Reforming Municipal Aid in Massachusetts: The Case for a Gap-Based Formula

4 Pages Posted: 21 Sep 2011

See all articles by Bo Zhao

Bo Zhao

Federal Reserve Bank of Boston

David Coyne

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: 2010

Abstract

This policy brief evaluates the distribution of municipal aid in Massachusetts in FY 2011 and suggests an approach for reforming municipal aid without redistributing current aid. We use the “municipal gap,” a measure that is outside the control of local officials, to determine a community’s need for municipal aid. To show the general pattern of municipal gaps across the state, we compare five prototype communities – large cities, job-center suburbs, higher-income residential suburbs, rural towns, and resort towns. The analysis shows that the distribution of FY 2011 municipal aid does not closely relate to municipal gaps. A 10-year simulation from FY 2012 to FY 2021 shows that with only modest increases to the aid pool, a gap-based formula can significantly improve the distribution of municipal aid in just a few years.

Suggested Citation

Zhao, Bo and Coyne, David, Reforming Municipal Aid in Massachusetts: The Case for a Gap-Based Formula (2010). FRB of Boston Public Policy Brief No. 10-2, Available at SSRN: https://ssrn.com/abstract=1931845

Bo Zhao (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
T-10
Boston, MA 02210
United States
617-973-3061 (Phone)
617-619-8357 (Fax)

HOME PAGE: http://sites.google.com/site/bozhao/

David Coyne

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

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