This paper examines the distribution of unrestricted municipal aid in Massachusetts, which has been a major concern to civic leaders and elected officials of many communities, including Springfield. The paper develops a measure of the municipal fiscal gap indicating the relative need of municipalities for state aid. The analysis shows that in recent years, unrestricted municipal aid has not been distributed in proportion to the gap measure among the 10 largest cities in Massachusetts. For example, despite having the largest municipal gap, Springfield received almost the lowest per capita amount of Additional Assistance—a key component of municipal aid. This pattern is the result of deep and uneven aid cuts in the past that distorted the distribution of municipal aid. This paper therefore suggests that state government consider adopting a formula that provides more aid to communities facing larger municipal gaps. To avoid disrupting local budgets, the state could consider holding existing aid harmless, and using the gap-based formula to distribute new aid. The simulations show that if the state commits to reasonably large increases in municipal aid, this new approach can be both equalizing and beneficial to a majority of municipalities in the Commonwealth within a relatively short time period. The paper provides various formula evaluations and policy recommendations that could support efforts to reform state aid in Massachusetts.
This Working Paper is one of several Center papers exploring local aid reform.
To review other Center research about state and local public finance, please visit our research index.