A report from the Massachusetts Municipal Association shows a mix of fiscal pressures are making it hard for local governments to control spending and at the same time provide services, something the town managers of Athol and Winchendon say they’ve seen firsthand.
The report, “A Perfect Storm: Cities and Towns Face Historic Fiscal Pressures,” cites Proposition 2 ½, inflation and a decrease in state aid among the reasons for this spending challenge. The report also noted that “Municipalities are barred by state law from collecting local income or sales taxes [outside of lodging and meals taxes], leaving property taxes as their dominant source of revenue.”
Proposition 2½ is a state law enacted by voters in 1980 that limits how much property taxes can be raised annually to 2 ½ percent.
“The report is merely documenting what every city manager, town manager, town administrator who I know already knows,” said Athol Town Manager Shaun Suhoski. “That is that, especially as we look at the economy over the last several years, as inflation spiked, cities and towns just cannot keep pace, especially with the limits of Prop. 2 ½.
“As health care costs skyrocket, and all the other fixed costs and personnel costs try to keep pace with inflation, it becomes very, very difficult for a municipality like the Town of Athol to be able to keep pace,” he added. “There just isn’t sufficient revenue.”
Winchendon Town Manager Bill McKinney said the report supported what he told voters earlier this year regarding an approved $1.9 million Proposition 2 ½ override, which kept the Beals Memorial Library and senior center open and maintained program and staffing levels in Winchendon Public Schools.
Suhoski said Athol has avoided an override, but doing so required the cooperation of town employees.
“Last year, we had to go to the employees, we had to freeze all of the step increases – and these are people who live and work just down the street, and their payroll money goes right back into the local economy,” he said. “We had to work with them to freeze those steps and take a 1% cost of living adjustment, which isn’t anywhere near the actual cost of living. And then health insurance premiums went up. So, really, our employees during this current fiscal year are probably seeing an actual reduction in their take-home pay.”
Suhoski said he’s proud that Athol has been able to continue providing a high level of service to residents, while also maintaining the town’s infrastructure.
Suhoski and McKinney both said the time may have come to take a look at making changes to Proposition 2 ½.
“Is there enough flexibility in that formula that allows local governments to be sustainable?” Suhoski said.
“I don’t think getting rid of Prop 2 ½ is the answer,” McKinney said. “I think it would need to be looked at and ask ‘what is a reasonable amount of increase that should be allowed?’ Because 2 ½ is not enough to keep all the services and other things that residents rely on. In Winchendon, where almost half of our budget comes from the state, we really rely on the state for funding.”
Suhoski noted that the MMA is currently working on a legislative package, which may be released sometime this month and is likely to suggest changes in Proposition 2 ½.
McKinney said that, with budget planning for the next fiscal year already underway, town administrators and boards need will need to make sure taxpayers know what decisions are being made regarding their budget and why.
Greg Vine can be reached at gvineadn@gmail.com.