Auditor’s Office Provides Solutions to Address Fiscal Impacts on Municipalities

040616 5-Year Fiscal Impact Report 2011-2015

bumpBOSTON, MA — Auditor Suzanne M. Bump today released recommendations about how the state can reduce its impact on municipal finances. The policy recommendations come as part of a report from Bump’s Division of Local Mandates (DLM) which reviewed laws passed from 2011 to 2015 and found that municipalities are being inadvertently impacted by the cost of implementing programs mandated by the state.

“The Division of Local Mandates is a critical resource for local governments, which are already strained by limited resources,” Bump said. “The recommendations we have brought forward today will allow this Division to more effectively serve as a resource to lawmakers by providing them with more information about the municipal impacts of proposed laws, and ensuring that agencies are taking into consideration the municipal impacts of regulations.”

For this report, DLM reviewed 1,560 statutes and identified 97 statutory provisions that have a significant fiscal impact on local governments. The report found that the most heavily legislated issues that impacted municipalities fell in the areas of education, employment benefits, public safety, and elections.

In addition, the review found that since 2003, municipalities have had to fund a greater percentage of their operations through increased tax levies. From 2003 through 2015, tax levies increased in the amount local revenue they were responsible for by approximately 7 percent, while state aid dropped by approximately the same amount.

The recommendations provided by Bump are aimed at providing greater transparency of the fiscal impacts of the decisions made by state policymakers.

The first recommended statutory change would require that state agencies file a municipal impact statement with the Secretary of State’s Office, DLM, and the Local Government Advisory Commission (LGAC) when adopting, amending, or repealing regulations. The suggested change aims to ensure state agencies take into account the impact that their actions would have on local governments, and encourages them to mitigate negative impacts.

The second recommendation would grant DLM the authority to develop reports on the fiscal impacts of proposed legislation on municipalities. Currently, DLM has the authority to review statutes, rules, and regulations already in place, but is prohibited from reviewing most pending legislation. This change would allow DLM to provide research, assistance, and analysis to legislators, as well as legislative committees and staff, on the fiscal impacts of proposed legislation on cities and towns. 

“On behalf of communities across Massachusetts, we applaud Auditor Bump for recognizing the serious fiscal challenges that our cities and towns face,” said Geoffrey C. Beckwith, Executive Director of the Massachusetts Municipal Association. “Unfunded mandates increase pressure on the property tax and force local officials to reduce funding for other vital local services, including education and public safety. We strongly support Auditor Bump’s proposals to require local impact reviews on all state regulations, and to provide a deeper analysis of legislative proposals to identify and stop unfunded mandates before they become law. This would strengthen the partnership between the state and its cities and towns, and add important protections for local taxpayers.”

The Division of Local Mandates (DLM) was established in 1980 as part of Proposition 2 ½, an initiative which limits the abilities of cities and towns to increase property taxes. Under the state’s Local Mandate Law, the Legislature and state agencies are prohibited from passing costs along to municipalities to implement state programs; however, over time, court decisions have limited the scope of that law. DLM was established to respond to municipal request to determine whether an unfunded mandate has been passed on to local governments, and make a cost determination of the state funding necessary to sustain a mandate. Since its inception in 1980, DLM’s role has expanded beyond providing unfunded mandate determinations to also providing comprehensive reports relative to the financial impacts of policy decisions on municipalities. Legislators use these reports, referred to as “6B reports,” to make better informed policy decisions.

The Five-Year Statutory Fiscal Impact Report is attached.