George King’s Financial Rules Create Inevitable Infrastructure Damage

This is the second of three articles examining the damage done to city finances, city infrastructure and city students by the application of George King’s budget ‘rules’ to a city which has what Moody’s Investor Service calls: ‘Above average resident income and wealth’ but is experiencing rapid demographic changes in its school age population as the Latino/Hispanic population expands.

The first article focused on taxing below the levy limit, affordability arguments and the effect on city finances. This article focuses on how increased Chapter 70 state aid triggered taxing below the levy limit with consequent damage to city infrastructure. The third article will lay out the educational damage being done to students and the school district, as the city struggles with its self-inflicted financial and infrastructure problems.

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As observed in the first article of this series, George King articulated his finance rules in the City Council meeting on May 30th, 2023. The associated video clip is here:

https://www.youtube.com/watch?v=Q02FW_x2Q4Y

The rule we will focus on here is:

• The annual growth in a municipal budget must lie in the range between 2.5% and 4.5%.

which George laid out quite clearly.

It drives his approach to city finances, in his role as Chair of the City Council Finance Subcommittee which reviews the Mayor’s proposed annual city budget, as prescribed in the city charter, and transmits a set of recommended adjustments for that budget, to the full City Council.

In the video, George further elaborates his financial approach with the statement:

“If we had a zero percent increase in state revenue, then yeah, we would be having a 2½% increase in taxes because we’d have no choice.”

Here when George says “state revenue” he means state Chapter 70 aid for education, as that is the only state revenue for Framingham which has shown any significant increase in the last decade. So, George’s position is that when Chapter 70 funds increase significantly for Framingham, annual property tax increases should drop below the standard 2.5% annual levy increase allowed by Proposition 2½. It’s directly connected to the rule above, as those annual increases in Chapter 70 funds would generally push the city budget increase above 4.5%, triggering tax breaks which bring the annual city budget increase back into George’s acceptable range.

This may seem esoteric, but it is actually what is happening.

I served on the Framingham School Committee from 2018-2021 and was Chair of the Finance & Operations Subcommittee. In that role, I met with George multiple times over coffee to ensure that the City Council and the School Committee were communicating well on finances. In one of those meetings, he verified for me that increased Chapter 70 state aid triggered the start of taxing below the levy limit in 2013.

The central problem with George’s rule is that it simply does not apply to cities or towns where the immigrant population is expanding. Witness the city budget growth of Worcester: 6%, Lawrence: 9%, New Bedford: 6%. Any community with a rising immigrant population breaks George’s ‘rule’.

The rule works perfectly well for communities which have low population growth and no significant immigrant population, such as Wellesley, Wayland, and Newton. They raise taxes annually by 2.5% and have about 1% property tax revenue growth from new and renovated homes and other buildings, getting to 3.5%, right in George’s sweet spot for annual budget increases.

But applying that ‘rule’ to Framingham, where the immigrant community is on the rise, is simply a mistake, which has some very bad consequences.

The first big problem is that application of the ‘rule’ for Framingham has led directly to underfunding of cityside operations and consequent infrastructure deterioration.

The infrastructure underfunding began in 2013, when increased Chapter 70 funds triggered taxing under the levy limit for the first time in Framingham’s history.

As people may know, there had been a problem with the application of the Chapter 70 funding formula for Framingham which lead to Framingham getting less Chapter 70 funds than it should have. Through the efforts of our state senator, Karen Spilka and others, the formula was fixed in 2013 and Chapter 70 funds for Framingham jumped up. That triggered taxing below the levy limit.

From 2013 to 2018, in the last 5 years Framingham was a town, Chapter 70 funds increased, supporting the rising population of low-income, non-English speaking students, just as Chapter 70 state aid for education is designed to do.

See the chart which shows the demographic changes occurring in Framingham Public Schools (FPS) for the period 2013-2023.

During that time, Town Meeting ensured that all of those Chapter 70 funds properly flowed to the school district budget and that the local taxpayer funded portion of the school district budget, the ‘local contribution’ also rose with inflation and increasing student numbers, as it should.

The problem was that, although Town Meeting acted to protect the school district budget, the lowered city property tax revenue caused by taxing below the levy limit was having a negative impact year after year on town side operations.

That pattern worsened when Framingham became a city. Town Meeting dropped away as the school district protector, but the new School Committee stepped up and defended the school district budget, ensuring that all Chapter 70 funding still flowed to the schools and that the ‘local contribution’ increased by $1 million each year for the first 4 city years, even as the annual city property tax revenue increase was dropped to 0% by the City Council, cutting cityside operations to the bone.

In summary, the principal result of under taxing from 2013-2023 was a big hit to cityside operations, where the lowered city revenue stream caused the most damage, underfunding critical maintenance for roads, buildings, and the water & sewer system.

The symptoms are all around us: deteriorating roads, school roofs leaking, and their replacements deferred, water & sewer problems on the rise. The Enterprise Fund was drained because of a shortage of tax revenue to fund critical water & sewer projects. Free cash hit an all-time low, as every reserve in sight was drained. Vacancies started to rise in Department of Public Works staffing. Moody’s Investors Service lowered Framingham’s financial outlook to negative.

Added to that are the huge water & sewer bills, which affect everyone, especially homeowners at the lower end of the income spectrum. Increasing water & sewer rates to make up for the shortfall in property tax revenue is a dreadful way to manage city services. It punishes the most vulnerable residents and makes business operations more expensive.

We also know things are bad when the city gets annoyed that its water & sewer revenue is reduced when customers conserve water. We also know things are bad when the Mayor is shopping rental of our water system network to adjacent communities who want to tie in to the MWRA water network.

The bottom line on our infrastructure nightmare is that the current maintenance backlogs are huge: roads - $100 million; school roofs - $100 million; water & sewer - $200 million.

The situation is so bad that the city has now resorted to extreme measures to avoid being drowned in financial and infrastructure problems. It has turned its attention to school district funding to drain away education dollars.

In the last two years, the city has begun diverting Chapter 70 state aid for our students to help address the rising infrastructure backlog. $10 million/year in Chapter 70 aid is now being used to fix city infrastructure, not educate students. Never before in Framingham’s history has such a diversion of state aid for education occurred.

The protection previously provided by an activist School Committee has fallen away since the start of 2022, and key objectives, including expanding pre-K to accommodate all 4-year-old children, solving the dire shortage of classroom aides for special needs students and students whose native language is not English, and addressing the late school bus problem in a timely fashion, fell away.

The late buses could have been fixed many months ago and the remaining objectives could be completely solved in the next year with that $10 million/year the city stole from students to fix roads and roofs and pipes.

The damage to the school system is rising and if not addressed will see Framingham Public Schools fall into mediocrity. It is an educational crisis, which will be addressed in the third and final article in this series.