massachusetts Municipal Association (MMA) about expected Massachusetts budget deficits in 2008:
… she [Massachusett’s Governer’s Budget Chief Leslie Kirwan] is pegging the state’s structural shortfall for next year at $1.3 billion, and possibly higher.
At the Nov. 13 meeting of the Local Government Advisory Commission, local officials told Gov. Deval Patrick that structural budget shortfalls are expected to be widespread in municipalities again next year, leaving cities and towns with few options other than cutting services or asking voters to approve property tax increases.
Why the budget shortfall despite projected 3.8% “revenue growth” (tax collection)? Predictably:
Growth in basic government costs, mainly related to health care and other uncontrollable fixed costs, are expected to outpace revenue by a wide margin next year, leaving hard-to-close shortfalls.
None of the above even makes me blink. Of course cost increases are “uncontrollable.” (State-regulated healthcare hasn’t kicked in yet?) Of course local property taxes will go up. Of course.
Of course we will continue to have problems as we continue to do the following:
The biggest challenge to state and local officials for fiscal 2009 is fixing the Lottery-funded municipal aid program (Additional Assistance and Lottery distributions) that provides $1.3 billion to help balance local budgets and ease over-reliance on the property tax. The Lottery shortfall for fiscal 2008 is expected to exceed $100 million, with little hope for recovery in fiscal 2009.
What’s wrong with using lottery proceeds to fund municipal aid? It’s not sustainable. You’re funding a government service from the tax proceeds of something completely unrelated. Government services don’t work unless you fund them from taxes on the beneficiaries. We should not “ease an over-reliance on the property tax” by digging up tax revenue from something else; those local property taxes — or local sales tax or local-whatever taxes — need to be adequate to cover whatever services the citizens request. If those local taxes aren’t enough, don’t tax something else. Crazy idea that the government needs to charge you for the benefits you receive.
And: even if you call the Lottery a ’sin tax’ or say that a state-run, legalized monopoly on the Lottery system helps ‘protect’ the poor-that-use-it from sleazy(er) gambling operators … using the lottery proceeds to do anything but promote-gambling is unsustainable. Does MA really want to be in that business?
And: even given such fiscal mismanagement, municipal bonds - even those just above junk - are still far more secure than Aaa corporate bonds.
The MMA article is a fun, quick read. How do you fix this?
I’d start by selling off services to other, private companies, thusly GAINING revenue, and REDUCING expenses. Then, those private companies can charge accordingly the people who use those services (Garbage, Library, Fishing Land, Historical Sites, Administration of the Town, Highway Departments, Recreation Departments, Electrical Department, even outsource the fire and ambulance department to another city/town that probably would love to ‘grow’. Selling off the Electrical would especiially provide a large boost in revenue, while giving residents a chance to participate in deregulation of electricity. (Although the current rates in West Boylston are very competative.)
Unfortunately, the largest part of the budget, other than healthcare is the school system, which due to state mandated regulations would be unable to be outsourced, BUT you could combine with another town, and either recieve tuition from them per student, OR better yet, just pay a standard fee for having the student study elsewhere.
posted by Brad at 8:38 am on December 7th, 2007a similar situation: http://www.taxfoundation.org/blog/show/22795.html
posted by Zachary Wyatt at 11:05 am on December 10th, 2007