Summary:
The Massachusetts Municipal Association has called for an increase of $351 million in unrestricted general government aid to help cities and towns cope with rising operational costs. The association also recommends changes to state aid formulas, increased flexibility in raising revenues, and support for regionalization of services and controlling health care costs.
Whether it’s the price of gas, eggs or rent, the cost of everything seems to be going up — even the costs of operating cities and towns across Massachusetts.
As municipalities look for ways to navigate “the perfect storm” of financial pressures, the Massachusetts Municipal Association says fiscal stability would require an investment of $351 million in unrestricted general government aid. A new report from the association, “Navigating the Storm: Charting a Course Toward Fiscal Stability,” looks at what Massachusetts can do to support its cities and towns in traversing these pressures.
“We took the findings, we worked with our fiscal policy committee and board of directors, and came up with a suite of recommendations,” said Adam Chapdelaine, executive director and CEO of the Massachusetts Municipal Association.
In October, the association released a report stating cities and towns in Massachusetts are struggling to balance increasing operational costs with stagnant state aid and limits on taxation and other revenue sources. Chapdelaine said that, based on the findings of that report, the recommendations aren’t surprising.
To address the challenges municipalities are facing, the association said the state needs to make changes to state aid formulas, increase the amount of funding it sends to cities and towns, adjust property tax regulations and open avenues for other revenue sources.
“This is an urgent issue, not only for local taxpayers, but also for the commonwealth as a whole. Ultimately, the success of Massachusetts depends on the fiscal strength of its cities and towns,” the report states. “When municipalities are stable and resilient, the commonwealth is better positioned to grow, innovate and support its residents.”
State aid
The report recommends that the state review how it funds its cities and towns and make changes to the formulas that calculate allotments for Chapter 70 and Chapter 90, as well as increase the total pot of unrestricted general government aid (UGGA). The association is asking the state to increase UGGA by $351 million, a symbolic request of $1 million for each of the state’s 351 cities and towns.
“We feel very strongly that the No. 1 priority should be increasing unrestricted general government aid,” Chapdelaine said. “That’s really the only way to provide benefits to all towns.”
Chapdelaine said that, as UGGA is unrestricted funding, municipalities can use the money to offset their budgets in any way they wish, unlike Chapter 70 and Chapter 90 funds, which are limited to covering education and roadway infrastructure costs, respectively.
The report explains that from 2008 to 2011, the state made significant cuts to UGGA due to the recession. More than a decade later, the state has restored UGGA in fiscal year 2026 to its 2008 levels, but given inflation, the funding’s value has diminished, limiting its assistance to towns and leading them to rely more on property tax revenue.
Regarding UGGA, Chapdelaine said the association calculated the amount of funding actually needed for general government aid by reviewing tax receipts and the inflows and outflows of funding across the state. The association found that $356 million is needed.
“When you do that, you actually get to $356 million,” Chapdelaine said. However, he added, the Massachusetts Municipal Association “recommended $351 million to make it stick in the minds of the people who can make this happen.”
He added that increasing funding for other state aid programs, such as Circuit Breaker (the state’s Special Education Reimbursement Program), school transportation funds, rural school aid and payment in lieu of taxes (PILOT) programs would also be an immense help to municipalities.
“We want to make clear these things are, and will, remain important,” Chapdelaine said.
Orange Town Administrator Matthew Fortier said the town is one of the largest and poorest communities in Franklin County. Increasing UGGA is one of the biggest things the state could do to help the town gain fiscal stability. He added that a one-time boost to state funding would not do much except assist in a capital project, but if the state could commit to raising UGGA to match inflation, it would make a big difference.
“A one-time $1 million for Orange would be nice, but it would only help with a one-time item like a capital need,” Fortier said. “An ongoing unrestricted $1 million a year, on the other hand, would go a long way in helping to stabilize its operating budget.”
For fiscal year 2010, the state budgeted $1.42 million in unrestricted general government aid to Orange. For FY26, that amount was raised to $2.01 million. This is an increase of 41.3% since 2010, according to the U.S. Bureau of Labor Statistics, though inflation in that time has gone up by 49%
Local tax options
In addition to increasing state funding, the report recommends that the state provide more flexibility in how municipalities raise revenues, including providing multi-year override options and allowing towns to raise their 2.5% levy limit cap, with voter approval. The report also suggests the state should increase local meals, lodging and motor vehicle excise tax options.
Chapdelaine said that as more and more towns reach their levy limits, giving towns the option to ask voters to raise those limits would help manage rising costs and avoid budget cuts.
“The biggest thing we’re advocating for is flexibility,” Chapdelaine said.
The report adds that allowing towns to increase shifts of the tax rate onto commercial, industrial and personal property, and giving towns more flexibility to offer exemptions to seniors and veterans, would help taxpayers manage increased levy limits.
Other measures
The report also notes that changing how towns operate could help cut costs, whether it be through supporting regionalization of services with grants and technical assistance, or pursuing systemic changes to one of the biggest drivers of municipal budgets: health insurance.
Montague Town Administrator Walter Ramsey said that with the plethora of issues towns face, they need the state to step in and make changes, whether that means increasing aid, supporting regionalization, or working to control health care costs and other rising expenses.
“Towns need help. Towns are struggling to keep up with inflation and the rising cost of business,” he said. “The broken health care system is killing municipal budgets as well as the employees’ bottom line. It is simply not sustainable for the state to keep the Prop. 2.5% cap and have UGGA be lower than the inflation rate. Something has got to give. I feel that regionalization of services is part of the solution, and I urge the state to take a strong leadership role in helping municipalities and special districts make that happen.”
Chapdelaine said tackling health care costs would require precise balancing, as legislators would need to find ways to cut costs for towns and taxpayers, while also keeping hospitals funded so the doors remain open.
“Health insurance is very challenging,” Chapdelaine said. “It’s expensive, but at the same time, hospitals are on the verge of insolvency.”
Deerfield Town Administrator Christopher Dunne said that other measures noted in the report, such as passing the Municipal Empowerment Act filed by Gov. Maura Healey, would help towns cut red tape and operate more efficiently.
“The changes in procurement that it considers would be very helpful,” Dunne said. “I always joke that we spend an amazing amount of time just shopping for things, because procurement laws are so stringent in Massachusetts, and that makes sense for larger communities, but it is a real challenge for smaller communities, and I say that as someone who’s a certified procurement official. The amount of regulation can be daunting.”
After discussing this with the Office of the Inspector General, he said, “I’m hopeful some of those things might move forward.” Dunne added that loosening these standards would “[make] it easier for us to do what we have to do every day.”
From recommendation to reality
Chapdelaine said the Massachusetts Municipal Association has begun conversations with the Healey-Driscoll administration and state Senate and House leaders on how these recommendations can be implemented.
Karissa Hand, a spokesperson for the governor, said Healey is not in favor of rescinding Proposition 2½, but that she understands the immense pressures that cities and towns are facing and is committed to working with local leaders to ease the burden. Hand added that Healey has worked to increase state aid since taking office.
“Gov. Healey knows that municipal leaders are struggling with their budgets. It’s why she has delivered record investments to municipalities for schools, roads and bridges, infrastructure projects and economic development,” Hand said. “Our administration believes deeply that a strong local-state partnership is key to a strong Massachusetts. We will continue to work closely with our local leaders to help them deliver for their communities.”
“The real work begins now,” Chapdelaine added.
Aalianna Marietta contributed reporting.