State Aid to Boston Not Keeping Pace

State aid for Boston has declined as share of City’s total operating revenue

The Commonwealth is not keeping pace with revenue sharing to its largest city, especially state education aid, an important driver of the state’s economy.  State aid for Boston in FY18 is budgeted at $440.5M, which represents an increase of $10.7M or 2.5% over FY17. That will help the City, but state aid represents only 7.2% of the total budget increase of $148.4M in FY18.  The relatively flat growth of state aid since FY08 has resulted in state aid as a percent of Boston’s total General Fund revenue decreasing since FY08.  That decline required the City to rely more on the property tax.  In FY18, the property tax accounts for 76.6% of the total budget growth. With property tax growth restricted by Proposition 2½, Boston has been fortunate with the levy increases due to new growth in recent years, but this boom will not continue indefinitely.

% of General Fund Revenue
FY08 FY13 FY18
Property Tax Levy 55.3% 65.6% 68.7%
GF State Aid 21.1% 16.1% 14.0%
Chapter 70 Ed. Aid 9.2% 8.3% 6.9%

Education Aid and Unrestricted Aid
Boston’s largest state aid account is Chapter 70 education aid, which in FY18 is $217.4M, an increase of only $1.3M or 0.6%. The adopted School Department budget in FY18 is $1.06B, an increase of 2.8%.  However, spending will increase by 5.8% due to the cost of the new teachers’ contract this year, with other school contracts yet to be settled.

Unrestricted General Government Aid (UGGA) is basically the only discretionary state aid for municipalities.  Together, Ch.70 and UGGA represent 92.3% of Boston’s total state aid and in aggregate increased by 2.1% in FY18.

Key State Aid Accounts

$ in Millions

FY17 FY18 $ Change  %
Ch.70 Aid $216.1 $217.4 $1.3 0.6%
Unrestricted Aid $182.2 $189.3 $7.1 3.9%
All Other $31.6 $33.8 $2.3 7.2%
Total $429.9 $440.5 $10.7 2.5%

Reliance on Own-Source Revenues

The City has become increasingly reliant on own-source revenues, such as the property tax, excises taxes, fines and fees in order to fund city operations. In FY18, the City relied on its own revenues to support 93% of the total General fund budget increase.  State aid, the City’s second-largest revenue source, now represents 14% of Boston’s operating revenue compared to 21.1% in FY08. The net property tax levy accounts for 68.7% of the total operational budget in FY18, up from 55.3% in FY08.

 

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