Does Springfield Receive its Fair Share of Municipal Aid? Implications for Aid Formula Reform in Massachusetts

45 Pages Posted: 22 Sep 2011

See all articles by Bo Zhao

Bo Zhao

Federal Reserve Bank of Boston

Marques Benton

Federal Reserve Bank of Boston

Lynn Elaine Browne

affiliation not provided to SSRN

Prabal Chakrabarti

affiliation not provided to SSRN

DeAnna Green

affiliation not provided to SSRN

Yolanda K. Kodrzycki

Federal Reserve Bank of Boston - Research Department

Ana Patricia Munoz

Federal Reserve Bank of Boston

Richard C. Walker

Federal Reserve Bank of Boston

Date Written: 2010

Abstract

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.

Keywords: state aid, fiscal equalization

JEL Classification: H70, H72, H73, H77, H83

Suggested Citation

Zhao, Bo and Benton, Marques and Browne, Lynn Elaine and Chakrabarti, Prabal and Green, DeAnna and Kodrzycki, Yolanda K. and Munoz, Ana Patricia and Walker, Richard C., Does Springfield Receive its Fair Share of Municipal Aid? Implications for Aid Formula Reform in Massachusetts (2010). FRB of Boston Public Policy Brief No. 10-4, Available at SSRN: https://ssrn.com/abstract=1931763 or http://dx.doi.org/10.2139/ssrn.1931763

Bo Zhao (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
T-10
Boston, MA 02210
United States
617-973-3061 (Phone)
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HOME PAGE: http://sites.google.com/site/bozhao/

Marques Benton

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Lynn Elaine Browne

affiliation not provided to SSRN ( email )

Prabal Chakrabarti

affiliation not provided to SSRN

DeAnna Green

affiliation not provided to SSRN ( email )

Yolanda K. Kodrzycki

Federal Reserve Bank of Boston - Research Department ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-3809 (Phone)

Ana Patricia Munoz

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Richard C. Walker

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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