Polito forecasts $31 million increase in unrestricted aid to cities and towns

By Chris Lisinski

With state tax revenues continuing to blow past projections, municipal leaders said Friday they are disappointed in Lt. Gov. Karyn Polito’s forecast that cities and towns would share a collective $31.5 million hike in the pot of unrestricted local aid they receive from Beacon Hill.

Polito, who has developed an annual tradition of teasing portions of Gov. Charlie Baker’s annual state budget during the week ahead of its unveiling, told Massachusetts Municipal Association members the fiscal 2023 spending bill will recommend a 2.7 percent increase in unrestricted local aid, to $1.2 billion total. The unrestricted aid is the second largest basket of local aid, with Chapter 70 school aid being the largest.

The increase mirrors the estimated growth in tax revenue the administration and Democrat legislative leaders announced last week. However, the percent change reflects the projected year-over-year tax revenue increase from a just-revised fiscal 2022 projection, meaning it does not take into account a nearly $1.55 billion upgrade in the current forecast fueled by surging collections.

If the administration opted to boost unrestricted local aid to match tax revenue growth from the original 2022 outlook, cities and towns would be in line for even more money.

“Unfortunately, the local aid funding in the administration’s fiscal 2023 budget is too low,” MMA Executive Director Geoff Beckwith said in a statement. “State tax revenue growth is through the roof — 22% higher than original projections — but aid to cities and towns would remain almost flat under this proposal, with just a 2.7% increase.”

MMA President Adam Chapdelaine, who serves as Arlington’s town manager, said he hopes the proposed 2.7 percent increase is a “starting point” for debate.

“State revenue has grown at record levels the past two years, but municipalities haven’t seen that growth,” he said. “As cities and towns continue to provide critical services, we hope that surplus state revenue can be shared via local aid.”

Addressing MMA’s members at the virtual meeting, Polito said the latest recommended local aid figure lands $253.9 million higher than when she and Baker took office in 2015.

The duo, neither of whom plans to seek reelection in November, campaigned on a pledge to match the state’s estimated revenue growth with similar increases in the unrestricted aid split among the 351 cities and towns in Massachusetts.

Noting that the fiscal 2021 state budget kept local funding level with the prior year amid COVID-19 upheaval, Polito said the administration otherwise has kept unrestricted aid for municipalities growing at the same rate as tax revenues.

“Let me just pause on that point, because promises made, promises kept,” Polito said in her livestreamed remarks. “The reason the promise was important is because it allowed you to be able to depend on that number in budgeting locally. Building in a level of certainty and predictability was a key element and certainly was the right way to start our administration’s work with you.”

Unrestricted general government aid represents one of the largest funding streams, alongside property tax revenues, that cities and towns use to fund essential local services.

Other avenues by which state government steers money to municipalities have not matched tax revenue growth in the same way.

School aid referred to as Chapter 70 funding has grown at an uneven rate in recent years. In a 2019 education funding law designed to steer an additional $1.5 billion to K-12 schools over seven years, lawmakers set a requirement for the annual state budget to increase funding to schools “in an equitable and consistent manner.”

Baker has also typically filed single-year bills steering $200 million into the Chapter 90 program that funds local road and bridge work, sometimes supplemented with tens of millions of additional dollars later in the year, despite repeated requests from MMA for a multi-year authorization including $300 million per year.

Polito did not forecast what cities and towns can expect in Chapter 90 funding this year.

“We know Chapter 90 is a key program. Those dollars in your hands can really make a difference, but we also wanted to tailor certain programs to meet you where you are,” she said, referencing several transportation-related grant programs such as Complete Streets.

In addition to robust tax revenues, officials at both the state and local leverls have also had at their disposal billions of dollars in emergency COVID-19 relief from the federal government.

Polito said she looks forward to working with municipal leaders to put to work the $4 billion in spending included in an American Rescue Plan Act and tax surplus bill Baker signed in December. State government is sitting on about $2.25 billion in remaining ARPA funds to use at a later date.

Local governments also got injections of federal funding over the course of the pandemic via ARPA and the Elementary and Secondary School Emergency Relief Fund, or ESSER. Massachusetts received more than $2.8 billion in ESSER funds across three rounds, according to the National Conference of State Legislatures.

Rating agency Fitch Ratings expects that economic growth will slow in 2022 but will remain strong compared to pre-pandemic trends. Experts at the agency plan to discuss the year’s outlook for state and local governments at a webinar on Wednesday.

In her final address at MMA’s annual meeting, Polito recounted numerous grant programs and initiatives the administration launched to streamline collaboration between state and local governments.

She praised municipal officials for their work to respond to the COVID-19 pandemic, saying “the anxiety and the fear that we were experiencing and the level of uncertainty was met with the commitment and the dedication, the ability for us to hear from you and develop the solutions with you.”

And as she looked back at her inauguration seven years ago, Polito, a former Shrewsbury selectman, became visibly choked up.

“It has been an incredible — I wasn’t going to do this — opportunity to be your partner,” Polito said. “I want to thank you for your friendship, and most of all, I want to say: as someone who is so proud of her hometown and what we’ve been able to accomplish in my home area in central Massachusetts, the pride that I feel in the place that I live and work and raised my family is the pride that I feel for you in your communities.”