The tax plan drew sharp criticism from the Legislature’s top Republicans, who sounded the alarm about putting more financial burdens on Massachusetts residents.
The governor’s budget, which will be released Wednesday, will feature $8.7 billion in local aid, a 3 percent increase compared to this fiscal year, Healey announced to locally elected officials and town government employees during remarks at the Hynes Convention Center.
The $8.7 billion figure includes raising unrestricted general government aid to $1.31 billion, a 3 percent bump, and Chapter 70 local public school aid to $6.86 billion, a $263 million or 4 percent increase.
Without directly mentioning her administration’s recent state budget cuts, Healey acknowledged the state faces “real challenges” at the Massachusetts Municipal Association’s annual meeting.
“And a lot of the funding that everybody had for a few years is going away or has gone away, right? We still have revenue growth, but it’s not at the rate that it’s been,” said Healey, who traded off delivering remarks alongside Lt. Gov. Kim Driscoll, the former mayor of Salem.
“So we recognize that there are real challenges for all of us,” Healey continued. “But I think if we work together and communicate, it’s going to be about making smart decisions, right — not how much money we spend, but how we spend it, where we spend it. We’re just going to need to work together over the next year, and I know we’ll be able to do great things.”
With an audience of hundreds of local officials, Healey and Driscoll unveiled two legislative packages they plan to file on Monday.
The Municipal Empowerment Act would enable cities and towns to generate more revenue by raising the maximum local option tax on hotels, motels and other rentals from 6 percent to 7 percent of the price of a room, Healey’s office said. In Boston, the tax could rise from 6.5 percent to 7.5 percent.
The local options meal tax could increase from 0.75 percent to 1 percent, under the governor’s plan.
The House’s top Republican said he was a “bit perplexed” by Healey’s plan to help municipalities, saying the bill contradicts the governor’s goal of making life in Massachusetts more affordable for people. House Minority Leader Brad Jones, the former chair of the North Reading Select Board, said a patchwork of local tax rates, depending on which municipalities choose to increase taxes, also raises equity concerns.
“I got to be honest with you, I’m amazed the governor is saying we’re not proposing any tax increases, but apparently we’re going to propose ways for everyone else to raise taxes,” Jones told the News Service. “I guess I’m somewhat shocked they’re proposing that.”
Raising the local lodging tax could generate about $49 million in additional local revenue, according to a Healey administration policy brief. The revenue jump “would be particularly impactful for larger communities and destination areas, such as the Cape,” the brief states.
The new local meals tax ceiling could bring in another $58 million in annual local revenue, according to the brief.
Healey also rolled out a new local option vehicle surcharge plan under which a 5 percent surcharge fee could be assessed by local officials on vehicles registered in their communities based on the vehicle’s value. That fee could bring in $48 million in new local revenue, according to the brief.
“For the first time that I can ever remember in 20 years, we’re going to adjust that motor vehicle excise allocation in a way that’s going to deliver real dollars for the needs that you have at the local level,” said Driscoll, who called it a “pretty significant revenue stream.”
Jones said he fields “so many complaints” about the existing vehicle tax from residents buying new cars and grappling with the surcharge.
Healey’s proposal carves out a new means-tested property tax exemption for eligible seniors, and municipalities could raise existing senior property tax exemptions, Healey’s office said. Municipalities would also gain more local control over the quantity of liquor licenses, and the proposal looks to make pandemic-era flexibilities permanent, such as outdoor dining and to-go cocktails.
“The MMA is deeply grateful to the Healey-Driscoll Administration for this robust proposal, which would benefit each and every one of our Commonwealth’s 351 cities and towns,” MMA Executive Director Adam Chapdelaine said in a statement provided by Healey’s office. “The Municipal Empowerment Act includes strong recommendations based on input from local officials, with a focus on supporting our communities, modernizing practices, and improving efficiency in the delivery of essential services provided by our cities and towns.”
Healey also announced plans to file a two-year $400 million Chapter 90 bill that would be supplemented with a $100 million boost for local road and bridge repairs funded with income surtax revenue and another $24 million to support rural communities.
Friday’s announcements build on spending increases Healey outlined Wednesday during her State of the Commonwealth address.
On Thursday, reporters asked the governor, who last week cut spending by $375 million and reached for $625 million in new non-tax revenue to snap this year’s budget into balance, if she planned to pursue any tax or fee increases to help cover her spending plans.
“No,” Healey said. “We’ve got to remind the public we’re still seeing revenue growth. We see revenue growth this year over last year, it just happens it’s growing at a slower rate. I promised last night [to] the people that I’m only going to file a budget that is fiscally responsible. That’s what you’re going to see next week.”
The governor, asked Friday about the Legislature’s appetite to approve higher local option taxes, noted her proposal contains a number of municipal reforms to help local government operate more efficiently and better serve residents.
The bill is based on feedback Driscoll heard during a municipal listening tour last year, which reached more than 130 managers and administrators from 112 municipalities, the governor’s office said. Driscoll said local leaders emphasized it’s a critical time to ensure they have resources to meet their needs, including for education, neighborhood safety and infrastructure.
“They’re impacted by all the same things that everybody else is, and again, it will be a local choice,” Driscoll told reporters. “This is the empowerment that we’re trying to create — flexibilities, tools. There’s a whole lot of housekeeping in there as well, making it easier to procure items, making it easier for senior tax exemptions, things that really are meaningful in community and contribute to a high quality of life.”
Asked for a response to Healey’s plan to allow local tax hikes, a spokesperson for House Speaker Ron Mariano told the News Service, “The House will review the Governor’s bill.” A spokesperson for Senate President Karen Spilka did not respond to requests for comment.
Senate Minority Leader Bruce Tarr noted the Legislature and Healey just agreed to reduce taxes to address the state’s high cost of living.
“Now is not the time to increase the already heavy burdens of local taxation, and change the course we have been on to make our state more competitive, and stem the exodus of taxpayers choosing to live in other states,” Tarr said in a statement. “We certainly need to support our cities and towns, and the local officials who work so hard to balance budgets and deliver local services that are so important. But moving them in the direction of further burdening their constituents, many of whom are already struggling with taxes, presents them with a tool that could well provide more harm than benefit, and a burden shift of increasing taxes locally to support those services.”
MMA members on Saturday plan to vote on a resolution outlining a litany of funding and policy requests for state government.
The resolution calls on the state to ensure unrestricted municipal aid grows by “at least the same rate as the growth in state tax collections,” raise Chapter 70 aid to an amount “consistent with the Commonwealth’s constitutional obligation to ensure adequate funding in all schools,” review the formula for the required local contribution under Chapter 70, amend charter school finance law, fully fund the Student Opportunity Act, and use surtax dollars to fund at least $100 million for municipal roadway construction and maintenance.
Under the resolution, MMA also wants municipalities to be held “harmless” for the emergency shelter crisis — including costs tied to education, transportation and case management — and for impacts to local room and occupancy taxes. MMA also wants expanded flexibility to pursue local taxes and other revenues to cover capital projects, as well as municipal and school services.
Asked about the resolution’s migrant crisis request, Driscoll said officials are “doing all we can to hold cities harmless and towns harmless, so we are reimbursing for education.”
Healey chimed in, “Absolutely, they’re getting reimbursed right now.”