Overview
Municipal budgets rely on state aid and state reimbursements to help fund critical services, yet the percentage of local revenue represented by state assistance continues to decline. This trend is alarming, as the growth rate of the aid programs documented in this report falls significantly behind increases in property tax levies, with the exception of an accelerated phase-in of funding under the SOA schedule. (The Commonwealth is one year ahead on its commitment to gradually fund OOD special education transportation - via the Circuit Breaker - as well as charter school tuition reimbursements.) Insufficient state appropriations or allocations have left programs underfunded, and some programs have seen financial obligations completely ignored despite a commitment under law. Of significant concern is the differential effect of partially funded programs on cities and towns as Massachusetts communities vary widely in terms of location, size, and demographic and economic characteristics.
The shortfall in funding raises the importance of the large programs reported on the state’s Cherry Sheet—specifically, Chapter 70 aid for education and UGGA. As noted above, both of these programs have been promised additional resources over the coming years.154 The Chapter 70 aid program is in the process of meeting the commitment of the SOA, which will provide another $400 million to $450 million per year in additional funding.155 As we have seen, there is often a difference between projected and actual state revenues; the Commonwealth needs to be mindful of this difference since the funding of UGGA is based on projected revenues.
Although the SOA will provide a significant infusion of much-needed funding to school districts, an overwhelming majority of unmet state aid obligations is derived from non-Chapter 70 education aid programs. Municipal and regional school districts continue to be constrained by education expenses, and required local contributions do not show a complete picture of what communities have to spend to cover costs outside of Chapter 70 aid.
One area that particularly strains local budgets is school transportation, which currently faces $574.4 million in unmet state obligations.156 Although local officials can, to some degree, mitigate high transportation expenses through careful budgeting, numerous legal requirements prevent officials from cutting costs. An important example is the requirement that municipalities offer students transportation to vocational education programs outside their home district. For some districts, this requirement means that a few students must be transported to an OOD vocational-technical school. However, for some communities, particularly those in Western Massachusetts, there are no in-district programs, so all students opting for this form of education must be transported elsewhere. With a 5.6% reimbursement level, this expense is a painful drain of important resources for these small towns. Furthermore, communities struggle with school transportation vendors to obtain affordable transportation services, and some local officials have noted recent cost increases.157
Another factor affecting transportation budgets is rising fuel costs. Based on a June 2022 discussion with school business officers, recent increases in school transportation costs ranged from 6.8% to 20% due to fuel costs and lack of competition.158 Some agreements have come due and require rebids in the midst of the inflation crisis, meaning that new contracts will likely be affected by rising fuel costs. Other contracts have fuel cost escalation provisions, which will increase costs for the next school year.