New Mass. Municipal Association Report: Mass. Cities and Towns Reaching a Fiscal Breaking Point

 New Mass. Municipal Association Report: Mass. Cities and Towns Reaching a Fiscal Breaking Point

“Perfect storm” of inflation, Prop 2 ½ constraints, inadequate state aid leading to local cuts, erosion of services

 

BOSTON, October 9, 2025 -- A new report released today by the Massachusetts Municipal Association (MMA) documents the convergence of severe factors that are now creating a fiscal crisis in cities and towns across the Commonwealth that increasingly threatens the essential services residents rely on every day. 

 

A Perfect Storm: Cities and Towns Face Historic Fiscal Pressures, developed in partnership with the Center for State Policy Analysis, identifies the key factors shaping municipal budgets and the trends that have led to this point:

 

• While average annual state government spending appropriately has increased by 2.8 percent since 2010 to meet critical needs, constraints on local revenue sources, including Proposition 2 ½, have held Massachusetts city and town spending growth to just 0.6 percent.  

• Massachusetts municipal governments’ spending growth also lags far behind the U.S. average for cities and towns, 1.0 percent. 

• When adjusted for inflation, funding for Unrestricted General Government Aid (UGGA) – the Commonwealth’s primary source of local aid to municipalities – is 25 percent lower than in 2002.

 

As a result of all these factors and more, municipalities have been keeping budgets balanced by cutting or reducing essential services, which impacts schools, libraries, roads, public safety, and an overall shrinking of community vibrancy.

 

As state leaders are currently assessing the economic impacts of federal policy actions on state revenues, the new MMA report details the conditions under which municipalities have been operating for years and the critical financial crunch being felt in cities and towns.  

 

“Municipalities have been frugal, and any cuts they’re forced to make are now cutting bone,” said MMA Executive Director Adam Chapdelaine. “Even with the most valiant efforts to operate efficiently, city and town leaders simply can’t overcome the larger trends that are forcing them to make drastic reductions, felt by local residents and local businesses.” 

 

Municipalities have few options to fill fiscal gaps: 

• Municipalities are barred by state law from collecting local income or sales taxes (outside of lodging and meals taxes), leaving property taxes as their dominant source of revenue.  

• Proposition 2 ½ limits property tax revenue that a city or town can raise to no more than 2.5 percent over the previous year – irrespective of inflation. 

• Nearly 3 out of 4 Massachusetts municipalities are at 95 to 99 percent of their “levy limit,” the amount of property taxes they can generate before needing to resort to a costly Proposition 2 ½ override campaign. 

 

Proposition 2 ½ overrides are, overwhelmingly, not a viable solution for most of the Commonwealth's 351 cities and towns, the report shows. From rural communities to Gateway Cities, many lack the property values, household income levels, or both to make an override feasible for voters. Thus, even as a vast majority of cities and towns bump up to their levy limit, only 44 percent have attempted an override campaign since 2010. 

 

Mayors and city managers remain on the front lines of engaging with constituents to understand their priorities as municipalities face tough choices. 

 

“Cities and towns across the Commonwealth are in such a difficult position today. The cost of health care, energy, paving, construction and schools are contributing to cost increases that are outpacing revenue growth,” said Newton Mayor Ruthanne Fuller. “We have to change tracks and find new paths to invest sufficiently in the places we love and call home.” 

 

“The success of the Commonwealth is tied directly to the success of its cities and towns. Massachusetts cannot thrive if municipalities are struggling to provide the fundamental services that residents need every single day,” said Amesbury Mayor Kassandra Gove. “I hope this report promotes a better understanding of the challenges faced by communities and serious consideration of solutions.”

 

“When you talk about what makes a city or town a ‘community,’ it’s libraries and senior centers and the staff you can rely on to respond to a 911 call or fix a pothole,” said Adams Select Board Member Christine Hoyt. “The big things and the little things all matter. We need to rally in support of the investments our residents deserve.”

“This ‘Perfect Storm’ report is so valuable because it’s data-based and provides a solid analysis of how we got here,” said Amherst Town Manager Paul Bockelman. “Our residents rely on us for their most cherished and essential government services, but the fiscal health of cities and towns is at risk. We clearly need to have serious conversations about how we can adequately support municipal services.”

In the coming weeks, the MMA will be discussing the report’s findings in detail with its members and other civic partners. Later this fall, the MMA plans to release a set of policy recommendations to put cities and towns back on the path toward long-term financial sustainability.