Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2009

Governor's Budget Recommendation FY 2009

Budget Deveopment Local Aid

Aid to cities and towns, or local aid, represents an important component of the Commonwealth's annual budget. The Administration's approach to the local aid budget reflects the Governor's and Lieutenant Governor's commitment to a strong partnership between the state and its cities and towns. Allocating a large share of the increase in spending in the fiscal year 2009 budget to local aid despite the current fiscal challenges is one of the clear ways in which the Administration is partnering with communities, and fulfills its promise not to balance the budget on the backs of the municipalities.

There are many commitments to cities and towns included in this budget, and there are initiatives proposed by this Administration to strengthen this commitment that are not included in this budget. This budget supports a total of $6.369 billion in local school and general spending, an increase of $310M (5.12%) over the fiscal year 2008 General Appropriations Act. The increases in local aid accounts are due to the following:

FY2009 Local Aid
Cherry Sheet Items
PROGRAM FY2008 GAA FY2009 H.2 FY2009 H.2
Increase over
FY2008 GAA
% Increase
Chapter 70 $3,725,671,328 $3,948,824,061 $223,152,733 6.0%
Veterans Benefits $15,165,374 $20,904,223 $5,738,849 37.8%
State Owned Land $28,300,000 $30,300,000 $2,000,000 7.1%
School Building Authority $634,700,000 $702,000,000 $67,300,000 10.6%
Other Cherry Sheet Items $340,440,913 $352,569,564 $12,128,651 3.6%
Total 6,059,073,834 6,369,394,067 310,320,233 5.1%

Full funding for Chapter 70: $223.1M Increase - This is an increase of 6% over the fiscal year 2008 GAA and the second largest increase in the budget after Medicaid. Chapter 70 state aid will be at an unprecedented level totaling $3.948B in fiscal year 2009. With this increase in aid, all 328 districts will get more Chapter 70 funds than they received in fiscal year 2008, and it ensures that the growth in each district's foundation budget is supported by the state. This year, the Governor's budget does not reflect any changes to the Chapter 70 formula, which was reformed in fiscal year 2007 by the Legislature. The Governor's budget implements the 3rd year of this 5 year phase-in model, which was set up to resolve some of the inequities of the original Chapter 70 formula that was conceived during education reform in 1993. 303 operating districts will see an increase in their foundation budgets in fiscal year 2009. Since this proposal delivers new Chapter 70 funding for all 328 operating districts, 228 of them can spend above their foundation budget.

Veterans Benefits: $5.7M Increase - These funds, totaling $20.9M in FY2009 serve as benefits to Veterans as required under MGL Chapter 115 section 6. This benefit is needs based and due to a caseload increase of 574 veterans this year (4,687 veterans in total) and anticipated increased of 755 veterans (5,442 veterans in total) in FY2009, this budget appropriately reflects our obligations to cities and towns for veterans who are entitled to benefit payments.

Easing the Local Burden for State Property: $2M Increase - Many cities and towns that house state property such as facilities or office buildings fail to benefit from property tax revenue. To ease this burden, the payment in lieu of taxes (PILOT) program was established at the Treasurer's office to partially reimburse cities and towns for this revenue loss. The Governor's budget continues to make progress in providing funding for state-owned land and increases the PILOT program by $2M, or 7%, to ease the local pressure of foregone property taxes. This account distributes funds to 292 communities and is an important program for small towns within the Commonwealth.

School Building Assistance: $67.3M Increase - This $67.3M increase brings the total to $702M in FY2009 and reflects the state's commitment to cities and towns in providing an ongoing revenue source that allows for communities to better invest in school construction needs. The state continues to keep its promise to ensure that the use of 1% of sales tax revenue is dedicated to building new schools throughout the commonwealth that will serve as essential resources for education our children.

Lottery Proceeds "Shortfall" in Aid: $124M - Actual Lottery proceeds to be distributed to cities and towns are estimated at $811M in fiscal year 2009, $124M short of the $935M recorded on the fiscal year 2008 Cherry Sheets. The Governor's budget proposes to use one-time funds from Year 1 of destination resort casino license fees to hold communities harmless at $935 million. This is discussed in more detail under the Budget Solutions section.

Other Local Uses of Gaming License Fees - Not included in the budget, but very much related to the municipal partnership, the Governor's casino proposal would not only cover the fiscal year 2009 shortfall in the lottery, but will also provide $88 million in direct property tax relief and $88 million to be delivered to communities through the Chapter 90 formula to be spent on local transportation and other capital infrastructure needs.

Regional Efficiency Assistant Grants Trust Fund - $3 million of budget surpluses from the Bay State Competitiveness Trust Fund will fund grants to encourage and help municipalities and regionalized authorities to implement regional approaches to delivering services. This effort is designed to improve service delivery while containing or reducing costs.

This budget proposal takes very seriously the Governor's commitment to local aid, while recognizing that many communities need flexibility as well as direct assistance. This budget is only one part of the Governor's continuing efforts to build a stronger partnership with municipalities. There are further municipal partnership initiatives not included in this budget that will be forthcoming in subsequent months.

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