Massachusetts Cities and Towns Doing Enough to Prepare for


A fresh shroud of snow blankets Worcester City Hall (left) on February 18th. At right, snow removal activities continue outside City Hall and continue to drive many municipal budgets deeper into the red.

That's the word from the Governor's office to cities and towns in light of the current budget crisis.

A recent press release points out that the Governor's office has 60 press secretaries, and is terminating 21 of them, to save $1.2 million annually. "We also have over 800 lawyers in the Executive office, costing $50 million a year," says a spokesman. "We'll cut back and save $15-$30 million. The communities can follow our example by cutting back on unnecessary expenses."

This brings a laugh from Allan Tosti, Arlington's finance board chairman. "We don't have the huge support staff that the state has, so we don't have that flexibility," he says. "We have two lawyers, and we probably need both of them."

The reality is a lot worse: "We're looking at 150 to 200 layoffs now -- that's a lot of teachers, people in public works, libraries, firemen, policemen already," says Tosti.

Worcester Mayor Tim Murray is equally direct about how hard the big cities are being hit. "Springfield has just laid people off and Worcester will do the same next month," says Murray. "We're looking at losing 200-300 jobs on the city municipal side and 400 more on the school side. Police, fire, teachers, public works, library services, programs for the elderly -- these are things that are well within the core capabilities that will suffer as a result of the [budget cuts]."

However, things could get a lot worse next year, according to Gus Faucher, senior economist for Economy.com. "Growth is very slow at the current point," he says. "We're currently saying there's a 1 in 3 probability that the economy could slip into another recession - that would be a double dip recession. It's not in recession now - but it could slip back into recession."

Indeed, the economic forecast considered most likely -- a gradual recovery following a quick, successful war in Iraq -- could be derailed by any number of risks, according to Nariman Behravesh, Chief Economist for Waltham based Global Insight Inc.

A war in Iraq "could take a lot longer and be a lot messier" than expected, says Behravesh. A nuclear showdown in Korea could push stock prices down significantly. The housing "bubble" could burst, reducing home values. Or there could be "a default in a large emerging market, such as Brazil, or by a much-anticipated financial meltdown in Japan." Although a major financial crisis is unlikely, according to Behravish, a new recession is a reasonable possibility.

Some of these international concerns could have a direct effect on the cities and towns, according to Sandy Pooler, Newton's chief budget officer. "One of the things I'm worried about is the Iraq situation, because that can affect oil prices," he says. "We heat a lot of buildings and we have a lot of cars, so we buy a lot of oil and gas. Higher oil prices can have a negative affect on budgets."

Pooler is right to worry: Analysts are already forecasting that gasoline prices will exceed $2.00 per gallon this summer.

However, the biggest potential effect of these international problems is the domino effect in that they make people feel uncertain about the future, which reduces consumer and investor conference, which reduces purchases and investments, which leads to further recession, which affects every level of government. Already, the federal government is
well into deficit territory, and almost all of the 50 states are having difficulties balancing their budgets.

And when international problems cause national economic troubles, it's the towns and cities that suffer, according to Jim Malloy, Sturbridge town administrator. "Local government is the one level of government that can't pass the buck," he says. "The federal
government can pass the buck to the states, and the state government can pass the buck to the cities and towns. But the local government has to remain responsive to local residents."

Unlike some of the big cities, Sturbridge is in pretty good shape so far, according to Malloy. "Sturbridge receives most of its revenue from property taxes, and a relatively small percentage from state aid," he says. "So a 10% state aid cut for us is different than for Worcester or Boston, where it's a larger percentage of their overall budget."

Nonetheless, some specific services are being cut, even in Sturbridge. "For example our recycling center gets state grants for certain things," says Malloy, "and if those grants get cut, then either we don't provide that service, or we have to fund it ourselves."

Like Sturbridge, Newton is also getting along pretty well under the existing budget cuts. "With the cuts that we've seen already, we've started freezing vacancies, told departments to cut down on spending, we've cut projects, including conferences, and we've reduced the asphalt accounts so we can't repave roads or fix potholes until this
spring," says Newton's Pooler. "We've told people that for the next six months we have to reduce costs to essential needs. I think we're all holding our breath to see what the next round of budget cuts will bring."

Even some smaller towns are being heavily impacted by the budget cuts. "You have to avoid the stereotype of the rich towns and poor cities," says Arlington's Tosti. "Some towns, including Arlington, have been living right at the edge for several years."

Whether a town is rich or poor depends on what kind of real estate it has. "If it's a 99% residential community, then all you have are single family houses, and those represent a tax loss because there are a lot of kids and lots of schools," he says. "Towns with one and
two bedroom apartments are much better off because those appeal to young couples and the elderly, with few children. Towns that have a lot of commercial land bordering routes 93 and 495 can increase property revenues by encouraging new construction. In Arlington, we don't have two empty house lots to rub together.

"When the Governor did the cuts, he didn't make any distinction based on hardship. If you're Weston, local aid getting cut is trivial. But local aid was cut across the board, which meant that the poorer communities were cut the most."

But even if money is scarce, there are some other things the state can do to ease local problems, according to Geoffrey Beckwith, executive director of the Massachusetts Municipal Association. "Now is the time for regulatory reform, to allow communities to
improve service and save money," he says.

He gives two examples: Elimination of the Civil Service system that provides detailed requirements for municipal hiring and firing; and elimination of the public construction projects which, he says, add substantially to the time and costs of small municipal projects. "However, you won't see savings right away," he cautions. "We should do the regulatory reform now, so that we'll begin to see the savings in 2005 and 2006."

In the meantime, cities are going to be hit pretty hard if the economic news gets any worse, according to Worcester's Murray. "There's going to be huge reductions in services, police response times will go up, classroom sizes will be bigger, and the city will take a lot longer to pick up trash," he says. "I don't know how you prepare for anything like that."

John J. Xenakis is working on a new book, Forecasting America's Destiny. His web site is www.ww2010.com.