Local Services, Local Aid, and Common Challenges

November 2, 2005
Phineas Baxandall (Assistant Director, Rappaport Institute for Greater Boston)

This brief is based chiefly on the Municipal Finance Task Force’s September 2005 report, "Local Communities at Risk: Revisiting the Fiscal Partnership Between the Commonwealth and Cities and Towns."

Virtually all of Massachusetts’ cities and towns face long-term financial problems. Many costs, particularly health insurance costs, are rising faster than revenues from local taxes and fees. Localities have virtually no ability to tap new sources of revenue or to signifi cantly increase revenue from existing taxes and fees. State aid for localities dropped dramatically in recent years and since the mid 1990s, a growing proportion of local aid has been reserved for education and comes with restrictions that do not allow local governments to redirect this revenue to non-education uses.