By Andrew Firestone

With the $30.6 billion state budget approved last week, Somerville has joined cities and towns across Massachusetts in coming to grips with a frightening situation: for the first time City healthcare costs have risen above state aid. This means that, for the $29.1 million in state aid for the fiscal year 2011, all of it has gone to bridge the $34.1 million in healthcare costs. In the last decade, aid to Somerville has fallen by $28.3 million, and while the City has managed to stave off any cuts to services, it is becoming clearer that tax reform might be needed in order to save failing municipalities across the state.

“What’s happened in the last several years is that [state aid] has dropped off precipitously and what has happened, it’s not just Somerville, but almost every city and town in Massachusetts that gets some state aid has had to recalculate how to manage their expenses,” said Alderman-at-Large John Connolly.

“The lack of the consistence in state aid, which is what hurts, has made cities and towns much more independent and self-reliant as a result and it’s made decisions much more difficult for local leaders, not just in Somerville but also across the state,” he said.

These decisions include raising fees for parking, as well as making zoning changes to accommodate large developments, such as in Assembly Square, and plans for the Inner Belt. Connolly said this decision stems from “how vital the commercial tax dollar is to the City.”

Representative Denise Provost said that poor subsidy choices for the state have had ruinous consequences for the amount of discretionary spending the state can provide. “If you look at the $54 million that was handed over to Evergreen Solar, which has since relocated to China, it would almost cover the shortfall in local aid for this year for the entire Commonwealth,” she said. The subsidies have not alleviated the burden of healthcare, which now makes up a third of the state budget.

“[It’s] good because it means that, even in this terrible recession, people are covered for healthcare, but it’s very expensive,” she said. She compared the situation in the state budget to defense spending for the federal government.

However, deep cuts have effected spending for education, care for the elderly, and also mental health services, which economists say is a recipe for disaster.

“Unfortunately nothing has been spared,” said Representative Carl Sciortino. “I don’t think there is any sector of the budget that hasn’t seen significant reductions over the last couple of years. We are in the midst of a global financial meltdown that has direct impact on the state’s revenue needs.”

Sciortino described the situation as having been engineered by continuous cuts during times good and bad throughout the last several decades. “Massachusetts used to have the nickname ‘Taxachusetts’ and in the 1970s that was very appropriate,” he said, “but especially through the 1990s, the state reduced the tax burden for families and businesses to the point where we now no longer have the revenue base that we need to meet basic services.”

“In fact, every time the economy was good we reduced taxes, when the economy was bad we reduced services. So we’ve basically ratcheted ourselves down to a point where we can’t afford to meet the basic needs of what state government needs to pay for. Until we have a fundamental readjustment of our revenue structure, there really are only bad choices to make on the cutting side of the ledger,” he said.

One of these choices included the GIC bill in the budget, which has generated differing opinions on all sides. Mayor Joseph Curtatone has said that subscribing to the program would help save the City of Somerville somewhere near $10 million. However, Representatives Sciortino, Provost and Tim Toomey who represent sections of Somerville all voted against it in the house, saying it curtailed union labor rights.

“They’re one step removed,” said Connolly. “They don’t see that it’s something that has to happen because it’s going to make the city much more balanced. This is something we need to do.”

For now, options in the future include raising taxes for those in the upper tax brackets, but much of the source of state aid, being the lottery, is dependent upon the economy. The shortfall caused the City to take out $2 million from their “Rainy Day” fund in order to bridge the deficit in the budget. “We’re better off than other communities but still, we’re effected,” said Connolly. “We were anticipating a bigger hit this year, and it turned out to be not quite as draconian, but still we had to take money out of our free-cash account which is something you really don’t like to have to do.”