Despite a state aid increase of 3.7 percent, cities and towns will remain under fiscal pressure for the foreseeable future, one analyst said.
BOSTON — After years of cuts or stagnant funding, state aid for cities and towns staged a comeback this year.
The state budget for the fiscal year that started July 1, signed a week ago by Gov. Deval L. Patrick, includes $5.32 billion in statewide local aid, an increase of 3.7 percent from last year. While the lion's share of the aid in the $32.5 billion budget is for education and some cuts remain from prior years, the aid is helping some municipal budgets become more stable, officials said.
AP Photo/Dina Rudick of The Boston GlobeDeval Patrick approved an increase in local aid when he signed a $32.5 billion state budget for the fiscal year starting July 1.
Michael J . Widmer, president of the Massachusetts Taxpayers Foundation, said local aid was "the big winner" in the budget.
Nonetheless, Widmer said, cities and towns will be under fiscal pressure for the foreseeable future.
"They are not going to be on easy street any time soon, if ever," Widmer said. "We're not going to return to the 1990s."
Beacon Hill handed some other key victories to cities and towns in this year's budget including new money that should substantially increase state matches next year for 148 municipalities that have adopted a property tax surcharge to raise money to buy open space, create affordable housing and upgrade historic properties.
The budget also has first-time funding of $11.3 million to pay cities and towns for busing transient homeless students, helping Chicopee, Holyoke and Springfield.
The new measures follows last year's law that gives cites and towns more flexibility to save money by making changes in co-payments, deductibles and other aspects of public employee health insurance. The Patrick administration said last week that 77 communities and school districts have used the reform law to achieve savings.
A total of 159 municipalities are also raising revenues after approving a new 0.75 percent municipal tax on restaurant meals, an option passed three years ago by legislators and the governor, according to the state Department of Revenue.
While many communities are fiscally steady, some such as Springfield are still feeling the effects of past reductions in local aid.
Local aid is important for financing services such as schools, police and fire. When local aid is reduced, communities are forced to rely more heavily on the property tax to finance services, lay off employees or use reserves.
Communities are also restricted by Proposition 2½, a state law that limits growth in taxes.
The day after Patrick signed the budget, the state Division of Local Services notified cities and towns of aid numbers for the new fiscal year.
Geoffrey C. Beckwith, executive director of the Massachusetts Municipal Association, said the budget is very strong for local aid.
"These funds will support essential services and help communities stabilize their budgets," Beckwith said.
Out of the total $5.32 billion in local aid, general education aid was a historic high of $4.171 billion, up by 4.5 percent, according to the governor's office.
The second-biggest pot of aid – some $899 million unrestricted aid – was level funded.
"The fact that it is the same is good," said Palmer Town Manager Charles T. Blanchard. "We should be getting more than this, but it's better to have the same amount rather than a cut."
Statewide unrestricted aid still is down about 32 percent from $1.313 billion approved in the state budget in July 2008, just before a deep financial crisis started and the aid was cut to help balance the state budget.
The cut, preceded by other reductions in the early part of the last decade, has taken its toll on some communities.
Springfield, for example, received $47 million in unrestricted aid five years ago and $32 million this year. Northampton's unrestricted aid dropped from $5.4 million to $3.7 million over the same time; Chicopee's fell from $14.3 million to $9.7 million; Holyoke's declined from $12.6 million to $8.6 million; Ludlow's plunged from $3.8 million to $2.6 million and Easthampton's from about $3.4 million to $2.3 million.
"State aid is no longer sufficient and the cuts we have experienced over the past 10 years ... have resulted in a significant reduction in local service levels," Easthampton Mayor Michael A. Tautznik said in an e-mail. "Innovation and hard work have helped to relieve some of the burden but the damage exists in every aspect of our operation."
Local aid is also vital to Springfield. The aid comes to about $325 million for Springfield, or about 59 percent of the annual $552 million city budget.
The aid increased by $13.4 million, or 4 percent, from last year, with $10.4 million of that increase for the school department.
Springfield Mayor Domenic J. Sarno said the city appreciates the increase in local aid this fiscal year, but needs a lot more due to growing costs and an expected sharp decline in tax revenues.
Springfield is one of the poorer cities in the Northeast with 27 percent of its people living below the poverty level, according to the census.
The city's budget for this fiscal year eliminates 96 vacant jobs, lays off 11 people, closes three branch libraries, and reduces mowing and maintenance of parks, among other cuts.
Sarno said he is hopeful of additional increases in local aid for the next fiscal year to start compensating for past reductions.
The city has “cut things to the bone for all services, including police and fire,” and any further decreases in local aid would be devastating, Sarno said.
Chicopee Mayor Michael D. Bissonnette said he could not be more pleased with the increase in general education aid.
"That really has benefited our school system as we try to keep educational programs and extra-curricular activities in place," Bissonnette said.
Bissonnette said it's difficult to boost municipal services considering the limits of Proposition 2½ and that fixed costs such as payroll and benefits constitute about 95 percent of a city budget.
Chicopee's $163 million budget is up $4.5 million from last year. About $2.5 million of the increase is for schools, $900,000 for pensions and $950,000 for health insurance, he said.
Holyoke Mayor Alex B. Morse said the city was pleased with education aid, which was $69.5 million, an increase of 5 percent from five years ago. Morse said a few school employees were laid off because of a loss of federal grants.
Morse said Holyoke's budget is efficient and lean with nearly all the increases for fixed costs such as payments for long-term debt and pensions.
Morse and other municipal leaders said they are hoping for an increase next year in unrestricted aid.
In Ludlow, town officials added back six teaching positions after the state provided more aid than expected. Ludlow's general education aid rose to $13.21 million.
"The budget we have meets the needs of residents," said Ludlow Selectman Aaron L. Saunders. "We're in a good position to hold the line on taxes and provide services."
Staff reporters Fred Contrada, Peter Goonan, Diane Lederman, Suzanne McLaughlin and Lori Stabile contributed to this report.