The Massachusetts Municipal Association (MMA) joined Mayor Ruthanne Fuller at City Hall on Thursday, October 9, to announce a new report warning that cities and towns across Massachusetts are nearing a fiscal breaking point.
The report, A Perfect Storm: Cities and Towns Face Historic Fiscal Pressures, was produced in partnership with Tufts University Center for State Policy Analysis. It found that rising costs and inflation are outpacing the limited revenue growth available to Massachusetts cities and towns, leaving many struggling to fund basic services.
MMA Executive Director Adam Chapdelaine said the findings reveal the depth of a long-building crisis, driven by rising costs for schools, public safety, and infrastructure alongside strict limits on how much revenue municipalities can raise under Proposition 2½, the state law that caps annual property tax increases at 2.5% (plus increases due to new development) unless voters approve an override. He emphasized that the stakes extend beyond budgets and balance sheets.
“Local government services are the foundation to the livability of Massachusetts and the quality of life that we all get to enjoy,” Chapdelaine said.
Mayor Fuller on Newton’s finances
Mayor Fuller, who once served as president of the MMA, said the report’s findings reflect what Newton and other municipalities across Massachusetts are already experiencing.
“The walls are stretched thin,” Fuller said. “The headway is facing the edge, and sectors in the Commonwealth are resulting in a storm across this wonderful Massachusetts.”
Newton holds the highest possible bond rating (Aaa) from Moody’s Investors Service — a sign of strong fiscal management. “We’ve been very fiscally responsible,” she told Fig City News. But even with that rating and careful budgeting, Fuller said rising costs for schools, infrastructure, and employee benefits are straining local resources.
Despite those challenges, Fuller said Newton remains in a relatively strong position. She points to the City’s long-term planning and Aaa bond rating as signs of stability. Still, she acknowledged that even well-managed communities face limits on how far sound budgeting can go in the face of inflation and state funding constraints.
On Monday night, Mayor Ruthanne Fuller presented the City’s long-range financial plan to the City Council. “Newton is on solid footing,” Fuller said.
She noted that the City has been able to provide “meaningful” budget increases for the public schools over the past few years but said those gains still fall short of what families and educators are asking for. “That funding does not match what our educators see or what our parents want,” Fuller said.
Elements of the ‘Perfect Storm’
Chapdelaine said the MMA commissioned the report earlier this year after it became clear that cities and towns across Massachusetts were being pushed to the fiscal brink.
Chapdelaine said the report shows that state aid to municipalities has fallen by 25% since 2002 when adjusted for inflation, leaving local governments to shoulder more of the financial burden on their own. He added that the ripple effects of the 2008 Great Recession are still being felt today, even as cities and towns have kept operating spending unusually restrained since 2010.
“After so many years, fiscal austerity really takes a major toll on the quality of municipal services,” Chapdelaine said.
He said that in the years following the COVID-19 pandemic, sustained inflation has driven up the cost of nearly everything cities and towns rely on — from energy and construction materials to vehicles, employee health benefits, pensions, and day-to-day supplies.
But while costs have surged, cities and towns remain constrained by Proposition 2½ –causing local leaders to struggle to keep up with inflation. “Most cities and towns are getting all they possibly can out of the property tax,” Chapdelaine said. “They have very few options for generating other types of revenue.” He described the state law as a “vice” that is preventing most communities from getting out of the “hole” they find themselves in.
Property taxes make up roughly 83% of Newton’s general fund revenue, according to the Mayor’s recent Five-Year Capital Improvement Plan and Long-Range Financial Forecast — a proportion that mirrors many other municipalities across Massachusetts. For most cities and towns, property taxes are the primary source of local revenue, so even small limits on how much they can rise have an outsized effect on budgets.
With few other options to generate revenue, many communities are feeling the squeeze. Chapdelaine said the result is that municipalities across Massachusetts are being forced to make difficult choices about what services they can afford to maintain. Years of limited revenue growth have left municipalities delaying road repairs, postponing equipment replacements, and scaling back on staff or programs in schools, libraries, and public safety departments.
