Massachusetts finding return to Yankee thrift difficult

Massachusetts -- sometimes called "Taxachusetts" -- is fast becoming "Axachusetts." Municipal official from Boston to the Berkshires, still reeling from the passage Nov. 4 of a Proposition 13-type property tax rollback, appear to have gotten the message:

* Street repairs and other public works projects have been canceled.

* Hundreds of municipal workers, including teachers, are to be laid off.

* School consolidations are being charted.

* Cutbacks in public services, including shorter library hours and elimination of recreational programs, are under way or planned.

However, much of the budget crunch lies ahead. And concerned mayors, managers, and selectmen appear increasingly unsure as to how far and in what directions the budget scythe should swing.

In Boston, $45 million in public construction contracts, for projects that were to have begun either this month or early next year, have been postponed indefinitely or canceled.

Unlike California's "Prop 13," which passed in 1978 and limits real estate taxes to 1 percent of fair market value, the new Massachusetts statute limits a community's property tax yield to 2 1/2 percent of the full cash value of taxable property.

Real estate tax levels here, the second-highest in the nation, average $545. 957 per capita. In California, prior to the Prop 13 rollback, the levy averaged instead of third.

Property tax reductions totaling $500 million, about one-seventh of what local governments now take in through real estate levies, are projected in Massachusetts for the first year under "Prop 2 1/2." In addition, the state's annual "excise tax" on motor vehicles, a major source of local revenue, was slashed from $60 per $1,000 valuation to $25.

To comply with these cutbacks, Boston faces a $79 million reduction over the next six months in its fiscal 1981 spending and an additional $97 million cut in the city budget for the 12 months commencing next July 1.

Boston Mayor Kevin H. White appointed an advisory committee to suggest ways the city can trim its budget -- $862 million for the current fiscal year. The panel proposed 25 percent cuts in city police and firefighter payrolls, a two-third s reduction in parks and recreation manpower, and the closing of the civic auditorium, which is a convention magnet. That last suggestion is not likely to be seriously considered. The potential $11 million savings is just 1 percent of what is sought, and shutting down the hall would cost the city economy much more than that.

Proposition 2 1/2 also made more difficult a compromise to finance through the end of the year the deficit-ridden Massachusetts Bay Transportation Authority (MBTA), which shut down for 26 hours because it ran out of money. In trying to forge a compromise bill to aid the transit system, the state legislature ran into opposition from communities served by MBTA. These cities and towns, which contribute money to the authority to keep it running, balked at pouring ever more precious funds into what many saw as a bottomless financial pit.

Implementation of Prop 2 1/2 comes at a time when the state itself has no extra funds with which to help bail out hard-squeezed local governments. In California a $5 billion state surplus was used to provide communities a two-year cushion for adjusting to Prop 13.

The new Bay State law, which besides easing the tax burden on property owners enables tenants to deduct half of their rent from their income taxes, went into effect Dec. 4. Although its full impact won't be felt until fiscal 1982 municipal budgets take effect next July 1, many -- perhaps most -- layoffs, program pruning, and other economies will come weeks earlier.

The fiscal squeeze is by no means limited to Boston and the state's other large and older cities. At least 184 of the 351 municipalities in Massachusetts will have less revenue from real estate and auto excise taxes.

Particularly hard hit are some small towns, with few employees and low property valuation.

Pelham, a rural community of 1,153 inhabitants, has voted to ask the state legislature for exemption from Prop 2 1/2. "There is no way we can get along under such restrictions without great hardship," explains Clarice Thorp, chairman of the board of selectmen.

The special "let us out" petition approved overwhelmingly at a Dec. 4 town meeting is required to head off an anticipated $71,000 cut in the $800,000 municipal budget that would result from the lowering of local taxes.

A small avalanche of proposals to increase local aid from the state or make Proposition 2 1/2 more flexible have been filed by public employee unions, municipal officials, and even sponsors of the tax-cut measure for consideration by the 1981 state legislature.

There is little talk, however, of outright repeal. Even those who were most critical of the restrictive law before voters decisively approved it (by a 3-to- 2 margin) appear resigned to live with it as best they can, at least for the time being.

Some, like Peter Boyer, president of the Massachusetts Municipal Association, are pushing alternative measures to replace some of the money that won't be flowing into city and town coffers.

Prospects for such help, they forecast, will brighten considerably once the people see what cutbacks are forced onto their local governments.

Although Prop 1/2 places no restrictions on the revenue-raising power of the commonwealth, prospects for hikes in state taxes to make up some of the local revenue shortfall are slim. Massachusetts already ranks 12th per capita nationally in combined state and local taxes, including not only the second-highest property taxes but the fifth-steepest income tax.

Regardless of whether the commonwealth springs loose more appreciable increased local aid to help cushion the impact of property tax reductions, the position of public employee unions appears to have been weakened, perhaps substantially, by Proposition 2 1/2. Already gone, and not likely to return, are binding arbitration rights for police and firefighters in deadlocked contract negotiations and fiscal autonomy for local school boards, which made it easier for teacher unions to get what they wanted.

Civil service employees are not the only ones in jeopardy of receiving pink slips. Those holding partonage jobs -- especially in Boston, which has many more such jobs than other communities -- also will be affected.