Here in Massachusetts, Proposition 2½ is not just the law of the land. It’s become a tradition, maybe almost a religion for some.
But changes could be coming now that the Legislature has decided it’s time to give a fresh look to this four-decade-old cap on municipal property taxes.
Nestled deep within the educational funding bill that Governor Charlie Baker signed on Tuesday is a proposal that is modest in description but ambitious in scope: a requirement for the administration to analyze the impact Proposition 2½ has had on municipal budgets and potentially make recommendations to mitigate those constraints.
The driving force behind the measure: the vast economic disparity between the western and eastern parts of the state. Growth continues unabated on the eastern end, as Boston booms and prospers. Out west, though, many cities and towns struggle to raise enough money to pay their bills; property values and new construction simply have not kept pace with municipal expenses.
A wave of antitax sentiment pushed Prop 2½ onto the ballot in 1980, and then into the law books. The two basic tenets: Municipalities can’t increase tax collections by more than 2.5 percent a year (not including new development), and overall collections are capped at 2.5 percent of the value of all taxable property within their borders.
It’s this second element of Prop 2½ that has officials in slow-growth communities particularly concerned. The annual spending threshold can be overridden by voters. The ceiling can be temporarily surpassed as well, by excluding new debt for projects such as school buildings. But those votes can be tough: Just ask the folks in Holyoke, where a debt-exclusion vote on Nov. 5 for two new middle schools failed, jeopardizing roughly $75 million in state school building aid.
Even successful debt overrides can only go so far, though. Operating budgets keep rising. Sooner or later, the inexorable ceiling looms: $25 per $1,000 of a municipality’s total property value.
Many of the communities with the highest tax rates are west of Worcester. In fact, five of the top 10 are in the district of new state senator Jo Comerford.
During her campaign last year, the Northampton Democrat regularly heard from towns approaching the ceiling and she wondered why they were clustered together, in Western Mass. The reason? Because economic prosperity has passed them by.
So she convinced her Senate colleagues to include a Prop 2½ analysis in their version of the ed-funding bill. The measure survived House-Senate negotiations, and landed on Baker’s desk for his signature.
Senator Eric Lesser welcomes the review. The Democrat from Longmeadow is seeing many of the same issues in his district. The new ed-funding bill helps school districts with many low-income families, but Lesser worries many middle-class communities are being left out.
Comerford and Lesser say they simply want to make sure regional inequities get reflected in future state aid formulas. They’re not, they say, looking to open up the property-tax spigot.
But Chip Ford isn’t so sure about that. Ford waves the Prop 2½ flag as executive director for Citizens for Limited Taxation, the antitax group that helped make the original levy limits a reality four decades ago. Ford wrote to Baker on Sunday, urging him to amend the bill and send it back to the Legislature with the Prop 2½ language excised. (Baker declined to do so.) Ford said reforms to Prop 2½ should be discussed openly, not moved along in the back of an education funding bill.
For Mark Gold, a member of Longmeadow’s select board, there’s no time to waste. At $24.09 per $1,000, Longmeadow had the highest residential property tax rate of any town in the last fiscal year, reflecting the area’s stalled economic growth. By Gold’s estimates, Longmeadow will hit the dreaded ceiling in four years. Town officials can delay the inevitable by moving some services, such as trash collection, off the budget books and charging fees for them. There’s a surplus property Longmeadow could sell. But steps like those only buy momentary relief. Longmeadow could be on a collision course with its finances that could lead to layoffs of teachers and firefighters.
Gold would like the option to move past the 2½ percent ceiling, to avoid compromising valuable services, although that might be a tough sell at the State House.
Local business leaders are also watching the situation closely. Tricia Canavan, who runs a Springfield-based staffing service and is vice chair of the Western Massachusetts Economic Development Council, says the outcome in Holyoke underscores the precarious school funding situation many communities in the region face. Maybe, she says, this review of Prop 2½ could eventually bring more state aid to the region.
Boston’s rising tide is only so powerful. It’s the Tale of Two States, again. Western Mass. might seem far away from policy makers on Beacon Hill. But this latest development should remind them why they can’t ignore the region’s persistent economic challenges.