Massachusetts Municipal Budgets Strained by Rising Costs

Massachusetts, October 9, 2025

News Summary

A report by the Massachusetts Municipal Association reveals that rising costs and sluggish state aid are putting immense pressure on municipal budgets across Massachusetts. The analysis highlights the constraints on local revenue sources, which contribute to stagnant operational spending growth since 2010. Many municipalities are near their property tax levy limits, and while some tax overrides have passed in suburban areas, rural towns are facing significant challenges in meeting increasing service demands. As local officials warn of a fiscal crisis, discussions on policy changes are anticipated.

Boston — A new report by the Massachusetts Municipal Association (MMA) warns that rising costs and sluggish growth in state aid are straining municipal budgets in Massachusetts, making it increasingly difficult to meet demands for better local services. The analysis finds that structural limits on local revenue, combined with rising costs for core services, are producing mounting budget pressure for cities and towns across the state.

Key findings

A new report by the Massachusetts Municipal Association (MMA) highlights these fiscal challenges. The report criticizes restrictions on local revenue tools, noting that the report criticizes restrictions on local property tax increases and the ban on local income and sales taxes, which limit municipalities’ revenue-raising capabilities. Municipal spending growth since 2010 has not kept pace with state or national trends, and municipalities face constrained options to generate new revenue.

Spending and revenue trends

Between 2010 and 2022, inflation-adjusted spending on operations in Massachusetts municipalities grew by only 0.6% per year. This growth rate is slower than the U.S. average for local spending growth and the growth rate of the Massachusetts state budget, which has been at approximately 2.8% per year. At the same time, costs for health care, energy, paving, construction, and schools have been rising faster than revenue growth.

Limits on property taxes and overrides

The report examines the effects of Proposition 2 1/2, enacted in 1980, limits property tax increases and spending growth, but the report suggests the current constraints may be too restrictive given the 0.6% annual real spending growth. It also notes that the cap on annual property tax increases lacks any adjustment for inflation, making it more manageable during low-inflation periods but harmful when inflation exceeds 3%. Since the COVID-19 pandemic, inflation has exceeded 3%, forcing municipalities to cut actual spending yearly.

As a result, three-quarters of municipalities in Massachusetts are at 95% to 99% of their property tax levy limit, necessitating tax override campaigns to generate additional revenue. However, nearly 200 of the 351 cities and towns in Massachusetts have not pursued any tax overrides in the past 15 years. The report finds that tax overrides that have passed have predominantly occurred in suburban towns, while rural towns and gateway cities struggle to respond to revenue needs.

State aid and local impact

Municipal budgets remain heavily dependent on local property taxes and state aid. The report notes that compared to the national average where cities receive 31% of their revenue from state aid, Massachusetts towns receive only 26%. The largest components of state aid are Unrestricted General Government Aid and Chapter 70 school aid, with Chapter 70 funding totaling around $6.8 billion and Unrestricted General Government Aid over $1.3 billion.

When adjusted for inflation, since 2010, unrestricted local aid, when adjusted for inflation, has fallen by 25%. The analysis conducted with the Center for State Policy Analysis at Tufts University found that the analysis was conducted with the Center for State Policy Analysis at Tufts University, which indicated that unrestricted local aid is $66 million short of what is needed to keep pace with inflation. While Chapter 70 funding has increased more than inflation, the report finds those gains have mainly favored urban districts, leaving many average municipalities and rural towns with little or reduced educational support.

Where pressures are concentrated

The report describes an uneven local response capacity: suburban towns have carried most successful override efforts, while many rural towns and gateway cities face declining capacity to raise funds. MMA described the situation as a perfect storm, indicating a fiscal crisis is emerging in cities and towns due to converging pressures.

Policy context and next steps

The report does not include specific policy prescriptions. The report does not offer specific recommendations but suggests that municipal leaders will discuss this in upcoming meetings, with policy recommendations expected later this fall. The Democrat-controlled Legislature has historically resisted broader local option taxes, balancing many public service needs in setting local aid levels. The report signals that policy change recommendations could create debate over tax burdens and the appropriate level of state aid.

Local officials stress the importance of continued investments in services such as libraries, senior centers, and emergency response, and municipal leaders have emphasized the urgency of identifying new funding paths to support local services adequately.

Implications for residents and officials

For residents, constrained municipal budgets could mean slower improvements or cuts to local services. For municipal managers and elected officials, the report underscores the need for careful budget planning, potential override campaigns, and active engagement with state policymakers on the distribution and level of local aid.

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Additional Resources

• NBC Boston: Massachusetts Cities and Towns Fiscal Crisis
• Patch: Newton City Council FY26 Budget Approval
• Boston Globe: Rising Water Bills in Massachusetts
• Wikipedia: State Aid
• Google Search: Massachusetts Municipal Association

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