SEPTEMBER 2000 - Tax Cut Could Force Local Cuts - Members, insured under one of the many health insurance plans offered through the state's municipalities, should pay very close attention to the pending ballot initiative that seeks to roll back the state income tax rate to 5%.

Since the Education Reform Act of 1993 took effect, the state has been spending several billion dollars each year in local aid to public schools. This is in addition to the billion dollars in general aid that annually flows from the state to the cities and towns. In the current fiscal year, more than $4 billion dollars will be given to the municipalities in the form of local aid.

"The Legislature has not expanded state programs like they did in the 1980's. Most of the increased spending over the past decade has been targeted at education, infrastructure repairs, and local aid. Most other state programs have been level funded for years," explains retired Milton Town Accountant and current retirement board member Joe Graziani, who is also an Association vice president. "There is not a lot to cut at the state level.

"My sense is that the $1.5 billion will be taken from the cities and towns. Here in Milton we are already stretched paper thin, we could not afford to take a hit in local aid without raising taxes or making some severe budget reductions of our own."

Most observers feel that those reductions would come from layoffs and reductions in employee/retiree benefits. Since pension benefits are contractually guaranteed under state law, they cannot be altered, but future COLAs could be reduced. While general health insurance benefits are guaranteed, there are many changes that can take place to reduce the costs incurred by the municipality.

For instance, Chapter 32B (health insurance law) guarantees that the municipality will pay a certain percentage of the premiums as voted. Beyond the contribution rate, municipalities can alter the type of coverage offered, increase copayments and deductibles, and restrict the types of services covered. Nearly identical changes can also be put in place at the state level for members insured through the Group Insurance Commission.

"Members need to pay very close attention to this issue. Even assuming this may have a positive long-term impact on the business community, it will have an immediate negative impact on our members," says Association President Ralph White. "Anyone who thinks they are immune from these potential cuts better go back and reexamine the facts. You cannot take more than a billion dollars off the table and expect there to be no consequences. Without these revenues, a city or town could be hard pressed into making substantial alterations in their health plans, possibly even dropping their indemnity plan."