Proposition 2 1/2: making its mark on Massachusetts

Were Paul Revere to revisit historic Lexington some Friday night, he would find the town's public library closed. Eighteen miles to the west in the rural Massachusetts town of Harvard, new curbing around the village green will remain incomplete for at least another year.

Meanwhile, three Boston firehouses are being closed and police patrols cut back.

These are just a few ways revenue-squeezed Massachusetts cities and towns are trimming their fiscal sails to weather Propositon 2 1/2, the tax-slashing hurricane unleashed last November by Bay State voters.

The controversial measure, patterned after but considerably more restrictive than California's much-publicized Proposition 13, is forcing drastic cutbacks in many municipal budgets.

The new law, approved by a 3-to-2 margin, is expected to provide a statewide total of $500 million to $600 million in property tax relief in the first year. Its backers contend this will spur the state's economy.

Thus far, no Bay State community is fiscally awash, but elected officials in some of the older and poorer cities and towns are scrambling to make up for the cut in revenue.

Uncertainty over the consequences of Proposition 2 1/2 caused Moody's Investor Service to suspend the bond credit ratings of Boston and 42 other local governments in late March.

Even some of the state's best-managed communities are being battered and face tough decisions concerning municipal employee layoffs, service cutbacks, and other perhaps politically unpopular economies forced by the measure.

In Cambridge, for example, where voters opposed the measure by a large margin , a $20 million reduction in the city's annual operating budget will be needed for the 1982 fiscal year. This, according to City Manager James L. Sullivan, will mean a 25 percent cut in spending for most municipal departments, including schools.

Under Proposition 2 1/2, no community has to cut overall appropriations more than 15 percent a year until yield from property taxes reaches 2.5 percent of total assessment of all real estate.

Mr. Sullivan notes that a considerable portion of the Cambridge budget is for items "beyond city control," such as pension obligations, county and state assessments, and municipal debt payments, which cannot be trimmed.

In contrast, California's Proposition 13 exempts this type of previously incurred debt from the property tax rollback. This is but one of several ways in which the new Massachusetts statute differs from its counterpart in the Golden State.

Proposition 13, approved by California voters in June 1978, set property valuations at 1 percent of their full market value as of 1975, or the sales price if ownership had changed since then.

In Massachusetts, once a municipality gets its tax base down to the mandated level, the total property tax levy can increase by no more than 2.5 percent a year. That cap, however, can be exceeded if approved by a two-thirds vote in a municipal referendum.

California's Proposition 13 allows annual property tax increases of 2 percent of the full cash value of the property. Meanwhile, the local tax base can increase through new construction.

The Massachusetts law limits the amount of new revenue a community can take in from real estate, new or old, thus providing little incentive to spur construction and broaden the municipal tax base.

Despite dire warnings of massive layoffs of teachers, police, firefighters, and other municipal employees in Boston and some other cities and towns, nobody seems to know how many jobs could be wiped out and to what extent services will be cut back of eliminated.

Cambridge City Manager Sullivan forecasts more than 500 of the city's approximately 4,000 employees will have to be let go. Such layoffs may include 200 from the school department and 100 each from police and fire departments.

Meanwhile, in Newton, another Bay State community with a reputation for being well run, the fiscal 1982 budget submitted to the board of aldermen calls for a reduction of 315 municipal workers from a force of 2,801.

In the long run, much will depend on what, if anything, Massachusetts Gov. Edward J. King and state lawmakers do toward either amending Proposition 2 1/2 to make it easier to comply with or come up with additional local aid to help cushion the measure's impact.

Despite mounting prssure from municipal officials and public employee unions, there is no indication such help is on the way.

Instead, both the governor and state legislature appear to be waiting to see what the cities and towns do toward cutting back their spending. Municipal officials have been given extra time to prepare and approve their budgets.

Even though spring town meeting season is well under way, most communities appear to be postponing tough budget decisions.

And those few which, like rural Harvard, have now wrapped up their business proceeded cautiously, postponing purchases of new equipment and capital improvements until next year. It's hoped by next year there may be a clearer picture of what the local impact of the law will be.

"We still don't know where we are at," says Elizabeth Stone, Harvard's town accountant, noting that the March 28 annual business meeting was one of the briefest and poorest attended in many years.

The townspeople, who favored Proposition 2 1/2 last November by a 1,244-to-1, 049 vote, approved a fiscal 1982 operating budget of $3.4 million, some $140,000 less than was appropriated for the current year.

Key town meeting decisions included elimination of a vacant position on the town's police force and postponing purchase of a new compactor for the local sanitary landfill.

In Lexington, a Bay State community where the first-year impact of Proposition 2 1/2 will be comparatively mild. Town Manager Robert Hutchinson says he is concerned about the cumulative impact of the measure.

The motor vehicle excise tax slash, which is one element of Proposition 2 1/2 , will cost this suburban Boston community $700,000 to $800,000. Mr. Hutchinson says that despite this loss in revenue and a modest reduction in the town's operating budget, no additional employee layoffs are planned.

Lexington, he explains, has reduced its payroll by 7 percent over the past four years, largely through attrition. One of the current economies involves a three-hour reduction in the library schedule through closing on Friday evenings.

Other cutbacks are being made in road maintenance and distribution of various town reports to every household.