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Advocacy Policies & Resolutions Five Measurements of a High-Quality State Revenue-Sharing Plan
The five general criteria listed below of a high-quality state tax revenue-sharing system are intended to help state and local officials evaluate proposals that are expected to be made on renewal of funding for Chapter 70 school aid and on how to provide discretionary revenues to cities and towns once the Lottery schedule has expired. The criteria are deliberately described in general terms as a starting point. More specific criteria will be prepared and approved based on ideas and comments made by municipal officials at forums for discussion.
1. Revenue adequacy
An appropriate revenue-sharing system must provide sufficient revenues for cities, towns and school districts to pay for the operational services and capital expenses that are the responsibility of local government. Revenue sharing must include school aid distributions that increase annually to ensure continuing improvement of schools, general revenue sharing that grows at least at the same rate as state taxes and the state budget, and full funding for all state commitments to local government, including property tax relief programs. Adequate funding must also be provided to support state-mandated programs.
2. Stability and predictability
Revenue sharing should be stable and predictable so that long-term public policy goals can be met. Rainy day funds should be encouraged at the local level. The state’s stabilization fund should include a specific set-aside to support school aid and general revenue sharing payments during times of state fiscal distress. To facilitate orderly budget planning at the local level, cities and towns need to be notified of revenue sharing amounts well in advance of the start of the fiscal year.
3. Equity
One of the most important purposes of revenue sharing is reduction of disparities in revenues across all the cities and towns of the commonwealth. Revenue sharing distributions must ensure equity in the ability of cities and towns to provide a certain minimum level of services, although all cities and towns must share in any increase in funding.
4. Accountability
A revenue-sharing system and the rules and formulas used to implement it should be clearly and simply stated so that policy objectives and proposed outcomes can be understood by state and local officials and the general public. Clear and simply stated objectives and rules are also needed to facilitate effective and efficient administration of programs. The state must be accountable for adequately funding any revenue sharing commitments that it makes, including payments for state-mandated programs, joint state-local programs and general revenue sharing programs to reduce reliance on the property tax.
5. Intergovernmental coordination
An efficient and sustainable system of state tax revenue sharing must fit with the overall long-term taxation and spending policy goals of the state and its local governments. The state-local framework should grant the responsibility to deliver services to the level of government best able to achieve these policy goals. Tax policy should directly discourage reliance on regressive revenue sources such as the property tax to support services, both on a statewide basis and in individual cities and towns. It should also be clear in policies that state tax revenues must be used to reduce the disparity in revenues available across the commonwealth’s 351 cities and towns to support schools and municipal services.
- Massachusetts Municipal Association
Advocacy Policies & Resolutions Five Measurements of a High-Quality State Revenue-Sharing Plan
Five Measurements of a High-Quality State Revenue-Sharing Plan
The five general criteria listed below of a high-quality state tax revenue-sharing system are intended to help state and local officials evaluate proposals that are expected to be made on renewal of funding for Chapter 70 school aid and on how to provide discretionary revenues to cities and towns once the Lottery schedule has expired. The criteria are deliberately described in general terms as a starting point. More specific criteria will be prepared and approved based on ideas and comments made by municipal officials at forums for discussion.
1. Revenue adequacy
An appropriate revenue-sharing system must provide sufficient revenues for cities, towns and school districts to pay for the operational services and capital expenses that are the responsibility of local government. Revenue sharing must include school aid distributions that increase annually to ensure continuing improvement of schools, general revenue sharing that grows at least at the same rate as state taxes and the state budget, and full funding for all state commitments to local government, including property tax relief programs. Adequate funding must also be provided to support state-mandated programs.
2. Stability and predictability
Revenue sharing should be stable and predictable so that long-term public policy goals can be met. Rainy day funds should be encouraged at the local level. The state’s stabilization fund should include a specific set-aside to support school aid and general revenue sharing payments during times of state fiscal distress. To facilitate orderly budget planning at the local level, cities and towns need to be notified of revenue sharing amounts well in advance of the start of the fiscal year.
3. Equity
One of the most important purposes of revenue sharing is reduction of disparities in revenues across all the cities and towns of the commonwealth. Revenue sharing distributions must ensure equity in the ability of cities and towns to provide a certain minimum level of services, although all cities and towns must share in any increase in funding.
4. Accountability
A revenue-sharing system and the rules and formulas used to implement it should be clearly and simply stated so that policy objectives and proposed outcomes can be understood by state and local officials and the general public. Clear and simply stated objectives and rules are also needed to facilitate effective and efficient administration of programs. The state must be accountable for adequately funding any revenue sharing commitments that it makes, including payments for state-mandated programs, joint state-local programs and general revenue sharing programs to reduce reliance on the property tax.
5. Intergovernmental coordination
An efficient and sustainable system of state tax revenue sharing must fit with the overall long-term taxation and spending policy goals of the state and its local governments. The state-local framework should grant the responsibility to deliver services to the level of government best able to achieve these policy goals. Tax policy should directly discourage reliance on regressive revenue sources such as the property tax to support services, both on a statewide basis and in individual cities and towns. It should also be clear in policies that state tax revenues must be used to reduce the disparity in revenues available across the commonwealth’s 351 cities and towns to support schools and municipal services.
- Massachusetts Municipal Association