Uneven distribution
The report notes that the financial strain is not distributed evenly across Massachusetts. Rural towns, Gateway cities, and suburban communities are each being hit in different ways.
In smaller rural towns, limited populations and modest tax bases make it difficult to raise enough revenue to fund schools and maintain infrastructure. Many of these communities rely heavily on state aid, which has not kept pace with inflation. Gateway cities such as Worcester, Lowell, and Springfield have seen increases in state education funding, but those gains have not offset rising costs in public safety, housing, and transportation. Suburban communities like Newton often depend on voter-approved tax overrides to maintain services, a tool that wealthier towns can use more readily.
The MMA’s report says that close to three out of four municipalities across Massachusetts are already taxing at 95 percent or more of their allowable levy limit — the maximum they can raise through property taxes before needing voter approval for an override. Chapdelaine said that underscores how little flexibility most communities have left as costs continue to climb.
Proposition 2½ overrides
Chapdelaine said overrides are a “nonstarter” in most Massachusetts cities and towns. Gateway cities (the state’s midsize urban centers) and rural municipalities often lack the high property values or household incomes needed to raise meaningful revenue through an override, which permanently increases local property taxes. As a result, only a small share of communities can realistically turn to voters for this kind of relief.
“In many communities, residents literally can’t afford to vote yes on an override,” Chapdelaine said. Since 2010, about 56% of Massachusetts municipalities have not attempted a single override, according to the report. Chapdelaine said among the small number that have pursued multiple overrides, particularly in higher-cost regions such as Cape Cod, Martha’s Vineyard, and the Berkshires, the added tax burden is beginning to overwhelm residents and local budgets alike.
All of this, Chapdelaine said, has culminated in what the report calls a “perfect storm” for Massachusetts — a convergence of long-term declines in state aid, years of constrained local budgets, and the lingering effects of post-COVID inflation. “The release of today’s report is just the beginning of a new conversation,” Chapdelaine said.
Potential areas of reform
Chapdelaine said that new conversation about solutions must focus on giving municipalities greater flexibility to raise and manage revenue. The report outlines broad areas for reform, including increasing state aid to cities and towns, revisiting Proposition 2½, and exploring new sources of local revenue. Without structural change, Chapdelaine warned, many communities will continue to face difficult choices that threaten core services and long-term stability.
Chapdelaine said the report is intended to lay the groundwork for a deeper exploration of long-term solutions to the fiscal challenges facing Massachusetts communities.
He said residents should be aware of the financial pressures their cities and towns are under but take confidence in the professionalism of local leaders. “This report could help them understand that their city or town is likely quite well managed,” Chapdelaine told Fig City News.
Still, he noted that even well-managed municipalities are facing fiscal pressure from costs rising faster than inflation. Addressing the problem, he said, will require a multi-pronged approach, including increasing state aid and examining potential adjustments to Proposition 2½.
“All of it has to keep in mind a balance between the services residents receive and the taxes they’re able to sustain,” Chapdelaine said. “We’re trying to make sure the services that residents enjoy continue into the future.”
Chapdelaine said the MMA will continue discussing the report’s findings with its members and civic partners. John Ouellette, MMA’s Senior Executive and Director of Communications, told Fig City News that the MMA has also been talking with state legislators and the Governor’s administration, and an initial report of possible solutions should be available in mid-November. The organization plans to release a set of policy recommendations aimed at putting cities and towns on a path toward long-term financial sustainability. The data, he said, outlines what communities will need to do in 2026 and beyond to regain stable footing.
“Ultimately, this is about protecting the vital municipal services that make cities and towns places where people want to live,” Chapdelaine said.
Ed. Note: We corrected our citation of how close three out of four municipalities are to hitting their levy limits. We also clarified that the MMA’s expected delivery of policy recommendations will be in mid-November.
